UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from _________ to _________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO
As of August 4, 2025, the registrant had
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AGRIFY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share data)
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets associated with discontinued operations | ||||||||
| Total current assets | ||||||||
| Goodwill | ||||||||
| Intangible assets | ||||||||
| Non-current assets associated with discontinued operations | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Long-term debt, current | ||||||||
| Related party debt, current | ||||||||
| Current liabilities associated with discontinued operations | ||||||||
| Total current liabilities | ||||||||
| 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 | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 16) | ||||||||
| Stockholders’ equity: | ||||||||
| Common Stock, $ | ||||||||
| Preferred Stock, $ | ||||||||
| Preferred A Stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity attributable to Agrify Corporation | ||||||||
| Non-controlling interests | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
AGRIFY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share and per share data)
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Change in contingent consideration | ( | ) | ||||||||||||||
| Loss on disposal of property and equipment | ( | ) | ( | ) | ||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ( | ) | ||||||||||
| Other (expense) income, net | ( | ) | ||||||||||||||
| Total other (expense) income, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss from continuing operations before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax provision | ||||||||||||||||
| Loss from continuing operations, net of income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| (Loss) income from discontinued operations | ( | ) | ( | ) | ( | ) | ||||||||||
| (Loss) gain on disposal of Extraction business | ( | ) | ||||||||||||||
| Income tax effect on discontinued operations | ||||||||||||||||
| (Loss) income from discontinued operations, net of income taxes | ( | ) | ( | ) | ||||||||||||
| Net (loss) income | ( | ) | ( | ) | ( | ) | ||||||||||
| Income (loss) attributable to non-controlling interest | ||||||||||||||||
| Net (loss) income attributable to Agrify Corporation | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Net (loss) income per share: | ||||||||||||||||
| Basic (loss) income per share | ||||||||||||||||
| Continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Discontinued operations | ( | ) | ( | ) | ||||||||||||
| Net (loss) income per share attributable to Common Stockholders – basic (1) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Diluted (loss) income per share | ||||||||||||||||
| Continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Discontinued operations | ( | ) | ( | ) | ||||||||||||
| Net (loss) income per share attributable to Common Stockholders – diluted (1) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Weighted average common shares outstanding - basic (1) | ||||||||||||||||
| Weighted average common shares outstanding - diluted (1) | ||||||||||||||||
| (1) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
AGRIFY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY
(DEFICIT) (UNAUDITED)
(In thousands)
| Common Stock | Additional Paid-In- | Accumulated | Total Stockholders’ Equity (Deficit) attributable | Non-Controlling | Total Stockholders’ Equity | |||||||||||||||||||||||
| Shares | Amount | Capital | Deficit | to Agrify | Interests | (Deficit) | ||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | | $ | ( | ) | |||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||
| 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 | ( | ) | ||||||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||
| 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 | ||||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Common Stock | Additional Paid-In- | Accumulated | Total Stockholders’ Equity attributable | Non-Controlling | Total Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Capital | Deficit | to Agrify | Interests | Equity | ||||||||||||||||||||||
| Balance at January 1, 2025 | $ | | $ | $ | ( | ) | | $ | | $ | | |||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||
| Cancellation of common shares | ( | ) | ||||||||||||||||||||||||||
| Impairment of non-controlling interests | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| 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 | — | |||||||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
AGRIFY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
| For the six months ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Non-cash interest expense | ||||||||
| Lease expense | ||||||||
| Impairment of right-of-use assets | ||||||||
| Stock-based compensation expense | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Change in provision for credit losses, net | ||||||||
| Change in inventory reserves | ( | ) | ||||||
| Loss on inventory write-down | ||||||||
| Gain on disposal of property and equipment | ( | ) | ( | ) | ||||
| Gain on early termination of lease | ( | ) | ||||||
| Change in contingent consideration | ( | ) | ||||||
| Gain on settlement of contingent liability | ( | ) | ||||||
| Gain on disposal of Extraction business | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Other non-current assets | ||||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued expenses and other current liabilities | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Contract liabilities | ( | ) | ( | ) | ||||
| Other liabilities | ||||||||
| Net cash and cash equivalents used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| 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 (used in) provided by investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| 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 | ||||||||
| Repayments of notes payable | ( | ) | ||||||
| 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 | ||||||||
| Cash and cash equivalents of discontinued operations, beginning of period | $ | $ | ||||||
| Cash and cash equivalents of discontinued operations, end of period | ||||||||
| Cash and cash equivalents at the end of period | $ | $ | ||||||
| Supplemental disclosures | ||||||||
| Cash paid for interest | ||||||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| 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 | $ | $ | ||||||
| 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 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 these condensed consolidated financial statements.
4
AGRIFY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 — Overview, Basis of Presentation and Significant Accounting Policies
Description of Business
Agrify Corporation (together with its subsidiaries, the “Company”) is a developer of branded innovative solutions for the cannabis and hemp industries. 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 been a leading provider of innovative cultivation and extraction solutions for the cannabis industry. Prior to the exit of the extraction business on March 30, 2025, the Company’s comprehensive extraction product line (“the Extraction Business”), which included hydrocarbon, alcohol, solventless, post-processing, and lab equipment, empowered producers to maximize the quantity and quality of extract required for premium concentrates. 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.
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 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 Company acquired certain assets from Double or Nothing, LLC (“Double or Nothing”), the owner and creator of the Señorita brand of hemp-derived drinks as part of the Company’s strategic plan to reposition itself as a distributor of hemp-derived THC beverages and similar products.
On December 31, 2024, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with CP Acquisitions, LLC (“CP”), an entity affiliated with Raymond Chang, the Company’s former Chairman and Chief Executive Officer. Under the Purchase Agreement, CP acquired assets from the Company relating to the Company’s VFUs, including the related Agrify total-turnkey (“TTK”) solution assets and Agrify InsightsTM software solutions (collectively the “Cultivation Business”). The sale of the Cultivation Business occurred following signing on December 31, 2024. The results of the Cultivation Business are presented as discontinued operations in the Condensed Consolidated Statements of Operations and, as such, have been excluded from continuing operations. Further, the Company reclassified the assets and liabilities of the Cultivation 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. 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 approved the winding down of the Extraction Business by March 31, 2025, including but not limited to, the sale or other disposal of all remaining assets constituting the Extraction Business, the cessation of all business operations related to the Extraction Business, the termination of any outstanding contracts related to the Extraction Business, and termination of any employees primarily involved in the Extraction Business. The results of the Extraction Business are presented as discontinued operations in the Condensed Consolidated Statements of Operations and, as such, have been excluded from continuing operations. Further, the Company reclassified the assets and liabilities 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 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 included elsewhere in the notes to the unaudited condensed consolidated financial statements.
5
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 $
Nasdaq Deficiency Notice
On January 30, 2024, the Company received formal notice that the Nasdaq Hearings Panel (the “Panel”) of the Nasdaq Stock Market LLC (“Nasdaq”) had granted the Company’s request for an exception through April 15, 2024 to evidence compliance with the Nasdaq Listing Rule 5550(b)(1) (the “Listing Rule 5550(b)(1)”), which was subsequently extended to May 15, 2024. As a result of the conversion of a convertible note and a junior note held in favor of CP, the Company regained compliance with the stockholders’ equity requirement, On May 28, 2024, the Company received formal written notice from Nasdaq confirming that the Company had regained compliance with the minimum stockholders’ 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 $
Basis of Presentation and Principles of Consolidation
These interim condensed consolidated financial statements of the Company are unaudited. In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures necessary for a fair presentation of these unaudited condensed consolidated financial statements have been included. The results reported in the unaudited condensed consolidated financial statements for any interim periods are not necessarily indicative of the results that may be reported for the entire year. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and do not include all information and footnotes necessary for a complete presentation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”).
