Debra Borchardt
Agrify Corporation (Nasdaq: AGFY) issued a press release about raising $1.84 million after it slashed the price of its warrants, but the company didn’t issue a release telling investors that its financial statements were not reliable. While shares popped 73% on Tuesday to 30 cents, they were plunging 30% in early trading on Wednesday to lately sell near 20 cents.
At the end of March Agrify noted that its earnings reports would be delayed, but also didn’t issue a press release about that. Agrify stated that it expects to report revenue of approximately $58.3 million for the fiscal year ending December 31, 2022. Lower than last year’s revenue of $59.9 million for 2021. Agrify said that the decrease was primarily due to a reduction in facility build-out revenue resulting from the completion of a facility under the Company’s TTK Solutions, a reduction of revenue that was included in deferred revenue resulting from Bud & Mary’s pending litigation and a decrease in cultivation products and service sales primarily due to migration to a VFU leasing model, and was partially offset by extraction solution sales.
In addition, Agrify is forecasting a net loss of approximately $184 million for 2022 (not including the aforementioned potential accounting adjustment for warrant liability, loans receivable reserves and inventory reserves) compared to a net loss of approximately $32.5 million for the fiscal year ended December 31, 2021. The increase in net loss was attributed to increased general and administrative expenses, an impairment of goodwill and intangible assets, loss on extinguishment of notes payable, and interest expense.
Accounting Errors
Agrify filed an 8K with the SEC on April 17 stating that its accountants Marcum LLP concluded, “The Company’s previously issued unaudited condensed consolidated interim financial statements as of and for the fiscal periods ended March 31, 2022, June 30, 2022, and September 30, 2022, included in the Company’s Quarterly Reports on Form 10-Q for such periods should no longer be relied upon.” In addition, the filing stated that earnings releases and investor communications describing the financial statements for those periods should no longer be relied upon.
Agrify said it identified errors in the accounting for warrants previously issued by the company. “Specifically, the Audit Committee concluded 301,575 warrants issued in a private placement on January 28, 2022 and 688,111 warrants issued in a private placement on March 23, 2022 (collectively, the “Warrants”) should have been classified as a liability measured at fair value, with changes in fair value each period reported in earnings, rather than as a component of equity.”
Agrify said it would fix the misstatements in its previously issued unaudited financial statements as soon as it could.
Warrants
Today’s news also revolved around warrants. Agrify said it has entered into warrant inducement letters to raise up to $1.84 million in gross proceeds from the exercise of 10,651,430 common stock warrants issued in the company’s public offering in December 2022.
On April 18, 2023, Agrify reduced the exercise price of all the existing warrants from $0.65 per share to $0.1725 per share. Agrify also said it entered into warrant inducement offer letters with certain investors pursuant to which the investors may exercise 10,651,430 Existing Warrants at the reduced exercise price of $0.1725, and the company will issue to such investors new warrants to purchase 200% of the shares exercised pursuant to the Existing Warrants from April 18, 2023 to 9:00am on April 21, 2023.
Such new warrants will become exercisable six months after issuance, have an exercise price of $0.1725, and a five-year term from their initial exercise date, which will, among other things, be reduced to the extent the company issues securities for a lower purchase price, subject to certain exceptions and substantially consistent with the equivalent term in the Existing Warrants.
Agrify did note that all the warrants would have to be exercised in order to reap the whole $1.84 million.
Denver Greens
On a positive note, Agrify stated last week that Denver Greens is expected to become the new operating partner through the acquisition of the total turnkey project Greenstone, pending the execution of documentation and final approval from the Colorado Marijuana Enforcement Division (MED). The company said that it is the first-of-its-kind program in which Agrify engages with qualified cannabis operators to provide critical support including: design and buildout of cultivation and extraction facilities, providing state-of-the-art cultivation and extraction equipment, process design, training, implementation, proven grow recipes, product formulations, and data analytics.
