UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 001-39946

AGRIFY CORPORATION

(Exact name of registrant as specified in its charter)

Nevada		30-0943453
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2220 Hicks Road Suite 210

Rolling Meadows, IL 60008

(Address of principal executive offices, including zip code)

(855) 420-0020

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		AGFY		NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

As of August 4, 2025, the registrant had 2,002,568 shares of Common Stock, $0.001 par value per share outstanding.

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION		1

ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to the Condensed Consolidated Financial Statements	5

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	42

ITEM 4.	CONTROLS AND PROCEDURES	42

PART II OTHER INFORMATION		43

ITEM 1.	LEGAL PROCEEDINGS	43

ITEM 1A.	RISK FACTORS	43

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	43

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	43

ITEM 4.	MINE SAFETY DISCLOSURES	43

ITEM 5.	OTHER INFORMATION	43

ITEM 6.	EXHIBITS	44

SIGNATURES		45

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AGRIFY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share and per share data)

	June 30,			December 31,
	2025			2024
Assets
Current assets:
Cash and cash equivalents	$	40,956		$	31,170
Accounts receivable, net		1,572			30
Inventory, net		2,209			500
Prepaid expenses and other current assets		1,589			398
Current assets associated with discontinued operations		46			2,596
Total current assets		46,372			34,694
Goodwill		9,713			9,713
Intangible assets		13,292			8,900
Non-current assets associated with discontinued operations		97			715
Total assets	$	69,474		$	54,022
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,651		$	825
Accrued expenses and other current liabilities		3,029			4,090
Long-term debt, current		621			522
Related party debt, current		10,000			10,000
Current liabilities associated with discontinued operations		2,243			9,242
Total current liabilities		17,544			24,679
Warrant liabilities		704			996
Related party debt, net of current		27,000			—
Long-term debt, net of current		3,000			1
Other non-current liabilities		263			—
Non-current liabilities associated with discontinued operations		—			257
Total liabilities		48,511			25,933
Commitments and contingencies (Note 16)
Stockholders’ equity:
Common Stock, $0.001 par value per share, 35,000,000 shares authorized; 2,002,568 and 1,952,032 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively		2			2
Preferred Stock, $0.001 par value per share, 2,895,000 shares authorized, no shares issued or outstanding		—			—
Preferred A Stock, $0.001 par value per share, 105,000 shares authorized, no shares issued or outstanding		—			—
Additional paid-in capital		337,490			335,400
Accumulated deficit		(316,529	)		(307,543	)
Total stockholders’ equity attributable to Agrify Corporation		20,963			27,859
Non-controlling interests		—			230
Total stockholders’ equity		20,963			28,089
Total liabilities and stockholders’ equity	$	69,474		$	54,022

The accompanying notes are an integral part of these condensed consolidated financial statements.

AGRIFY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except share and per share data)

	Three months ended June 30,						Six months ended June 30,
	2025			2024			2025			2024
Revenue	$	2,042		$	—		$	2,580		$	—
Cost of goods sold		1,360			—			1,808			—
Gross profit		682			—			772			—

Selling, general and administrative		7,480			677			11,271			2,229
Research and development		—			185			—			460
Change in contingent consideration		—			—			—			(2,180	)
Loss on disposal of property and equipment		—			(9	)		—			(9	)
Total operating expenses		7,480			853			11,271			500

Operating loss from continuing operations		(6,798	)		(853	)		(10,499	)		(500	)

Interest expense, net		(291	)		(28	)		(290	)		(128	)
Change in fair value of warrant liabilities		(115	)		(1,277	)		292			(404	)
Other (expense) income, net		(1	)		—			18			—
Total other (expense) income, net		(407	)		(1,305	)		20			(532	)

Loss from continuing operations before income taxes		(7,205	)		(2,158	)		(10,479	)		(1,032	)
Income tax provision		—			—			—			—
Loss from continuing operations, net of income taxes		(7,205	)		(2,158	)		(10,479	)		(1,032	)

(Loss) income from discontinued operations		(123	)		(814	)		(2,041	)		2,296
(Loss) gain on disposal of Extraction business		(32	)		—			3,534			—
Income tax effect on discontinued operations		—			—			—			—
(Loss) income from discontinued operations, net of income taxes		(155	)		(814	)		1,493			2,296

