Agrify Announces the Result of its Reconvened Annual Meeting, At Premium $3.9 Million Debt Conversion, and the Exercise of a Majority of Previously Issued Warrants

Rhea-AI Summary

Agrify Corporation (AGFY) announced that shareholders approved an amendment to increase authorized shares of common stock, consolidate outstanding debt, and reduce the number of outstanding warrants. The Charter Amendment was approved at the Reconvened Meeting. The Company believes this will help it to regain compliance with Nasdaq's Listing Rule 5550(b)(1).

Insights

Financial Analyst

The approval of the Charter Amendment by Agrify Corporation's shareholders, allowing an increase in authorized shares, is a strategic move aimed at providing the company with flexibility in its capital structure. This flexibility can be crucial for funding operations, pursuing acquisitions, or facilitating debt-to-equity conversions. The conversion of $3.9 million of outstanding debt into equity at a significant premium indicates strong confidence from the management in the company's future prospects. This transaction not only reduces the company's debt burden but also aligns the interests of the debt holders with those of the equity holders, potentially leading to more prudent corporate governance.

The cashless exercise of warrants by the Prior Lender, resulting in a reduced number of outstanding warrants, simplifies the capital structure and can be seen as a positive signal by investors, as it may reduce the potential for dilution of existing shareholders' interests. However, the partial exercise of the Exchange Warrant leaves some uncertainty regarding future dilution. The reduction in liabilities is expected to help the company regain compliance with Nasdaq's minimum stockholders' equity requirement, which is a positive step towards maintaining its listing and could improve investor confidence.

Market Research Analyst

From a market perspective, Agrify's restructuring of its balance sheet through equity conversion and debt consolidation is indicative of a broader trend among cannabis companies seeking financial stability in a volatile market. The industry faces unique challenges, including regulatory hurdles and market saturation, which can impact company valuations and investor sentiment. Agrify's proactive approach to managing its debt and equity structure could set a precedent for other players in the sector. The premium conversion price reflects a bullish stance by insiders, which might be leveraged in investor relations to project confidence in the company's trajectory.

It's also important to consider the potential impact on stock liquidity and market perception. By increasing the number of authorized shares, Agrify has positioned itself to take advantage of strategic opportunities, which may include partnerships, mergers, or acquisitions. Such maneuvers could potentially enhance the company's market position and create value for shareholders, though they may also introduce new risks or dilute current ownership.

Legal Expert

The legal implications of the Charter Amendment and the subsequent transactions are significant for Agrify. By increasing the number of authorized shares, the company ensures it has the necessary legal framework to issue additional stock for various purposes, including equity conversion. This is a common practice used by companies to improve their financial position and flexibility. The process of managing the amendment and its approval at the Reconvened Meeting underscores the importance of shareholder engagement and consent in corporate governance.

The consolidation of debt instruments into a single convertible note simplifies the company's debt structure and may reduce legal complexities associated with managing multiple debt agreements. However, the involvement of board members and company affiliates in these transactions necessitates careful adherence to fiduciary duties and disclosure requirements to avoid potential conflicts of interest and ensure transparency for all stakeholders.

TROY, Mich., Jan. 25, 2024 (GLOBE NEWSWIRE) -- Agrify Corporation (Nasdaq: AGFY) (“Agrify” or the “Company”), a leading provider of innovative cultivation and extraction solutions for the cannabis industry, today announced that the shareholders of the Company approved an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of the Company’s common stock from 10,000,000 to 35,000,000 (the “Charter Amendment”), that all its outstanding debt held by CP Acquisitions LLC (the “New Lender”), an entity affiliated with Raymond Chang, the Chief Executive Officer of the Company and a member of the Board of Directors (the “Board”), and I-Tseng Jenny Chan, a member of the Board, has been consolidated under a single convertible note and approximately $3.9 million of the outstanding debt has been converted into equity at a conversion price per share equal to $1.46, or 212% premium to the latest closing price, and that its prior secured lender (the “Prior Lender”) has exercised 2,475,629 of the warrants previously issued in October 2023 on a cashless basis for a net issuance of 2,473,542 shares of common stock, thus greatly reducing the number of outstanding warrants.

The Company’s Annual Meeting of Stockholders on January 8, 2024 (the “Annual Meeting”) was adjourned until January 22, 2024 (the “Reconvened Meeting”), only with respect to the proposal to approve the Charter Amendment, owing to Item 3 receiving less than the affirmative vote of a majority of the Company’s outstanding common stock as of the record date of December 6, 2023, which was the required minimum vote to approve the Charter Amendment. At the Reconvened Meeting, shares representing approximately 51.6% of the outstanding shares of common stock as of the record date were voted in favor of the Charter Amendment, representing approximately 94.6% of votes cast on the proposal, resulting in the Charter Amendment being approved. The Charter Amendment will provide the Company with a number of shares of common stock so that common stock can be issued in connection with conversion of the Restated Note into equity, among other things.

