Agrify (AGFY) - 2021 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements The unaudited statements show significant revenue growth, increased net losses, and a strengthened equity position from public offerings Condensed Consolidated Balance Sheets Total assets surged to $159.3 million while stockholders' equity became positive, driven by capital raised from public offerings Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Sep 30, 2021 (Unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $44,746 | $8,111 | | Marketable securities (Current) | $62,261 | $0 | | Total current assets | $132,865 | $18,640 | | Total Assets | $159,298 | $21,839 | | Liabilities & Equity | | | | Total current liabilities | $23,006 | $27,029 | | Total Liabilities | $24,623 | $28,293 | | Total Stockholders' Equity (Deficit) | $134,297 | ($6,679) | Condensed Consolidated Statements of Operations Revenue grew substantially in Q3 2021, but higher costs led to a gross loss and an increased net loss for the period Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue, net | $15,751 | $2,813 | $34,584 | $7,734 | | Gross (loss) profit | ($380) | ($199) | ($393) | $860 | | Operating loss | ($9,802) | ($2,585) | ($21,726) | ($8,472) | | Net loss attributable to Agrify | ($9,758) | ($2,705) | ($19,204) | ($8,562) | | Net loss per share | ($0.47) | ($0.67) | ($1.07) | ($2.13) | Condensed Consolidated Statements of Cash Flows Financing activities provided $138.9 million, funding significant cash use in operations and investing activities for nine months Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($17,557) | ($10,723) | | Net cash used in investing activities | ($84,683) | ($1,195) | | Net cash provided by financing activities | $138,875 | $16,670 | | Net increase in cash | $36,635 | $4,752 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, public offerings, a new loan program, and a significant subsequent acquisition - The company develops precision hardware and software grow solutions for the indoor agriculture marketplace, primarily serving the cannabis and hemp industry[21] - In February 2021, the company completed an IPO and a secondary public offering, raising significant capital[25] - The company launched the 'Agrify TTK Solution' program, providing capital for construction and equipment to customers; loan receivables under this program totaled $13.1 million as of September 30, 2021[59][61] - Subsequent to the quarter end, on October 1, 2021, the company acquired Cascade Sciences and Precision Extraction Solutions for up to $65 million in cash and stock[123][126] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong revenue growth from build-outs, declining gross margins, rising operating expenses, and a solid liquidity position Results of Operations Revenue surged due to facility build-outs, while gross margin turned negative and SG&A expenses increased significantly Revenue Breakdown (in thousands) | Revenue Source | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Cultivation solutions | $2,702 | $99 | $3,969 | $4,594 | | Facility build-outs | $12,995 | $2,597 | $30,466 | $3,019 | | Services | $54 | $117 | $141 | $121 | | Total Revenue | $15,751 | $2,813 | $34,584 | $7,734 | - Gross profit margin decreased to (1.1%) for the nine months ended Sep 30, 2021, compared to 11.1% in the same period in 2020, primarily due to higher production costs and a different revenue mix[161] - SG&A expenses for the nine months of 2021 increased to $18.85 million from $6.94 million in 2020, largely due to higher payroll, stock-based compensation, and a $2.4 million one-time financing termination fee[167] Liquidity and Capital Resources The company's liquidity was significantly enhanced by 2021 public offerings, providing sufficient capital for future operations - Following its February 2021 public offerings, the company had approximately $139 million in cash and cash equivalents and believes this is sufficient to fund planned operations for at least the next 12 months[172] Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Operating Activities | ($17,557) | ($10,723) | | Investing Activities | ($84,683) | ($1,195) | | Financing Activities | $138,875 | $16,670 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exempt from this disclosure requirement as a "smaller reporting company" - The Company is not required to provide information on market risk as it qualifies as a "smaller reporting company"[182] Item 4. Controls and Procedures Management concluded that disclosure controls were not effective as of September 30, 2021, and is implementing remediation measures - The CEO and CFO concluded that the company's disclosure controls and procedures were not effective at a reasonable assurance level as of September 30, 2021[184] - The company is implementing remediation measures for material weaknesses, including hiring additional qualified personnel and enhancing control procedures and monitoring[185] PART II OTHER INFORMATION Item 1. Legal Proceedings The company is defending against a lawsuit from two former employees concerning compensation and wrongful termination claims - The company is involved in a lawsuit with two former employees regarding compensation and employment claims, which the company believes lack merit and is defending against[113][114] Item 5. Other Information The company announced significant management changes in November 2021, appointing a new President, COO, and CFO - Effective November 10, 2021, the company appointed Thomas Massie as President and COO and Timothy Oakes as CFO[188] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including officer certifications and XBRL financial data - The report includes a list of filed exhibits, such as officer certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL data files[190]