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Restatement of Current Period

6 Months Ended

Jun. 30, 2022

Restatement of Current Period [Abstract]

Restatement of Current Period

Note 2 — Restatement of Current Period

The Company’s financial statements as of and for the three and six-months ended June 30, 2022 have been restated due to the following errors:

PIPE Warrants/SPA Warrants Classification and Measurement

During the six months ended June 30, 2022 the Company entered into several debt and equity financing transactions including i) the issuance of common stock and warrants in a private placement on January 25, 2022 (the “PIPE Warrants”) and ii) the issuance of a note payable with associated warrants on March 14, 2022 (the “SPA Warrants”).

The Company determined that the PIPE Warrants and the SPA Warrants were incorrectly classified as equity and must be reclassified to a liabilities measured at fair value upon issuance and remeasured to fair value at each reporting date. In addition, the Company used an incorrect volatility percentage when calculating the value of the PIPE Warrants and the SPA Warrants upon issuance. As a result of these errors:

●

Additional paid-in capital was overstated by $24.2 million as of June 30, 2022 due to the incorrect classification of the SPA Warrants and the PIPE Warrants as equity rather than liabilities;

●

Warrant liabilities was understated by the fair value of the PIPE Warrants and the SPA Warrants of $9.5 million as of June 30, 2022;

●

Long-term debt and Long-term debt, current was overstated by $9.2 million and $5.5 millions, respectively, as of June 30, 2022 due to the incorrect allocation of the debt discount in connection with the issuance of debt and SPA Warrants, as a result of the improper classification of the SPA Warrants as equity rather than liabilities;

●

Accumulated deficit as of June 30, 2022 was overstated by $29.5 million as a result of the net impact of the following errors in the condensed consolidated statement of operations:

o

The change in fair value of warrant liabilities was understated by $20.2 million and $31.0 million for the three and six-months ended June 30, 2022, respectively, due to the fact that the Company did not appropriately remeasure the fair value of the warrant liabilities through earnings;

o

Interest expense, net was understated by $1.4 million and $1.5 million for the three and six-months ended June 30, 2022 due to incorrect debt discount amortization in connection with the issuance of debt and SPA Warrants, as a result of the improper classification of the SPA Warrants as equity rather than liabilities.

The impact of these/this adjustment(s) is/are shown below in the restated and reclassified condensed consolidated balance sheet, condensed consolidated statement of operations, and condensed consolidated statement of cash flows for the three and six-months ended June 30, 2022.

The following is a summary of the impact of the restatement and reclassifications on the Company’s condensed consolidated balance sheet:

		June 30, 2022
						Adjustments
		Previously Reported				Warrants				Reverse Stock Split				Restated
Assets
Current assets:
Cash and cash equivalents		$	18,608				—							$	18,608
Restricted cash and restricted marketable securities			30,000				—								30,000
Marketable securities			11,323				—								11,323
Accounts receivable, net of allowance for doubtful accounts of $2,740			10,468				—								10,468
Inventory, net of reserves of $1,871			41,871				—								41,871
Prepaid and refundable taxes			210				—								210
Prepaid expenses and other current assets			5,925				—								5,925
Total current assets			118,405												118,405
Loan receivable, net of allowance for doubtful accounts of $7,079			35,090				—								35,090
Property and equipment, net			11,932				—								11,932
Right-of-use assets, net			2,866				—								2,866
Goodwill			—				—								—
Intangible assets, net			—				—								—
Other non-current assets			2,920				—								2,920
Total assets		$	171,213											$	171,213
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	4,157				—							$	4,157
Accrued expenses and other current liabilities			27,456				—								27,456
Operating lease liabilities, current			1,084				—								1,084
Long-term debt, current			9,615				(5,536	)							4,079
Deferred revenue			3,753				—								3,753
Total current liabilities			46,065												40,529
Warrant liabilities			—				9,530								9,530
Other non-current liabilities			236				—								236
Operating lease liabilities, non-current			1,908				—								1,908
Long-term debt			45,014				(9,226	)							35,788
Total liabilities			93,223												87,991

Commitments and Contingencies (Note 18)

Stockholders’ equity:
Common Stock, $0.001 par value per share, 250,000 shares authorized, 132,957 shares issued and outstanding			25				—				(25	)			—
Preferred Stock, $0.001 par value per share, 2,895,000 shares authorized, no shares issued or outstanding			—				—								—
Preferred A Stock, $0.001 par value per share, 105,000 shares authorized, no shares issued or outstanding			—				—								—
Additional paid-in capital			238,854				(24,227	)			25				214,652
Accumulated deficit			(161,258	)			29,459								(131,799	)
Total stockholders’ equity attributable to Agrify			77,621												82,853
Non-controlling interests			369				—								369
Total liabilities and stockholders’ equity		$	171,213											$	171,213