6
Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 21, 2025, as amended on March 28, 2025 (the “Form 10-K”). The December 31, 2024 balances reported herein are derived from the audited consolidated financial statements for the year ended December 31, 2024, retrospectively adjusted for discontinued operations.
Accounting for Wholly-Owned Subsidiaries
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly-owned Subsidiaries, as described above, in accordance with the provisions required by Accounting Standards Codification (“ASC”) Topic 810, Consolidation (“ASC 810”) of the Financial Accounting Standards Board (“FASB”). The Company includes results of operations of acquired companies from the date of acquisition. All significant intercompany transactions and balances are eliminated.
Use of Estimates
The preparation of the Company’s condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of expenses during the reporting period. On an ongoing basis, we evaluate estimates, which include estimates related to accruals, stock-based compensation expense, reported amounts of revenues and expenses during the reported period, fair value of warrant liabilities, sales tax liabilities, valuation of deferred tax assets, net realizable value of inventory, intangible assets, goodwill, and litigation. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ materially from those estimates or assumptions.
The Company regularly evaluates its assets, including asset groups or reporting units, for impairment in accordance with U.S. GAAP. The Company is aware of the impact that prolonged net losses can have on the fair value of underlying assets and the overall company. The Company is committed to ensuring that the carrying amounts of its assets are appropriately assessed and adjusted for any impairment, reflecting a true and fair view of its financial position.
Reclassifications
The Company effected a 1-for-15
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 $
Certain amounts in the condensed consolidated financial statements related to the prior years have been reclassified to conform to the current year’s presentation, specifically related to discontinued operations.
7
Discontinued Operations
On December 31, 2024, the Company entered into and closed the Purchase Agreement with CP. Under the Purchase Agreement, CP acquired assets from the Company relating to the Cultivation Business. On March 30, 2025, the Company discontinued the Extraction Business.
As the sale of the Cultivation Business and the exit of the Extraction Business represented strategic shifts that will have a major effect on the Company’s operations 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 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 included elsewhere in the notes to the unaudited condensed consolidated financial statements.
Accounts Receivable, Net
Accounts receivable, net, primarily consists of amounts for goods and services that are billed and currently due from customers. In accordance with the current expect credited loss (“CECL”) impairment model under Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326), accounts receivable balances are presented net of an allowance for credit losses, which are an estimate of billed or borrowed amounts that may not be collectible. In determining the amount of the allowance at each reporting date, management makes judgments about general economic conditions, historical write-off experience, and any specific risks identified in customer or borrower collection matters, including the aging of unpaid accounts receivable and changes in customer or borrower financial conditions. Accounts and loans receivable balances are written off after all means of collection are exhausted and the potential for non-recovery is determined to be probable. Adjustments to the allowance for credit losses are recorded as general and administrative expenses in the unaudited condensed consolidated statements of operations.
Concentration of Credit Risk and Significant Customer
Financial instruments that potentially subject the Company to a concentration of credit risk primarily consist of cash, cash equivalents, and accounts receivable. Cash equivalents primarily consist of money market funds with original maturities of three months or less, which are invested primarily with U.S. financial institutions. Cash deposits with financial institutions generally exceed federally insured limits. Management believes minimal credit risk exists with respect to these financial institutions and the Company has not experienced any losses on such amounts.
For the three months ended
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
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
As of June 30, 2025, one
of the Company’s related party customers accounted for
Inventories
The Company values all its inventories, which consist primarily of finished goods and raw materials, at the lower of cost or net realizable value, with cost principally determined by the weighted-average cost method on a first-in, first-out basis. Write-offs of potentially slow-moving or damaged inventory are recorded through specific identification of obsolete or damaged material. The Company takes a physical inventory count at least once annually at all significant inventory locations.
8
Warrants
The Company evaluates all its financial instruments, including issued private placement stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC Topic 815, Derivatives and Hedging (“ASC 815”). The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815. Management’s assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own Common Stock among other conditions for equity classification.
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 operations.
Fair Value of 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
Overview
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. 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. |
9
| ● | 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. The Company does not maintain a specific reserve for returns due to the limited circumstances under which returns are permitted in customer agreements. 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 satisfied. 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
The Company presents basic and diluted net (loss) income per share attributable to Common Stockholders in conformity with the one-class method. The Company computes basic (loss) income per share by dividing net (loss) income available to Common Stockholders by the weighted-average number of Common Stock outstanding. Diluted (loss) income per share adjusts basic loss per share for the potentially dilutive impact of convertible notes, stock options, restricted stock units and warrants. 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 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 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 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 ending December 31, 2025.
Recently Announced Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income – Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses. This guidance requires additional disclosure of certain amounts included in the expense captions presented on the Statement of Operations as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted for annual financial statements that have not yet been issued. The Company is currently evaluating 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.
10
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 statements.
Note 2 — Revenue
Revenue
The Company generates revenue 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. 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 June 30, | Six months ended June 30, | |||||||||||||||
| (In thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Hemp-derived products | $ | $ | $ | $ | ||||||||||||
| Royalty revenue | ||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
In accordance with ASC 606-10-50-13, the Company is required to include disclosure on its remaining performance obligations as of the end of the current reporting period. Due to the nature of the Company’s contracts, these reporting requirements are not applicable because the majority of the Company’s remaining contracts meet certain exemptions as defined in ASC 606-10-50-14 through 606-10-50-14A, including (i) performance obligation is part of a contract that has an original expected duration of one year or less and (ii) the right to invoice practical expedient.
Note 3 — Supplemental Condensed Consolidated Balance Sheet Information
Accounts Receivable, Net
Accounts receivable, net, consisted of the following as of June 30, 2025 and December 31, 2024:
| June 30, | December 31, | |||||||
| (In thousands) | 2025 | 2024 | ||||||
| Accounts receivable, gross | $ | $ | ||||||
| Less allowance for credit losses | ||||||||
| Accounts receivable, net | $ | $ | ||||||
There is allowance for credit losses as of June 30, 2025 and December 31, 2024.
11
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following as of June 30, 2025 and December 31, 2024:
| June 30, | December 31, | |||||||
| (In thousands) | 2025 | 2024 | ||||||
| Prepaid materials | $ | $ | ||||||
| Prepaid marketing | ||||||||
| Other receivables | ||||||||
| Prepaid insurance | ||||||||
| Prepaid expenses, other | ||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following as of June 30, 2025 and December 31, 2024:
| June 30, | December 31, | |||||||
| (In thousands) | 2025 | 2024 | ||||||
| Accrued consulting fees | $ | $ | ||||||
| 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 | ||||||||
| Total accrued expenses and other current liabilities | $ | $ | ||||||
During the six months ended
June 30, 2025, the company paid $
As of June 30, 2025 and December
31, 2024, the Company had related party accrued consulting fees with Green Thumb of approximately $
Note 4 — Fair Value Measures
Fair Values of Assets and Liabilities
In accordance with ASC Topic 820, Fair Value Measurement, the Company measures fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the assumptions that market participants would use in pricing an asset or liability (the inputs) are based on a tiered fair value hierarchy consisting of three levels, as follows:
Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.
Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar instruments in active markets or for similar markets that are not active.
Level 3: Unobservable inputs for which there is little or no market data which require the Company to develop its own assumptions about how market participants would price the asset or liability.
12
Valuation techniques for assets and liabilities include methodologies such as the market approach, the income approach or the cost approach, and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs are only utilized to the extent that observable inputs are not available or cost-effective to obtain.
