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Supplemental Condensed Consolidated Balance Sheet Information

6 Months Ended

Jun. 30, 2024

Supplemental Condensed Consolidated Balance Sheet Information [Abstract]

Supplemental Condensed Consolidated Balance Sheet Information

Note 3 — Supplemental Condensed Consolidated Balance Sheet Information

Accounts Receivable, Net

Accounts receivable consisted of the following as of June 30, 2024 and December 31, 2023:

(In thousands)	June 30, 2024			December 31, 2023
Accounts receivable, gross	$	2,835		$	3,036
Less allowance for credit losses		(2,563	)		(1,887	)
Accounts receivable, net	$	272		$	1,149

The movements in the Company’s credit losses accounts were as follow:

(In thousands)	Six months ended June 30, 2024			Year ended December 31, 2023
Allowance for credit losses - beginning of period	$	1,887		$	4,605
(Recovery of) allowance for credit losses		698			(1,426	)
Accounts receivable written-off		(22	)		(1,292	)
Allowance for credit losses - end of period	$	2,563		$	1,887

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of June 30, 2024 and December 31, 2023:

(In thousands)	June 30, 2024		December 31, 2023
Receivable from legal settlement	$	318	$	625
Prepaid insurance		173		454
Prepaid expenses, other		77		82
Other receivables		57		34
Prepaid software		24		70
Prepaid materials		14		13
Prepaid settlement asset		—		2,054
Total prepaid expenses and other current assets	$	663	$	3,332

The Company recorded in the fourth quarter of the year ended December 31, 2023 a prepaid settlement asset in connection with the Modification and Settlement Agreement entered into with Mack Molding Co. as described in detail within Note 14 — Commitments and Contingencies. This amount represents the value of warrants to be issued to Mack Molding Co. upon satisfaction of the terms of the settlement agreement and one $500 thousand prepayment to Mack Molding Co. During the quarter ended March 31, 2024, the conditions of the agreement were met and the prepaid settlement asset was derecognized and recorded into gain on settlement of contingent liabilities upon the closing of the settlement.

Property and Equipment, Net

Property and equipment, net consisted of the following as of June 30, 2024 and December 31, 2023:

(In thousands)	June 30, 2024			December 31, 2023
Leased equipment	$	4,465		$	4,465
Machinery and equipment		905			904
Software		606			606
Computer and office equipment		546			588
Leasehold improvements		200			702
Research and development laboratory equipment		175			183
Furniture and fixtures		116			116
Trade show assets		79			78
Vehicles		43			43
Total property and equipment, gross		7,135			7,685
Accumulated depreciation		(3,124	)		(2,894	)
Construction in progress		2,943			2,943
Total property and equipment, net	$	6,954		$	7,734

Depreciation expense for the three months ended June 30, 2024 and 2023 was $0.4 million and $0.5 million, respectively, and $0.8 and $0.9 million for the six months ended June 30, 2024 and 2023, respectively. Depreciation expense is recorded within general and administrative, selling and marketing, and research and development depending on the nature of the related property and equipment.

Construction in Progress (“CIP”) includes all direct and indirect costs related to the construction, development, or acquisition of tangible property and equipment that is not yet ready for use. All costs incurred during the construction phase are accumulated in the CIP account. Costs remain in the CIP account until the asset is substantially complete and ready for its intended use. Once the asset is ready for use, the total accumulated costs are transferred from the CIP account to the appropriate property and equipment account. The asset is then depreciated over its estimated useful life from the date it is placed into service. CIP is reviewed regularly to ensure that all costs are accurate and that the project is progressing as planned. Any indication of impairment is assessed, and if the carrying amount exceeds the recoverable amount, an impairment loss is recognized.

During the six months ended June 30, 2024, the Company sold property and equipment with a cost basis of $2,000 in exchange for proceeds of $11,000, resulting in a gain of $9,000. During the three and six months ended June 30, 2024, the Company retired certain fully depreciated property and equipment which had an original cost of $544,000.

During the year ended December 31, 2023, the Company sold property and equipment in exchange for proceeds of $105,000, resulting in a gain of $144,000. During the year ended December 31, 2023, the Company retired certain fully depreciated property and equipment which had an original cost of $444,000.

Other Non-Current Assets

Other non-current assets consists only of security deposits as of June 30, 2024 and December 31, 2023.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following as of June 30, 2024 and December 31, 2023:

(In thousands)	June 30, 2024		December 31, 2023
Sales tax payable (1)	$	4,848	$	5,338
Accrued construction costs		1,312		1,412
Accrued professional fees		402		457
Accrued warranty expenses		316		420
Compensation related fees		304		474
Accrued consulting fees		210		43
Accrued inventory purchases		14		10
Accrued interest expense		4		321
Accrued acquisition liabilities		—		2,180
Total accrued expenses and other current liabilities	$	7,410	$	10,655

(1)

Sales tax payable primarily represents identified sales and use tax liabilities arising from our acquisition of Precision and Cascade. These amounts are included as part of our initial purchase price allocations and are the subject matter of an indemnification claim under the Precision and Cascade acquisition agreement.

Accrued acquisition liabilities

Resulting from the 2021 acquisitions of Precision Extraction Newco, LLC (“Precision”) and Cascade Sciences, LLC (“Cascade”) from Sinclair Scientific, LLC (“Sinclair”), the Company withheld from the transaction shares issuable to Precision and Cascade 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 purchase agreement. The accrued acquisition liabilities as of December 31, 2023 represent the value of this held back Common Stock at the price per share at the time of the transaction.

On June 15, 2023, the Company and its wholly-owned subsidiary, Precision, filed an Amended Verified Complaint in the Court of Chancery of the State of Delaware against Sinclair and certain individual defendants (the “Delaware Action”). The claims filed in the Delaware Action concern various breaches of the Plan of Merger and Equity Purchase Agreement dated September 29, 2021, by and between the Company, Sinclair, Mass2Media, LLC, and certain of their members (the “Merger Agreement”). In response to the Delaware Action, certain of the defendants filed counterclaims for breach of contract and declaratory judgment against the Company and Precision alleging breach of the Merger Agreement. Pursuant to a Settlement and Release Agreement, dated December 14, 2023, the Company and Sinclair dismissed all legal claims and entered into a settlement for an undisclosed amount. As a result of this settlement, the Company derecognized the accrued acquisition liability and issued the held back Common Stock in the first quarter of 2024 at Agrify’s price per share at the time of issuance. The difference between the value of the shares at issuance and the derecognized liabilities was recorded as a gain within change in contingent consideration within the Company’s condensed and consolidated statement of operations for the three months ended March 31, 2024.