The following is a summary of the impact of the restatement and reclassifications on the Company’s condensed consolidated statement of operations:

		Three Months ended June 30, 2022																Six Months ended June 30, 2022
						Adjustment																Adjustment
		Previously Reported				Warrants				Reverse Stock Split				Restated				Previously Reported				Warrants				Reverse Stock Split				Restated
Revenue including $1,140 and $2,411from related parties, respectively)		$	19,329				—				—			$	19,329			$	45,350				—				—			$	45,350
Cost of goods sold			17,717				—				—				17,717				39,568				—				—				39,568
Gross profit (loss)			1,612												1,612				5,782								—				5,782

General and administrative			19,378				—				—				19,378				29,137				—				—				29,137
Selling and marketing			2,332				—				—				2,332				4,422				—				—				4,422
Research and development			2,438				—				—				2,438				4,522				—				—				4,522
Change in contingent consideration			(907	)			—				—				(907	)			(907	)			—				—				(907	)
Impairment of goodwill and intangible assets			69,904				—				—				69,904				69,904				—				—				69,904
Total operating expenses			93,145												93,145				107,078												107,078
Loss from operations			(91,533	)											(91,533	)			(101,296	)											(101,296	)
Interest (expense) income, net			(1,927	)			(1,384	)			—				(3,311	)			(1,245	)			(1,507	)							(2,752	)
Other expenses			—				—				—				—				—				—				—				—
Change in fair value of warrant liabilities			—				20,181				—				20,181				—				30,966				—				30,966
Gain on extinguishment of notes payable			—				—				—				—				—				—				—				—
Other (expense) income, net			(1,927	)			18,797								16,870				(1,245	)			29,459								28,214
Net loss before income taxes			(93,460	)			18,797								(74,663	)			(102,541	)			29,459								(73,082	)
Income tax benefit			(62	)			—				—				(62	)			(262	)			—				—				(262	)
Net loss			(93,398	)			18,797								(74,601	)			(102,279	)			29,459								(72,820	)
Income (loss) attributable to non-controlling interest			3				—				—				3				4				—				—				4
Net loss attributable to Agrify Corporation		$	(93,401	)		$	18,797							$	(74,604	)		$	(102,283	)		$	29,459							$	(72,824	)
Net loss per share attributable to Common Stockholders – basic and diluted		$	(3.51	)		$	0.71			$	(558.50	)		$	(561.31	)		$	(4.00	)		$	1.15			$	(566.28	)		$	(569.13	)
Weighted-average common shares outstanding – basic and diluted			26,582,104				—				(26,449,193	)			132,911				25,591,114				—				(25,463,158	)			127,956

The following is a summary of the impact of the restatement and reclassifications on the Company’s condensed consolidated statement of cash flows:

		Six Months ended June 30, 2022
Cash flows from operating activities		Previously Reported				Adjustment Warrants				Restated
Net loss attributable to Agrify Corporation		$	(102,283	)			29,459			$	(72,824	)
Adjustments to reconcile net loss attributable to Agrify Corporation to net cash used in operating activities:
Depreciation and amortization			2,193				—				2,193
Impairment on goodwill and intangible assets			69,904				—				69,904
Amortization of premium on investment securities			1,055				—				1,055
Amortization of debt discount			1,228				1,507				2,735
Amortization of issuance costs			—				370				370
Interest on investment securities			(1,247	)			—				(1,247	)
Early termination of lease			—				26				26
Provision for doubtful accounts			8,630				—				8,630
Provision for slow-moving inventory			929				—				929
Prepaid and refundable taxes			—				(16	)			(16	)
Debt issuance costs			2,422				(2,422	)			—
Deferred income taxes			(262	)			—				(262	)
Compensation in connection with the issuance of stock options			1,893				—				1,893
Non-cash interest (income) expense			(1,010	)			—				(1,010	)
Gain on extinguishment of notes payable, net			—				—				—
Loss from disposal of fixed assets			8				—				8
Change in fair value of contingent consideration			(907	)			—				(907	)
Change in fair value of warrant liabilities			—				(30,966	)			(30,966	)
Income (loss) attributable to non-controlling interests			4				—				4
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable			(4,305	)			—				(4,305	)
Inventory			(20,171	)			—				(20,171	)
Prepaid expenses and other current assets			(2,714	)			3,499				785
Prepaid and refundable taxes			(16	)			16				—
Right-of-use assets, net			86				(26	)			60
Other non-current assets			(1,514	)			1,514				—
Accounts payable			(4,943	)			2,619				(2,324	)
Accrued expenses and other current liabilities			(4,000	)			(49	)			(4,049	)
Deferred (expense) revenue, net			(2,560	)			1,558				(1,002	)
Net cash used in operating activities			(57,580	)			7,089				(50,491	)