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:
| June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||
| Fair Value Measurements Using Input Types | Fair Value Measurements Using Input Types | |||||||||||||||||||||||||||||||
| (In thousands) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Warrant liabilities | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Fair Value of Financial Instruments
The Company has certain financial instruments which consist of cash and cash equivalents, accounts receivable, contingent consideration, operating lease liabilities, long-term debt, related party debt, and warrant liabilities. Fair value information for each of these instruments as well as other balances of the Company are as follows:
| ● | Cash and cash equivalents approximate their fair value based on the short-term nature of these instruments. |
| ● | 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. |
| ● | The Company has pre-funded warrants issued to a related party. As of result of the latest amendment executed as of December 31, 2024, the warrants met the requirements for equity classification and were marked to fair value as of December 31, 2024. The warrants will not be marked to fair value on a recurring basis. |
Warrant Liabilities
The estimated fair value 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.
However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.
The following table summarizes the Company’s assumptions used in the valuations as of June 30, 2025 and December 31, 2024:
| June 30, 2025 | December 31, 2024 | |||
| Stock price | $ | $ | ||
| Exercise price | $ | $ | ||
| Expected term (in Years) | | | ||
| Volatility | ||||
| Discount rate - treasury yield | |
13
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 June 30, 2025 | For the year ended December 31, 2024 | Number of Outstanding Warrant Liabilities | |||||||||
| Warrant liabilities - beginning of period | $ | $ | ||||||||||
| Initial fair value of warrant liabilities | ||||||||||||
| Exercise of warrants | ( | ) | ||||||||||
| Reclassification of warrant liabilities to equity | ( | ) | ||||||||||
| Change in estimated fair value | ( | ) | ||||||||||
| Warrant liabilities end of period | $ | $ | ||||||||||
Note 5 — Inventory
Inventories are stated at the lower of cost or net realizable value, with cost principally determined by the weighted-average cost method on a first-in, first-out basis. Such costs include the acquisition cost for raw materials and operating supplies. The Company’s standard payment terms with suppliers may require making payments in advance of delivery of the Company’s products.
Inventory consisted of the following as of June 30, 2025 and December 31, 2024:
| June 30, | December 31, | |||||||
| (In thousands) | 2025 | 2024 | ||||||
| Finished goods | $ | $ | | |||||
| Raw materials | ||||||||
| Packaging materials | ||||||||
| Inventory, gross | ||||||||
| Inventory reserves | ( | ) | ||||||
| Total inventory, net | $ | $ | ||||||
Inventory Reserves
The Company establishes an inventory reserve for obsolete, slow moving, and defective inventory. The Company calculates inventory reserves for obsolete, slow moving, or defective items as the difference between the cost of inventory and its estimated net realizable value. The reserves are based upon management’s expected method of disposition.
14
Note 6 — Discontinued Operations
Cultivation Business Discontinued Operations
On December 31, 2024, the
Company executed and closed the Purchase Agreement with CP for the sale of assets relating to the Company’s Cultivation Business.
The consideration for the sale of the Cultivation Business consisted of the assumption by CP of all the Company’s secured indebtedness
currently held by CP with an aggregate amount of principal and accrued interest of approximately $
The disposition resulted
in a loss on sale of $
The assets and liabilities associated with discontinued operations with respect to the Cultivation Business consisted of the following as of June 30, 2025 and December 31, 2024, respectively:
| June 30, 2025 | December 31, 2024 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Prepaid expenses and other current assets | $ | $ | ||||||
| Current assets associated with discontinued operations | ||||||||
| Total assets associated with discontinued operations | $ | $ | ||||||
| Liabilities | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Current liabilities associated with discontinued operations | ||||||||
| Total liabilities associated with discontinued operations | $ | $ | ||||||
15
The following table summarizes 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
months ended June 30, | For the six
months ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ( | ) | ||||||||||||||
| Gross income (loss) | ( | ) | ||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Gain on settlement of contingent liabilities | ( | ) | ||||||||||||||
| Gain on early termination of lease | ( | ) | ( | ) | ||||||||||||
| Total operating expense (income) | ( | ) | ||||||||||||||
| Operating (loss) income from discontinued operations | ( | ) | ( | ) | ||||||||||||
| Net (loss) income from discontinued operations | ( | ) | ( | ) | ||||||||||||
| Income tax effect on discontinued operations | ||||||||||||||||
| (Loss) income from discontinued operations, net of income taxes | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
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 the Cultivation Business for the three and six months ended June 30:
| For the three
months ended June 30, | For the six
months ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | ||||||||||||
| Provision for (recovery of) credit losses | $ | $ | $ | $ | ( | ) | ||||||||||
| Recovery of provision for slow-moving inventory | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
16
Extraction Business Discontinued Operations
On March 30, 2025, the Company approved the discontinuation and wind down of its legacy Extraction Business. 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 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. As a result, the Extraction Business has been presented as discontinued operations in the condensed consolidated financial statements for all periods presented.
As a result of the decision
to wind down the Extraction Business, a gain of approximately $
The assets and liabilities associated with discontinued operations with respect to the Extraction Business consisted of the following as of June 30, 2025 and December 31, 2024, respectively:
| June
30, 2025 | December 31, 2024 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Accounts receivable, net | $ | $ | ||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets associated with discontinued operations | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Other non-current assets | ||||||||
| Non-current assets associated with discontinued operations | ||||||||
| Total assets of discontinued operations | $ | $ | ||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Operating lease liabilities, current | ||||||||
| Customer deposits | ||||||||
| Current liabilities associated with discontinued operations | ||||||||
| Operating lease liabilities, net of current | ||||||||
| Non-current liabilities associated with discontinued operations | ||||||||
| Total liabilities associated with discontinued operations | $ | $ | ||||||
17
The following table summarizes 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
months ended June 30, | For the six
months ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit (loss) | ( | ) | ||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Impairment of right-of-use assets | ||||||||||||||||
| Gain on disposal of property and equipment | ( | ) | ||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss from discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expense) Income | ||||||||||||||||
| (Loss) gain on disposal of Extraction business | ( | ) | ||||||||||||||
| Other income, net | ||||||||||||||||
| 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 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 June 30, | For the six
months ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | ||||||||||||
| (Recovery of) provision for credit losses | $ | ( | ) | $ | | $ | $ | | ||||||||
| Recovery of provision for slow-moving inventory | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
18
Note 7 — 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. Supplemental 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 $
The Company prepared a preliminary
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 $
The following table summarizes the preliminary allocation of the purchase price:
| Allocation of Purchase Price (in thousands) | ||||
| Accounts Receivable | $ | |||
| Inventory | ||||
| Prepaid | ||||
| Tradenames | ||||
| Customer Relationships | ||||
| Total assets acquired at fair value | ||||
| Accounts Payable | ( | ) | ||
| Total liabilities assumed at fair value | ( | ) | ||
| Total purchase price | $ | |||
19
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 combination. 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. Accordingly, the measurement period has ended and the purchase accounting is now considered final in accordance with ASC 805.
