| Accounting Policies, by Policy (Policies) | 9 Months Ended |
| Sep. 30, 2022 |
| Accounting Policies [Abstract] | |
| Description of Business | Description
of Business Agrify Corporation (“Agrify” or the
“Company”) is one of the most innovative providers of advanced cultivation and extraction solutions for the cannabis industry,
bringing data, science, and technology to the forefront of the market. The Company’s proprietary micro-environment-controlled Agrify
Vertical Farming Units (or “VFUs”) enable cultivators to produce the highest quality products with what it believes to be
an unmatched consistency, yield, and Return on Investment at scale. The Company’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. The Company believes it is the only company with
an automated and fully integrated grow solution in the industry. The Company’s cultivation and extraction solutions seamlessly combines
its integrated hardware and software offerings with a broad range of associated services including consulting, engineering, and construction
and is designed to deliver the most complete commercial indoor farming solution available from a single provider. The totality of its
product offerings and service capabilities forms an unrivaled ecosystem in what has historically been a highly fragmented market. As a
result, the Company believes it is well situated to create a dominant market position in the indoor agriculture sector. The
Company was formed in the State of Nevada on June 6, 2016 as Agrinamics, Inc., and subsequently changed its name to Agrify Corporation.
The Company is sometimes referred to herein by the words “we,” “us,” “our,” and similar terminology. The
Company has nine wholly-owned subsidiaries, which are collectively referred to as the “Subsidiaries”:
● AGM
Service Corp LLC (formerly AGM Service Corp Inc.);
● TriGrow
Systems, LLC (“TriGrow”, which acted as the Company’s exclusive distributor and which was acquired in January 2020
as TriGrow Systems, Inc. and converted to TriGrow Systems, LLC in May 2020);
● Ariafy
Finance, LLC;
● Agxiom,
LLC;
● Harbor
Mountain Holdings, LLC (“HMH”) (acquired in July 2020);
● Cascade
Sciences, LLC (“Cascade”) (which was acquired by the Company on October 1, 2021);
● Precision
Extraction NewCo, LLC (“Precision”) (which was a newly formed subsidiary in connection with the October 1, 2021 acquisition
of Mass2Media, LLC, d/b/a PX2 Holdings, LLC, d/b/a Precision Extraction Solutions and Cascade); and
● PurePressure,
LLC (“PurePressure”) (which was acquired by the Company on December 31, 2021); and
● Lab
Society NewCo, LLC (“Lab Society”) (which was a newly formed subsidiary in connection with the February 1, 2022 acquisition
of LS Holdings Corp). The
Company also has ownership interests in the following companies:
● Teejan
Podoponics International LLC (“TPI”) (the Company has owned 50% of TPI since December 2018);
● Agrify-Valiant,
LLC (“Agrify-Valiant”) (the Company is 60% majority owner and Valiant-America, LLC owns 40%, which was formed in December
2019. Subsequent to September 30, 2022, On October 27, 2022, the Company provided notice to Valiant-America, LLC of our intention to
begin winding up of Agrify-Valiant); and
● Agrify
Brands, LLC (“Agrify Brands”) (formerly TriGrow Brands, LLC) (the Company owns 75% of Agrify Brands, which ownership
position was created as part of the January 2020 acquisition of TriGrow). |
| Reverse Stock Split | Reverse
Stock Split On
January 12, 2021, the Company effected a 1-for-1.581804 reverse stock split of its Common Stock, $0.001 par value per share (“Common
Stock”). All share and per share information has been retroactively adjusted to give effect to the reverse stock split for all
periods presented unless otherwise indicated. On October 18, 2022, the Company effected a 1-for-10
reverse stock split of its Common Stock. All share and per share information has been retroactively adjusted to give effect to the reverse
stock split for all periods presented unless otherwise indicated. No fractional shares of Common Stock were issued
as a result of these reverse stock splits. Any fractional shares in connection with these reverse stock splits were rounded up to the
nearest whole share and no stockholders received cash in lieu of fractional shares. The reverse stock splits had no impact on the number
of shares of Common Stock that the Company is authorized to issue pursuant to its articles of incorporation or on the par value per share
of the Common Stock. Proportional adjustments were made to the number of shares of Common Stock
outstanding stock options and warrants,
the exercise price or conversion price (as applicable) of the Company’s outstanding stock options and warrants, and the number of
shares reserved for issuance under the Company’s equity incentive plan. |
| Initial Public Offering and Secondary Public Offering | Initial
Public Offering and Secondary Public Offering On February 1, 2021, the Company closed its initial
public offering, or (“IPO”), of 621,000 shares of its Common Stock (inclusive of 81,000 shares of Common Stock from the full
exercise of the over-allotment option of shares granted to the underwriters). The offer and sale of all of the shares in the IPO were
registered under the Securities Act of 1933, as amended, pursuant to a registration statement on Form S-1 (File Nos. 333- 251616 and 333-252490),
which was declared effective by the Securities Exchange Commission (“SEC”) on January 27, 2021. In the IPO, Maxim Group LLC
and Roth Capital Partners acted as the underwriters. The IPO price for shares of Common Stock was $100.00 per share. The total gross proceeds
from the IPO were $62.1 million. After deducting underwriting discounts and commissions of $4 million and
offering expenses paid or payable by us of approximately $1 million, the net proceeds from the IPO were approximately $57 million. The
Company used the net proceeds from the IPO for its current working capital needs, to support revenue growth, increase inventory to meet
customer demand forecasts, and support operational growth. On
February 19, 2021, the Company consummated a secondary public offering (the “February Offering”) of 555,556 shares of its
Common Stock for a price of $135.00 per share, less certain underwriting discounts, and commissions. On March 22, 2021, the Company closed
