What changed in this filing

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Item 1. Financial Statements

2025-08-08 compared with 2025-05-09 · 697 added, 484 removed, 740 unchanged (61% of the section changed)

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AGRIFY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share and per share data)

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Warrant liabilities

Related party debt, net of current

Long-term debt, net of current

Other non-current liabilities

Non-current liabilities associated with discontinued operations

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Common Stock, $ 0.001 par value per share, 35,000,000 shares authorized;

1,952,014 and 1,952,032 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

2,002,568 and 1,952,032 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively

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

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AGRIFY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

Three months ended

Six months ended

Cost of goods sold

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Change in contingent consideration

Loss on disposal of property and equipment

Total operating expenses

Operating (loss) income from continuing operations

Interest income (expense), net

Operating loss from continuing operations

Interest expense, net

Change in fair value of warrant liabilities

Other income, net

Total other income, net

(Loss) income from continuing operations before income taxes

Other (expense) income, net

Total other (expense) income, net

Loss from continuing operations before income taxes

Income tax provision

(Loss) income from continuing operations, net of income taxes

Loss from continuing operations, net of income taxes

(Loss) income from discontinued operations

Gain on disposal of Extraction business

(Loss) gain on disposal of Extraction business

Income tax effect on discontinued operations

Income from discontinued operations, net of income taxes

(Loss) income from discontinued operations, net of income taxes

Net (loss) income

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Discontinued operations

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

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

Diluted (loss) income per share

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Weighted average common shares outstanding - diluted (1)

(1) Periods presented have been adjusted to retroactively reflect the 1-for-15

reverse stock split on October 8, 2024.

Additional information regarding reverse stock splits may be found in Note 1 – Overview,

Basis of Presentation, and Significant Accounting Policies, included in the notes to the condensed consolidated financial statements.

presented have been adjusted to retroactively reflect the 1-for-15 reverse stock split on October 8, 2024.

Additional information regarding

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

the notes to the condensed consolidated financial statements.

The accompanying notes are an integral part of

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AGRIFY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF

CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

(DEFICIT) (UNAUDITED)

(In thousands)

Stockholders’ Equity

Stockholders’

(Deficit) attributable

Non-Controlling

Stockholders’

Balance at January 1, 2024

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Stock-based compensation

Cancellation of common shares

Impairment of non-controlling interests

Issuance of Common Stock and pre-funded warrants through public offering

Issuance of held-back shares from Sinclair acquisition

Cashless exercise of high trail warrants

Exercise of pre-funded warrants issued through public offering

Conversion of convertible note

Deemed contribution from troubled debt restructuring with related party

Stock split share adjustment

Balance at March 31, 2024

$ ( 261,561 )

Stockholders’ Deficit

Stock-based compensation

Exercise of pre-funded warrants issued through public offering

Excess of related party debt and pre-funded warrants

Issuance of equity classified prefunded warrants

Issuance of vested RSUs, net of shares held back to offset tax

Balance at June 30, 2024

$ ( 264,533 )

Stockholders’

Equity attributable

Non-Controlling

Stockholders’

Balance at January 1, 2025

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Stock-based compensation

Issuance of Common Stock and pre-funded warrants through public

Issuance of held-back shares from Sinclair

Cashless exercise of high trail warrants

Exercise of pre-funded warrants issued through public offering

Conversion of convertible note

contribution from troubled debt restructuring with related party

Stock split share adjustment

Cancellation of common shares

Impairment of non-controlling interests

Balance at March 31, 2025

$ ( 309,169 )

Stock-based compensation

Issuance of vested RSUs, net of shares held back to offset tax

Issuance of pre-funded warrants in lieu of cash interest payments on related party debt

Accrued pre-funded warrants in lieu of cash interest

Balance at June 30, 2025

$ ( 316,529 )

The accompanying notes are an integral part of

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AGRIFY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH

FLOWS (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

For the three months ended

For the six months ended

Cash flows from operating activities:

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Depreciation and amortization

Non-cash interest expense

Lease expense

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Change in provision for credit losses, net

Change in provision for inventory

Change in inventory reserves

Loss on inventory write-down

(Gain) loss on disposal of property and equipment

Gain on disposal of property and equipment

Gain on early termination of lease

Change in contingent consideration

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Prepaid expenses and other current assets

Operating lease right-of-use assets

Other non-current assets

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Contract liabilities

Other liabilities

Net cash and cash equivalents used in operating activities

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Purchases of property and equipment

Related party acquisition of MC Brands

Proceeds from disposal of property and equipment

Proceeds from repayment of loan receivable

Net cash and cash equivalents provided by investing activities

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

Cash flows from financing activities:

Proceeds from issuance of Common Stock

Proceeds from exercise of p re-funded warrants

Proceeds from related party notes

Proceeds from notes payable

Proceeds from issuance of Common Stock through an S-1 and prefunded warrants offering

Proceeds from exercise of S-1 Prefunded Warrants

Proceeds from issuance of related party notes

Payments on insurance financing loans

Repayments of notes payable

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

Net decrease in cash and cash equivalents

Payments on other financing loans

Payments on insurance financing loans

Net cash and cash equivalents provided by financing activities continuing operations

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of period

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Supplemental disclosure of non-cash investing and financing activities

Reclassification of accounts payable to notes payable

Conversion of related party debt interest into pre-funded warrants

Accrued pre-funded warrants in lieu of cash interest

Reclassification of accounts payable and accrued interests to notes payable

Cashless exercise of liability classified warrants

Financing of prepaid insurance

Contribution from troubled debt restructuring with related party

Accrued interest consolidated into related party debt

Deemed contribution from troubled debt restructuring with related party

Transfer of loans receivable from noncurrent to current

Conversion of convertible notes into equity

Consolidation of related party debt

Consolidation of related party debt principal

Fair value of warrants in connection with reclassification and issuance

Conversion of related party debt to equity

The accompanying notes are an integral part of

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AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Overview, Basis of Presentation

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with its subsidiaries, the “Company”) is a developer of branded innovative solutions for the cannabis and hemp industries.

The Company’s Señorita brand offers consumers hemp-derived tetrahydrocannabinol (“THC”) beverages that mirror

well-known cocktails like a margarita – in three flavors – classic Lime Jalapeño Margarita, Mango Margarita, and Paloma.

Known for its clean, fresh taste and commitment to high-quality, natural ingredients, Señorita offers a low-sugar, low-calorie

alternative to alcoholic beverages and is available at top retailers including Total Wine, ABC Fine Wine & Spirits, and Binny’s

in ten states in the United States and Canada, with plans for expansion and future availability in premier on-premises destinations.

The Company’s portfolio of consumer-packaged goods brands includes Señorita brand which offers consumers hemp-derived tetrahydrocannabinol

(“THC”) beverages that mirror well-known cocktails like a margarita – in four flavors – classic Lime Jalapeño

Margarita, Mango Margarita, Paloma and Ranch Water.

Known for its clean, fresh taste and commitment to high-quality, natural ingredients,

Señorita offers a low-sugar, low-calorie alternative to alcoholic beverages and is available at top retailers including Total Wine,

ABC Fine Wine & Spirits, and Binny’s in eleven U.S.

states and Canada, with plans for expansion and future availability in premier

on-premises destinations.

Other hemp-derived products including RYTHM beverages and incredibles and Beboe edible products are primarily

sold online and through direct-to-retail partnerships

Agrify has also historically

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required for premium concentrates.

Additionally, prior to its sale on December 31, 2024, our proprietary micro-environment-controlled

Additionally, prior to its sale on December 31, 2024, the Company’s proprietary micro-environment-controlled

Agrify Vertical Farming Units(“VFUs”) enabled cultivators to produce high quality products for the cannabis industry.

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referred to herein by the words “we,” “us,” “our,” and similar terminology.

The Company has ten wholly-owned

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

in certain companies.

The Company has eleven wholly-owned

consolidated subsidiaries, which are collectively referred to as the “Subsidiaries” and seven out of eleven subsidiaries are

related to discontinued operations.

On December 12, 2024, the

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the Company reclassified the assets and liabilities of the Cultivation Business associated with discontinued operations in the Condensed

Consolidated Balance Sheet as of March 31, 2025 and December 31, 2024.

Consolidated Balance Sheet as of June 30, 2025 and December 31, 2024.

In connection with the reclassification as discontinued operations,

the assets and liabilities were remeasured to fair value less cost to sell as of March 31, 2025.

The balances as of December 31, 2024

reflect historical carrying values, without remeasurement.

For further discussion on the discontinued operations, refer to Note 6 of this

Quarterly Report on Form 10-Q (this “Quarterly Report”).

the assets and liabilities were remeasured to fair value less cost to sell.

For further discussion on the discontinued operations, refer

to Note 6 included elsewhere in the notes to the unaudited condensed consolidated financial statements.

On March 30, 2025, the Company

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Further, the Company reclassified the assets and liabilities

of the Extraction Business associated with discontinued operations in the Condensed Consolidated Balance Sheet as of March 31, 2025 and

of the Extraction Business associated with discontinued operations in the Condensed Consolidated Balance Sheet as of June 30, 2025 and

December 31, 2024.

In connection with the reclassification as discontinued operations, the assets and liabilities were remeasured to fair

value less cost to sell as of March 31, 2025.

value less cost to sell as of June 30, 2025.

The balances as of December 31, 2024 reflect historical carrying values, without remeasurement.

For further discussion on the discontinued operations, refer to Note 6.

For further discussion on the discontinued operations, refer to Note 6 included elsewhere in the notes to the unaudited condensed consolidated financial statements.

On May 20, 2025, the Company

entered into a purchase agreement with VCP IP Holdings, LLC (“VCP”), an indirectly wholly-owned subsidiary of Green Thumb

Industries Inc.

(“Green Thumb”), a related party, pursuant to which the Company acquired all of the equity interests in MC

Brands LLC and its wholly-owned subsidiary Core Growth LLC (together referred to as “MC Brands”).

The assets of MC Brands

consist primarily of intellectual property rights to the incredibles brand.

The aggregate consideration exchanged for the equity

interest was cash consideration of $ 5.1 million.

In connection with the purchase of MC Brands, the Company also licensed the right to

use the RYTHM and Beboe brands from Green Thumb for hemp-derived THC beverages and similar products.

Nasdaq Deficiency Notice

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equity requirement as set forth in Listing Rule 5550(b)(1).

On March 5, 2024, the Company

received a deficiency letter from the Nasdaq Listing Qualifications Department (the “Staff”) notifying the Company that,

for the last 30 consecutive business days, the bid price for the Company’s 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”).

On March 5, 2024, the Company received a deficiency letter from

the Nasdaq Listing Qualifications Department (the “Staff”) notifying the Company that, for the last 30 consecutive business

days, the bid price for the Company’s 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”).

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

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

The compliance period for the Company expired on September 3, 2024.

On September 4, 2024, the Staff notified the company in writing that

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

On October 8, 2024, the Company completed a 1-for-15 reverse stock split of its 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 the Company that it had regained compliance with the Minimum Bid Requirement.

In accordance with Nasdaq Listing Rule

5810(c)(3)(A), the Company had 180 calendar days to regain compliance with the Minimum Bid Requirement.

The compliance period for the

Company expired on September 3, 2024.

On September 4, 2024, the Staff notified the company in writing that it was eligible for an additional

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

On October 8, 2024, the Company

completed a 1-for-15 reverse stock split of its 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 the Company that it had regained compliance with the Minimum Bid Requirement.

Basis of Presentation and Principles of Consolidation

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adjusted for discontinued operations.

Accounting for Wholly-Owned

Accounting for Wholly-Owned Subsidiaries

The accompanying unaudited

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The Company effected a 1-for-15

reverse stock split of its Common Stock on July 5, 2023 and a 1-for-15 reverse stock split of its Common Stock on October 8, 2024.

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

otherwise indicated.

The shares of Common Stock retained a par value of $ 0.001 per share.

Accordingly, the Stockholders’ equity

(deficit) section of the condensed consolidated balance sheets reflects the reverse stock split by reclassifying from Common Stock to

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

reverse stock split of its Common Stock on October 8, 2024.

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.

The shares of Common Stock retained a par value

of $ 0.001 per share.

Accordingly, the Stockholders’ equity section of the condensed consolidated balance sheets reflects

the reverse stock split by reclassifying from Common Stock to additional paid-in capital an amount equal to the par value of the decreased

shares resulting from the reverse stock split.

Certain amounts in the condensed

consolidated financial statements related to the prior years have been reclassified to conform to the current year’s presentation.

consolidated financial statements related to the prior years have been reclassified to conform to the current year’s presentation, specifically related to discontinued operations.

Discontinued Operations

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and financial results, they have been presented in discontinued operations in accordance with ASC 205, Presentation of Financial Statements ,

separate from continuing operations for the three months ended March 31, 2025 and 2024, and as of March 31, 2025 and December 31, 2024,

separate from continuing operations for the three months and six months ended June 30, 2025 and 2024, and as of June 30, 2025 and December

31, 2024, as applicable.

For further discussion, refer to Note 6 of this Quarterly Report.

For further discussion, refer to Note 6 included elsewhere in the notes to the unaudited condensed consolidated financial statements.

Accounts Receivable, Net

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For the three months ended

March 31, 2025, the Company had four customers that accounted for 10% or more of the total revenue from continuing operations.

These customers

represented between 10% and 26% each of total revenue from continuing operations for the period.

For the three months ended March 31,

2024, the Company had no revenue from continuing operations and therefore no customer represented a significant portion of revenue from

continuing operations.

As of March 31, 2025, four

of the Company’s customers discussed above also accounted for between 15% and 37% each of accounts receivable.

As of December 31,

2024, one customer accounted for 100 % of total accounts receivable.

June 30, 2025, the Company had one related party customer and one third-party customer that accounted for 10% or more of the total revenue

from continuing operations.

A related party customer and a third-party customer represented 13 % and 38 % each of total revenue from continuing

operations for the period, respectively.

For the three months ended June 30, 2024, the Company had no revenue from continuing operations

and therefore no customer represented a significant portion of revenue from continuing operations.

For the six months ended

June 30, 2025, the Company had three third-party customers that accounted for 10% or more of the total revenue from continuing operations.

These customers represented between 11 % and 30 % each of total revenue from continuing operations for the period.

For the six months ended

June 30, 2024, the Company had no revenue from continuing operations and therefore no customer represented a significant portion of revenue

from continuing operations.

As of June 30, 2025, one

of the Company’s related party customers accounted for 14 % of accounts receivable and three of the Company’s third-party

customers also accounted for between 16 % and 40 % each of accounts receivable.

As of December 31, 2024, one third-party customer accounted

for 100 % of accounts receivable.

The Company values all its

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annually at all significant inventory locations.

Warrant Liabilities

The Company evaluates all

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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.

Issued or modified warrants

that meet all of the criteria for equity classification are recorded as a component of additional paid-in capital at the time of issuance.

Issued or modified warrants that are precluded from equity classification are recorded as a liability at their initial fair value on the

date of issuance and subject to remeasurement on each balance sheet date with changes in the estimated fair value of the warrants to be

recognized as an unrealized gain or loss in the unaudited condensed consolidated statements of operations.

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.

Issued or modified

warrants that meet all of the criteria for equity classification are recorded as a component of additional paid-in capital at the

time of issuance or when incurred.

Issued or modified warrants that are precluded from equity classification are recorded as a liability at their

initial fair value on the date of issuance and subject to remeasurement on each balance sheet date with changes in the estimated

fair value of the warrants to be recognized as an unrealized gain or loss in the unaudited condensed consolidated statements of

Fair Value of Financial Instruments

Company’s financial instruments consist of cash and cash equivalents, accounts receivable, contingent consideration, operating

lease liabilities, long-term debt, related party debt, and warrant liabilities.

Refer to Note 4 - Fair Value Measures, included elsewhere

in the notes to the unaudited condensed consolidated financial statements for details of the Company’s financial instruments.

The Company’s financial

instruments consist of cash and cash equivalents, accounts receivable, contingent consideration, operating lease liabilities, long-term

debt, related party debt, and pre-funded warrants.

Refer to Note 4 - Fair Value Measures, included elsewhere in the notes to the unaudited

condensed consolidated financial statements for details of the Company’s financial instruments.

Revenue Recognition

The Company generates

revenue from continuing operations through the sale of hemp-derived beverages.

In accordance with ASC Topic 606, Revenue

Recognition (“ASC 606”), revenue is recognized through a five-step model, as outlined below:

the customer contract :

A customer contract is identified when there is mutual approval

and commitment between the Company and its customer, the rights and obligations are clear,

payment terms are set, the contract has commercial substance, and collectability is probable.

Written or electronic signatures on contracts and purchase orders are obtained if such orders

are issued in the normal course of business by the customer.

The Company generates revenue

from continuing operations through the sale of hemp-derived THC products and related party licensing arrangements.

The Company licenses intellectual property to a related party under

arrangements that provide for sales-based royalties.

The Company recognizes

royalty income derived from licensing agreements in accordance with ASC Topic 606, Revenue Recognition (“ASC 606”), specifically,

the sales-based royalty exception.

In accordance with ASC 606, revenue is recognized through a five-step model, as outlined below:

Identify the customer contract :

A customer contract is identified when there is mutual approval and commitment between the Company and its customer, the rights and obligations are clear, payment terms are set, the contract has commercial substance, and collectability is probable.

Written or electronic signatures on contracts and purchase orders are obtained if such orders are issued in the normal course of business by the customer.

Identify performance obligations that are distinct :

The Company identifies distinct performance obligations in each contract.

A performance obligation is considered distinct if the customer

can benefit from the good or service on its own or with readily available resources, and if it is separately identifiable from other

promises in the contract.

A performance obligation is considered distinct if the customer can benefit from the good or service on its own or with readily available resources, and if it is separately identifiable from other promises in the contract.

The Company’s revenue-generating activities typically have a single performance obligation.

Determine the transaction price :

The transaction price

is the amount of consideration the Company expects to receive in exchange for the sale of the product.

This amount is determined excluding

sales taxes collected on behalf of government agencies and net of any sales discounts, incentives, and returns.

● Allocate the transaction price to distinct performance

obligations :

The transaction price is allocated to each distinct performance obligation based on the relative standalone selling

prices (“SSP”) of the goods or services provided.

If a contract involves multiple performance obligations, each is accounted

for separately if distinct, and the SSP reflects the price the Company would charge if the good or service were sold separately in similar

circumstances and to similar customers.

revenue as the performance obligations are satisfied :

Revenue is recognized when control

of the product transfers to the customer, typically upon delivery or shipment, as the customer

assumes the risks and rewards of ownership.