Net (loss) income		(7,360	)		(2,972	)		(8,986	)		1,264
Income (loss) attributable to non-controlling interest		—			—			—			—
Net (loss) income attributable to Agrify Corporation	$	(7,360	)	$	(2,972	)	$	(8,986	)	$	1,264

Net (loss) income per share:
Basic (loss) income per share
Continuing operations	$	(3.66	)	$	(2.29	)	$	(5.35	)	$	(1.47	)
Discontinued operations		(0.08	)		(0.87	)		0.76			3.27
Net (loss) income per share attributable to Common Stockholders – basic ⁽¹⁾	$	(3.74	)	$	(3.16	)	$	(4.59	)	$	1.80
Diluted (loss) income per share
Continuing operations	$	(3.66	)	$	(2.29	)	$	(5.35	)	$	(0.30	)
Discontinued operations		(0.08	)		(0.87	)		0.76			1.35
Net (loss) income per share attributable to Common Stockholders – diluted ⁽¹⁾	$	(3.74	)	$	(3.16	)	$	(4.59	)	$	1.05
Weighted average common shares outstanding - basic⁽¹⁾		1,965,425			940,953			1,958,724			701,563
Weighted average common shares outstanding - diluted⁽¹⁾		1,965,425			940,953			1,958,724			1,696,069

(1)

Periods presented have been adjusted to retroactively reflect the 1-for-15 reverse stock split on October 8, 2024. Additional information regarding reverse stock splits may be found in Note 1 – Overview, Basis of Presentation, and Significant Accounting Policies, included in the notes to the condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

AGRIFY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(DEFICIT) (UNAUDITED)

(In thousands)

	Common Stock				Additional Paid-In-			Accumulated			Total Stockholders’ Equity (Deficit) attributable			Non-Controlling		Total Stockholders’ Equity
	Shares		Amount		Capital			Deficit			to Agrify			Interests		(Deficit)
Balance at January 1, 2024		113,416	$	—	$	250,857		$	(265,797	)	$	(14,940	)	$	230	$	(14,710	)
Stock-based compensation		—		—		490			—			490			—		490
Issuance of Common Stock and pre-funded warrants through public offering		184,000		—		2,123			—			2,123			—		2,123
Issuance of held-back shares from Sinclair acquisition		39		—		—			—			—			—		—
Cashless exercise of high trail warrants		208,814		—		—			—			—			—		—
Exercise of pre-funded warrants issued through public offering		200,667		—		3			—			3			—		3
Conversion of convertible note		178,109		—		1,731			—			1,731			—		1,731
Deemed contribution from troubled debt restructuring with related party		—		—		676			—			676			—		676
Stock split share adjustment		1		1		(1	)		—			—			—		—
Net income		—		—		—			4,236			4,236			—		4,236
Balance at March 31, 2024		885,046	$	1	$	255,879		$	(261,561	)	$	(5,681	)	$	230	$	(5,451	)
Stock-based compensation		—		—		81			—			81			—		81
Exercise of pre-funded warrants issued through public offering		63,579		—		1			—			1			—		1
Excess of related party debt and pre-funded warrants		—		—		10,044			—			10,044			—		10,044
Issuance of equity classified prefunded warrants		—		—		6,791			—			6,791			—		6,791
Issuance of vested RSUs, net of shares held back to offset tax		41		—		—			—			—			—		—
Net loss		—		—		—			(2,972	)		(2,972	)		—		(2,972	)
Balance at June 30, 2024		948,666	$	1	$	272,796		$	(264,533	)	$	8,264		$	230	$	8,494

	Common Stock					Additional Paid-In-		Accumulated			Total Stockholders’ Equity attributable			Non-Controlling			Total Stockholders’
	Shares			Amount		Capital		Deficit			to Agrify			Interests			Equity
Balance at January 1, 2025		1,952,032		$	2	$	335,400	$	(307,543	)		27,859		$	230		$	28,089
Stock-based compensation		—			—		589		—			589			—			589
Cancellation of common shares		(18	)		—		—		—			—			—			—
Impairment of non-controlling interests		—			—		—		—			—			(230	)		(230	)
Net loss		—			—		—		(1,626	)		(1,626	)		—			(1,626	)
Balance at March 31, 2025		1,952,014		$	2	$	335,989	$	(309,169	)	$	26,822		$	—		$	26,822
Stock-based compensation		—					515		—			515			—			515
Issuance of vested RSUs, net of shares held back to offset tax		50,554			—		—		—			—			—			—
Issuance of pre-funded warrants in lieu of cash interest payments on related party debt		—			—		510		—			510			—			510
Accrued pre-funded warrants in lieu of cash interest		—			—		476		—			476			—			476
Net loss		—			—		—		(7,360	)		(7,360	)		—			(7,360	)
Balance at June 30, 2025		2,002,568		$	2	$	337,490	$	(316,529	)	$	20,963		$	—		$	20,963

The accompanying notes are an integral part of these condensed consolidated financial statements.

AGRIFY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

	For the six months ended June 30,
	2025			2024
Cash flows from operating activities:
Net (loss) income	$	(8,986	)	$	1,264
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization		735			782
Non-cash interest expense		164			—
Lease expense		85			290
Impairment of right-of-use assets		24			—
Stock-based compensation expense		1,104			571
Change in fair value of warrant liabilities		(292	)		404
Change in provision for credit losses, net		52			346
Change in inventory reserves		—			(1,092	)
Loss on inventory write-down		112			—
Gain on disposal of property and equipment		(2	)		(9	)
Gain on early termination of lease		—			(39	)
Change in contingent consideration		—			(2,180	)
Gain on settlement of contingent liability		—			(5,935	)
Gain on disposal of Extraction business		(3,534	)		—
Changes in operating assets and liabilities:
Accounts receivable		(812	)		201
Inventory		(610	)		1,759
Prepaid expenses and other current assets		(903	)		2,686
Other non-current assets		—			44
Accounts payable		(324	)		(2,792	)
Accrued expenses and other current liabilities		(943	)		(669	)
Operating lease liabilities		(104	)		(275	)
Contract liabilities		(1,167	)		(172	)
Other liabilities		263			—
Net cash and cash equivalents used in operating activities		(15,138	)		(4,816	)

Cash flows from investing activities:
Purchases of property and equipment		—			(4	)
Related party acquisition of MC Brands		(5,075	)		—
Proceeds from disposal of property and equipment		—			10
Proceeds from repayment of loan receivable		—			330
Net cash and cash equivalents (used in) provided by investing activities		(5,075	)		336

Cash flows from financing activities:
Proceeds from related party notes		27,000			—
Proceeds from notes payable		3,000			—
Proceeds from issuance of Common Stock through an S-1 and prefunded warrants offering		—			2,123
Proceeds from exercise of S-1 Prefunded Warrants		—			4
Proceeds from issuance of related party notes		—			2,294
Repayments of notes payable		(1	)		—
Payments on other financing loans		—			(1	)
Payments on insurance financing loans		—			(317	)
Net cash and cash equivalents provided by financing activities continuing operations		29,999			4,103
Net increase (decrease) in cash and cash equivalents		9,786			(377	)
Cash and cash equivalents at the beginning of period		31,170			430
Cash and cash equivalents of discontinued operations, beginning of period	$	—		$	—
Cash and cash equivalents of discontinued operations, end of period		—			—
Cash and cash equivalents at the end of period	$	40,956		$	53

Supplemental disclosures
Cash paid for interest		518			95
Supplemental disclosure of non-cash investing and financing activities
Conversion of related party debt interest into pre-funded warrants	$	510		$	—
Accrued pre-funded warrants in lieu of cash interest	$	476		$	—
Reclassification of accounts payable and accrued interests to notes payable	$	99		$	—
Cashless exercise of liability classified warrants	$	—		$	3
Financing of prepaid insurance	$	—		$	17
Accrued interest consolidated into related party debt	$	—		$	364
Deemed contribution from troubled debt restructuring with related party	$	—		$	676
Transfer of loans receivable from noncurrent to current	$	—		$	1,295
Conversion of convertible notes into equity	$	—		$	1,731
Consolidation of related party debt principal	$	—		$	3,799
Fair value of warrants in connection with reclassification and issuance	$	—		$	6,791
Conversion of related party debt to equity	$	—		$	10,044

The accompanying notes are an integral part of these condensed consolidated financial statements.