on the sale of an additional 83,333 shares of Common Stock on the same terms and conditions pursuant to the exercise of the underwriters’
over-allotment option. The exercise of the over-allotment option brought the total number of shares of Common Stock sold by the Company
in connection with the February Offering to 638,889 shares and the total net proceeds received in connection with the February Offering
to approximately $80 million, after deducting underwriting discounts and estimated offering expenses. The Company used the net proceeds
from the IPO for its current working capital needs, to support revenue growth, increase inventory, meet customer demand forecasts, and
support operational growth. |
| Coronavirus (“COVID-19”) Pandemic Impact and Uncertainties | Coronavirus
(“COVID-19”) Pandemic Impact and Uncertainties The
COVID-19 pandemic has created significant public health concerns as well as economic disruption, uncertainty, and volatility that may
negatively affect its business operations and financial results. As a result, if the pandemic or its effects persist or worsen, its accounting
estimates and assumptions could be impacted in subsequent interim reports and upon final determination at year-end, and it is reasonably
possible such changes could be significant (although the potential effects cannot be estimated at this time). The Company has experienced
minimal business interruption as a result of the COVID-19 pandemic. The COVID-19 pandemic to date has resulted in supply chain delays
of its inventory, higher operating costs and increased shipping costs, among other impacts. As events surrounding the COVID-19 pandemic
can change rapidly, the Company cannot predict how it may disrupt its operations or the full extent of the disruption. |
| The Paycheck Protection Program | The Company received total loan proceeds
of approximately $779 thousand from the PPP Loan. The SBA denied the Company’s application for the forgiveness of the outstanding
balance of the PPP Loan. On June 23, 2022, the Company received a letter from Bank of America agreeing to extend the maturity date
to May 7, 2025 and bears interest at a rate of 1.00% per year. The PPP loan is payable in 34 equal combined monthly principal and interest
payments of approximately $24 thousand that commenced on August 7, 2022. |
| Preparation of Condensed Consolidated Financial Statements | Preparation
of Condensed Consolidated Financial Statements The
condensed consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”), and on the same basis as the audited consolidated financial statements included
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and filed with the SEC (“Form 10-K”),
except for the recently adopted accounting pronouncements described below. The
condensed consolidated financial statements included herein reflect all normal and recurring adjustments which, in the opinion of management,
are necessary for a fair presentation of the Company’s condensed consolidated statements of operations for the three and nine months
ended September 30, 2022 and 2021, condensed consolidated statements of stockholders’ equity for the three and nine months
ended September 30, 2022 and 2021, and the condensed consolidated cash flows for the nine months ended September 30, 2022 and
2021. The
condensed consolidated balance sheet as of December 31, 2021 is derived from the audited consolidated financial statements presented
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Certain information and disclosures normally
included in annual consolidated financial statements have been omitted pursuant to the rules and regulations of the SEC. Because the
condensed consolidated interim financial statements do not include all of the information and disclosures required by GAAP for a complete
set of financial statements, they should be read in conjunction with the audited consolidated financial statements and notes included
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 31, 2022. The results
for interim periods are not necessarily indicative of a full year’s results. |
| Basis of Presentation and Principles of Consolidation | Accounting
for Wholly-Owned Subsidiaries The
accompanying consolidated financial statements have been prepared in accordance with GAAP and include the accounts of Agrify Corporation
and its wholly-owned subsidiaries, as described above in Note 1 – Overview, Basis of Presentation and Significant Accounting Policies,
in accordance with the provisions required by the Consolidation Topic 810 of the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”). The Company includes results of operations of acquired companies from the date
of acquisition. All significant intercompany transactions and balances are eliminated. Accounting
for Less Than Wholly-Owned Subsidiaries For the Company’s less than wholly-owned
subsidiaries, which include TPI, Agrify-Valiant, and Agrify Brands, the Company first analyzes whether these entities are a variable interest
entity (a “VIE”) in accordance with ASC Topic 810 Consolidation (“ASC810”), and if so, whether the Company
is the primary beneficiary requiring consolidation. A VIE is an entity that has (i) insufficient equity to permit it to finance its
activities without additional subordinated financial support or (ii) equity holders that lack the characteristics of a controlling
financial interest. The financial results of a VIE are consolidated by the primary beneficiary, which is the entity that has both the
power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses
or the right to receive benefits from the entity that potentially could be significant to the entity. Variable interests in a VIE are
contractual, ownership or other financial interests in a VIE that change with changes in the fair value of the VIE’s net assets.
The Company continuously re-assesses (i) whether the joint-venture is a VIE, and (ii) if the Company is the primary beneficiary of the
VIE. If it is determined that the joint-venture qualifies as a VIE and the Company is the primary beneficiary, the Company’s financial
interest in the VIE is consolidated. Based on the Company’s analysis of these
entities, the Company has determined that Agrify-Valiant and Agrify Brands are each a VIE, and that the Company is the primary beneficiary.
