Agrify Corporation Announces Approximately $13.8 Million Debt-to-Equity Conversion

Rhea-AI Summary

Agrify , a leading provider in the cannabis industry, has announced a significant $13.8 million debt-to-equity conversion involving CP Acquisitions and GIC Acquisitions. This conversion is expected to help Agrify regain compliance with Nasdaq’s Listing Rule by raising its shareholders' equity to at least $2.5 million.

CP Acquisitions, controlled by CEO Raymond Chang, converted $11.5 million of senior notes into warrants for 8,561,644 shares, and GIC Acquisitions converted $2.29 million of junior notes into warrants for 3,225,807 shares. The warrants include provisions for adjustments if Agrify conducts equity financing within the next 12 months, pending shareholder approval.

CEO Raymond Chang expressed optimism, noting that the conversion demonstrates strong management and shareholder commitment to Agrify’s future, providing a cleaner balance sheet to support growth.

Positive

• Agrify converts $13.8 million debt to equity, reducing its debt load significantly.
• Shareholders' equity increases to exceed $2.5 million, helping regain Nasdaq compliance.
• Management and shareholders, including CEO Raymond Chang, demonstrate strong commitment.
• Conversion allows for a cleaner balance sheet and potential for future growth.
• Provisions included in warrants for equity financing adjustments, showing strategic foresight.

Negative

• Debt-to-equity conversion dilutes existing shareholders, issuing 11,787,451 new shares.
• Potential risk of further shareholder dilution if additional equity financing occurs within 12 months.
• The need to convert debt to meet Nasdaq listing requirements highlights previous financial instability.

Insights

Financial Analyst

The debt-to-equity conversion of approximately $13.8 million is a notable move, particularly because it helps Agrify regain compliance with Nasdaq's shareholders' equity requirement. This step is important for maintaining the company's listing on the Nasdaq, thereby preserving its accessibility to a broad array of institutional and retail investors. By converting debt to equity, the company reduces its debt burden, which improves the balance sheet and reduces interest expenses. This can potentially free up cash flow that the company may reinvest into its operations and growth initiatives.

However, issuing new shares or warrants to satisfy these conversions dilutes existing shareholders' equity. The trading volume and share price might experience fluctuations as the market digests the issuance of new shares. The move also highlights a shift in the company's capital structure, pointing to a possible strategy of operational turnaround and financial restructuring.

Overall, while the immediate financial impact seems positive due to the reduction in liabilities, the long-term effects on shareholder value due to dilution need to be closely monitored.

Market Research Analyst

The cannabis industry continues to be highly volatile, with companies like Agrify needing to frequently adjust their financial strategies. Agrify’s decision to convert debt to equity is indicative of its strategic focus on long-term stability and growth rather than short-term gains. This conversion signals management’s confidence in the company’s future prospects and its commitment to aligning its interests with those of shareholders. Additionally, it suggests a stronger belief in the potential of its cultivation and extraction solutions within the cannabis market.

From a market perspective, regaining compliance with Nasdaq's listing requirements also boosts investor confidence, as it reduces the risk associated with potential delisting, which could have severely impacted stock liquidity and valuation. This move can be seen as an effort to restore credibility and investor trust, which are vital for continued fundraising efforts and market presence.

The impact on market perception could be mixed; while some investors might view dilution negatively, others could see the reduction in debt and compliance with Nasdaq requirements as a positive step towards financial health.

Company Expects to Regain Compliance with Nasdaq Shareholders’ Equity Requirement

TROY, Mich., May 22, 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 an approximately $13.8 million debt-to-equity conversion by CP Acquisitions, LLC and GIC Acquisitions LLC. As a result of the conversion, the Company is expected to regain compliance with Nasdaq’s Listing Rule, achieving stockholder’s equity of at least $2.5 million as of the date of conversion.

In connection with the conversions, CP Acquisitions, LLC (“CP”), an entity affiliated with and controlled by Raymond Chang, the Chairman and Chief Executive Officer of the Company, and I-Tseng Jenny Chan, a member of Agrify’s Board of Directors, converted $11.5 million of its senior convertible note into a Pre-Funded Warrant exercisable at issuance for up to 8,561,644 shares of common stock. GIC Acquisitions LLC (“GIC”), an entity affiliate with and controlled by Mr. Chang, converted approximately $2.29 million of its junior secured note into a Pre-Funded Warrant exercisable at issuance for up to 3,225,807 shares of common stock. Each Pre-Funded Warrant includes adjustment provisions in the event that Agrify conducts any equity financing during the twelve month period following conversion, subject to shareholder approval.

As a result of the conversions, the Company believes that its shareholders’ equity exceeds $2.5 million, which would allow the Company to regain compliance with Nasdaq Listing Rule 5550(b)(1). Raymond Chang, Chairman and Chief Executive Office of Agrify, stated “I am very pleased to see the continuous turnaround in Agrify. The decision to convert a substantial portion of the senior debt shows the management and the shareholders’ commitment to the future of Agrify. We are excited to see the strong positive momentum in our business across both the extraction and cultivation divisions. We believe this large debt conversion allows Agrify to meet the minimum shareholders’ equity requirement under Nasdaq continued listing rules and provides Agrify with a cleaner and positive balance sheet to fuel our future growth. We remain focused on executing the Company’s turnaround.”

About Agrify (Nasdaq:AGFY)

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. Agrify’s proprietary micro-environment-controlled Vertical Farming Units (VFUs) enable cultivators to produce the highest quality products with unmatched consistency, yield, and ROI at scale. Agrify’s comprehensive extraction product line, which includes hydrocarbon, ethanol, solventless, post-processing, and lab equipment, empowers producers to maximize the quantity and quality of extract required for premium concentrates. For more information, please visit Agrify 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 the ability to regian compliance with Nasdaq listing rules, Agrify’s future growth, and Agrify’s ability to deliver solutions and services. 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 filed for the year ended December 31, 2023 with the SEC, 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.

Company Contacts

Agrify Investor Relations
IR@agrify.com
(857) 256-8110

FAQ

What is Agrify's stock symbol?

Agrify's stock symbol is AGFY.

How much debt was converted into equity by Agrify?

Agrify converted approximately $13.8 million of debt into equity.

How many shares were issued in the debt-to-equity conversion?

Agrify issued up to 11,787,451 shares as part of the debt-to-equity conversion.

What is the purpose of the debt-to-equity conversion for Agrify?

The debt-to-equity conversion aims to help Agrify regain compliance with Nasdaq's Listing Rule and improve its balance sheet.

Who are the entities involved in Agrify's debt-to-equity conversion?

The entities involved are CP Acquisitions and GIC Acquisitions

What is the expected outcome of Agrify's debt-to-equity conversion?

The expected outcome is for Agrify to regain Nasdaq compliance with shareholders' equity exceeding $2.5 million.