The following table summarizes the final allocation of purchase price for Double or Nothing:
| Allocation of Purchase Price (in thousands) | ||||
| Inventory | $ | |||
| Deposits | ||||
| Tradenames | ||||
| Customer Relationships | ||||
| Goodwill | ||||
| Total purchase price | $ | |||
Note 8 — Intangible Assets, Net
Intangible assets, net at June 30, 2025 and December 31, 2024 are summarized as follows:
| June 30, 2025 | ||||||||||||||||||
| Estimated | Gross | Accumulated | Net | |||||||||||||||
| Useful Life | Carrying | Accumulated | Impairment | Carrying | ||||||||||||||
| in Years | Amount | Amortization | Amount | Amount | ||||||||||||||
| Tradenames | $ | $ | ( | ) | $ | $ | ||||||||||||
| Customer Relationships | ( | ) | ||||||||||||||||
| $ | $ | ( | ) | $ | $ | |||||||||||||
| December 31, 2024 | ||||||||||||||||||
| Estimated | Gross | Accumulated | Net | |||||||||||||||
| Useful Life | Carrying | Accumulated | Impairment | Carrying | ||||||||||||||
| in Years | Amount | Amortization | Amount | Amount | ||||||||||||||
| Tradenames | | |||||||||||||||||
| Customer Relationships | ||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||
The Company recorded amortization
expense of $
The Company recorded amortization
expense of $
20
Note 9 — Debt
The Company’s debt consisted of:
| (In thousands) | June 30, 2025 | December 31, 2024 | ||||||
| Related party debt: | ||||||||
| Convertible Notes | $ | $ | ||||||
| Total related party debt | ||||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Related party debt, net of current | $ | $ | ||||||
| Short-term debt: | ||||||||
| PPP Loan | $ | $ | ||||||
| Other Notes Payable - Current | ||||||||
| Total short-term debt | $ | $ | ||||||
| Long-term debt: | ||||||||
| Convertible Notes | ||||||||
| Other notes payable | ||||||||
| Total long-term debt | ||||||||
| Less: current portion | ||||||||
| Long-term debt, net of current | $ | $ | ||||||
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
On
May 22, 2025, the Company issued secured convertible notes with an aggregate original principal amount of $
21
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
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 $
Related party interest expense
incurred on the Notes amounted to approximately $
Interest expense
incurred on the Notes related to unaffiliated third parties amounted to approximately $
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) | ||||
| Remaining 2025 | $ | |||
| 2026 | ||||
| Total future payments | $ | |||
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. 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 rate in its leases was generally not known, the Company used its incremental borrowing rate as the discount rate for purposes of determining the present value of its lease liabilities. The Company’s incremental borrowing rate was determined using the interest rate on a long term debt position entered into at approximately the same time and for the same duration as the lease.
When a contract contained lease and non-lease elements, both were accounted for as a single lease component.
As of June 30, 2025 and December 31, 2024, the Company had no active finance leases.
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 $
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 $
As of June 30, 2025, the Company did not have any operating leases related to continuing operations. As such, no operating lease cost, weighted average remaining lease term, or weighted average discount rate, and cash paid for operating leases are presented for continuing operations for the three and six months ended June 30, 2025. As of June 30, 2025, there is no future lease payment related to continuing operations.
22
Note 11 — Stockholders’ Equity
Public Offerings
On February 27, 2024, the
Company entered into a placement agency agreement (the “Agency Agreement”) with Alexander Capital as placement agent (the
“Placement Agent”), pursuant to which the Company agreed to issue and sell an aggregate of
The Company issued
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 $
Related Party Warrant Issuance
On May 21, 2024, in connection
with the amendment of previously outstanding notes, the Company issued
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
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
$
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,
2024. They were remeasured to their fair value upon modification resulting in an increase to the fair value of $
23
Note 12 — Stock-Based Compensation and Employee Benefit Plans
2022 Omnibus Equity Incentive Plan
On April 29, 2022, the Company’s
Board of Directors, and on June 8, 2022, the Company’s stockholders, adopted and approved the 2022 Omnibus Equity Incentive Plan
(the “2022 Plan”), which provides for the grant of stock options, stock appreciation right awards, performance share awards,
restricted stock awards, restricted stock unit awards, other stock-based awards and cash-based awards. The aggregate number of shares
of Common Stock that may be reserved and available for grant and issuance under the 2022 Plan is
The Company’s stock
compensation expense from continuing operations was $
The Company’s stock
compensation expense from discontinued operations was a forfeiture of $
Stock Options
For six months ended June
30, 2025, there were no options granted or exercised under the Company’s stock option plans. For the same period, there were
24
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 June 30, 2025:
| Options Vested and Exercisable | ||||||||||||||
| Price ($) | Number of Options | Weighted- Average Remaining Contractual Life (Years) | Weighted-Average Exercise Price | |||||||||||
| $ | 40,234 | $ | ||||||||||||
| $ | 14,248 | $ | ||||||||||||
| $ | 5,717 | $ | ||||||||||||
Restricted Stock Units
Under the 2022 Plan, the Company may grant restricted stock units to employees, directors and officers. The restricted stock units granted generally vest equally over periods ranging from one to three years, subject to certain exceptions for directors. The fair value of restricted stock units is determined based on the closing market price of the Company’s Common Stock on the date of grant. Compensation expense related to the restricted stock units is recognized using a straight-line attribution method over the vesting period.
The following table presents restricted stock unit activity for the six months ended June 30, 2025:
| Number of Shares | Weighted- Average Grant Date Fair Value | |||||||
| Unvested at December 31, 2024 | $ | | ||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Unvested at June 30, 2025 | $ | |||||||
As of June 30, 2025, total
unrecognized compensation expense related to unvested restricted stock units was $
25
Note 13 — Stock Warrants
The following tables present all warrant activity of the Company for the six months ended June 30, 2025:
| Number of Warrants | Weighted-Average Exercise Price | |||||||
| Warrants outstanding at December 31, 2024 | $ | |||||||
| Issued | ||||||||
| Exercised | ||||||||
| Canceled | ||||||||
| Warrants outstanding at June 30, 2025 | $ | |||||||
Note 14 — Income Taxes
The Company’s effective
income tax rates were
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 limitations. 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. tax system. The bill
includes restoration of
26
Note 15 — Net (Loss) Income Per Share
Net (loss) income per share calculations for all periods have been adjusted to reflect the Company’s reverse stock splits. Net (loss) income per share was calculated based on the weighted-average number of shares of the Company’s Common Stock outstanding.
Basic net (loss) income per share is calculated using the weighted-average number of shares of Common Stock outstanding during the periods. Diluted net (loss) income per share is computed by giving effect to all potential shares of Common Stock, including the reflection of as-converted convertible notes, outstanding stock options, stock related to unvested restricted stock units, and outstanding warrants to the extent dilutive. Net (loss) 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 June 30, | Six months ended June 30, | |||||||||||||||
| (In thousands, except share and per share data) | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Numerator: | ||||||||||||||||
| 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 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Denominator: | ||||||||||||||||
| Denominator for basic EPS - Weighted-average common shares outstanding | ||||||||||||||||
| Effect of dilutive securities: | ||||||||||||||||
| Conversion of convertible notes | ||||||||||||||||
| 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 June 30, 2024, the
Company had convertible notes outstanding with a principal balance of approximately $
27
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.
| Six months ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Shares subject to outstanding warrants | ||||||||
| Shares subject to unvested restricted stock units | ||||||||
| Shares subject to outstanding stock options | ||||||||
Note 16 — Commitments and Contingencies
Legal Matters
From time to time, the Company may become involved in material legal proceedings or be subject to claims arising in the ordinary course of our business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
Bud & Mary’s Litigation
On September 15, 2022, the
Company provided a notice of default to Bud & Mary’s Cultivation, Inc. (“Bud & Mary’s) and certain related parties
notifying such parties that Bud & Mary’s was in default of its obligations under the TTK solution between the Company and Bud
& Mary (the “Bud & Mary TTK Agreement”). On October 5, 2022, Bud & Mary’s filed a complaint in the Superior
Court of Massachusetts in Suffolk County, naming the Company as the defendant (the “Bud & Mary Complaint”). Bud &
Mary’s is seeking, among other relief, monetary damages in connection with alleged unfair or deceptive trade practices, breach of
contract and conversion arising from the Bud & Mary TTK Agreement. While the Company believes the claim is without merit and will
continue to vigorously defend itself against Bud & Mary’s allegations, litigation is inherently unpredictable and there can
be no assurance that the Company will prevail in this matter. During the third quarter of 2022, the Company deemed it necessary to fully
reserve for the outstanding $
28
Bowdoin Construction Corp. Litigation
On February 22, 2023, Bowdoin
Construction Corp. (“Bowdoin”) filed a complaint in the Superior Court of Massachusetts in Norfolk County, Massachusetts (the
“Bowdoin Complaint”), naming the Company, Bud & Mary’s and certain related parties as defendants, captioned Bowdoin
Construction Corp. v. Agrify Corporation, Bud & Mary’s Cultivation, Inc. and BMLC2, LLC, case no. 2382CV00173. The Bowdoin Complaint
relates to a construction contract between Bowdoin and the Company relating to the property that is the subject of the Bud & Mary’s
Complaint, and alleges breach of contract by Bud & Mary’s and by the Company due to nonpayment of approximately $
McCutchan, Inc.
In December 2021, the Company
entered into a standard form of agreement between owner and contractor whereby Valiant Group LLC (“Valiant”) is the general
contractor for tenant improvements on certain real property located in Bellevue, Washington (the “Project”). McCutchan, Inc.
(“McCutchan”) agreed to be a subcontractor on the Project and engaged various other subcontractors (the “Valiant Agreement”).
The Company terminated Valiant as the general contractor for, among other allegations, breach of contract and unjust enrichment. Following
the termination of Valiant, in October 2022, the Valiant Agreement was assigned and accepted (the “Assignment”) to Agxion,
LLC, a wholly owned Subsidiary of the Company. The Assignment contemplates that, as a subcontractor to the Valiant Agreement, McCutchan
is still bound to the subcontract agreement and will continue construction operations on the Project. The Company is pursuing Valiant
in a separate litigation to collect no less than approximately $
Other Litigation
On February 9, 2022, a former sales Vice President of the Company filed suit against the Company claiming he is owed back wages, commission and is entitled to equity in the Company, under theories of liability under Massachusetts labor laws including retaliation, breach of contract, breach of covenant of good faith and fair dealing, fraudulent inducement, tortious interference and unjust enrichment. The Company filed its answer to the initial complaint in January 2023. The Company believes this is a meritless claim and has responded to various discovery requests.
Other Commitments and Contingencies
The Company is potentially subject to claims related to various non-income taxes (such as sales, value-added, consumption, and similar taxes) from various tax authorities, including in jurisdictions in which the Company already collects and remits such taxes. If the relevant taxing authorities successfully pursue these claims, the Company could be subject to additional tax liabilities.
29
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. Ben Kovler, Agrify’s Chairman and Interim Chief Executive Officer also serves as Green Thumb’s Chairman and Chief Executive Officer. Agrify’s Chief Financial Officer is a Green Thumb employee and provides services under a shared services agreement. Including Mr. 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 with entities identified as related parties to the Company:
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| (In thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Green Thumb Industries | $ | $ | $ | $ | ||||||||||||
The net activity of $
The net activity of $
The following table summarizes the net related party payable as of June 30, 2025 and December 31, 2024:
| June 30, | December 31, | |||||||
| (In thousands) | 2025 | 2024 | ||||||
| Green Thumb Industries | $ | $ | ||||||
The net related party payable
of $
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 $
30
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)
Note 18 — Segment Reporting
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 revenue.
Note 19 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed consolidated financial statements were issued and concluded that there were no subsequent events that required recognition or disclosure in the financial statements.
31
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The information contained in this Quarterly Report is intended to update the information contained in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities And Exchange Commission (the “SEC”) on March 21, 2025, as amended on March 28, 2025 (the “Form 10-K”) and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in the Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Quarterly Report.
The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Quarterly Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this Quarterly Report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the risk factors described in the Form 10-K in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this Quarterly Report. The following should also be read in conjunction with the unaudited financial statements and notes thereto that appear elsewhere in this Quarterly Report.
Except as otherwise indicated herein or as the context otherwise requires, references in this Quarterly Report to “we,” “us,” “our,” “Company,” and “Agrify” refer to Agrify Corporation, a Nevada corporation and its consolidated subsidiaries.
Overview
Agrify is a developer of branded innovative solutions for the cannabis and hemp industries. Our portfolio of consumer-packaged goods brands includes our 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 incredibles and Beboe edible products are primarily sold online and through direct-to-retail partnerships
In addition to hemp-derived products, Agrify has also historically been a leading provider of innovative cultivation and extraction solutions for the cannabis industry (the “Extraction Business”). Prior to our exit of the Extraction Business on March 30, 2025, our comprehensive extraction product line, which includes hydrocarbon, alcohol, solventless, post-processing, and lab equipment, empowered producers to maximize the quantity and quality of extract required for premium concentrates. Additionally, prior to its sale on December 31, 2024, our proprietary micro-environment-controlled Agrify Vertical Farming Units (“VFUs”) enabled cultivators to produce high quality products for the cannabis industry (the “Cultivation Business”).
Reverse Stock Split
On October 8, 2024, we effected a 1-for-15 reverse stock split of our Common Stock. All share and per share information has been retroactively adjusted to give effect to the reverse stock splits for all periods presented unless otherwise indicated.
Lines of Business
Hemp-Derived Products and Royalties
We acquired the Señorita brand of hemp-derived THC beverages in November 2024. Señorita was designed and formulated by world-class winemakers Charles Bieler and Joel Gott. Recognizing a growing generational demand for adult beverage alternatives, Bieler and Gott gave the classic margarita a modern twist—replacing alcohol with hemp-derived to create a delightful adult beverage alternative. Through the use of all-natural, premium ingredients like organic Mexican agave, fresh lime juice and sweet, tangy mango, Señorita quickly gained acclaim, taking home the top spot in The High Times Cannabis Cup just one year after inception. Gott and Bieler continue to collaborate on the brand with Mr. Kovler and the Agrify team.
32
Señorita currently offers four award-winning flavors – classic Lime Jalapeño Margarita, Paloma, Mango Margarita, and Ranch Water. Señorita’s hemp-derived beverages are currently available at top retailers including Total Wine, ABC Fine Wine & Spirits, and Binny’s in eleven U.S. states and Canada. Products are also available for direct-to-consumer purchase where permissible under state law at senoritadrinks.com.
On May 20, 2025, we acquired MC Brands, which consists primarily of intellectual property rights to the incredibles brand. Concurrent with the MC Brands acquisition, we entered a License Agreement with subsidiaries of Green Thumb Industries Inc. (“Green Thumb”), a related party, to use certain intellectual property related to the Beboe, Rythm and incredibles brands. The Beboe and Rythm licensing agreements are in connection with our production, marketing and sale of hemp-derived products to the extent such activities are legal under applicable state and federal laws in the United States. By contrast, the incredibles licensing agreement grants GTI Core (an indirectly wholly-owned subsidiary of Green Thumb) the rights to use certain intellectual property related to the incredibles brand in connection with GTI Core’s existing state-licensed cannabis business. The consideration payable by GTI Core for the license rights consists of a monthly license fee, payable in cash, based on sales of product using the licensed intellectual property.
Co-Manufacturing Arrangements
Our finished goods are manufactured by various third-party co-manufacturers situated throughout the United States and Canada, under separate arrangements with each party. Our co-manufacturing arrangements vary in terms and, from time to time, we may enter into manufacturing contracts with agreed upon minimum quantities to ensure continuity of supply of certain products in certain territories. We continue to actively seek alternative and/or additional co-manufacturing facilities with adequate capacity and capability for the production of our various products to minimize transportation costs as well as mitigate the risk of disruption in production.
Our ability to estimate demand for our products is imprecise, particularly with new products, and may be less precise during periods of rapid growth, including in new markets. If we materially underestimate demand for our products and/or are unable to secure sufficient ingredients or raw materials and/or procure adequate co-manufacturing arrangements and/or obtain adequate or timely shipment of our products, we might not be able to satisfy demand on a short-term basis.
Distribution Agreements
During the first half of 2025, we continued to expand distribution of our hemp-derived beverage products in our domestic markets. We have entered into agreements with various distributors providing for the distribution of certain of our hemp-derived beverage products, subject to certain terms and conditions, which may vary depending on the form of the agreement. Such agreements remain in effect for their then-current term as long as our products are being distributed, but are subject to specified termination rights held by each party. Additionally, we are entitled to terminate certain distribution agreements at any time without cause upon payment of a termination fee, which may be material depending on the agreement.
Discontinued Operations
Cultivation Solutions
Prior to its sale on December 31, 2024, we sold proprietary cultivation solutions to independent licensed cultivators as part of our Cultivation Business. The two primary products we sold were the VFUs and Agrify Insights™ software.
The proprietary VFU technology offered a modular, compartmentalized micro-climate growing system for indoor vertical farming. The VFU system was designed for craft farmers, single-state operators, and multi-state operators who were looking to consistently produce higher-quality crops at scale. The VFUs were designed to line up horizontally in rows, and could be stacked vertically up to three units tall.
33
The VFUs were designed to work in conjunction with the Agrify Insights™ software. Each VFU sold included a license for Agrify Insights™ and a monthly Software-as-a-Service (“SaaS”) subscription fee was charged per VFU. The VFU could not operate successfully without Agrify Insights™. Agrify Insights™ license agreements were generally for a multi-year term, with an annual auto-renewal.
Extraction Solutions
Prior to its discontinuation on March 30, 2025, our extraction equipment and business solutions that were a part of our Extraction Business could be used within indoor processing facilities by fully licensed cannabis and hemp cultivators and processors or in some cases, by individual processors for individual use in compliance with applicable law. We sold our proprietary extraction solutions to independent, licensed cultivators and processing labs.
We had strategically acquired four brands in the extraction space in late 2021 and early 2022: Precision Extraction, PurePressure, Lab Society, and Cascade Sciences. These brands encompassed hydrocarbon, alcohol, and solventless extraction and distillation and post-processing solutions. Our extraction brands provided equipment and solutions for extraction, post-processing, and testing for the cannabis and hemp industries.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include assumptions about the valuation and recognition of stock-based compensation expense, valuation allowance for deferred tax assets, goodwill, impairment of long-lived assets, provision for litigation, inventory reserve, fair value measurements and useful life of fixed assets and intangible assets.
Financial Overview
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial position and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate estimates, which include estimates related to accruals, business combinations, and stock-based compensation expense. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from those estimates or assumptions.
Warrants
We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC Topic 815, Derivatives and Hedging (“ASC 815”). Management’s assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own Common Stock among other conditions for equity classification.
For issued or modified warrants that meet all of the criteria for equity classification, they are recorded as a component of additional paid-in capital at the time of issuance or when incurred. For issued or modified warrants that are precluded from equity classification, they are recorded as a liability at their initial fair value on the date of issuance and 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. The fair value of the warrant liabilities are estimated using a Black-Scholes option-pricing model.
34
The estimated fair value of the warrant liabilities 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 our best estimate. The volatility rate is determined utilizing our own share price and the share price of competitors over time.
Revenue Recognition
Overview
We generate revenue from continuing operations through the sale of hemp-derived THC products and related party licensing arrangements. We license intellectual property to a related party under arrangements that provide for sales-based royalties. We recognize royalty income derived from licensing agreements in accordance with ASC 606, specifically, for sales-based royalties. In accordance with ASC Topic 606, Revenue Recognition (“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 us and our 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: We identify 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. Our revenue-generating activities typically have a single performance obligation. |
| ● | Determine the transaction price: The transaction price is the amount of consideration we expect 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 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 we 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. We do not maintain a specific reserve for returns due to the limited circumstances under which returns are permitted in customer agreements. 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 satisfied. 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. |
Income Taxes
We account for income taxes pursuant to the provisions of ASC Topic 740, Income Taxes, (“ASC 740”) which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
35
We follow the provisions of ASC 740-10-25-5, “Basic Recognition Threshold.” When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10-25-6, the benefit of a tax position is recognized in the unaudited condensed consolidated financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. We have an uncertain tax position offsetting our research and development tax credits given we have not engaged any third parties to perform a study to support credits claimed under Internal Revenue Code §41 for tax years ended December 31, 2016 through December 31, 2024. If recognized, none of the unrecognized tax benefits would impact our effective tax rate.
We recognize the benefit of a tax position when it is effectively settled. ASC 740-10-25-10, “Basic Recognition Threshold” provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. ASC 740-10-25-10 clarifies that a tax position can be effectively settled upon the completion of an examination by a taxing authority. For tax positions considered effectively settled, we recognize the full amount of the tax benefit.
Accounting for Stock-Based Compensation
We follow the provisions of ASC Topic 718, Compensation — Stock Compensation, (“ASC 718”) establishes standards surrounding the accounting for transactions in which an entity exchanges its equity instruments for goods or services. ASC 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions, such as options issued under our equity incentive plan.
The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model. This model incorporates certain assumptions for inputs including a risk-free market interest rate, expected dividend yield of the underlying Common Stock, expected option life, and expected volatility in the market value of the underlying Common Stock.
The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because our stock options and warrants have characteristics different from those of our traded stock, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of such stock options. The risk-free interest rate is based upon quoted market yields for United States Treasury debt securities with a term similar to the expected term. The expected dividend yield is based upon our history of having never issued a dividend and management’s current expectation of future action surrounding dividends. We calculate the expected volatility of the stock price based on the corresponding volatility of our peer group stock price for a period consistent with the underlying instrument’s expected term. The expected lives for such grants were based on the simplified method for employees and directors.
As permitted under ASC 718, we have made an accounting policy choice to account for forfeitures when they occur.
It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies disclosed above.
36
Results of Operations
Comparison of the Three and Six Months Ended June 30, 2025 and 2024
The following table summarizes our results of continuing operations for the three and six months ended June 30, 2025 and 2024:
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue | $ | 2,042 | $ | — | $ | 2,580 | $ | — | ||||||||
| Cost of goods sold | 1,360 | — | 1,808 | — | ||||||||||||
| Gross profit | 682 | — | 772 | — | ||||||||||||
| Selling, general and administrative | 7,480 | 677 | 11,271 | 2,229 | ||||||||||||
| Research and development | — | 185 | — | 460 | ||||||||||||
| Change in contingent consideration | — | — | — | (2,180 | ) | |||||||||||
| Loss on disposal of property and equipment | — | (9 | ) | — | (9 | ) | ||||||||||
| Total operating expenses | 7,480 | 853 | 11,271 | 500 | ||||||||||||
| Operating loss from continuing operations | (6,798 | ) | (853 | ) | (10,499 | ) | (500 | ) | ||||||||
| Interest expense, net | (291 | ) | (28 | ) | (290 | ) | (128 | ) | ||||||||
| Change in fair value of warrant liabilities | (115 | ) | (1,277 | ) | 292 | (404 | ) | |||||||||
| Other (expense) income, net | (1 | ) | — | 18 | — | |||||||||||
| Total other (expense) income, net | (407 | ) | (1,305 | ) | 20 | (532 | ) | |||||||||
| Loss from continuing operations before income taxes | (7,205 | ) | (2,158 | ) | (10,479 | ) | (1,032 | ) | ||||||||
| Income tax provision | — | — | — | — | ||||||||||||
| Loss from continuing operations, net of income taxes | (7,205 | ) | (2,158 | ) | (10,479 | ) | (1,032 | ) | ||||||||
| (Loss) income from discontinued operations | (123 | ) | (814 | ) | (2,041 | ) | 2,296 | |||||||||
| (Loss) gain on disposal of Extraction business | (32 | ) | — | 3,534 | — | |||||||||||
| Income tax effect on discontinued operations | — | — | — | — | ||||||||||||
| (Loss) income from discontinued operations, net of income taxes | (155 | ) | (814 | ) | 1,493 | 2,296 | ||||||||||
| Net (loss) income | (7,360 | ) | (2,972 | ) | (8,986 | ) | 1,264 | |||||||||
| Income (loss) attributable to non-controlling interest | — | — | — | — | ||||||||||||
| Net (loss) income attributable to Agrify Corporation | $ | (7,360 | ) | $ | (2,972 | ) | $ | (8,986 | ) | $ | 1,264 | |||||
| Net (loss) income per share attributable to Common Stockholders – basic (1) | $ | (3.74 | ) | $ | (3.16 | ) | $ | (4.59 | ) | $ | 1.80 | |||||
| Net (loss) income per share attributable to Common Stockholders – diluted (1) | $ | (3.74 | ) | $ | (3.16 | ) | $ | (4.59 | ) | $ | 1.05 | |||||
| Weighted average common shares outstanding - basic (1) | 1,965,425 | 940,953 | 1,958,724 | 701,563 | ||||||||||||
| Weighted average common shares outstanding – diluted (1) | 1,965,425 | 940,953 | 1,958,724 | 1,696,069 | ||||||||||||
| (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. |
Revenues
We generate revenue from sales of hemp-derived THC products and related party royalty revenue.
The following table provides a breakdown of our revenue from continuing operations for the three and six months ended June 30, 2025 and 2024:
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | Change | % Change | 2025 | 2024 | Change | % Change | ||||||||||||||||||||||||
| Hemp-derived products | $ | 1,794 | $ | — | $ | 1,794 | N/A | $ | 2,332 | $ | — | $ | 2,332 | N/A | ||||||||||||||||||
| Royalty Revenue | 248 | — | 248 | N/A | 248 | — | 248 | N/A | ||||||||||||||||||||||||
| Total revenue | $ | 2,042 | $ | — | $ | 2,042 | N/A | $ | 2,580 | $ | — | $ | 2,580 | N/A | ||||||||||||||||||
Revenue increased by $1.8 million for the three months ended June 30, 2025, as compared to the same period in 2024. The comparative increase in revenue was primarily driven by the acquisition of Señorita in December 2024 and the acquisition of MC Brands in May 2025 and all revenue from the Cultivation Business and Extraction Business for the three months ended June 30, 2024 being presented as part of discontinued operations.
37
Revenue increased by $2.6 million for the six months ended June 30, 2025, as compared to the same period in 2024. The comparative increase in revenue was primarily driven by the acquisition of Señorita in December 2024 and the acquisition of MC Brands in May 2025 and all revenue from the Cultivation Business and Extraction Business for the six months ended June 30, 2024 being presented as part of discontinued operations.
Cost of Goods Sold
Cost of goods sold represents costs associated with the hemp-derived products sales.
The following table provides a breakdown of our cost of goods sold from continuing operations for the three and six months ended June 30, 2025 and 2024:
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | Change | % Change | 2025 | 2024 | Change | % Change | ||||||||||||||||||||||||
| Hemp-derived products | $ | 1,360 | $ | — | $ | 1,360 | N/A | $ | 1,808 | $ | — | $ | 1,808 | N/A | ||||||||||||||||||
| Total cost of goods sold | $ | 1,360 | $ | — | $ | 1,360 | N/A | $ | 1,808 | $ | — | $ | 1,808 | N/A | ||||||||||||||||||
Cost of goods sold increased by $1.4 million for the three months ended June 30, 2025 compared to the same period in 2024. The comparative increase in cost of goods sold is associated with the acquisition of Señorita in December 2024, which aligns with the increase in revenue.
Cost of goods sold increased by $1.8 million for the six months ended June 30, 2025 compared to the same period in 2024. The comparative increase in cost of goods sold is associated with acquisition of Señorita in December 2024, which aligns with the increase in revenue.
Gross Profit
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | Change | % Change | 2025 | 2024 | Change | % Change | ||||||||||||||||||||||||
| Gross profit | $ | 682 | $ | — | $ | 682 | N/A | $ | 772 | $ | — | $ | 772 | N/A | ||||||||||||||||||
Gross profit totaled $682 thousand, or 33.4% of total revenue during the three months ended June 30, 2025.
Gross profit totaled $772 thousand, or 29.9% of total revenue during the six months ended June 30, 2025.
Selling, General and Administrative
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | Change | % Change | 2025 | 2024 | Change | % Change | ||||||||||||||||||||||||
| Selling, general and administrative | $ | 7,480 | $ | 677 | $ | 6,803 | 1005 | % | $ | 11,271 | $ | 2,229 | $ | 9,042 | 406 | % | ||||||||||||||||
Selling, general and administrative (“SG&A”) expenses consist principally of salaries and related costs for personnel, including stock-based compensation and travel expenses, associated with executive and other administrative functions. Other SG&A expenses include, but are not limited to, professional fees for legal, consulting, depreciation and amortization and accounting services, as well as facility-related costs.
SG&A expense increased by $6.8 million, or 1005%, for the three months ended June 30, 2025, compared to the same period in 2024. The comparative change is primarily attributable to sales and marketing expense to support the growth of the hemp-derived THC products in addition to the SG&A expense from the Cultivation Business and Extraction Business for the three months ended June 30, 2024 being presented as part of discontinued operations.
SG&A expense increased by $9.0 million, or 406%, for the six months ended June 30, 2025, compared to the same period in 2024. The comparative change is primarily attributable to sales and marketing expense to support the growth of the hemp-derived THC products in addition to the SG&A expense from the Cultivation Business and Extraction Business for the six months ended June 30, 2024 being presented as part of discontinued operations.
38
Research and Development
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | Change | % Change | 2025 | 2024 | Change | % Change | ||||||||||||||||||||||||
| Research and development | $ | — | $ | 185 | $ | (185 | ) | (100 | )% | $ | — | $ | 460 | $ | (460 | ) | (100 | )% | ||||||||||||||
Research and development expense decreased by $185 thousand, or 100% for the three months ended June 30, 2025, compared to the same period in 2024. The decrease is attributable to the reduction in personnel resulting from the discontinuation of Extraction Business.
Research and development expense decreased by $460 thousand, or 100% for the six months ended June 30, 2025, compared to the same period in 2024. The decrease is attributable to the reduction in personnel resulting from the discontinuation of Extraction Business.
Other Income, Net
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||||||||
| (In thousands) | 2025 | 2024 | Change | % Change | 2025 | 2024 | Change | % Change | ||||||||||||||||||||||||
| Interest expense, net | $ | (291 | ) | $ | (28 | ) | $ | (263 | ) | 939 | % | $ | (290 | ) | $ | (128 | ) | $ | (162 | ) | 127 | % | ||||||||||
| Change in fair value of warrant liabilities | (115 | ) | (1,277 | ) | 1,162 | (91 | )% | 292 | (404 | ) | 696 | (172 | )% | |||||||||||||||||||
| Other (expense) income, net | (1 | ) | — | (1 | ) | N/A | 18 | — | 18 | N/A | ||||||||||||||||||||||
| Total other (expense) income, net | $ | (407 | ) | $ | (1,305 | ) | $ | 898 | (69 | )% | $ | 20 | $ | (532 | ) | $ | 552 | (104 | )% | |||||||||||||
Interest expense, net was $291 thousand for the three months ended June 30, 2025, compared to interest expense, net of $28 thousand for the three months ended June 30, 2024. The change is attributable mainly to the increase of $40.0 million principal under the Convertible Notes.
Interest expense, net was $290 thousand for the six months ended June 30, 2025, compared to interest expense, net of $128 thousand for the six months ended June 30, 2024. The change is attributable mainly to the increase of $40.0 million principal under the Convertible Notes.
The change in fair value of warrant liabilities decreased by $1.2 million, or 91% during the three months ended June 30, 2025, compared to the same period in 2024. The decrease is primarily related to the fair value remeasurement of warrants.
The change in fair value of warrant liabilities decreased by $696 thousand, or 172% during the six months ended June 30, 2025, compared to the same period in 2024. The decrease is primarily related to the fair value remeasurement of warrants.
Other expense, net was $1 thousand for the three months ended June 30, 2025, compared to none for the same period in 2024.
Other income, net was $18 thousand for the six months ended June 30, 2025, compared to none for the same period in 2024.
Income Tax (Expense) Benefit
There was no income tax expense or benefit for the three months ended June 30, 2025 and June 30, 2024.
There was no income tax expense or benefit for the six months ended June 30, 2025 and June 30, 2024.
39
Liquidity and Capital Resources
As of June 30, 2025, our principal sources of liquidity were cash and cash equivalents and marketable securities totaling $41.0 million. Our current working capital needs are to support revenue growth and manage inventory to meet demand forecasts and support operational growth. Our long-term financial needs primarily include working capital requirements. There are many factors that may negatively impact our available sources of funds in the future, including the ability to generate cash from operations, raise debt capital and raise cash from the issuance of our securities. The amount of cash generated from operations is dependent upon factors such as the successful execution of our business strategy and general economic conditions.
As part of our growth strategies, we may opportunistically raise debt capital and raise cash from the issuance of our securities, subject to market and other conditions. If additional financing is required from outside sources, we may not be able to raise such capital on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition may be adversely affected.
Indebtedness
Convertible Notes
On November 5, 2024, we issued a secured convertible note (the “November 2024 Note”) to RSLGH, LLC (“RSLGH”), a subsidiary of Green Thumb. The November 2024 Note is a secured obligation and ranks senior to all of our indebtedness 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 November 2024 Note. On May 22, 2025, we 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.
On May 22, 2025, we 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 and rank senior to all of our indebtedness except for the November 2024 Note, which ranks on parity with the May 2025 Notes. 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 1, 2025. 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 events. 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 warrant. 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.
40
Cash Flows
The following table presents the major components of net cash flows from and used in operating, investing, and financing activities for the six months ended June 30, 2025 and 2024:
| Six months ended June 30, | ||||||||
| (In thousands) | 2025 | 2024 | ||||||
| Net cash (used in) provided by: | ||||||||
| Operating activities | $ | (15,138 | ) | $ | (4,816 | ) | ||
| Investing activities | (5,075 | ) | 336 | |||||
| Financing activities | 29,999 | 4,103 | ||||||
| Net increase (decrease) in cash and cash equivalents | $ | 9,786 | $ | (377 | ) | |||
The following discussion explains the major components contributing to the net cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024, as summarized in the table above. Each section below provides details on the key drivers of the cash inflows and outflows for the respective periods.
Cash Flow from Operating Activities
For the six months ended June 30, 2025, our operating cash flows included a net loss of $9.0 million, which included $735 thousand related to depreciation and amortization, $1.1 million of stock-based compensation expense, $292 thousand gain related to the change in fair value of warrant liabilities, and $3.5 million gain on disposal of Extraction business. Net cash was decreased by changes in operating assets and liabilities of $4.6 million.
For the six months ended June 30, 2024, we had net income of $1.3 million, which included $782 thousand related to depreciation and amortization, $571 thousand of stock-based compensation expense, $404 thousand loss related to the change in fair value of warrant liabilities, $2.2 million gain from change in contingent consideration, and $5.9 million gain on settlement of contingent liability. Net cash was increased by changes in operating assets and liabilities of $782 thousand.
Cash Flow from Investing Activities
For the six months ended June 30, 2025, net cash used in investing activities was $5.1 million, which primarily resulted from the related party acquisition of MC Brands.
For the six months ended June 30, 2024, net cash provided in investing activities was $336 thousand, which primarily resulted from $330 thousand in proceeds from the repayment of a loan receivable.
Cash Flow from Financing Activities
For the six months ended June 30, 2025, net cash provided by financing activities was $30.0 million, which resulted from proceeds from May 2025 Notes.
For the six months ended June 30, 2024, net cash provided by financing activities was $4.1 million, primarily driven by proceeds from the issuance of common stock and warrants of $2.1 million and proceeds from the issuance of related party notes of 2.3 million.
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are therefore not exposed to the financing, liquidity, market, or credit risk that could arise if we had engaged in those types of relationships.
41
Critical Accounting Policies and Estimates
Part I, Item, 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” discusses our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates under different assumptions or conditions.
These estimates are based on our knowledge and understanding of current conditions and actions that we may take in the future. Changes in these estimates will occur as a result of the passage of time and the occurrence of future events. Subsequent changes in these estimates may have a significant impact on our financial condition and results of operations and are recorded in the period in which they become known. We have identified the following estimates that, in our opinion, are subjective in nature, require the exercise of judgment and involve complex analysis: the fair value of derivative assets and liabilities, goodwill impairment assessment, intangible assets, revenue recognition and cost of goods sold.
The significant accounting policies and estimates that have been adopted and followed in the preparation of our condensed consolidated financial statements are detailed in Note 1 - Overview, Basis of Presentation and Significant Accounting Policies included in the Form 10-K and Note 1 - Overview, Basis of Presentation and Significant Accounting Policies to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report. There have been no changes in these policies and estimates that had a significant impact on the financial condition and results of operations for the periods covered in this Quarterly Report.
Recently Issued Accounting Pronouncements Adopted
For more information on recently issued accounting pronouncements are included within Note 1 - Overview, Basis of Presentation and Significant Accounting Policies, included elsewhere in the notes to unaudited condensed consolidated financial statements covered under Part I, Item 1 of this Quarterly Report.
New Accounting Pronouncements Not Yet Adopted
For more information on new accounting pronouncements not yet adopted are included within Note 1 - Overview, Basis of Presentation and Significant Accounting Policies, included elsewhere in the notes to unaudited condensed consolidated financial statements covered under Part I, Item 1 in this Quarterly Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company” as defined by 17 C.F.R. § 229.10, we are not required to provide information required by this Item.
Item 4. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Interim Chief Executive Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act, our Interim Chief Executive Officer and our Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2025. Based on this evaluation, our Interim Chief Executive Officer and our Chief Financial Officer concluded that, due to the material weaknesses in our internal control over financial reporting previously identified in Item 9A, “Controls and Procedures” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and filed with the SEC on March 21, 2025, as amended on March 28, 2025, our disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, 2025.
Management, with the oversight of the Audit Committee of our Board of Directors, continue to focus on remediating the material weaknesses identified in the design and operation of our internal control over financial reporting, including adding additional qualified personnel, further documentation and implementation of control procedures and the implementation of control monitoring. While we have begun the process of implementing measures which we believe will remediate the underlying cause of these material weaknesses, there can be no assurance as to when the remediation plan will be fully developed and implemented and whether such measures will be effective. Until our remediation plan is fully implemented and effective, we will continue to devote time, attention and financial resources to this effort.
Changes in Internal Control Over Financial Reporting
Other than those measures intended to remediate the material weaknesses noted above, there have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
42
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are a party to various legal proceedings or claims arising in the ordinary course of business. For information related to legal proceedings, see the discussion under the caption Legal Proceedings in Note 16 - Commitments and Contingencies to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report, which information is incorporated by reference into this Part II, Item 1.
Item 1A. Risk Factors
As of the date of this Quarterly Report, there are no material changes to our risk factors as previously disclosed in Part I, Item 1A of the Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
No
officers or directors, as defined in Rule 16a-1(f),
43
Item 6. Exhibits
| * | Filed herewith. |
| ** | Furnished herewith in accordance with Item 601 (b)(32) of Regulation S-K. |
| † | Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish copies of any of the omitted schedules and exhibits upon request by the U.S. Securities and Exchange Commission. |
44
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| AGRIFY CORPORATION | ||
| Date: August 8, 2025 | By: | /s/ Benjamin Kovler |
| Benjamin Kovler | ||
| Chairman and Interim Chief
Executive Officer (Principal Executive Officer) | ||
| Date: August 8, 2025 | By: | /s/ Brad Asher |
| Brad Asher | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
45