While the Company owns 60% of Agrify-Valiant’s equity interests and 75% of Agrify Brand’s equity interests, the remaining
equity interests in Agrify-Valiant and Agrify Brands are owned by unrelated third parties, and the agreement with these third parties
provides the Company with greater voting rights. Accordingly, the Company consolidates its interest in the financial statements of Agrify-Valiant
and Agrify Brands under the VIE rules and reflects the third parties’ interests in the consolidated financial statements as a non-controlling
interest. The Company records this non-controlling interest at its initial fair value, adjusting the basis prospectively for the third
parties’ share of the respective consolidated investments’ net income or loss or equity contributions and distributions. These
non-controlling interests are not redeemable by the equity holders and are presented as part of permanent equity. Income and losses are
allocated to the non-controlling interest holders based on its economic ownership percentage. The investment in 50% of the shares of TPI
is treated as an equity investment as the Company cannot exercise significant influence. |
| Going Concern | Going
Concern In accordance with the FASB Accounting Standards
Update (“ASU”) 2014-15, “Presentation of Financial Statements - Going Concern”, the Company’s management
evaluated whether there are conditions or events that raise substantial doubt about its ability to continue as a going concern within
one year after the financial statements’ issuance date. The following matters raise substantial doubt about the Company’s
ability to continue as a going concern within one year after the date the financial statements are issued. The Company has incurred operating losses since
its inception and has negative cash flows from operations. The Company also has an accumulated deficit of $207.5 million as of September
30, 2022. The Company's primary sources of liquidity are its cash and cash equivalents and marketable securities, with additional liquidity
accessible, subject to market conditions and other factors, including limitations that may apply to the Company under applicable SEC regulations,
from the capital markets, including under its at-the-market continuous equity offering (“ATM” or ATM Program”). As of September 30, 2022, the Company had $12.5
million of cash, cash equivalents, marketable securities and restricted cash. The Company’s restricted cash is associated with its
new senior secured note (the “Exchange Note”) was $10.0 million as of September 30, 2022. Current liabilities were $41.5 million
as of September 30, 2022. Additional information regarding the Company’s Exchange Note may be found in Note 9 – Debt, included
elsewhere in the notes to the consolidated financial statements. Subsequent to the end of the third quarter of
2022, the Company entered into an agreement for the ATM Program with Canaccord Genuity LLC (the “Agent”), pursuant to
which the Company may issue and sell, from time to time, shares of its Common Stock having an aggregate offering price of up to $50 million,
depending on market demand, with the Agent acting as an agent for sales. The ATM allows for quick and agile sales of Common Stock to interested
investors and provides an opportunity to raise additional capital for working capital requirements or to fund strategic opportunities
that may present themselves from time to time. The Company has used, and intends to continue to use, the $15.1 million in net proceeds
generated from the ATM Program as of November 7, 2022 for working capital and general corporate purposes, including repayment of indebtedness,
funding the Company’s transformation initiatives and product category expansion efforts and capital expenditures. As of November
7, 2022, the Company had $34.4 million of remaining availability for future issuances of Common Stock under the ATM Program. Additional information regarding the Company’s
ATM Program and proceeds received subsequent to September 30, 2022, may be found in Note 19 – Subsequent Events, included elsewhere
in the notes to the consolidated financial statements. These financial statements have been prepared
on a going concern basis, which implies the Company believes these conditions raise substantial doubt about its ability to continue
as a going concern within the next twelve months from the date these financial statements are available to be issued. The Company’s
continuation as a going concern is dependent upon its ability to obtain the necessary debt or equity financing to continue operations
until the Company begins generating sufficient cash flows from operations to meet its obligations. There is no assurance that the Company will ever
be profitable. The financial statements do not include any adjustments to reflect the potential future effects on the recoverability and
classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as
a going concern. |
| Use of Estimates | Use of Estimates The preparation of the Company’s consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and
the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial
statements include, but are not limited to, the accrual of expenses. The Company bases its estimates on historical experience, known trends
and other market-specific, other relevant factors that it believes to be reasonable under the circumstances and management’s judgement.
On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates
are recorded in the period in which they become known. Actual financial results could differ from those estimates. |
| Fiscal Year | Fiscal
Year For
the Company and its Subsidiaries, the fiscal year ends on December 31, each year. |
| Emerging Growth Company | Emerging
Growth Company The
Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, (“JOBS
Act”). As a result, the Company is permitted to, and intends to, rely on exemptions from certain disclosure requirements that are
applicable to companies that are not emerging growth companies. In
addition, the JOBS Act provides that an “emerging growth company” can use the extended transition period for complying with
new or revised accounting standards. The
Company will remain an “emerging growth company” until the earliest to occur of:
● reporting
$1.0 billion or more in annual gross revenues;
● the
issuance, in a three-year period, of more than $1.0 billion in non-convertible debt;
● the
end of the fiscal year in which the market value of Common Stock held by non-affiliates exceeds $700 million on the last business
day of our second fiscal quarter; or |
| Reclassifications | Reclassifications Certain amounts in the Company’s prior period financial statements
have been reclassified to conform to the presentation of the current period financial statements. In this Form 10-Q, the Company has reclassified
selling, general and administrative expenses to two separate line items in the accompanying consolidated statements of operations as general
and administrative expenses and selling and marketing expenses for the three and nine months ended September 30, 2022 and 2021. In addition, the Company effected a 1-for-10 reverse stock split of its Common Stock on October 18, 2022. All
share and per share information has been retroactively adjusted to give effect to the reverse stock split for all periods presented unless
otherwise indicated. The shares of Common Stock retained a par
value of $0.001 per share. Accordingly, the stockholders’ deficit reflects the reverse stock split by reclassifying from “Common
Stock” to “additional paid-in capital” an amount equal to the par value of the decreased shares resulting from the reverse
stock split. |
| Cash, Cash Equivalents, and Restricted Cash | Cash,
Cash Equivalents, and Restricted Cash Cash
and cash equivalents consist principally of cash and deposits with maturities of three months or less as of September 30, 2022 and December
31, 2021. All cash equivalents are carried at cost, which approximates fair value. Restricted cash represents cash required to be held
as collateral for the Company’s Exchange Note. Accordingly, these balances contain restrictions as to their availability and usage
and are classified as restricted cash in the consolidated balance sheets. Additional information relating to the Company’s Exchange
Note may be found in Note 9 – Debt, included elsewhere in the notes to the consolidated financial