In addition, the New Lender, which previously purchased from the Prior Lender the Senior Secured Note issued by the Company to the Prior Lender on August 19, 2022 (the “Exchange Note”) and the Senior Secured Convertible Note issued by the Company to the Prior Lender on March 10, 2023 (the “Convertible Note”), and to which the Company previously issued a junior secured promissory note (the “Junior Secured Note”) with a maximum principal amount of $4,000,000, entered into a consolidation, amendment and restatement of the Convertible Note with the Company to consolidate the outstanding principal and interest due under the Junior Secured Note and the Exchange Note into the Convertible Note and to amend and restate the Convertible Note (the “Restated Note”) consistent with the terms contained in the proposal approved by the stockholders of the Company at the Annual Meeting, with an outstanding principal amount of approximately $18.9 million at the time of issuance of the Restated Note. Immediately following the execution of the Restated Note, the New Lender elected to convert approximately $3.9 million of outstanding principal into an aggregate of 2,671,633 shares of common stock, at a conversion price of $1.46 per share, and assigned its rights to receive such shares to entities affiliated with Mr. Chang and Ms. Chan. Concurrently, GIC Acquisition, another entity affiliated with Mr. Chang, agreed to increase the principal amount under its previously-issued junior secured note from $0.5 million to $1 million.

On January 22, 2024, pursuant to notices of exercise received from the Prior Lender, the Company issued an aggregate of 2,473,542 shares of common stock to the Prior Lender upon the cashless exercise of two warrants issued to the Prior Lender on October 27, 2023. The issuance of the Warrant Shares represents the full exercise of the Abeyance Warrant as described in the Company’s Current Report on Form 8-K filed on October 30, 2023 (the “October 30 Form 8-K”) and the partial exercise of the Exchange Warrant as described in the October 30 Form 8-K, which remains exercisable for up to 659,669 shares of common stock, subject to adjustment pursuant to its terms.

The consolidation of the outstanding debt held by the New Lender into the Restated Note and the conversion of some amount of the debt thereunder, together with the reduction in the number of outstanding warrants held by the Prior Lender is expected to result in a reduction in liabilities on the Company’s balance sheet, which the Company believes will help it to regain compliance with Nasdaq’s Listing Rule 5550(b)(1), which requires that listed companies maintain a minimum of $2.5 million in stockholders’ equity.

“We are very pleased to achieve yet another major milestone in our effort to restructure Agrify’s balance sheet. The $3.9 million conversion at a significant premium to our current market price exemplifies our continuous confidence and support in Agrify’s turnaround initiatives,” noted Raymond Chang, Chief Executive Officer of Agrify.

About Agrify

Agrify is a leading provider of innovative cultivation and extraction solutions for the cannabis industry, bringing data, science, and technology to the forefront of the market. Our proprietary micro-environment-controlled Vertical Farming Units (VFUs), enable cultivators to produce the highest quality products with unmatched consistency, yield, and ROI (return on investment) at scale. Our comprehensive extraction product line, which includes hydrocarbon, ethanol, solventless extraction, post-processing, and lab equipment, empowers producers to maximize the quantity and quality of extract required for premium concentrates. For more information, please visit our website at http://www.agrify.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning Agrify and other matters. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements including, without limitation, statements regarding future financial results, including the ability to regain compliance with Nasdaq listing standards and the ability to reduce liabilities on its balance sheet. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this press release are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. You should carefully consider the risks and uncertainties that affect our business, including those described in our filings with the Securities and Exchange Commission (“SEC”), including under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 that was filed with the SEC on November 28, 2023, which can be obtained on the SEC website at www.sec.gov. These forward-looking statements speak only as of the date of this communication. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements, whether as a result of any new information, future events, or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our public announcements and filings with the SEC.

Agrify Investor Relations

IR@agrify.com
(857) 256-8110

FAQ

What is the ticker symbol of Agrify Corporation?

The ticker symbol for Agrify Corporation is AGFY.

What was announced by Agrify Corporation?

Agrify Corporation announced the approval of an amendment to increase authorized shares of common stock, consolidate outstanding debt, and reduce the number of outstanding warrants.

What is the purpose of the Charter Amendment approved by Agrify Corporation?

The Charter Amendment will help Agrify Corporation regain compliance with Nasdaq's Listing Rule 5550(b)(1) by providing the company with a number of shares of common stock to be issued in connection with the conversion of the Restated Note into equity, among other things.

Who approved the Charter Amendment?

The Charter Amendment was approved at the Reconvened Meeting with shares representing approximately 51.6% of the outstanding shares of common stock as of the record date being voted in favor of the amendment.

What is the significance of the debt consolidation and reduction of outstanding warrants for Agrify Corporation?

The consolidation of the outstanding debt and reduction in the number of outstanding warrants is expected to result in a reduction in liabilities on the Company's balance sheet, which Agrify believes will help it to regain compliance with Nasdaq's Listing Rule 5550(b)(1).