AGRIFY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 — Overview, Basis of Presentation and Significant Accounting Policies

Description of Business

Agrify Corporation (together with its subsidiaries, the “Company”) is a developer of branded innovative solutions for the cannabis and hemp industries. The Company’s portfolio of consumer-packaged goods brands includes Señorita brand which offers consumers hemp-derived tetrahydrocannabinol (“THC”) beverages that mirror well-known cocktails like a margarita – in four flavors – classic Lime Jalapeño Margarita, Mango Margarita, Paloma and Ranch Water. Known for its clean, fresh taste and commitment to high-quality, natural ingredients, Señorita offers a low-sugar, low-calorie alternative to alcoholic beverages and is available at top retailers including Total Wine, ABC Fine Wine & Spirits, and Binny’s in eleven U.S. states and Canada, with plans for expansion and future availability in premier on-premises destinations. Other hemp-derived products including RYTHM beverages and incredibles and Beboe edible products are primarily sold online and through direct-to-retail partnerships

Agrify has also historically been a leading provider of innovative cultivation and extraction solutions for the cannabis industry. Prior to the exit of the extraction business on March 30, 2025, the Company’s comprehensive extraction product line (“the Extraction Business”), which included hydrocarbon, alcohol, solventless, post-processing, and lab equipment, empowered producers to maximize the quantity and quality of extract required for premium concentrates. Additionally, prior to its sale on December 31, 2024, the Company’s proprietary micro-environment-controlled Agrify Vertical Farming Units(“VFUs”) enabled cultivators to produce high quality products for the cannabis industry.

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 eleven wholly-owned consolidated subsidiaries, which are collectively referred to as the “Subsidiaries” and seven out of eleven subsidiaries are related to discontinued operations.

On December 12, 2024, the Company acquired certain assets from Double or Nothing, LLC (“Double or Nothing”), the owner and creator of the Señorita brand of hemp-derived drinks as part of the Company’s strategic plan to reposition itself as a distributor of hemp-derived THC beverages and similar products.

On December 31, 2024, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with CP Acquisitions, LLC (“CP”), an entity affiliated with Raymond Chang, the Company’s former Chairman and Chief Executive Officer. Under the Purchase Agreement, CP acquired assets from the Company relating to the Company’s VFUs, including the related Agrify total-turnkey (“TTK”) solution assets and Agrify Insights^TM software solutions (collectively the “Cultivation Business”). The sale of the Cultivation Business occurred following signing on December 31, 2024. The results of the Cultivation Business are presented as discontinued operations in the Condensed Consolidated Statements of Operations and, as such, have been excluded from continuing operations. Further, the Company reclassified the assets and liabilities of the Cultivation Business associated with discontinued operations in the Condensed Consolidated Balance Sheet as of June 30, 2025 and December 31, 2024. In connection with the reclassification as discontinued operations, the assets and liabilities were remeasured to fair value less cost to sell. For further discussion on the discontinued operations, refer to Note 6 included elsewhere in the notes to the unaudited condensed consolidated financial statements.

On March 30, 2025, the Company approved the winding down of the Extraction Business by March 31, 2025, including but not limited to, the sale or other disposal of all remaining assets constituting the Extraction Business, the cessation of all business operations related to the Extraction Business, the termination of any outstanding contracts related to the Extraction Business, and termination of any employees primarily involved in the Extraction Business. The results of the Extraction Business are presented as discontinued operations in the Condensed Consolidated Statements of Operations and, as such, have been excluded from continuing operations. Further, the Company reclassified the assets and liabilities of the Extraction Business associated with discontinued operations in the Condensed Consolidated Balance Sheet as of June 30, 2025 and December 31, 2024. In connection with the reclassification as discontinued operations, the assets and liabilities were remeasured to fair value less cost to sell as of June 30, 2025. The balances as of December 31, 2024 reflect historical carrying values, without remeasurement. For further discussion on the discontinued operations, refer to Note 6 included elsewhere in the notes to the unaudited condensed consolidated financial statements.

On May 20, 2025, the Company entered into a purchase agreement with VCP IP Holdings, LLC (“VCP”), an indirectly wholly-owned subsidiary of Green Thumb Industries Inc. (“Green Thumb”), a related party, pursuant to which the Company acquired all of the equity interests in MC Brands LLC and its wholly-owned subsidiary Core Growth LLC (together referred to as “MC Brands”). The assets of MC Brands consist primarily of intellectual property rights to the incredibles brand. The aggregate consideration exchanged for the equity interest was cash consideration of $5.1 million. In connection with the purchase of MC Brands, the Company also licensed the right to use the RYTHM and Beboe brands from Green Thumb for hemp-derived THC beverages and similar products.

Nasdaq Deficiency Notice

On January 30, 2024, the Company received formal notice that the Nasdaq Hearings Panel (the “Panel”) of the Nasdaq Stock Market LLC (“Nasdaq”) had granted the Company’s request for an exception through April 15, 2024 to evidence compliance with the Nasdaq Listing Rule 5550(b)(1) (the “Listing Rule 5550(b)(1)”), which was subsequently extended to May 15, 2024. As a result of the conversion of a convertible note and a junior note held in favor of CP, the Company regained compliance with the stockholders’ equity requirement, On May 28, 2024, the Company received formal written notice from Nasdaq confirming that the Company had regained compliance with the minimum stockholders’ equity requirement as set forth in Listing Rule 5550(b)(1).

On March 5, 2024, the Company received a deficiency letter from the Nasdaq Listing Qualifications Department (the “Staff”) notifying the Company that, for the last 30 consecutive business days, the bid price for the Company’s Common Stock had closed below $1.00 per share, which is the minimum closing price required to maintain continued listing on the Nasdaq Stock Market under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”). The Notice had no immediate effect on the listing of the Company’s Common Stock on Nasdaq. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company had 180 calendar days to regain compliance with the Minimum Bid Requirement. The compliance period for the Company expired on September 3, 2024. On September 4, 2024, the Staff notified the company in writing that it was eligible for an additional 180-day compliance period, or until March 3, 2025, to regain compliance with the Minimum Bid Requirement. On October 8, 2024, the Company completed a 1-for-15 reverse stock split of its Common Stock, in which each fifteen shares of Common Stock issued and outstanding was combined and converted into one share of Common Stock to regain compliance with the Minimum Bid Requirement. On October 22, 2024, the Staff notified the Company that it had regained compliance with the Minimum Bid Requirement.

Basis of Presentation and Principles of Consolidation

These interim condensed consolidated financial statements of the Company are unaudited. In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures necessary for a fair presentation of these unaudited condensed consolidated financial statements have been included. The results reported in the unaudited condensed consolidated financial statements for any interim periods are not necessarily indicative of the results that may be reported for the entire year. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and do not include all information and footnotes necessary for a complete presentation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”).

Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 21, 2025, as amended on March 28, 2025 (the “Form 10-K”). The December 31, 2024 balances reported herein are derived from the audited consolidated financial statements for the year ended December 31, 2024, retrospectively adjusted for discontinued operations.

Accounting for Wholly-Owned Subsidiaries

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly-owned Subsidiaries, as described above, in accordance with the provisions required by Accounting Standards Codification (“ASC”) Topic 810, Consolidation (“ASC 810”) of the Financial Accounting Standards Board (“FASB”). The Company includes results of operations of acquired companies from the date of acquisition. All significant intercompany transactions and balances are eliminated.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with U.S. 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 condensed consolidated financial statements, and the reported amounts of expenses during the reporting period. On an ongoing basis, we evaluate estimates, which include estimates related to accruals, stock-based compensation expense, reported amounts of revenues and expenses during the reported period, fair value of warrant liabilities, sales tax liabilities, valuation of deferred tax assets, net realizable value of inventory, intangible assets, goodwill, and litigation. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ materially from those estimates or assumptions.