statements. |
| Marketable Securities | Marketable
Securities The Company’s marketable security investments primarily include
investments held in mutual funds, municipal bonds, and corporate bonds. The mutual funds are recorded at fair value in the accompanying
consolidated balance sheets as part of cash and cash equivalents. The municipal and corporate bonds are considered to be held-to-maturity
securities and are recorded at amortized cost in the accompanying consolidated balance sheets. The fair value of these investments was
estimated using recently executed transactions and market price quotations. The Company considers current assets to be those investments
that will mature within the next 12 months, including interest receivable on long-term bonds. |
| Accounts Receivable, Net | Accounts
receivable, net, primarily consists of amounts for goods and services that are billed and currently due from customers. Accounts receivable
balances are presented net of an allowance for credit losses, which is an estimate of billed amounts that may not be collectible. In
determining the amount of the allowance at each reporting date, management makes judgments about general economic conditions, historical
write-off experience, and any specific risks identified in customer collection matters, including the aging of unpaid accounts receivable
and changes in customer financial conditions. Accounts receivable balances are written off after all means of collection are exhausted
and the potential for non-recovery is determined to be probable. Adjustments to the allowance for credit losses are recorded as general
and administrative expenses in the consolidated statements of operations. |
| Concentration of Credit Risk and Significant Customer | Concentration
of Credit Risk and Significant Customer Financial
instruments that potentially subject the Company to a concentration of credit risk primarily consist of cash, cash equivalents, restricted
cash, and accounts receivable. Cash equivalents primarily consist of money market funds with original
maturities of three months or less, which are invested primarily with U.S. financial institutions. Cash deposits with financial institutions,
including restricted cash, generally exceed federally insured limits. Management believes minimal credit risk exists with respect to
these financial institutions and the Company has not experienced any losses on such amounts. The
tables below show customers who account for 10% or more of the Company’s total revenues and 10% or more of the Company’s
accounts receivable for the periods presented: Revenue For
the three months ended September 30, 2022 and 2021, the Company’s customers that accounted for 10% or more of the total revenue
were as follows:
Three Months Ended Three Months Ended
(In thousands) Amount % of Total Amount % of Total
New England Innovation Academy (“NEIA”) – Related Party * * $ 3,217 20.4 %
Greenstone Holdings (“Greenstone”) – Related Party * * $ 1,998 12.7 %
Company Customer Number – 71 * * $ 3,174 20.2 %
Company Customer Number – 136 $ 908 12.9 % $ 2,480 15.7 %
Company Customer Number – 139 * * $ 4,006 25.4 % * Customer revenue, as a percentage of total revenue, was less than 10% For
the nine months ended September 30, 2022 and 2021, the Company’s customers that accounted for 10% or more of the total revenue
were as follows:
Nine Months Ended Nine Months Ended
(In thousands) Amount % of Total Amount % of Total
NEIA – Related Party * * $ 19,572 56.6 %
Company Customer Number – 71 * * $ 3,520 10.2 %
Company Customer Number – 136 $ 7,054 13.5 % * *
Company Customer Number – 139 $ 8,590 16.4 % $ 4,006 11.6 % * Customer revenue, as a percentage of total revenue, was less than 10% Accounts
Receivable, Net As
of September 30, 2022 and December 31, 2021, the Company’s customers that accounted for 10% or more of the total accounts receivable,
net, were as follows:
As of As of
(In thousands) Amount % of Total Amount % of Total
NEIA – Related Party * * $ 3,498 48.4 %
Company Customer Number - 126 $ 1,541 33.8 % $ 1,541 21.3 %
Company Customer Number - 15989 $ 600 13.2 % * *
Company Customer Number - 16540 $ 573 12.6 % * *
Company Customer Number - 185 $ 526 11.5 % * *
Company Customer Number - 12237 $ 510 11.2 % * * * Customer accounts receivable balance, as a percentage of total accounts receivable balance, was less than 10% |
| Inventories | Inventories The
Company values all of its inventories, which consist primarily of significant raw material hardware components, at the lower of cost
or net realizable value, with cost principally determined by the weighted-average cost method on a First-In, First-Out basis. Write-offs
of potentially slow-moving or damaged inventory are recorded through specific identification of obsolete or damaged material. The company
takes physical inventory at least once annually at all inventory locations. |
| Property and Equipment | are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expenses are recognized
using the straight-line method over the estimated useful life of each asset, as follows:
Estimated Useful
Computer and office equipment 2 to 3
Furniture and fixtures 2
Software 3
Vehicles 5
Research and development of laboratory equipment 5
Machinery and equipment 3 to 5
Leased equipment at customer 5 to 13
Trade show assets 3 to 5
Leasehold improvements Lower of estimated useful The estimated useful lives of the Company’s property and equipment
are periodically assessed to determine if changes are appropriate. The Company charges maintenance and repairs to expenses as incurred.
When the Company retires or disposes of assets, the carrying cost of these assets and related accumulated depreciation or amortization
are eliminated from the consolidated balance sheet and any resulting gain or loss are included in the consolidated statements of operations
in the period of retirement or disposal. Costs for capital assets not yet placed into service are capitalized as construction-in-progress
and depreciated once placed into service. |
| Goodwill | Goodwill Goodwill
is defined as the excess of cost over the fair value of assets acquired and liabilities assumed in a business combination. Goodwill is
tested for impairment annually, and more frequently if events and circumstances indicate that the asset might be impaired. The Company
has determined that it is a single reporting unit for the purpose of conducting the goodwill impairment assessment. A goodwill impairment
charge is recorded if the amount by which the Company’s carrying value exceeds its fair value, not to exceed the carrying amount
of goodwill. Factors that could lead to a future impairment include material uncertainties such as a significant reduction in projected
revenues, a deterioration of projected financial performance, future acquisitions and/or mergers, and/or a decline in the Company’s
market value as a result of a significant decline in the Company’s stock price. During the three-month period ended June 30,
2022, the Company identified an impairment-triggering event associated with both a sustained decline in the Company’s stock price
and associated market capitalization, as well as a second-quarter slowdown in the cannabis industry as a whole. Due to these factors,
the Company deemed that there was an impairment to the carrying value of its long-lived assets and accordingly performed interim testing
as of June 30, 2022. Based on its interim testing, the Company noted that the carrying value
of equity exceeded the calculated fair value by an amount greater than the aggregate value of our goodwill and intangible assets. Accordingly,
the Company concluded that the entire carrying value of its goodwill and intangible assets should be impaired, resulting in a second-quarter
impairment charge of $69.9 million. Additional information regarding the Company’s interim testing on goodwill may be found in Note
7 – Goodwill and Intangible Assets, Net, included elsewhere in the notes to the consolidated financial statements. Intangible
Assets The
Company initially records intangible assets at their estimated fair values and reviews these assets periodically for impairment. Identifiable
intangible assets, which consist principally of acquired customer-related acquired assets, acquired and/or developed technology, non-compete