Payment terms vary by customer, but the time

between revenue recognition and payment due is generally not significant.

For products sold

under consignment arrangements, revenue is recognized only when control is transferred to

the end customer.

The Company does not maintain a specific reserve for returns due

to the limited circumstances under which returns are permitted in customer agreements.

for slotting, listing fees, or other marketing or promotional activities, where legally permitted,

are recorded as a reduction in revenue unless a distinct good or service is received in exchange.

The transaction price is the amount of consideration the Company expects to receive in exchange for the sale of the product.

This amount is determined excluding sales taxes collected on behalf of government agencies and net of any sales discounts, incentives, and returns.

Allocate the transaction price to distinct performance obligations :

The transaction price is allocated to each distinct performance obligation based on the relative standalone selling prices (“SSP”) of the goods or services provided.

If a contract involves multiple performance obligations, each is accounted for separately if distinct, and the SSP reflects the price the Company would charge if the good or service were sold separately in similar circumstances and to similar customers.

● Recognize revenue as the performance obligations are satisfied :

- Revenue from the sale of hemp-derived THC products is recognized

when control of the product transfers to the customer, typically upon delivery or shipment, as the customer assumes the risks and rewards

of ownership.

Payment terms vary by customer, but the time between revenue recognition and payment due is generally not significant.

For products sold under consignment arrangements, revenue is recognized only when control is transferred to the end customer.

Company does not maintain a specific reserve for returns due to the limited circumstances under which returns are permitted in customer

Payments for slotting, listing fees, or other marketing or promotional activities, where legally permitted, are recorded

as a reduction in revenue unless a distinct good or service is received in exchange.

- In accordance with ASC 606-10-55-65 through 55-65B, royalty

revenue is recognized only when the underlying sale by the licensee occurs, and the performance obligation has otherwise been

This approach ensures that revenue is recognized in the period in which it is earned and determinable, consistent with the

transfer of control of the intellectual property to the licensee.

Net (Loss) Income Per Share

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stock options, restricted stock units and warrants.

For the three months ended March 31, 2024, the Company adjusts the net income available

For the six months ended June 30, 2024, the Company adjusts the net income available

to common stockholders and the weighted average common stock outstanding for the effective of dilutive securities as presented within

Note 15 – Net (Loss) Income Per Share.

As the Company has reported losses for the three months ended March 31, 2025, all potentially

dilutive securities including convertible notes, stock options, restricted stock units and warrants, are anti-dilutive, and accordingly,

basic net loss per share equals diluted net loss per share for those periods.

As the Company has reported losses for the three months ended June 30, 2025 and 2024 and

the six months ended June 30, 2025, all potentially dilutive securities including convertible notes, stock options, restricted stock units

and warrants, are anti-dilutive, and accordingly, basic net loss per share equals diluted net loss per share for those periods.

Net (loss) income per share

calculations for all periods have been adjusted to reflect the reverse stock splits effected on July 5, 2023 and October 8, 2024.

calculations for all periods have been adjusted to reflect the reverse stock split effected on October 8, 2024.

Recently Adopted Accounting Pronouncements

On December 14, 2023, the

Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Improvements to Income Tax Disclosures , a final

standard on improvements to income tax disclosures.

The standard requires disaggregated information about a reporting entity’s

effective tax rate reconciliation as well as information on income taxes paid.

The standard applies to all entities subject to income

taxes and is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation

Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Improvements to Income Tax Disclosures , a final standard

on improvements to income tax disclosures.

The standard requires disaggregated information about a reporting entity’s effective

tax rate reconciliation as well as information on income taxes paid.

The standard applies to all entities subject to income taxes and

is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions.

For public business entities (PBEs), the new requirements will be effective for annual periods beginning after December 15, 2024.

The guidance will be applied on a prospective basis with the option to apply the standard retrospectively.

The Company adopted

this new standard on January 1, 2025 and the effect of this guidance will be reflected in the financial statements for the year ended

December 31, 2025.

guidance will be applied on a prospective basis with the option to apply the standard retrospectively.

The Company adopted this new standard

on January 1, 2025 and the effect of this guidance will be reflected in the financial statements for the year ending December 31, 2025.

Recently Announced Accounting Pronouncements

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the impact of this ASU on its condensed consolidated financial statements and related disclosures.

In November 2024, the FASB

issued ASU 2024-04, Debt with Conversion and Other Options (“ASU 2024-04”), which clarifies the requirements for determining

whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

ASU 2024-04 is effective

for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods.

Early adoption

is permitted for all entities that have adopted the amendments in Update 2020-06.

Adoption can be on a prospective or retrospective basis.

The Company is currently evaluating the disclosure impact that ASU 2024-04 may have on its condensed consolidated financial statement

presentation and disclosures.

In November 2024, the

FASB issued ASU 2024-04, Debt with Conversion and Other Options (“ASU 2024-04”), which clarifies the requirements for

determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

2024-04 is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual

reporting periods.

Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06.

Adoption can be

on a prospective or retrospective basis.

The Company is currently evaluating the disclosure impact that ASU 2024-04 may have on its

condensed consolidated financial statement presentation and disclosures.

Other recent accounting pronouncements

did not or are not believed by management to have a material impact on the Company’s present or future condensed consolidated financial

Note 2 — Revenue and Contract Liabilities

Note 2 — Revenue

The Company generates revenue

in continuing operations from hemp-derived beverage sales.

For the three months ended

March 31, 2025, all of the Company’s revenue from continuing operations is transferred at a point-in-time and relates to hemp-derived

For the three months ended March 31, 2024, there was no revenue from continuing operations.

from continuing operations from hemp-derived THC products sales and royalty revenue.

For the three and six months

ended June 30, 2025, the Company generated revenue from continuing operations from hemp-derived product sales and sales-based royalty

Revenue from hemp-derived product sales is recognized at a point-in-time when control transfers to the customer.

Royalty revenue

is recognized over time as the underlying sales occurs in accordance with the terms of the related party license agreements.

For the three and six months ended June 30, 2024, the Company had no revenue from continuing operations.

The following table provides

the Company’s revenue from continuing operations disaggregated by revenue type:

Three months ended

Six months ended

(In thousands)

Hemp-derived products

Royalty revenue

Total revenue

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

6 unchanged sentences

Accounts receivable, net, consisted of the following

as of March 31, 2025 and December 31, 2024:

as of June 30, 2025 and December 31, 2024:

(In thousands)

3 unchanged sentences

There is nil allowance for credit losses as of

March 31, 2025 and December 31, 2024.

June 30, 2025 and December 31, 2024.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted

of the following as of March 31, 2025 and December 31, 2024:

of the following as of June 30, 2025 and December 31, 2024:

(In thousands)

Prepaid expenses, other

Prepaid materials

Prepaid insurance

Prepaid marketing

Other receivables

Prepaid insurance

Prepaid expenses, other

Total prepaid expenses and other current assets

1 unchanged sentence

Accrued expenses and other current liabilities

consisted of the following as of March 31, 2025 and December 31, 2024:

consisted of the following as of June 30, 2025 and December 31, 2024:

(In thousands)

1 unchanged sentence

Compensation related fees

Accrued fulfillment and manufacturing related costs

Accrued marketing fees

Litigation reserve

Accrued professional fees

Sales tax payable

Accrued interest expense

Other current liabilities

Sales tax payable

Litigation reserve

Total accrued expenses and other current liabilities

During the three months ended March 31, 2025, the company paid $ 1.5

million into escrow related to Cultivation Sale Agreement.

During the six months ended

June 30, 2025, the company paid $ 1.5 million into escrow related to Cultivation Sale Agreement.

See related legal matters in Note 16.

As of June 30, 2025 and December

31, 2024, the Company had related party accrued consulting fees with Green Thumb of approximately $ 1.3 million and $ 332 thousand, respectively.

Note 4 — Fair Value Measures

18 unchanged sentences

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

At March 31, 2025 and December

At June 30, 2025 and December

31, 2024, the Company’s assets and liabilities measured at fair value on a recurring basis were as follows:

March 31, 2025

June 30, 2025

December 31, 2024

11 unchanged sentences

Cash and cash equivalents approximate their fair value based on the short-term nature of these instruments.

Accounts receivable are presented net of an allowance for estimated

credit losses, which approximates fair value.

The carrying value of lease liabilities approximates fair value due

to the implicit discount rates used in the determination of the lease liabilities being consistent with the Company’s incremental

borrowing rates at the time of lease inception and accounting for the duration of the leases.

Long-term debt and related party debt, including the debt that has

undergone troubled debt restructuring, is carried at amortized cost, dictated by the prevailing market interest rates at the time

of each transaction in accordance with ASC Topic 470, Debt (“ASC 470”).

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 unaudited condensed consolidated statements of operations until the warrants are exercised.

Accounts receivable is presented net of an allowance for estimated credit losses, which approximates fair value.

The carrying value of lease liabilities approximates fair value due to the implicit discount rates used in the determination of the lease liabilities being consistent with the Company’s incremental borrowing rates at the time of lease inception and accounting for the duration of the leases.

Long-term debt and related party debt, including the debt that has undergone troubled debt restructuring, is carried at amortized cost, dictated by the prevailing market interest rates at the time of each transaction in accordance with ASC Topic 470, Debt (“ASC 470”).

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

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

4 unchanged sentences

The estimated fair value

of the warrant liabilities on March 31, 2025 and December 31, 2024 is determined using Level 3 inputs.

of the warrant liabilities on June 30, 2025 and December 31, 2024 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.

The volatility rate

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

However, inherent uncertainties

2 unchanged sentences

The following table summarizes

the Company’s assumptions used in the valuations as of March 31, 2025 and December 31, 2024:

the Company’s assumptions used in the valuations as of June 30, 2025 and December 31, 2024:

Exercise price

3 unchanged sentences

Discount rate - treasury yield

The following table (in

thousands) sets forth a summary of the changes in the fair value of the Level 3 warrant liabilities for the three months ended March

31, 2025 and for the year ended December 31, 2024:

(In thousands)

Three months ended

3.72 - 3.97 %

The following table sets

forth a summary of the changes in the fair value of the Level 3 warrant liabilities for the six months ended June 30, 2025 and for the

year ended December 31, 2024 and changes in the number of outstanding warrant liabilities for the six months ended June 30, 2025:

(In thousands, except number of outstanding warrant liabilities)

Six months ended

For the year ended

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suppliers may require making payments in advance of delivery of the Company’s products.

The Company’s prepaid inventory is

applied to the purchase of products once they are delivered.

Inventory consisted of the following as of March

Inventory consisted of the following as of June

30, 2025 and December 31, 2024:

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The disposition resulted

in a loss on sale of $ 11.9 million along with a loss from discontinued operations of $ 1.5 million for a total loss of $ 13.4 million,

which was recorded in net loss from discontinued operations in the consolidated statement of operations for the period ended December

The operating results of the Cultivation Business were reported as a net loss from discontinued operations in the consolidated

statements of operations through December 31, 2024, the date of disposition, and were considered material.

in a loss on sale of $ 11.9 million along with a loss from discontinued operations of $ 1.5 million for a total loss of $ 13.4 million, which

was recorded in net loss from discontinued operations in the consolidated statement of operations for the period ended December 31, 2024.

The operating results of the Cultivation Business were reported as a net loss from discontinued operations in the consolidated statements

of operations through December 31, 2024, the date of disposition, and were considered material.

The assets and liabilities

associated with discontinued operations with respect to the Cultivation Business consisted of the following as of March 31, 2025 and December

associated with discontinued operations with respect to the Cultivation Business consisted of the following as of June 30, 2025 and December

31, 2024, respectively:

(In thousands)

Current assets:

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The following table summarizes

the Company’s income from discontinued operations of the Cultivation Business for the three months ended March 31, 2025 and 2024,

respectively:

For the three months ended

(In thousands)

the Company’s income from discontinued operations of the Cultivation Business for the three and six months ended June 30, 2025

and 2024, respectively:

For the three

Cost of goods sold

Gross income (loss)

Selling, general and administrative

Gain on settlement of contingent liabilities

Total operating (loss) income

Gain on early termination of lease

Total operating expense (income)

Operating (loss) income from discontinued operations

6 unchanged sentences

the depreciation and amortization of long-lived assets, provisions for credit losses, and adjustments to net realizable value of inventories

related to discontinued operations of the Cultivation Business for the three months ended March 31:

(In thousands)

related to discontinued operations of the Cultivation Business for the three and six months ended June 30:

For the three

Depreciation and amortization

(Recovery of) provision for credit losses

Provision for slow-moving inventory

Provision for (recovery of) credit losses

Recovery of provision for slow-moving inventory

Extraction Business Discontinued Operations

2 unchanged sentences

As a result, all operations associated with the Extraction

Business have ceased as of March 31, 2025, and the Company has initiated the sale or disposal of all remaining assets related to the Extraction

In addition, all outstanding contracts associated with the Extraction Business have been or are in the process of being terminated

in accordance with their respective terms.

In connection with the discontinuation of the business, the Company reduced its workforce by

nine employees on April 1, 2025.

The discontinuation of the legacy Extraction Business represents efforts to strategically shift the Company’s

direction to support the continued expansion of its hemp-derived beverage business operations.

As a result, the Extraction Business has

been presented as discontinued operations in the condensed consolidated financial statements for all periods presented.

Business have ceased as of March 31, 2025, and the Company has initiated the sale or disposal of all remaining assets related to the

Extraction Business.

In addition, all outstanding contracts associated with the Extraction Business have been or are in the process of

being terminated in accordance with their respective terms.

In connection with the discontinuation of the business, the Company reduced

its workforce by nine employees on April 1, 2025.

The discontinuation of the legacy Extraction Business represents efforts to strategically

shift the Company’s direction to support the continued expansion of its hemp-derived products business operations.

the Extraction Business has been presented as discontinued operations in the condensed consolidated financial statements for all periods

As a result of the decision

1 unchanged sentence

for a total net gain of $ 1.5 million, was recorded in net income from discontinued operations in the condensed consolidated statement

of operations for the three months ended March 31, 2025.

The operating results of the Extraction Business were reported as a net loss

from discontinued operations in the condensed consolidated statements of operations through March 31, 2025, the date of disposition, and

were considered material.

The net loss from discontinued operations for the three months ended March 31, 2024, represents the Extraction

Business’ operating results from the prior year.

The assets and liabilities related to the Extraction Business have been separately

classified in the accompanying condensed consolidated balance sheet as of March 31, 2025 and December 31, 2024.

Balances as of March 31,

2025 have been remeasured at fair value less cost to sell as of March 31, 2025.

of operations for the six months ended June 30, 2025.

The operating results of the Extraction Business were reported as a net loss from

discontinued operations in the condensed consolidated statements of operations through June 30, 2025, and were considered material.

net loss from discontinued operations for the three and six months ended June 30, 2024, represents the Extraction Business’ operating

results from the prior year.

The assets and liabilities related to the Extraction Business have been separately classified in the accompanying

condensed consolidated balance sheet as of June 30, 2025 and December 31, 2024.

Balances as of June 30, 2025 have been remeasured at fair

value less cost to sell.

The assets and liabilities

associated with discontinued operations with respect to the Extraction Business consisted of the following as of March 31, 2025 and December

associated with discontinued operations with respect to the Extraction Business consisted of the following as of June 30, 2025 and December

31, 2024, respectively:

(In thousands)

Current assets:

18 unchanged sentences

The following table summarizes

the Company’s income (loss) from discontinued operations of the Extraction Business for the three months ended March 31, 2025 and

2024, respectively:

For the three months ended

(In thousands)

the Company’s (loss) income from discontinued operations of the Extraction Business for the three and six months ended June 30,

2025 and 2024, respectively:

For the three

Cost of goods sold

Gross (loss) profit

Gross profit (loss)

Selling, general and administrative

Impairment of right-of-use assets

Gain on disposal on property and equipment

Gain on disposal of property and equipment

Total operating expenses

Operating loss from discontinued operations

Gain on disposal of Extraction business

Other (expense) Income

(Loss) gain on disposal of Extraction business

Other income, net

Total other income

Net income (loss) from discontinued operations

Total other (expense) income

Net (loss) income from discontinued operations

Income tax effect on discontinued operations

Income (loss) from discontinued operations, net of income taxes

The condensed consolidated statements of cash

flows include continuing operations and discontinued operations.

The condensed consolidated

statements of cash flows include continuing operations and discontinued operations.

The following table summarizes

the depreciation and amortization of long-lived assets, provisions for credit losses, and adjustments to net realizable value of inventories

related to discontinued operations of Extraction Business for the three months ended March 31:

(In thousands)

related to discontinued operations of Extraction Business:

For the three

Depreciation and amortization

Provision for credit losses

(Recovery of) provision for credit losses

Recovery of provision for slow-moving inventory

Note 7 — Business Combinations

As previously disclosed in

the Form 10-K, the Company acquired certain assets from Double or Nothing, the owner and creator of the Señorita brand of hemp-derived

THC drinks, on December 12, 2024.

The transaction was accounted for as a business combination under ASC 805, Business Combinations .

The Company has determined

that the below acquisitions meet the criteria for business combinations under ASC 805, Business Combinations .

They are accounted

for by applying the acquisition method, whereby the assets acquired, and the liabilities assumed are recorded at their fair values with

any excess of the aggregate consideration over the fair values of the identifiable net assets allocated to goodwill (where applicable).

Operating results have been included in these consolidated financial statements from the date of each respective acquisition.

pro forma financial information has not been presented as the impact was not material to the Company’s consolidated financial statements.

In determining the fair

value of all identifiable assets and liabilities acquired, the most significant estimates relate to intangible assets.

For the intangible

assets identified, depending on the type of intangible asset and the complexity of determining its fair value, an independent valuation

expert or management may develop the fair value, using appropriate valuation techniques, which are generally based on a forecast of the

total expected future net cash flows and take into consideration other significant assumptions such as the expected use, market uncertainty

and the intangible asset useful lives.

Acquisition of MC Brands LLC

On May 20, 2025, the Company

entered into a purchase agreement with VCP IP Holdings, LLC (“VCP”), an indirect wholly-owned subsidiary of Green Thumb,

a related party, pursuant to which the Company acquired all of the equity interests in MC Brands LLC and its wholly-owned subsidiary Core

Growth LLC (together referred to as “MC Brands”).

The assets of MC Brands consist primarily of intellectual property rights

to the incredibles brand.

The aggregate consideration exchanged for the equity interest was $ 5.1 million of cash.

The Company prepared a preliminary

purchase price allocation for the business combination.

The preliminary valuation was based on management’s estimates and assumptions

which are subject to change within the purchase price allocation period (generally not more than one year from the acquisition date).

The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of the intangible assets acquired

and the residual goodwill.

The following table summarizes the initial accounting

purchase price allocation based on management’s estimates and assumptions which are subject to change within the purchase price

allocation period (generally not more than one year from the acquisition date).

Final valuations of the assets acquired and liabilities

assumed are not yet complete due to the inherent complexity associated with valuations and the short period of time between the acquisition

date and the period end.

As part of the preliminary purchase accounting, the Company recorded intangible assets of $ 4.8 million relating

to the incredibles trade name intellectual property and $ 275 thousand of customer relationships.

The preliminary estimates for

useful lives of the identified intangibles are five years for trade names and seven years for customer relationships with a weighted average

useful life of 5.11 years.

As the total purchase price equaled the fair value of the net identifiable assets acquired, no goodwill was

The following table summarizes

the preliminary allocation of the purchase price:

Allocation of Purchase Price (in thousands)

Accounts Receivable

Customer Relationships

Total assets acquired at fair value

Accounts Payable

Total liabilities assumed at fair value

Total purchase price

As of March 31, 2025, the

preliminary purchase price allocation remains unchanged.

The valuation of certain acquired intangible assets and the resulting goodwill

continues to be based on preliminary estimates.

The Company is in the process of obtaining additional information necessary to complete

the valuation analysis.

As such, the purchase price allocation remains provisional and is subject to change within the measurement period.

Refer to Note 8 – Intangible

Assets, Net in this Quarterly Report, for further information related to the identified intangible assets acquired in this transaction.

Acquisition – Double or Nothing

As previously disclosed,

on December 12, 2024, the Company acquired certain assets from Double or Nothing, the owner and creator of the Señorita brand of

hemp-derived THC drinks.

As of June 30, 2025, the Company has completed its purchase price allocation for the Double or Nothing business

The final allocation remains unchanged from the preliminary amounts disclosed in the Company’s financial statements

for the fiscal year ended December 31, 2024.

Based on the information available to management, no further adjustments are expected.

the measurement period has ended and the purchase accounting is now considered final in accordance with ASC 805.

following table summarizes the final allocation of purchase price for Double or Nothing:

Allocation of Purchase Price (in thousands)

Customer Relationships

Total purchase price

Note 8 — Intangible Assets, Net

Intangible assets, net at March 31, 2025 and

December 31, 2024 are summarized as follows:

March 31, 2025

Estimated Gross Accumulated Net

Useful Life Carrying Accumulated Impairment Carrying

in Years Amount Amortization Amount Amount

Tradenames 7 6,100 ( 215 ) —

Intangible assets, net at June 30, 2025 and December

31, 2024 are summarized as follows:

June 30, 2025

Customer Relationships

$ 8,900 $ ( 284 ) $ —

December 31, 2024

Estimated Gross Accumulated Net

Useful Life Carrying Accumulated Impairment Carrying

in Years Amount Amortization Amount Amount

Tradenames 7 6,100 —

Customer Relationships

1 unchanged sentence

expense of $ 399 thousand and $ 0 , respectively, in general and administrative expense in the condensed consolidated statements of operations

for the three months ended March 31, 2025 and the three months ended March 31, 2024.

for the three months ended June 30, 2025 and 2024, respectively.

The Company recorded amortization

expense of $ 683 thousand and $ 0 , respectively, in general and administrative expense in the condensed consolidated statements of operations

for the six months ended June 30, 2025 and 2024, respectively.

Note 9 — Debt

2 unchanged sentences

Related party debt:

Green Thumb Note

Convertible Notes

Total related party debt

5 unchanged sentences

Long-term debt:

Convertible Notes

Other notes payable

2 unchanged sentences

Long-term debt, net of current

Green Thumb Convertible Note

On November 5, 2024, the Company

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 of the Company and ranks senior to all

indebtedness of the Company.

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

The principal

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

The Green Thumb Note provides for advances of up to $ 20 million in

the aggregate, of which $ 10 million was advanced upon issuance.

The Green Thumb Note was amended on May 8, 2025 to issue pre-funded warrants

in lieu of cash interest with 18,614 pre-funded warrants issued on May 8, 2025 and an additional 11,373 pre-funded warrants to be issued

on September 1, 2025, replacing the previously defined cash interest payment dates.

The number of pre-funded warrants is equal to

the cash interest amount otherwise payable on The Green Thumb Note divided by the closing share price on May 8, 2025, which is the effective

Convertible Notes

On November 5, 2024, the

Company issued a secured convertible note (the “November 2024 Note”) to RSLGH, LLC (“RSLGH”), a subsidiary of

Green Thumb, a related party.

The November 2024 Note is a secured obligation of the Company and ranks senior to all indebtedness of the

Company except for the May 2025 Notes (as defined below), which rank on parity with the November 2024 Note.

The November 2024 Note will

mature on November 5, 2025 and has a 10.0 % annualized interest rate.

The principal amount of the November 2024 Note will be payable on

the maturity date.

The November 2024 Note provides for advances of up to $ 20 million in the aggregate, of which $ 10 million was advanced

upon issuance.

The November 2024 Note was amended on May 8, 2025 to issue pre-funded warrants in lieu of cash interest, with 18,614 pre-funded

warrants issued on May 8, 2025 and an additional 11,373 pre-funded warrants to be issued on September 1, 2025, which were issued in lieu

of the cash interest that would otherwise be payable under the November 2024 Note.

The number of pre-funded warrants is equal to the cash

interest amount otherwise payable on the November 2024 Note divided by the closing share price on May 8, 2025, which is the effective

date of the amendment.

No changes were made to the conversion price of the principal amount of the Green Thumb Note.

The Green Thumb Note imposes

certain customary affirmative and negative covenants upon the Company, including covenants relating to corporate existence, indebtedness,

liens, distributions, affiliate transactions, and issuance of other notes.

If an event of default under the Green Thumb Note occurs, the

Investor can elect to redeem the Green Thumb Note for cash equal to the then-outstanding principal amount of the Green Thumb 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 14 % from the date of a default or event of default.

The Company is in compliance with these covenants.

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.

Borrowings under the Green

Thumb Note as of March 31, 2025 totaled $ 10 million which are recorded on the Company’s condensed consolidated balance sheets in

related party debt.

Interest expense incurred on the Green Thumb Note amounted to approximately $ 250 thousand and $ 0 thousand for the

three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, future minimum principal payments on all debt positions, excluding accrued interest amounts, were as follows:

No changes were made to the conversion price of the principal amount of the November 2024 Note.

On May 22, 2025,

the Company and RSLGH entered into a second amendment to the November 2024 Note, which amended the terms to, among other things, permit

RSLGH to elect, subject to any required approvals under Nasdaq listing rules, to receive pre-funded warrants in lieu of shares of Common

Stock upon conversion of the November 2024 Note at a conversion price equal to the existing conversion price of $ 3.158 less the $ 0.001

exercise price of each pre-funded warrant.

May 22, 2025, the Company issued secured convertible notes with an aggregate original principal amount of $ 30.0 million (collectively

the “May 2025 Notes”) to RSLGH and to certain other third-party accredited investors.

The May 2025 Notes are secured obligations

of the Company and rank senior to all indebtedness of the Company except for the November 2024 Note, which ranks on parity with the May

The May 2025 Notes will mature on November 22, 2026 and accrue interest at a 10.0 % annualized rate, with interest to be paid

on the first calendar day of each September and March while the May 2025 Notes are outstanding, in pre-funded warrants, beginning September

The principal amount of the May 2025 Notes will be payable on the maturity date.

The May 2025 Notes may be converted into Common

Stock or, at the election of the holder, into pre-funded warrants, with a beneficial ownership limitation for RSLGH of 49.99 % and a beneficial

ownership limitation for other holders of 4.99 %, in each case subject to applicable Nasdaq listing rules.

If a holder elects to convert

the May 2025 Notes into Common Stock, the conversion price per share will be $ 23.53 , equal to the most recent closing price of the Common

Stock on the Nasdaq Capital Market at the time the May 2025 Notes were issued, subject to customary adjustments for certain corporate

If a holder elects to convert the May 2025 Notes into pre-funded warrants, and for interest payments payable in the form of pre-funded

warrants, the conversion price per pre-funded warrant will be equal to the $ 23.53 conversion price less than $ 0.001 exercise price of

The conversion of the May 2025 Notes into Common Stock and/or pre-funded warrants is subject to certain customary conditions

and, to the extent necessary, the receipt of stockholder approval under Nasdaq listing rules.

The November 2024 Note and

the May 2025 Notes (together referred to as “the Notes”) impose certain customary affirmative and negative covenants upon

the Company, including covenants relating to ranking and reservation of shares.

If an event of default under a Note occurs and is not

waived, the holder can elect to accelerate all or a portion of the then-outstanding principal amount of the applicable Note, plus accrued

and unpaid interest, including default interest, which accrues at a rate per annum equal to 14 % from the date of a default or event of

The Company is in compliance with these covenants as of June 30, 2025.

The Company determined the

convertible notes do not contain features that qualify as embedded derivatives in accordance with ASC 815.

Borrowings under the Notes

as of June 30, 2025 totaled $ 40.0 million, $ 10.0 million of which are recorded on the Company’s condensed consolidated balance sheets

in related party debt, current, $ 27.0 million of which are recorded in related party debt, and the remaining are reported in long-term

debt, net of current.

Related party interest expense

incurred on the Notes amounted to approximately $ 548 thousand and $ 0 for the three months ended June 30, 2025 and 2024, respectively.

Related party interest expense incurred on the Notes amounted to approximately $ 798 thousand and $ 0 for the six months ended June 30,

2025 and 2024, respectively.

Interest expense

incurred on the Notes related to unaffiliated third parties amounted to approximately $ 33 thousand and $ 0 for the three months ended

June 30, 2025 and 2024, respectively.

Interest expense incurred on the Notes related to unaffiliated third parties amounted to

approximately $ 33 thousand and $ 0 thousand for the six months ended June 30, 2025 and 2024, respectively.

As of June 30, 2025, future

minimum principal payments on all debt positions, excluding accrued interest amounts, were as follows:

Years ending December 31 (In thousands)

2 unchanged sentences

Note 10 — Leases

The determination as to whether

any arrangement contained a lease at its inception was performed based on whether or not the Company has the right to control the asset

during the contract period.

The lease term was determined assuming the exercise of options that were reasonably certain to occur.

with an original lease term of 12 months or less at inception were not reflected in the Company’s condensed consolidated balance

sheet and those lease costs are expensed on a straight-line basis over the respective term.

Leases with a term greater than 12 months

were reflected as non-current right-of-use assets and current and non-current lease liabilities in the Company’s condensed consolidated

balance sheets.

The determination as to

whether any arrangement contained a lease at its inception was performed based on whether or not the Company has the right to control

the asset during the contract period.

The lease term was determined assuming the exercise of options that were reasonably certain to

Leases with an original lease term of 12 months or less at inception were not reflected in the Company’s condensed consolidated

balance sheet and those lease costs are expensed on a straight-line basis over the respective term.

Leases with a term greater than 12

months were reflected as non-current right-of-use assets and current and non-current lease liabilities in the Company’s condensed

consolidated balance sheets.

As the implicit interest

5 unchanged sentences

lease and non-lease elements, both were accounted for as a single lease component.

As of March 31, 2025 and

As of June 30, 2025 and

December 31, 2024, the Company had no active finance leases.

Also during the three months

ended March 31, 2025, in connection with the discontinuation of Extraction Business, the Company subleased the assets under one of its

Also during the six months

ended June 30, 2025, in connection with the discontinuation of Extraction Business, the Company subleased the assets under one of its

leases, with the sublease commencement date on April 1, 2025, for $ 9 thousand per month.

The Company recognized an impairment of right-of-use

assets of $ 24 thousand, within loss from discontinued operations in the condensed consolidated statements of operations.

During the three months ended

March 31, 2025, in connection with the discontinuation of Extraction Business, the Company early terminated a lease and recognized a loss

The Company recognized a sublease income of

$ 27 thousand, within loss from discontinued operations in the condensed consolidated statements of operations.

The Company recognized

an impairment of right-of-use assets of $ 24 thousand, within loss from discontinued operations in the condensed consolidated statements

of operations.

During the six months ended

June 30, 2025, in connection with the discontinuation of Extraction Business, the Company terminated a lease early and recognized a loss

on lease termination of $ 161 thousand, within gain on disposal of Extraction Business in the condensed consolidated statements of operations.

As of March 31, 2025, the

As of June 30, 2025, the

Company did not have any operating leases related to continuing operations.

1 unchanged sentence

lease term, or weighted average discount rate, and cash paid for operating leases are presented for continuing operations for the three

months ended March 31, 2025.

As of March 31, 2025, there is no future lease payment related to continuing operations.

and six months ended June 30, 2025.

As of June 30, 2025, there is no future lease payment related to continuing operations.

Note 11 — Stockholders’ Equity

Public Offerings

On February 27, 2024, the

4 unchanged sentences

The public offering price for each share of Common Stock was $ 5.70 , and the offering price for each pre-funded

warrant is $ 5.685 , which equals the public offering price per share of the Common Stock, less the $ 0.015 per share exercise price of each

pre-funded warrant.

warrant is $ 5.685 , which equals the public offering price per share of the Common Stock, less the $ 0.015 per share exercise price of

each pre-funded warrant.

The Company issued 4,482

6 unchanged sentences

The Placement Agents Warrants were exercisable on a cash basis, unless

there was not an effective registration statement covering the issuance of the shares issuable upon exercise of the Placement Agents Warrants

or if shareholder approval for the full exercise of the Placement Agents Warrants was not received, in which case the Placement Agents

Warrants will also be exercisable on a cashless exercise basis at Alexander Capital’s election.

The Placement Agent Warrants were

exercised in full during November 2024.

The measurement of fair value

of the Placement Agents Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date

of issuance (i.e., share price of $ 7.80 , exercise price of $ 5.70 , term of five years, volatility of 128 %, risk-free rate of 4.32 %, and

expected dividend rate of 0 %).

The grant date fair value of these Placement Agents Warrants was estimated to be $ 31 thousand on February

27, 2024, and was originally recorded within additional paid-in capital.

As the Placement Agents Warrants were exercised during the year

ended December 31, 2024, the related amounts remain within equity as part of the total proceeds from the issuance of Common Stock.

there was not an effective registration statement covering the issuance of the shares issuable upon exercise of the Placement Agents

Warrants or if shareholder approval for the full exercise of the Placement Agents Warrants was not received, in which case the Placement

Agents Warrants would also be exercisable on a cashless exercise basis at Alexander Capital’s election.

The Placement Agent Warrants

were exercised in full during November 2024.

The measurement of fair

value of the Placement Agents Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at

the date of issuance (i.e., share price of $ 7.80 , exercise price of $ 5.70 , term of five years, volatility of 128 %, risk-free rate of

4.32 %, and expected dividend rate of 0 %).

The grant date fair value of these Placement Agents Warrants was estimated to be $ 31 thousand

on February 27, 2024, and was originally recorded within additional paid-in capital.

As the Placement Agents Warrants were exercised

during the year ended December 31, 2024, the related amounts remain within equity as part of the total proceeds from the issuance of

Common Stock.

Related Party Warrant Issuance

On May 21, 2024, in connection

with the amendment of previously outstanding notes, the Company issued 492,204 and 525,114 Pre-Funded Warrants to GIC Acquisitions and

CP (the “Related Party Pre-Funded Warrants”), respectively, in exchange of notes payable amounting approximately to $ 2.29

million and $ 11.5 million, respectively.

The Related Party Pre-Funded Warrants can be used to purchase Company’s Common Stock with

par value of $ 0.001 at an exercise price of $ 0.015 .

The Related Party Pre-Funded Warrants have been identified as freestanding financial

instruments and were determined not to be indexed to the Company’s own stock.

Accordingly, the Related Party Pre-Funded Warrants

are precluded from being classified within equity and classified as a liability with subsequent changes in fair value recognized each

reporting period in earnings.

The fair value of the Related Party Pre-Funded Warrants on the issuance date was $ 5,600,334 determined as

the intrinsic value.

On June 30, 2024, the Company

executed an amendment to the Related Party Pre-Funded Warrants, pursuant to which the Company revised certain provisions of the Related

Party Pre-Funded Warrants to (i) remove the adjustment to the exercise price of the Related Party 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 %.

The classification of the Related Party Pre-Funded Warrants was reassessed

upon the modification and the Related Party Pre-Funded Warrants were determined to meet all of the additional requirements for equity

classification.

Accordingly, as of June 30, 2024, the Company remeasured the Related Party Pre-Funded Warrants to its fair value immediately

prior to the modification and recognized the change in fair value of approximately $ 1.2 million in earnings.

The Company then reclassified

the Pre-Funded Warrant liability to stockholders’ equity at its post-modification fair value of $ 6.8 million.

On August 12, 2024, the stockholders of the Company approved a proposal

to amend the Related Party Pre-Funded Warrants to add the Adjustment Provisions at a future date.

Pursuant to that approval, on August

28, 2024, the Company entered into amendments to the Related Party Pre-Funded Warrants to insert the Adjustment Provisions.

This resulted

in a reassessment of the Related Party Pre-Funded Warrants such that they no longer met the requirements for equity classification and

became classified as liabilities.

They were remeasured to their fair value upon modification, resulting in a reduction in value of approximately

$ 3.1 million.

The fair value, as of August 28, 2024, of $ 3,723,383 was reclassified to a warrant liability.

As a result of the

warrant amendments and the subsequent issuance of 189,645 shares of Common Stock to Ionic at an effective purchase price of

$ 2.109 per share of Common Stock, the number of shares of Common Stock underlying the Related Party Pre-Funded Warrant held by CP

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

GIC Acquisition was adjusted to 1,085,122 .

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

affiliated with Raymond Chang and I-Tseng Jenny Chan received an aggregate of 383,127 shares of Common Stock upon the exercise.

On September 27, 2024, the

Company executed an amendment to the Related Party Pre-Funded Warrants to remove the Adjustment Provisions.

Accordingly, the Related

Party Pre-Funded Warrants met the requirements for equity classification.

The amendment also included a provision preventing the holders

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

They were remeasured to their fair value upon modification resulting in an increase to the fair value of $ 18,392,143 .

value as of September 27, 2024 of $ 20,770,707 was reclassified to equity.

Note 12 — Stock-Based Compensation and Employee Benefit Plans

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terminated, until the tenth anniversary of the date on which it was adopted by the Board of Directors.

As of March 31, 2025, there were

920 shares of Common Stock available to be granted under the Company’s 2022 Plan.

On June 11, 2025, the Company’s

stockholders approved an amendment to the 2022 Plan to increase the number of shares issuable thereunder by 250,000 shares.

30, 2025, there were 231,815 shares of Common Stock available to be granted under the Company’s 2022 Plan.

The Company’s stock

compensation expense from continuing operations was $ 587 thousand and $ 453 thousand for the three months ended March 31, 2025 and 2024,

compensation expense from continuing operations was $ 537 thousand and $ 58 thousand for the three months ended June 30, 2025 and 2024,

respectively.

The Company’s stock compensation expense from continuing operations was $ 1.1 million and $ 511 thousand for the six

months ended June 30, 2025 and 2024, respectively.

The Company’s stock

compensation expense from discontinued operations was $ 2 thousand and $ 37 thousand for the three months ended March 31, 2025 and 2024,

respectively.

compensation expense from discontinued operations was a forfeiture of $ 22 thousand and an expense of $ 23 thousand for the three months

ended June 30, 2025 and 2024, respectively.

The Company’s stock compensation expense from discontinued operations was a forfeiture

of $ 20 thousand and an expense of $ 60 thousand for the six months ended June 30, 2025 and 2024, respectively.

Stock Options

For three months ended March

For six months ended June

30, 2025, there were no options granted or exercised under the Company’s stock option plans.

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There were 75 and 216 options outstanding with a weighted average

exercise price of $ 24 thousand and $ 19 thousand as of March 31, 2025 and December 31, 2024, respectively.

exercise price of $ 27 thousand and $ 19 thousand as of June 30, 2025 and December 31, 2024, respectively.

There were 75 options vested

and exercisable with a weighted average exercise price of $ 24 thousand as of March 31, 2025.

There were 90 options vested and expected

to vest with a weighted average exercise price of $ 24 thousand as of March 31, 2025.

As of March 31, 2025, there

and exercisable with a weighted average exercise price of $ 27 thousand as of June 30, 2025.

There were no unvested options as of June

As of June 30, 2025, there

was no unrecognized compensation expense related to unvested options.

The following table summarizes information about

options vested and exercisable at March 31, 2025:

options vested and exercisable at June 30, 2025:

Options Vested and Exercisable

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$ 5,717 3 5.08 $ 4,104

The following table summarizes information about

options vested and expected to vest after March 31, 2025:

Options Vested and Expected to Vest

Price ($) Number of Options Weighted-

Life (Years) Weighted-Average

Exercise Price

$ 40,234 38 5.89 $ 40,234

$ 14,248 41 5.59 $ 14,248

$ 5,717 11 5.24 $ 5,717

Restricted Stock Units

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The following table presents restricted stock

unit activity for the three months ended March 31, 2025:

Number of Shares

Grant Date Fair Value

unit activity for the six months ended June 30, 2025:

Grant Date Fair

Unvested at December 31, 2024

Unvested at March 31, 2025

As of March 31, 2025, total

unrecognized compensation expense related to unvested restricted stock units was $ 858 thousand, which is expected to be recognized over

Unvested at June 30, 2025

As of June 30, 2025, total

unrecognized compensation expense related to unvested restricted stock units was $ 1.2 million, which is expected to be recognized over

a weighted average period of 0.6 years.

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The following tables present all warrant activity

of the Company for the three months ended March 31, 2025:

of the Company for the six months ended June 30, 2025:

Number of Warrants

Weighted-Average

Exercise Price

Warrants outstanding at December 31, 2024

Warrants outstanding at March 31, 2025

Warrants outstanding at June 30, 2025

Note 14 — Income Taxes

The Company’s effective

income tax rates were 0 % for each of the three months ended March 31, 2025 and 2024.

There was no provision for (benefit from) income

taxes for the three months ended March 31, 2025 and 2024.

There is no difference between the Company’s effective tax rates for the

2025 and 2024 periods.

There was no change in the provision for (benefit from) income taxes for the three months ended March 31, 2025

compared to the three months ended March 31, 2024.

income tax rates were 0 % for each of the three and six months ended June 30, 2025 and 2024.

There was no provision for (benefit from)

income taxes for the three and six months ended June 30, 2025 and 2024.

There is no difference between the Company’s effective tax

rates for the 2025 and 2024 periods.

There was no change in the provision for (benefit from) income taxes for the three and six months

ended June 30, 2025 compared to the three and six months ended June 30, 2024.

The utilization of the Company’s

net operating loss (“NOL”) carryforwards is subject to limitations under Section 382 of the Internal Revenue Code of 1986,

as amended and similar provisions in various state jurisdictions due to historical change in ownership provisions (“Ownership Changes”).

These limitations may reduce the amount of NOLs available in future periods and may result in the expiration of certain NOLs before they

can be utilized.

During the quarter ended June 30, 2025, the Company completed an analysis of Ownership Changes, which had not previously

been performed.

The analysis identified multiple historical ownership changes that significantly limit the utilization of federal NOLs

through the date of the most recent change on November 5, 2024, subjecting them to a minimal annual limitation.

The Company is in the

process of conducting a similar analysis for state income tax purposes.

NOLs generated after November 5, 2024 are not currently subject

to this limitation and may be available to offset future taxable income, although any future ownership changes could impose additional

The Company continues to maintain a full valuation allowance against its deferred tax assets, including NOLs, due to the

Section 382 limitations resulting from historical ownership changes and the uncertainty surrounding the Company’s ability to generate

sufficient taxable income to utilize the remaining NOLs before they expire.

On July 4, 2025, the One

Big Beautiful Bill (“OBBA”) was enacted, introducing significant and wide-ranging changes to the U.S.

includes restoration of 100 % accelerated tax depreciation on qualifying property including expansion to cover qualified production property.

Another key point is the return to immediate expensing of domestic research and experimental expenditures (“R&E”)

and accelerated tax deductions of R&E that was previously capitalized for large businesses.

The legislation also reinstates

EBITDA-based interest deduction for tax purposes.

While the Company does not expect material impact, the Company is currently assessing the potential impact of this legislation on its future

financial position, results of operations, and cash flows.

In accordance with U.S.

GAAP, the effects will be recognized in the period

of enactment.

Note 15 — Net (Loss) Income Per Share

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outstanding stock options, stock related to unvested restricted stock units, and outstanding warrants to the extent dilutive.

income per share, assuming dilution, is equal to basic net (loss) income per share for the three months ended March 31, 2025 and 2024

because the effect of dilutive securities outstanding during the periods, including convertible notes, options, restricted stock units

and warrants computed using the treasury stock method, is anti-dilutive.

The components of basic and diluted net loss

per share were as follows:

income per share, assuming dilution, is equal to basic net (loss) income per share for the three months ended June 30, 2025 and 2024 and

six months ended June 30, 2025 because the effect of dilutive securities outstanding during the periods, including convertible notes,

options, restricted stock units and warrants computed using the treasury stock method, is anti-dilutive.

The components of basic and diluted net loss per

share were as follows:

Three months ended

(In thousands, except share and per share

Net (loss) income attributable to Agrify Corporation

from continuing operations

Net income attributable to Agrify Corporation

from discontinued operations

Numerator for basic EPS - net(loss) income

available for common shareholders

Six months ended

(In thousands, except share and per share data)

Net loss attributable to Agrify Corporation from continuing operations

Net (loss) income attributable to Agrify Corporation from discontinued operations

Numerator for basic EPS - net (loss) income available for common shareholders

Effect of dilutive securities:

Interest expense on convertible notes -

from continuing operations

Numerator for diluted EPS - net (loss) income

available for common shareholders after assumed conversions

Interest expense on convertible notes - from continuing operations

Numerator for diluted EPS - net (loss) income available for common shareholders after assumed conversions

Denominator for basic EPS - Weighted-average common shares outstanding

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Conversion of convertible notes

Denominator for diluted EPS - adjusted

weighted-average common stock outstanding after assumed conversions

Denominator for diluted EPS - adjusted weighted-average common stock outstanding after assumed conversions

Basic net (loss) income per share attributable to common stockholders

Diluted net (loss) income per share attributable to common stockholders

As of March 31, 2024, the

As of June 30, 2024, the

Company had convertible notes outstanding with a principal balance of approximately $ 3.3 million convertible into 176,309 shares of Common

During the three months ended March 31, 2024, the Company also converted a portion of the convertible notes into 178,109 shares

of Common Stock.

Given the nominal exercise price of the Company’s issuance of pre-funded warrants, such pre-funded warrants are

included in in the calculation of basic net (loss) income per share and weighted for the period outstanding from issuance to March 31,

The exercise price per warrant is deemed non-substantive when compared to the fair value of the underlying shares of Common Stock.

In determination of the denominator for diluted earnings per share (“EPS”) for the three months ended March 31, 2024, the

Company assumed conversion of the 178,109 shares of Common Stock as of the beginning of the period, January 1, 2024, eliminating the weighting

of the shares from issuance to March 31, 2024.

The Company also included in the denominator for diluted EPS for the three months ended

March 31, 2024, the assumed conversion of 688,827 shares of Common Stock related to the convertible notes.

For each of the periods presented,

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

from the computation of basic and diluted net (loss) income per share with the exception of the pre-funded warrants, or penny warrants,

which are included in the computation, as detailed above.

The weighted-average number of shares of Common Stock outstanding used to calculate

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

The Company excluded the following potential

Common Stock equivalents presented based on amounts outstanding at each period end, from the computation of diluted net loss per share

attributable to Common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

Three months ended

During the six months ended June 30, 2024, the Company also converted a portion of the convertible notes into 178,109 shares of

Common Stock and 1,017,318 pre-funded warrants to purchase shares of Common Stock.

Given the nominal exercise price of the Company’s

issuance of pre-funded warrants, such pre-funded warrants are included in in the calculation of basic net (loss) income per share and

weighted for the period outstanding from issuance to June 30, 2024.

The exercise price per warrant is deemed non-substantive when compared

to the fair value of the underlying shares of Common Stock.

In determination of the denominator for diluted earnings per share (“EPS”)

for the six months ended June 30, 2024, the Company assumed conversion of the 178,109 shares of Common Stock and the 1,017,318 pre-funded

warrants as of the beginning of the period, January 1, 2024, eliminating the weighting of the shares from issuance to June 30, 2024.

Company also included in the denominator for diluted EPS for the six months ended June 30, 2024, the assumed conversion of 176,309 shares

of Common Stock related to the convertible notes.

For each of the periods

presented, the Company’s potential dilutive securities, which include stock options, restricted stock units, and warrants, and

convertible notes, have been excluded from the computation of basic and diluted net (loss) income per share with the exception of the

pre-funded warrants, or penny warrants, which are included in the computation, as detailed above.

The Convertible Notes outstanding during

the six months ended June 30, 2025 were also excluded from the computation of diluted net (loss) per share as they do not represent common

stock equivalents unless and until conversion conditions are met.

The weighted-average number of shares of Common Stock outstanding used

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

The Company excluded the following

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

per share attributable to Common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

Six months ended

Shares subject to outstanding warrants

51 unchanged sentences

$ 6.3 million is included in accounts payable and

$ 700 thousand is included in accrued expenses and other current liabilities in the condensed consolidated balance sheet.

$ 700 thousand is included in accrued expenses and other current liabilities in the consolidated balance sheet.

Two of Bowdoin’s

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for the benefit of settling this and other claims.

TRC Electronics Litigation

The Company was named as

a defendant in a complaint filed by TRC Electronics, Inc.

(“TRC”) on April 13, 2023 in the United States District Court for

the Eastern District of Pennsylvania.

In the complaint, TRC asserts two causes of action against the Company:

(1) breach of contract,

and (2) promissory estoppel.

TRC’s claims are based on allegations that the Company failed to make payments due under three purchase

orders for commercial electronics parts.

TRC was seeking damages in the amount of $ 0.5 million, plus attorneys’ fees, costs, and

post-judgment interest.

This matter was settled in January 2025 for no cost to the Company.

McCutchan, Inc.

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the Company and all other named defendants.

This matter is subject to the Cultivation sale escrow litigation reserve agreement where

the Company funded $ 1.5 million in January 2025 into escrow for the benefit of settling this and other claims.

This matter is subject to the Cultivation sale escrow litigation reserve agreement where the

Company funded $ 1.5 million in January 2025 into escrow for the benefit of settling this and other claims.

Other Litigation

12 unchanged sentences

pursue these claims, the Company could be subject to additional tax liabilities.

Refer to Note 9 – Debt,

included elsewhere in the notes to the unaudited condensed consolidated financial statements of this Quarterly Report for details of the

Company’s future minimum debt payments.

Refer to Note 10 – Leases, included elsewhere in the notes to the unaudited condensed

consolidated financial statements of this Quarterly Report for details of the Company’s future minimum lease payments under operating

lease liabilities.

Refer to Note 14 – Income Taxes, included elsewhere in the notes to the unaudited condensed consolidated financial

statements of this Quarterly Report for information regarding income tax contingencies.

Note 17 — Related Parties

Some of the current and

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

business opportunities that become available.

Some of the current and former officers and directors of the Company

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

Ben Kovler, Agrify’s Chairman and Interim Chief Executive Officer also serves as Green Thumb’s Chairman and Chief Executive

Agrify’s Chief Financial Officer is a Green Thumb employee and provides services under a shared services agreement.

Kovler, two of Agrify’s seven directors are affiliated with Green Thumb.

Additional details regarding the shared services arrangement,

convertible notes, and intellectual property and licensing agreements are provided in the sections below.

The following table describes the net activity

1 unchanged sentence

Three months ended

Six months ended

(In thousands)

Green Thumb Industries

The net activity of $ 3.4

million during the three months ended March 31, 2025 consists of $ 1.4 million of support services performed by Green Thumb on behalf of

the Company, which is comprised of $ 1.0 million in salary charges and $ 0.4 million in non-salary charges, and $ 250 thousand interest charges,

offset by $ 80 thousand of equipment sales and beverage sales from the Company to Green Thumb.

million during the three months ended June 30, 2025 consists of $ 2.9 million of support services performed by Green Thumb on behalf of

the Company, $ 182 thousand non-royalty chargeback expense, $ 548 thousand interest charges for the Convertible Notes, offset by $ 245 thousand

royalty revenue from Green Thumb.

The net activity of $ 4.9

million during the six months ended June 30, 2025 consists of $ 4.3 million of support services performed by Green Thumb on behalf of the

Company, which is comprised of $ 3.7 million in salary charges and $ 562 thousand in non-salary charges, and $ 798 thousand interest charges,

$ 182 thousand non-royalty chargeback expense, offset by $ 80 thousand of equipment sales and beverage sales and $ 245 thousand royalty revenue

from the Company to Green Thumb.

The following table summarizes

the net related party payable as of March 31, 2025 and December 31, 2024:

the net related party payable as of June 30, 2025 and December 31, 2024:

(In thousands)

Green Thumb Industries

The net related party payable

of $ 12.1 million as of March 31, 2025, consists of $ 1.7 million service charge payable, $ 10.0 million convertible notes payable, $ 0.4

million accrued interest payable, offset by $ 80 thousand receivable from equipment sales and beverage sales.

Green Thumb Convertible Note

On November 5, 2024, the Company issued the Green

Thumb Note to Investor.

For further discussion on the note, refer to Note 9 of this Quarterly Report.

of $ 38.8 million as of June 30, 2025, consists of $ 1.3 million service charge payable, $ 37.0 million convertible notes payable, $ 443 thousand

accrued interest payable, $ 232 thousand non-royalty chargeback payable, offset by $ 181 thousand receivable from royalty revenue.

Related Party Royalty Revenue

On May 20, 2025, the Company

acquired intellectual property rights to the incredibles brand, as part of the related party acquisition of MC Brands.

In connection

with the acquisition, the Company also licensed incredibles brand back to Green Thumb under a license arrangement and recognized

related party royalty revenue.

For further discussion on the acquisition and royalty revenue, refer to Note 7 and Note 2 included elsewhere

in the notes to the unaudited condensed consolidated financial statements.

Convertible Notes

On November 5, 2024, the

Company issued the November 2024 Note to RSLGH, an indirect wholly-owned subsidiary of Green Thumb, a related party.

On May 22, 2025, the Company issued a May 2025 Note with an original principal amount

of $ 27.0 million to RSLGH.

For further discussion on these notes, refer to Note 9 included elsewhere in the notes to the unaudited condensed

consolidated financial statements.

Support Services Agreement

On May 20, 2025, the Company

entered into an Amended and Restated Shared Services Agreement (the “Services Agreement”) with Vision Management Services,

LLC (“VMS”), an indirect wholly-owned subsidiary of Green Thumb, a related party.

Under the Services Agreement, VMS will provide

certain administrative, supply chain, operations management, sales and marketing, and technical services to the Company and its subsidiaries.

As consideration for those services, the Company pays VMS service fees equal to (i) 125 % of the costs incurred by VMS in connection with

any services provided by non-dedicated personnel and (ii) 100 % of such costs incurred by VMS in connection with services provided by dedicated

personnel and any third-party costs incurred in connection with the services.

The service fees are payable in cash or, upon mutual agreement

of the Company and VMS and to the extent permitted under applicable Nasdaq listing rules, in Common Stock or in pre-funded warrants, with

the value per share of Common Stock or pre-funded warrant being equal to $ 26.68 , the most recent closing price of the Company’s

Common Stock on the Nasdaq Capital Market as of the time the Services Agreement was executed.

The maximum cost for services provided by

non-dedicated personnel during the one-year term of the Services Agreement may not exceed $ 3.0 million unless the parties otherwise agree

Note 18 — Segment Reporting

The Company operates in one

consolidated segment, which is hemp-derived THC beverages.

The Company’s Chief Operating Decision Maker, Benjamin Kovler, Chairman

and Interim Chief Executive Officer of the Company, reviews net income (loss) of the Company when making resource allocation decisions.

Such information is presented in the condensed consolidated statements of operations.

The Company has determined

that it operates as a single operating and reporting segment in accordance with ASC 280, Segment Reporting.

This is due to the key decisions

and allocation of resources happening in a centralized manner based on the review of the Company’s Chief Operating Decision Maker

(“CODM”), Benjamin Kovler, the Company’s Chairman and Interim Chief Executive Officer, of Operating income from continuing

operations of the Company.

This profit measure is presented in the Condensed Consolidated Statements of Operations and the disaggregation

of sales from hemp-derived THC products and royalties is presented in Note 2 – Revenue.

There are no significant expenses associated

with the royalty revenue and the CODM does not review expense allocations, amortization expense or specific assets when reviewing royalty

Note 19 — Subsequent Events

3 unchanged sentences

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