XML 33 R19.htm IDEA: XBRL DOCUMENT
v3.22.1

Business Combination | 12 Months Ended
--- | ---
Dec. 31, 2021
Business Combinations [Abstract] |
Business Combination | Note 13 — Business Combination Acquisition of Precision and Cascade On September 29, 2021 (the “Execution Date”), the Company entered into a Plan of Merger and Equity Purchase Agreement, as amended by an amendment dated as of October 1, 2021 (as amended, the “Purchase Agreement”), with Sinclair Scientific, LLC, a Delaware limited liability company (“Sinclair”), Mass2Media, LLC, d/b/a PX2 Holdings, LLC, d/b/a Precision Extraction Solutions, a Michigan limited liability company (“Precision”); and each of the equity holders of Sinclair named therein (collectively, the “Sinclair Members”). On October 1, 2021, the Company consummated the transactions contemplated by the Purchase Agreement. Subject to the terms and conditions set forth in the Purchase Agreement, (1) Sinclair transferred, to the Company, and the Company purchased (the “Interest Purchase”) from Sinclair, 100% of the equity interests of Cascade Sciences, LLC, a Delaware limited liability company (“Cascade”), such that immediately after the consummation of such Interest Purchase, Cascade became a wholly owned subsidiary of the Company, and (2) Precision merged (the “Merger”) with and into a newly-formed wholly owned subsidiary of the Company, Precision Extraction NewCo, LLC. The aggregate consideration for the Interest Purchase and the Merger consisted of: (a) the sum of $30 million, plus consideration payable to holders of outstanding Sinclair equity awards, subject to certain adjustments for working capital, cash and indebtedness, payable in connection with the Interest Purchase; (b) the number of shares of the Company’s common stock, subject to adjustment, equal to the quotient of (i) $20.0 million divided by (ii) the volume-weighted average price per share of the Company’s common stock on The Nasdaq Capital Market for the 30 consecutive trading days ending on the Execution Date (the “VWAP Price”), issuable in connection with the Merger; and (c) the True-Up Buyer Shares, if any (as defined below), issuable in connection with the Merger. The Purchase Agreement includes customary post-closing adjustments, representations and warranties and covenants of the parties. The Sinclair Members may become entitled to additional shares of the Company’s common stock (the “True-Up Buyer Shares”) and cash (together with the True-Up Buyer Shares, the “Aggregate True-Up Payment) based on the eligible net revenues (as defined in the Purchase Agreement) achieved by the Cascade and Precision businesses during the fiscal year ending December 31, 2021. However, in no event shall the aggregate purchase price paid by the Company pursuant to the terms of the Purchase Agreement, taking into account any Aggregate True-Up Payment in favor of the Sinclair Members, exceed $65.0 million. Transaction and related costs, consisting primarily of professional fees, directly related to the acquisition, totaled $4.0 million for the year ended December 31, 2021. All transaction and related costs were expensed as incurred and are included in selling, general and administrative expenses. The purchase price allocation for the business combination has been prepared on a preliminary basis and changes to those allocations may occur as additional information becomes available during the respective measurement period (up to one year from the acquisition date). Fair values still under review as of December 31, 2021 include values assigned to identifiable intangible assets and goodwill. The following table sets forth the components and the allocation of the purchase price for the business combination:
(Dollar Amounts in Thousands) |  |
Purchase price consideration: |  |
Cash paid to Sinclair Members at close |  | $ | 23,000 |
Cash contributed to escrow accounts at close |  |  | 7,000 |
Cash paid for excess net working capital |  |  | 1,430 |
Stock issued at close |  |  | 14,535 |
Fair value of contingent consideration to be achieved |  |  | 3,953 |
Fair value of total consideration transferred |  |  | 49,918 |
Total purchase price, net of cash acquired |  | $ | 48,630 |
Fair value allocation of purchase price: |  |  |  |
Cash and cash equivalents |  | $ | 1,288 |
Accounts receivable |  |  | 897 |
Inventory |  |  | 6,761 |
Prepaid and other assets |  |  | 1,736 |
Property and equipment, net |  |  | 970 |
Operating lease right of use assets |  |  | 730 |
Capitalized web costs, net |  |  | 2 |
Accounts payable and accrued expenses |  |  | (9,196 | )
Deferred revenue |  |  | (5,419 | )
Long-term debt |  |  | (1,961 | )
Operating lease liabilities, current |  |  | (392 | )
Operating lease liabilities, noncurrent |  |  | (362 | )
Acquired intangible assets |  |  | 9,889 |
Goodwill |  |  | 44,975 |
Total purchase price |  | $ | 49,918 |
Identified intangible assets consist of trade names, technology, non-compete agreements, and customer relationships. The fair value of intangible assets and the determination of their respective useful lives were made in accordance with ASC 805 and are outlined in the table below:
(Dollar Amounts in Thousands) |  | Asset Value |  | Useful Life
Identified intangible assets: |  |  |  |
Trade names |  | $ | 1,260 |  | 6 to 7 years
Acquired developed technology |  |  | 3,818 |  | 5 years
Non-compete agreements |  |  | 1,202 |  | 5 years
Customer relationships |  |  | 3,609 |  | 7 to 8 years
Total identified intangible assets |  | $ | 9,889 |  |
The Company’s initial fair value estimates related to the various identified intangible assets were determined under various valuation approaches including the Income Approach, Relief-from-Royalty Method, and Discounted Cash Flow Method. These valuation methods require management to project revenues, operating expenses, working capital investment, capital spending and cash flows for the reporting unit over a multiyear period, as well as determine the weighted average cost of capital to be used as a discount rate. The Company amortizes its intangible assets assuming no residual value over periods in which the economic benefit of these assets is consumed. The amount of revenue of Precision and Cascade included in the consolidated statement of operations from the acquisition date of October 1, 2021 to December 31, 2021 was $12.3 million. The following pro forma financial information summarizes the combined results of operations for the Company, Precision and Cascade, as though the acquisition of Precision and Cascade occurred on January 1, 2020. The unaudited pro forma financial information was as follows:
|  | Year ended December 31, |
(Dollar Amounts in Thousands) |  | 2021 |  |  | 2020 |
Revenue, net |  | $ | 90,821 |  |  | $ | 52,723 |
Net loss before non-controlling interest |  |  | (35,783 | ) |  |  | (25,571 | )
Income (loss) attributable to non-controlling interest |  |  | 140 |  |  |  | (22 | )
Net loss |  | $ | (35,923 | ) |  | $ | (25,549 | )
The pro forma financial information for all periods presented above has been calculated after adjusting the results of Precision and Cascade to reflect the business combination accounting effects resulting from these acquisitions, including acquisition costs and the amortization expense from acquired intangible assets as though the acquisition occurred on January 1, 2020. The historical consolidated financial statements have been adjusted in the pro forma combined financial statements to give effect to pro forma events that are directly attributable to the business combination. The pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2020. Acquisition of PurePressure On December 31, 2021, the Company entered into a Membership Interest Purchase Agreement (the “Pure Purchase Agreement”) with PurePressure, LLC, a Colorado Limited liability company (“PurePressure”) and the members of PurePressure (collectively, the “Members”), Benjamin Britton as the Member Representative thereunder, and each of the Members. Concurrently with the execution of the Pure Purchase Agreement, the Company consummated the acquisition of all the outstanding equity interests of PurePressure, such that immediately after the consummation of such purchase, PurePressure became a wholly owned subsidiary of the Company (the “Acquisition”). The aggregate consideration for the Acquisition consisted of: (a) $4.0 million in cash, subject to certain adjustments for working capital, cash and indebtedness of PurePressure at closing; (b) 329,179 shares of the Company’s common stock (the “Buyer Shares”); and (c) the Earn-out Consideration (as defined below), to the extent earned. The Company withheld 88,878 of the Buyer Shares issuable to certain Members (the “Holdback Buyer Shares”) for the purpose of securing any post-closing adjustment owed to the Company and any claim for indemnification or payment of damages to which the Company may be entitled under the Pure Purchase Agreement. The Holdback Buyer Shares shall be released following the twelve (12) month anniversary of the Closing Date in accordance with and subject to the conditions of the Pure Purchase Agreement. The Pure Purchase Agreement includes customary post-closing adjustments, representations and warranties and covenants of the parties. The Members may become entitled to additional consideration with a value of up to $3.0 million based on the eligible net revenues achieved by the PurePressure business during the fiscal years ending December 31, 2022 and December 31, 2023, of which 40% will be payable in cash and the remaining 60% will be payable by issuing shares of the Company’s common stock (collectively, the “Earn-out Consideration”). The purchase price allocation for the business combination has been prepared on a preliminary basis and changes to those allocations may occur as additional information becomes available during the respective measurement period (up to one year from the acquisition date). Fair values still under review as of December 31, 2021 include values assigned to identifiable intangible assets and goodwill. The following table sets forth the components and the allocation of the purchase price for the business combination:
(Dollar Amounts in Thousands) |  |
Purchase price consideration: |  |