agreements, and trade names, are reported net of accumulated amortization, and are being amortized over their estimated useful lives
at amortization rates that are proportional to each asset’s estimated economic benefit. The Company’s intangible assets are
amortized on a straight-line basis over the estimated useful lives of the assets. The Company reviews the carrying value of these intangible
assets annually, or more frequently if indicators of impairment are present. The
finite-lived useful lives are as follows:
Trade names 5 to 7 years
Acquired developed technology 5 to 8 years
Non-compete agreements 5 years
Customer relationships 5 to 8 years
Capitalized website costs 3 to 5 years In
performing the review of the recoverability of intangible assets, the Company considers several factors, including whether there have
been significant changes in legal factors or the overall business climate that could affect the underlying value of an asset. The Company
also considers whether there is an expectation that the asset will be sold or disposed of before the end of its remaining estimated useful
life. If, as the result of examining any of these factors, the Company concludes that the carrying value of the intangible asset exceeds
its estimated fair value, the Company recognizes an impairment charge and reduces the carrying value of the asset to its estimated fair
value. During the three-month period ended June 30,
2022, the Company identified an impairment-triggering event associated with both a sustained decline in the Company’s stock price
and associated market capitalization, as well as a second-quarter slowdown in the cannabis industry as a whole. Due to these factors,
the Company deemed that there was an impairment to the carrying value of its long-lived assets and accordingly performed interim testing
as of June 30, 2022. |
| Intangible Assets | Intangible
Assets The
Company initially records intangible assets at their estimated fair values and reviews these assets periodically for impairment. Identifiable
intangible assets, which consist principally of acquired customer-related acquired assets, acquired and/or developed technology, non-compete
agreements, and trade names, are reported net of accumulated amortization, and are being amortized over their estimated useful lives
at amortization rates that are proportional to each asset’s estimated economic benefit. The Company’s intangible assets are
amortized on a straight-line basis over the estimated useful lives of the assets. The Company reviews the carrying value of these intangible
assets annually, or more frequently if indicators of impairment are present. The
finite-lived useful lives are as follows:
Trade names 5 to 7 years
Acquired developed technology 5 to 8 years
Non-compete agreements 5 years
Customer relationships 5 to 8 years
Capitalized website costs 3 to 5 years In
performing the review of the recoverability of intangible assets, the Company considers several factors, including whether there have
been significant changes in legal factors or the overall business climate that could affect the underlying value of an asset. The Company
also considers whether there is an expectation that the asset will be sold or disposed of before the end of its remaining estimated useful
life. If, as the result of examining any of these factors, the Company concludes that the carrying value of the intangible asset exceeds
its estimated fair value, the Company recognizes an impairment charge and reduces the carrying value of the asset to its estimated fair
value. During the three-month period ended June 30,
2022, the Company identified an impairment-triggering event associated with both a sustained decline in the Company’s stock price
and associated market capitalization, as well as a second-quarter slowdown in the cannabis industry as a whole. Due to these factors,
the Company deemed that there was an impairment to the carrying value of its long-lived assets and accordingly performed interim testing
as of June 30, 2022. Based on its interim testing, the Company noted that the carrying value
of equity exceeded the calculated fair value by an amount greater than the aggregate value of our goodwill and intangible assets. Accordingly,
the Company concluded that the entire carrying value of its goodwill and intangible assets should be impaired, resulting in a second-quarter
impairment charge of $69.9 million. Additional information regarding the Company’s interim testing on intangible assets may be found
in Note 7 – Goodwill and Intangible Assets, Net, included elsewhere in the notes to the consolidated financial statements. |
| Convertible Notes Payable | Convertible
Notes Payable The
Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative
financial instruments to be separately accounted for in accordance with ASC Topic 815 Derivatives and Hedging (“ASC815”).
The accounting treatment of derivative financial instruments requires that the Company identify and record certain embedded conversion
options (“ECOs”), certain variable-share settlement features, and any related freestanding instruments at their fair values
as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded
as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification
of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the
contract is reclassified as of the date of the event that caused the reclassification. Bifurcated embedded conversion options, variable-share
settlement features and any related freestanding instruments are recorded as a discount to the host instrument which is amortized to
interest expense over the life of the respective note using the effective interest method. If
the Company determines that an instrument is not a derivative liability, it then evaluates whether there is a beneficial conversion feature
(“BCF”), by comparing the commitment date fair value to the effective current conversion price of the instrument. The Company
records a BCF as a debt discount which is amortized to interest expense over the life of the respective note using the effective interest
method. BCFs that are contingent upon the occurrence of a future event are recognized when the contingency is resolved. |
| Warrant Liabilities | Warrant Liabilities The Company does not use derivative instruments to hedge exposures
to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued private placement
stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant
to ASC Topic 480, Distinguishing Liabilities from Equity (“ASC480”) and ASC815. The Company accounts for warrants as either
equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative
guidance in ASC480 and ASC815. Management’s assessment considers whether the warrants are freestanding financial instruments pursuant
to ASC480, whether they meet the definition of a liability pursuant to ASC480, and whether the warrants meet all of the requirements for
equity classification under ASC815, including whether the warrants are indexed to the Company’s own Common Stock among other conditions
for equity classification. For issued or modified
warrants that meet all of the criteria for equity classification, they are recorded as a component of additional paid-in capital at the
time of issuance. For issued or modified warrants that are precluded from equity classification, they are recorded as a liability at their
initial fair value on the date of issuance and subject to remeasurement on each balance sheet date with changes in the estimated fair
value of the warrants to be recognized as an unrealized gain or loss in the condensed consolidated statements of operations. On August 18, 2022, the
Company reached an agreement with its institutional lender to amend its existing Securities Purchase
Agreement and entered into a Securities Exchange Agreement (the “Exchange Agreement”). Pursuant to the Exchange Agreement,
the Company issued a new warrant to purchase 1,422,764 shares of Common Stock (the “Note Exchange Warrant”) and modified an
existing warrant (the “SPA Warrant”) to purchase up to an aggregate of 688,111 shares of Common Stock. The Company exchanged
the SPA Warrant for a new warrant for the same number of underlying shares but with a reduced exercise price (the “Modified Warrants”
and, collectively with the Note Exchange Warrant, the “Warrant Liabilities”). As of September 30, 2022, the Company had outstanding
liability-classified Warrant Liabilities that allows the accredited investor (the “Investor”) to purchase 2,110,875 shares
of the Company’s Common Stock. Additional information regarding the Exchange Agreement and Warrant Liabilities may be found in Note
4 – Fair Value Measures and Note 9 – Debt, included elsewhere in the notes to the condensed
consolidated financial statements. |
| Debt Issue Costs and Debt Discount | Debt
Issue Costs and Debt Discount The Company may record debt issuance costs and/or debt discounts in
connection with issuing of debt. The Company may cover these costs by paying cash or issuing warrants. These costs are amortized to interest
expense over the expected life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts
is immediately expensed. |
| Original Issue Discount | Original
Issue Discount For
certain convertible debt issued by the Company, it may provide the debt holder with an original issue discount. The Company would
record the original issue discount to debt discount, reducing the face amount of the note, and is then amortized to interest expense
over the life of the debt. |
| Leases | Leases The
Company determines at the inception of a right-of-use asset contract if such arrangement is or contains a lease. A contract is or contains
a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company classifies leases at the lease commencement date as operating or finance leases and records a right-of-use asset and a lease
liability on its consolidated balance sheet for all leases with an initial lease term of greater than 12 months. A lease with an initial
term of 12 months or less is not recorded on the balance sheet, but related payments are recognized as an expense on a straight-line
basis over the lease term. The
Company’s right-of-use asset contracts may contain both lease and non-lease components. Non-lease components may include maintenance,
utilities, and other operating costs. The Company combines the lease and non-lease components of fixed costs in its lease arrangements
as a single lease component. Variable costs, such as utilities or maintenance costs, are not included in the measurement of right-of-use
assets and lease liabilities, but rather are expensed when the event determining the amount of variable consideration to be paid occurs. Lease
liabilities and their corresponding right-of-use assets are recorded based on the present value of future lease payments over the expected
lease term. The Company determines the present value of future lease payments by using its estimated secured incremental borrowing rate
for that lease term as the interest rate implicit in the lease is not readily determinable. The Company estimates its secured incremental
borrowing rate for each lease based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease
payments on a collateralized basis over a similar term. Certain
of the Company’s right-of-use asset leases include options to extend or terminate the lease. The amounts determined for the Company’s
right-of-use assets and lease liabilities generally do not assume that renewal options or early-termination provisions, if any, are exercised
unless it is reasonably certain that the Company will exercise such options. |
| Deferred Revenue | Deferred
Revenue Deferred
revenue includes amounts collected or billed in excess of revenue that it can recognize. The Company recognizes deferred revenue
as revenue as the related performance obligation is satisfied. The Company records deferred revenue that will be recognized
during the succeeding twelve-month period as a current liability on the consolidated balance sheet. |
| Fair Value of Financial Instruments | Fair
Value of Financial Instruments The
Company’s financial instruments consist of cash, accounts receivable, accounts payable and accrued expenses. The estimated fair
value of the accounts receivable and accounts payable approximates their carrying value due to the short-term nature of these instruments. |
| Stock-Based Compensation | Stock-Based
Compensation The
Company measures all stock options and other stock-based awards granted to employees and directors based on the fair value on the date
of the grant and recognizes compensation expense of those awards, net of estimated forfeitures, over the requisite service period, which
is generally the vesting period of the respective award. Historically, the Company has issued stock options to employees, directors and
consultants with only service-based vesting conditions and records the expense for these awards using the straight-line method. The
Company classifies stock-based compensation expense in its consolidated statements of operations in the same manner in which the award
recipient’s payroll costs are classified. The Company estimates the fair value of each stock option grant on
the date of the grant using the Black-Scholes option-pricing model. Before the IPO, the Company was a private company and therefore lacks
company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical
volatility of similar publicly-traded companies and expects to continue to do so until such time as it has adequate historical data regarding
the volatility of its own traded stock price. The expected term of the Company’s stock options has been determined utilizing the
“simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined
by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the
expected term of the award. The expected dividend yield is based on the fact that the Company has never paid cash dividends and does not
expect to pay any cash dividends in the foreseeable future. |
| Business Combinations | Business
Combinations The Company accounts for business acquisitions using the purchase method
of accounting, in accordance with which assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition
date. The fair value of the consideration paid, including contingent consideration, is assigned to the assets acquired and liabilities
assumed based on their respective fair values. Goodwill represents the excess of the purchase price over the estimated fair values of
the assets acquired and liabilities assumed. The
Company’s management exercises significant judgments in determining the fair value of assets acquired and liabilities assumed,
as well as intangibles and their estimated useful lives. Fair value and useful life determinations are based on, among other factors,
estimates of future expected cash flows, royalty cost savings and appropriate discount rates used in computing present values. These
judgments may materially impact the estimates used in allocating acquisition date fair values to assets acquired and liabilities assumed,
as well as the Company’s current and future operating results. Actual results may vary from these estimates which may result in
adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determination
of asset and liability fair values, whichever occurs first. Adjustments to the fair value of assets and liabilities made after the
end of the measurement period are recorded within the Company’s operating results. For contingent consideration arrangements, the Company recognizes a
liability at fair value as of the acquisition date with subsequent fair value adjustments recorded in the consolidated statements of operations.
Additional information regarding the Company’s contingent consideration arrangements may be found in Note 4 – Fair Value Measures,
included elsewhere in the notes to the consolidated financial statements. |
| Revenue Recognition | Revenue
Recognition Overview The
Company generates revenue from the following sources: (1) equipment sales, (2) providing services and (3) construction
contracts. In
accordance with ASC 606 “Revenue Recognition”, the Company recognizes revenue from contracts with customers using a five-step
model, which is described below:
● identify
the customer contract;
● identify
performance obligations that are distinct;
● determine
the transaction price;
● allocate
the transaction price to the distinct performance obligations; and
● recognize
revenue as the performance obligations are satisfied. Identify
the customer contract A
customer contract is generally identified when there is approval and commitment from both the Company and its customer, the rights have
been identified, payment terms are identified, the contract has commercial substance and collectability, and consideration is probable.
Specifically, the Company obtains written/electronic signatures on contracts and a purchase order, if said purchase orders are issued
in the normal course of business by the customer. Identify
performance obligations that are distinct A
performance obligation is a promise by the Company to provide a distinct good or service or a series of distinct goods or services. A
good or service that is promised to a customer is distinct if the customer can benefit from the good or service either on its own or
together with other resources that are readily available to the customer, and a company’s promise to transfer the good or service
to the customer is separately identifiable from other promises in the contract. Determine
the transaction price The
transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services
to a customer, excluding sales taxes that are collected on behalf of government agencies. Allocate
the transaction price to distinct performance obligations The
transaction price is allocated to each performance obligation based on the relative standalone selling prices (“SSP”) of
the goods or services being provided to the customer. The Company’s contracts typically contain multiple performance obligations,
for which the Company accounts for individual performance obligations separately, if they are distinct. The standalone selling price
reflects the price the Company would charge for a specific piece of equipment or service if it was sold separately in similar circumstances
and to similar customers. Recognize
revenue as the performance obligations are satisfied Revenue
is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer. Significant
Judgments The
Company enters into contracts that may include various combinations of equipment, services and construction, which are generally capable
of being distinct and accounted for as separate performance obligations. Contracts with customers often include promises to transfer
multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations
that should be accounted for separately versus together may require significant judgment. Once the Company determines the performance
obligations, it determines the transaction price, which includes estimating the amount of variable consideration to be included in the
transaction price, if any. The Company then allocates the transaction price to each performance obligation in the contract based on the
SSP. The corresponding revenue is recognized as the related performance obligations are satisfied. Judgment
is required to determine the SSP for each distinct performance obligation. The Company determines SSP based on the price at which the
performance obligation is sold separately and the methods of estimating SSP under the guidance of ASC 606-10-32-33. If the SSP is not
observable through past transactions, the Company estimates the SSP, taking into account available information such as market conditions,
expected margins, and internally approved pricing guidelines related to the performance obligations. The Company licenses its software
as a SaaS type subscription license, whereby the customer only has a right to access the software over a specified time period. The full
value of the contract is recognized ratably over the contractual term of the SaaS subscription, adjusted monthly if tiered pricing is
relevant. The Company typically satisfies its performance obligations for equipment sales when equipment is made available for shipment
to the customer; for services sales as services are rendered to the customer and for construction contracts both as services are rendered
and when contract is completed. The
Company utilizes the cost-plus margin method to determine the SSP for equipment and build-out services. This method is based on the cost
of the services from third parties, plus a reasonable markup that the Company believes is reflective of a market-based reseller margin. The
Company determines the SSP for services in time and materials contracts by observable prices in standalone services arrangements. The
Company estimates variable consideration in the form of royalties, revenue share, monthly fees, and service credits at contract inception
and updated at the end of each reporting period if additional information becomes available. Variable consideration is typically not
subject to constraint. Changes to variable consideration were not material for the periods presented. If
a contract has payment terms that differ from the timing of revenue recognition, the Company will assess whether the transaction price
for those contracts include a significant financing component. The Company has elected the practical expedient that permits an entity
to not adjust for the effects of a significant financing component if the Company expects that at the contract inception, the period
between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service, will
be one year or less. For those contracts in which the period exceeds the one-year threshold, this assessment, as well as the quantitative
estimate of the financing component and its relative significance, requires judgment. Accordingly, the Company imputes interest on such
contracts at an agreed-upon interest rate and will present the financing components separately as financial income. For the three months
and nine months ended September 30, 2022 and 2021, the Company did not have any such financial income. Payment
terms with customers typically require payment 30 days from the invoice date. The Company’s agreements with its customers do not
provide for any refunds for services or products and therefore no specific reserve for such is maintained. In the infrequent instances where
customers raise concern over delivered products or services, the Company has endeavored to remedy the concern and all costs related
to such matters have been insignificant in all periods presented. The
Company has elected to treat shipping and handling activities after the customer obtains control of the goods as a fulfillment cost and
not as a promised good or service. Accordingly, the Company will accrue all fulfillment costs related to the shipping and handling of
consumer goods at the time of shipment. The Company has payment terms with its customers of one year or less and has elected the practical
expedient applicable to such contracts not to consider the time value of money. Sales, value add, and other taxes the Company collects
concurrent with revenue-producing activities are excluded from revenue. The
Company receives payment from customers based on specified terms that are generally less than 30 days from the satisfaction of performance
obligations. There are no contract assets related to performance under the contract. The difference in the opening and closing balances
of the Company’s deferred revenue primarily results from the timing difference between the Company’s performance and the
customer’s payment. The Company fulfills obligations under a contract with a customer by transferring products and services in
exchange for consideration from the customer. Accounts receivables are recorded when the customer has been billed or the right to consideration
is unconditional. The Company recognizes deferred revenue when consideration has been received or an amount of consideration is due from
the customer, and the Company has a future obligation to transfer certain proprietary products. In
accordance with ASC 606-10-50-13, the Company is required to include disclosure on its remaining performance obligations as of the end
of the current reporting period. Due to the nature of the Company’s contracts, these reporting requirements are not applicable.
The majority of the Company’s remaining contracts meet certain exemptions as defined in ASC 606-10-50-14 through 606-10-50-14A,
including (i) performance obligation is part of a contract that has an original expected duration of one year or less and (ii) the
right to invoice practical expedient. The
Company generally provides a one-year warranty on its products for materials and workmanship but may provide multiple-year warranties
as negotiated, and will pass on the warranties from its vendors, if any, which generally covers this one-year period. In accordance with
ASC 450-20-25, the Company accrues for product warranties when the loss is probable and can be reasonably estimated. The reserve for
warranty returns is included in accrued expenses and other current liabilities in the Company’s consolidated balance sheets. |
| Research and Development Costs | Research
and Development Costs The
Company expenses research and development costs as incurred. Research and development expenses include payroll, employee benefits and
other expenses associated with product development. The Company incurs research and development costs associated with the development
and enhancement of both hardware and software products associated with its cultivation and extraction equipment, as well as its SaaS-based
software offering, Agrify Insights™ cultivation software. |
| Capitalization of Internal Software Development Costs | Capitalization
of Internal Software Development Costs The
Company capitalizes certain software engineering efforts related to the continued development of Agrify Insights™ cultivation software
under ASC 985-20. Costs incurred during the application development phase are only capitalized once technical feasibility
has been established and the work performed will result in new or additional functionality. The types of costs capitalized during
the application development phase include employee compensation, as well as consulting fees for third-party software developers working
on these projects. Costs related to the research and development are expensed as incurred until technical feasibility is established
as well as post-implementation activities. Internal-use software is amortized on a straight-line basis over the estimated useful life
of the asset, which ranges from two to five years. |
| Shipping and Handling Charges | Shipping
and Handling Charges The
Company incurs costs related to shipping and handling of its manufactured products. These costs are expensed as incurred as a component
of cost of goods sold. Shipping and handling charges related to the receipt of raw materials are also incurred, which are recorded as
a cost of the related inventory. |
| Equity Method Investments | Equity
Method Investments Investments
in affiliates that are 50% or less owned by the Company for which the Company exercises significant influence but does not have
control are accounted for on the equity method. The Company has investments in equity investments without readily determinable fair values,
which represents investments in entities where the Company does not have the ability to significantly influence the operations of the
entities. An
assessment of whether or not the Company (as a holder of 50% of TPI) has the power to direct activities that most significantly impact
TPI’s economic performance and to identify the party that obtains the majority of the benefits of the investment was performed
as of September 30, 2022 and December 31, 2021 and will be performed as of each subsequent reporting date. After each of these assessments,
the Company concluded that the activities that most significantly impact TPI’s economic performance are the growth, marketing,
sale, and distribution of products using TPI’s technology and IP, each of which is solely directed by TPI. Based on the consideration
of these assessments, the Company concluded that the Company’s investment in TPI should be accounted for under the equity method. The
carrying value of the Company’s investment in TPI was $0 as of September 30, 2022 and December 31, 2021. The Company did not recognize
revenue from TPI for the three and nine months ended September 30, 2022 and September 30, 2021. |
| Income Taxes | Income
Taxes The
Company accounts for income taxes pursuant to the provisions of ASC Topic 740, “Income Taxes,” which requires, among other
things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts
and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management
believes it is more likely than not that the net deferred asset will not be realized. The
Company follows the provisions of ASC 740-10-25-5, “Basic Recognition Threshold.” When tax returns are filed, it is highly
certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty
about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance
of ASC 740-10-25-6, the benefit of a tax position is recognized in the consolidated financial statements in the period during which,
based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination,
including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more
than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated
with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax
benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities
upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company
has not recorded a liability for unrecognized tax benefits. As of September 30, 2022, tax years 2017 through 2021 remain open for IRS
audit. The Company has received no notice of audit from the IRS for any of the open tax years. The
Company recognizes the benefit of a tax position when it is effectively settled. ASC 740-10-25-10, “Basic Recognition Threshold”
provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously
unrecognized tax benefits. ASC 740-10-25-10 clarifies that a tax position can be effectively settled upon the completion of an examination
by a taxing authority. For tax positions considered effectively settled, the Company recognizes the full amount of the tax benefit. |
| Net Loss Per Share | Net
Loss Per Share The
Company presents basic and diluted net loss per share attributable to Common Stockholders in conformity with the two-class method required
for participating securities. The Company computes basic loss per share by dividing net loss available to Common Stockholders by the
weighted-average number of common shares outstanding. Net loss available to Common Stockholders represents net loss attributable to Common
Stockholders reduced by the allocation of earnings to participating securities. Losses are not allocated to participating securities
as the holders of the participating securities do not have a contractual obligation to share in any losses. Diluted loss per share adjusts
basic loss per share for the potentially dilutive impact of stock options and warrants. As the Company has reported losses for all periods
presented, all potentially dilutive securities including stock options and warrants, are anti-dilutive, and accordingly, basic net loss
per share equals diluted net loss per share. Net loss per share calculations for all periods have been adjusted
to reflect the reverse stock splits effected on January 12, 2021 and October 18, 2022. Net loss per share was calculated based on the
weighted-average number of Common Stock outstanding. |
| Recently Adopted Accounting Pronouncements | Recently
Adopted Accounting Pronouncements In August 2020, the FASB issued ASU No. 2020-06, Debt
- Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own
Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments
in ASU No. 2020-06 simplify the complexity associated with applying GAAP for certain financial instruments with characteristics
of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exceptions
for contracts in an entity’s own equity. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including
interim periods within those fiscal years. The adoption of this new accounting guidance had no impact
on the Company’s consolidated financial position. |
| Pending Accounting Pronouncements | Pending
Accounting Pronouncements In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), which introduces a new methodology
for accounting for credit losses on financial instruments, including available-for-sale debt securities and accounts receivable. The
guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial
instruments by using all practical and relevant information. Any expected credit losses are to be reflected as allowances rather than
reductions in the amortized cost of available-for-sale debt securities. ASU 2016-13 is effective in the first quarter
of fiscal 2024. The Company is currently evaluating the potential impact of this adoption on its consolidated financial statements and
related disclosures. In October 2021, the FASB issued ASU No. 2021-08, Business
Combinations (Topic 606): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires that
an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 as
if it had originated the contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets
and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements, if the acquiree
prepared financial statements in accordance with GAAP. The amendment in this update is effective for fiscal years beginning after December
15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period.
The guidance should be applied prospectively to business combinations occurring on or after the effective date of the amendment in this
update. The Company is currently evaluating the potential impact of this adoption on its consolidated financial statements and related
disclosures. Other recent accounting pronouncements
issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities
and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial
statements. |