Cash flows from investing activities
Purchases of property and equipment			(6,398	)			(2,702	)			(9,100	)
Purchase of securities			(211,030	)			—				(211,030	)
Proceeds from the sale of securities			214,449				—				214,449
Issuance of loan receivable			(20,443	)			—				(20,443	)
Cash paid for business combination, net of cash acquired			(3,513	)							(3,513	)
Net cash used in investing activities			(26,935	)			(2,702	)			(29,637	)

Cash flows from financing activities
Proceeds from issuance of debt and warrants in private placement			65,000				(2,595	)			62,405
Proceeds from issuance of Common Stock and warrants in private placement, net of fees			25,770				27				25,797
Proceeds from IPO, net of fees			—				—				—
Proceeds from Secondary public offering, net of fees			—				—				—
Proceeds from exercise of options			19				—				19
Proceeds from exercise of warrants			2				—				2
Short-term loan payable			2,513				(2,513	)			—
Repayments of debt			(2,008	)			2,008				—
Payments on other finance loans			—				(243	)			(243	)
Payments on insurance financing loans			—				(1,071	)			(1,071	)
Payments of financing leases			(187	)			—				(187	)
Net cash provided by financing activities			91,109				(4,387	)			86,722
Net increase in cash and cash equivalents			6,594								6,594
Cash and cash equivalents at the beginning of period			12,014								12,014
Cash and cash equivalents at the end of period		$	18,608							$	18,608
Cash, cash equivalents, and restricted cash and restricted marketable securities at end of period
Cash and cash equivalents		$	18,608							$	18,608
Restricted cash and restricted marketable securities			30,000								30,000
Total cash, cash equivalents, and restricted cash and restricted marketable securities at the end of period		$	48,608							$	48,608
Supplemental disclosures of non-cash investing activities
Initial fair value of warrants		$	—			$	40,496			$	40,496
Financing prepaid insurance		$	—			$	1,928			$	1,928

The following is a summary of the impact of the restatement and reclassifications on the Company’s condensed consolidated statement of stockholders’ equity as of June 30, 2022:

		Common Stock (Previously Reported)								Common Stock (Restated)								Additional Paid-In Capital (Previously				Additional Paid-In Capital				Accumulated Deficit (Previously				Accumulated Deficit				Total Stockholders’ Equity attributable to Agrify (Previously				Total Stockholders’ Equity attributable to Agrify				Non-Controlling Interests (Previously				Non-Controlling Interests				Total Stockholders’ Equity (Previously				Total Stockholders’ Equity
		Shares				Amount				Shares				Amount				Reported)				Restated)				Reported)				(Restated)				Reported)				(Restated)				Reported)				(Restated)				Reported)				(Restated)
Balance at January 1, 2022			22,207,103			$	21				111,035			$	—			$	196,013			$	196,034			$	(58,975	)		$	(58,975	)		$	137,059			$	137,059			$	365			$	365			$	137,424			$	137,424
Stock-based compensation			—				—				—				—				953				953				—				—				953				953				—				—				953				953
Issuance of Common Stock and warrants in private placement			2,450,350				2				12,252				—				25,795				14,800				—				—				25,797				14,800				—				—				25,797				14,800
Issuance of debt and warrants in private placement			—				—				—				—				13,230				—				—				—				13,230				—				—				—				13,230				—
Acquisition of Lab Society			297,929				—				1,490				—				1,903				1,903				—				—				1,903				1,903				—				—				1,903				1,903
Exercise of options			4,220				—				21				—				10				10				—				—				10				10				—				—				10				10
Exercise of warrants			1,583,288				2				7,916				—				(1	)			1				—				—				1				1				—				—				1				1
Net loss			—				—				—				—				—				0				(8,882	)			1,780				(8,882	)			1,780				1				1				(8,881	)			1,781
Balance at March 31, 2022			26,542,890			$	25				132,714			$	—			$	237,903			$	213,701			$	(67,857	)		$	(57,195	)		$	170,071			$	156,506			$	366			$	366			$	170,437			$	156,872
Stock-based compensation			—				—				—				—				940				940				—				—				940				940				—				—				940				940
Exercise of options			4,286				—				21				—				10				10				—				—				10				10				—				—				10				10
Exercise of warrants			44,254				—				222				—				1				1				—				—				1				1				—				—				1				1
Net loss			—				—				—				—				—				—				(93,401	)			(74,604	)			(93,401	)			(74,604	)			3				3				(93,398	)			(74,601	)
Balance at June 30, 2022			26,591,430			$	25				132,957			$	—			$	238,854			$	214,652			$	(161,258	)		$	(131,799	)		$	77,621			$	82,853			$	369			$	369			$	77,990			$	83,222

The related notes to the condensed consolidated financial statements have also been restated to reflect the error corrections described above.