Estimated closing proceeds |  | $ | 3,613 |
Indebtedness paid |  |  | 320 |
Transaction expenses |  |  | 115 |
Closing buyer shares |  |  | 2,211 |
Holdback buyer shares |  |  | 654 |
Earn-out consideration |  |  | 707 |
Estimated working capital adjustments |  |  | 330 |
Fair value of total consideration transferred |  |  | 7,950 |
Total purchase price, net of cash acquired |  | $ | 7,647 |
Fair value allocation of purchase price: |  |  |  |
Cash and cash equivalents |  | $ | 303 |
Accounts receivable, net |  |  | 48 |
Inventory |  |  | 1,537 |
Property and equipment, net |  |  | 219 |
Right of use assets, net |  |  | 191 |
Prepaid expenses and other receivables |  |  | 61 |
Other non-current assets |  |  | 16 |
Accounts payable and accrued expenses |  |  | (706 | )
Deferred revenue |  |  | (762 | )
Operating lease liabilities, current |  |  | (117 | )
Operating lease liabilities, noncurrent |  |  | (74 | )
Finance lease liabilities, current |  |  | (4 | )
Finance lease liabilities, noncurrent |  |  | (10 | )
Notes payable, current |  |  | (260 | )
Notes payable, noncurrent |  |  | (12 | )
Acquired intangible assets |  |  | 3,037 |
Goodwill |  |  | 4,483 |
Total purchase price |  | $ | 7,950 |
Identified intangible assets consist of trade names, technology, and customer relationships. The fair value of intangible assets and the determination of their respective useful lives were made in accordance with ASC 805 and are outlined in the table below:
(Dollar Amounts in Thousands) |  | Asset Value |  | Useful Life
Identified intangible assets: |  |  |  |
Trade name |  | $ | 227 |  | 5 years
Acquired developed technology |  |  | 1,093 |  | 8 years
Customer relationships |  |  | 1,717 |  | 5 years
Total identified intangible assets |  | $ | 3,037 |  |
Subject to certain customary limitations, (i) the Members will indemnify the Company and its affiliates, officers, directors and other agents against certain losses related to, among other things, breaches of the Members’ and PurePressure’s representations and warranties, indebtedness, transaction expenses, pre-closing taxes and the failure to perform covenants or obligations under the Pure Purchase Agreement, and (ii) the Company will indemnify the Members and their respective affiliates, officers, directors and other agents against certain losses related to, among other things, breaches of the Company’s representations and warranties and the failure to perform covenants or obligations under the Pure Purchase Agreement. Acquisition of TriGrow On January 22, 2020, the Company completed the acquisition of all outstanding shares of TriGrow. TriGrow is an integrator and distributor of the Company’s premium indoor grow solutions for the indoor controlled agriculture marketplace. As part of the acquisition, the Company received TriGrow’s 75% interest in Agrify Brands, LLC (formerly TriGrow Brands, LLC), a licensor and marketing supporter of established portfolio of consumer brands that utilize the Company’s growing technology. In consideration of TriGrow’s shares, the Company issued to TriGrow’s shareholders 595,552 shares of Agrify common stock. In addition, the closing conditions included the assumption of TriGrow’s outstanding obligation to invest $1.1 million (the “Funding Amount”) in a form of a so called “profit interest” investment in CCI Finance, LLC (“CCI”). The Company satisfied this obligation and made payment of the Funding Amount on January 24, 2020 pursuant to a Profits Interest Agreement with CCI. Under the Profits Interest Agreement, in return for the Company’s investment of the Funding Amount, CCI is obligated to share with the Company 28.5% of the net revenue generated from its equipment lease agreement with its customer, payable at least annually by CCI to the Company. The revenue sharing percentage is reduced from 28.5% to 20% once the Company has received payments equaling an 18% Internal Rate of Return on the Funding Amount (the “Preferred Return”) prior to the fifth anniversary of the agreement. The revenue sharing terminates upon the later of five years, or the Company’s attainment of the Preferred Return. To date, no revenue has been generated and shared with the Company under this agreement. As part of the acquisition of TriGrow, the Company made available 121,539 shares of its common stock for issuance to certain executives of TriGrow upon TriGrow’s and/or the Company’s receipt of $10.0 million of accumulative purchase orders for TriGrow and/or the Company’s equipment, products, and services, for the period from November 21, 2019 through June 30, 2020 as a result of the efforts of the TriGrow executives. Such common stock of the Company is to be distributed by the Company to certain executives of the surviving corporation responsible for achievement of such milestone, in the Company’s sole discretion. The Company concluded the earn-out, if materialized, will be considered as post combination services. Additionally, the Company concluded that the value associated with the earn-out to be de minimis. No earn-out was ever earned. The purchase price for this business combination was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the remaining unallocated purchase price recorded as goodwill. The fair value assigned to identifiable intangible assets acquired was determined primarily by using the income approach, which discounts expected future cash flows to present value using estimates and assumptions determined by the Company. Transaction and related costs, consisting primarily of professional fees, directly related to the acquisition, totaled $45 thousand for the year ended December 31, 2020. All transaction and related costs were expensed as incurred and are included in selling, general and administrative expenses. The following table sets forth the components and the allocation of the purchase price for the business combination:
(Dollar Amounts in Thousands) |  |  |
Components of Purchase Price: |  |  |
Obligation to invest cash in profit interest |  | $ | 1,140 |
Capital stock consideration |  |  | 1,356 |
Noncontrolling Interest |  |  | 207 |
Total purchase price |  | $ | 2,703 |
Allocation of Purchase Price: |  |  |  |
Net tangible assets, including cash acquired of $44 |  | $ | 543 |
Identifiable intangible assets: |  |  |  |
Brand rights |  |  | 930 |
Customer relationships |  |  | 850 |
Total identifiable intangible assets |  |  | 1,780 |
Goodwill |  |  | 380 |
Total purchase price allocation |  | $ | 2,703 |
Trade names and Customer relationships were assigned estimated useful lives of ten years and nine years, respectively, the weighted average of which is approximately 9.5 years. The amount of revenue of TriGrow included in the Company’s consolidated statement of operations from the acquisition date of January 22, 2020 to December 31, 2020 was $4.0 million. Acquisition of Harbor Mountain Holdings, LLC In July 2020, the Company acquired all the outstanding equity interests of HMH, located in the Atlanta, GA area, that has been producing and assembling many of the Company’s products. As part of the acquisition, the Company waived net receivable owed amounting to $214 thousand and assumed lease liabilities for existing equipment and premises. On September 20, 2021, the Company issued an aggregate of 8,000 shares of common stock to an executive of HMH for achieving certain milestones from the acquisition date through March 31, 2021. The common shares were valued at $176 thousand based on the Company’s Stock Price at closing September 20, 2021. The value of the shares is included in research and development in the condensed consolidated statements of operations. The purchase price for this business combination was allocated by management to the tangible and intangible assets acquired and liabilities assumed based on their book value which estimated their fair values on the acquisition date, with the remaining unallocated purchase price recorded as goodwill. Transaction and related costs, consisting primarily of professional fees, directly related to the acquisition, totaled $35 thousand for the year ended December 31, 2020. All transaction and related costs were expensed as incurred and are included in selling, general and administrative expenses. The following table sets forth the components and the allocation of the purchase price for the business combination:
(Dollar Amounts in Thousands) |  |  |
Components of Purchase Price: |  |  |
Waiver of net receivable owed to Agrify |  | $ | 214 |
Total purchase price |  | $ | 214 |
Allocation of Purchase Price: |  |  |  |
Net tangible assets (liabilities): |  |  |  |
Cash |  | $ | 4 |
Property and Equipment |  |  | 817 |
Accounts payable |  |  | (187 | )
Accrued expenses |  |  | (23 | )
Financing lease liabilities |  |  | (649 | )
Net tangible liabilities |  |  | (38 | )
Goodwill |  |  | 252 |
Total purchase price allocation |  | $ | 214 |
The amount of revenue of HMH included in the Company’s consolidated statement of operations from the acquisition date of July 22, 2020 to December 31, 2020 was $0. The following pro forma financial information summarizes the combined results of operations for us, TriGrow and HMH, as though the acquisition of TriGrow and HMH occurred on January 1, 2020. The unaudited pro forma financial information was as follows:
|  | Year ended December 31, |
(Dollar Amounts in Thousands) |  | 2020 |
Revenue, net |  | $ | 12,121 |
Net loss before non-controlling interest |  | $ | (22,743 | )
Loss attributable to non-controlling interest |  |  | 65 |
Net loss |  | $ | (22,678 | )
The pro forma financial information for all periods presented above has been calculated after adjusting the results of TriGrow and HMH to reflect the business combination accounting effects resulting from these acquisitions, including acquisition costs and the amortization expense from acquired intangible assets as though the acquisition occurred on January 1, 2020. The historical consolidated financial statements have been adjusted in the pro forma combined financial statements to give effect to pro forma events that are directly attributable to the business combination. The pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2020.

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration