Nature of Business and Basis of Presentation

12 Months Ended

Dec. 31, 2021

Nature of Business and Basis of Presentation [Abstract]

Nature of Business and Basis of Presentation

Note 1 — Nature of Business and Basis of Presentation

Description of Business

Agrify Corporation (“Agrify” or the “Company”) is a developer of highly advanced and proprietary precision hardware and software grow solutions for the indoor agriculture marketplace and provides equipment and solutions for cultivation, extraction, post-processing, and testing for the cannabis and hemp industry. The Company was formed in the State of Nevada on June 6, 2016 as Agrinamics, Inc., and subsequently changed its name to Agrify Corporation. The Company is sometimes referred to herein by the words “we,” “us,” “our,” and similar terminology.

The Company has eight wholly owned subsidiaries, which are collectively referred to as the “Subsidiaries”:

● AGM Service Corp LLC (formerly AGM Service Corp Inc.);

● TriGrow Systems, LLC (“TriGrow”, which acted as the Company’s exclusive distributor and which was acquired in January 2020 as TriGrow Systems, Inc. and converted to TriGrow Systems, LLC in May 2020);

● Ariafy Finance, LLC;

● Agxiom, LLC;

● Harbor Mountain Holdings, LLC (“HMH”)(acquired in July 2020);

● Cascade Sciences, LLC (“Cascade”)(which was acquired by the Company on October 1, 2021);

● Precision Extraction NewCo, LLC (“Precision”)(which was a newly formed subsidiary in connection with October 1, 2021 acquisition of Mass2Media, LLC, d/b/a PX2 Holdings, LLC, d/b/a Precision Extraction Solutions and Cascade); and

● PurePressure, LLC (“PurePressure”)(which was acquired by the Company on December 31, 2021).

The Company also has ownership interests in the following companies:

● Teejan Podoponics International LLC (“TPI”)(the Company has owned 50% of TPI” since December 2018);

● Agrify-Valiant, LLC (“Agrify-Valiant”)(the Company owns 60% of Agrify-Valient, which was formed in December 2019); and

● Agrify Brands, LLC (“Agrify Brands”)(formerly TriGrow Brands, LLC)(the Company owns 75% of Agrify Brands, which ownership position was created as part of the January 2020 acquisition of TriGrow).

On February 1, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with LS Holdings Corp. (“Lab Society”), Lab Society NewCo, LLC, a newly formed wholly owned subsidiary of the Company (“Merger Sub”), Michael S. Maibach Jr. as the Owner Representative thereunder, and each of the shareholders of Lab Society (collectively, the “Owners”), pursuant to which the Company agreed to acquire Lab Society. Concurrently with the execution of the Merger Agreement, the Company consummated the merger of Lab Society with and into Merger Sub, with Merger Sub surviving such merger as a wholly owned subsidiary of the Company (the “Lab Society Acquisition”). See Note 23, Subsequent Events included elsewhere in the notes to the consolidated financial statements.

Reverse Stock Split

On January 12, 2021, the Company effected a 1-for-1.581804 reverse stock split. 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.

Initial Public Offering and Secondary Public Offering

On February 1, 2021, we closed our initial public offering, or (“IPO”), of 6,210,000 shares of common stock (inclusive of 810,000 shares of common stock from the full exercise of the over-allotment option of shares granted to the underwriters). The offer and sale of all of the shares in the IPO were registered under the Securities Act of 1933, as amended, pursuant to a registration statement on Form S-1 (File Nos. 333- 251616 and 333-252490), which was declared effective by the SEC on January 27, 2021. Maxim Group LLC and Roth Capital Partners acted as the underwriters. The public offering price of the shares sold in the offering was $10.00 per share. The total gross proceeds from the offering were $62.1 million.

After deducting underwriting discounts and commissions of $4 million and offering expenses paid or payable by us of approximately $1 million, the net proceeds from the offering were approximately $57 million. During the fiscal year ended December 31, 2021, we used the net proceeds from the IPO for our current working capital needs to support accounts receivable growth, manage inventory to meet demand forecasts, and support operational growth.

On February 19, 2021, we consummated a secondary public offering (the “February Offering”) of 5,555,555 shares of common stock for a price of $13.50 per share, less certain underwriting discounts and commissions. On March 22, 2021, we closed on the sale of an additional 833,333 shares of common stock on the same terms and conditions pursuant to the exercise of the underwriters’ over-allotment option. The exercise of the over-allotment option brought the total number of shares of common stock sold by us in connection with the February Offering to 6,388,888 shares and the total net proceeds received in connection with the February Offering to approximately $80 million, after deducting underwriting discounts and estimated offering expenses. During the fiscal year ended December 31, 2021, we used the net proceeds from the IPO for our current working capital needs to support accounts receivable growth, manage inventory to meet demand forecasts, and support operational growth.

On September 14, 2021, the Company entered into a letter agreement and waiver (the “Letter Agreement”), to amend the terms of its underwriting agreement with the representative of the underwriters in the IPO. Pursuant to the letter agreement, the representative agreed to waive the right of first refusal included in the underwriting agreement in consideration of (i) a cash payment of $2.4 million and (ii) the right to participate as a co-manager with ten percent (10%) of the economics with respect to the Company’s next public offering of securities, payable in cash upon the closing of such offering.

Coronavirus (“COVID-19”) Pandemic

The spike of COVID-19 in the first quarter of 2020 has caused significant volatility in the U.S. markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. economy. To date, there has not been a material impact on the Company’s business operations and financial performance. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend in part, on the length and severity of these restrictions and on the Company’s ability to conduct business in the ordinary course. 

The Paycheck Protection Program

In May and July 2020, the Company entered into two separate PPP Loans with Bank of America pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (the “SBA”)(the “PPP Loans”). The Company received total proceeds of approximately $823 thousand from the unsecured PPP Loans, of which $44 thousand was forgiven in September 2021. The Company’s application related to the forgiveness of the remaining outstanding balance of PPP Loans is currently under review by the SBA.