The Company regularly evaluates its assets, including asset groups or reporting units, for impairment in accordance with U.S. GAAP. The Company is aware of the impact that prolonged net losses can have on the fair value of underlying assets and the overall company. The Company is committed to ensuring that the carrying amounts of its assets are appropriately assessed and adjusted for any impairment, reflecting a true and fair view of its financial position.

Reclassifications

The Company effected a 1-for-15 reverse stock split of its Common Stock on October 8, 2024. 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’ equity section of the condensed consolidated balance sheets 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.

Certain amounts in the condensed consolidated financial statements related to the prior years have been reclassified to conform to the current year’s presentation, specifically related to discontinued operations.

Discontinued Operations

On December 31, 2024, the Company entered into and closed the Purchase Agreement with CP. Under the Purchase Agreement, CP acquired assets from the Company relating to the Cultivation Business. On March 30, 2025, the Company discontinued the Extraction Business.

As the sale of the Cultivation Business and the exit of the Extraction Business represented strategic shifts that will have a major effect on the Company’s operations and financial results, they have been presented in discontinued operations in accordance with ASC 205, Presentation of Financial Statements, separate from continuing operations for the three months and six months ended June 30, 2025 and 2024, and as of June 30, 2025 and December 31, 2024, as applicable. For further discussion, refer to Note 6 included elsewhere in the notes to the unaudited condensed consolidated financial statements.

Accounts Receivable, Net

Accounts receivable, net, primarily consists of amounts for goods and services that are billed and currently due from customers. In accordance with the current expect credited loss (“CECL”) impairment model under Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326), accounts receivable balances are presented net of an allowance for credit losses, which are an estimate of billed or borrowed 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 or borrower collection matters, including the aging of unpaid accounts receivable and changes in customer or borrower financial conditions. Accounts and loans 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 unaudited condensed consolidated statements of operations.

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, 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 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.

For the three months ended June 30, 2025, the Company had one related party customer and one third-party customer that accounted for 10% or more of the total revenue from continuing operations. A related party customer and a third-party customer represented 13% and 38% each of total revenue from continuing operations for the period, respectively. For the three months ended June 30, 2024, the Company had no revenue from continuing operations and therefore no customer represented a significant portion of revenue from continuing operations.

For the six months ended June 30, 2025, the Company had three third-party customers that accounted for 10% or more of the total revenue from continuing operations. These customers represented between 11% and 30% each of total revenue from continuing operations for the period. For the six months ended June 30, 2024, the Company had no revenue from continuing operations and therefore no customer represented a significant portion of revenue from continuing operations.

As of June 30, 2025, one of the Company’s related party customers accounted for 14% of accounts receivable and three of the Company’s third-party customers also accounted for between 16% and 40% each of accounts receivable. As of December 31, 2024, one third-party customer accounted for 100% of accounts receivable.

Inventories

The Company values all its inventories, which consist primarily of finished goods and raw materials, 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 a physical inventory count at least once annually at all significant inventory locations.

Warrants

The Company evaluates all 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 (“ASC 480”) and ASC Topic 815, Derivatives and Hedging (“ASC 815”). 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 ASC 480 and ASC 815. Management’s assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own Common Stock among other conditions for equity classification.

Issued or modified warrants that meet all of the criteria for equity classification are recorded as a component of additional paid-in capital at the time of issuance or when incurred. Issued or modified warrants that are precluded from equity classification 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 unaudited condensed consolidated statements of operations.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, contingent consideration, operating lease liabilities, long-term debt, related party debt, and pre-funded warrants. Refer to Note 4 - Fair Value Measures, included elsewhere in the notes to the unaudited condensed consolidated financial statements for details of the Company’s financial instruments.

Revenue Recognition

Overview

The Company generates revenue from continuing operations through the sale of hemp-derived THC products and related party licensing arrangements. The Company licenses intellectual property to a related party under arrangements that provide for sales-based royalties. The Company recognizes royalty income derived from licensing agreements in accordance with ASC Topic 606, Revenue Recognition (“ASC 606”), specifically, the sales-based royalty exception. In accordance with ASC 606, revenue is recognized through a five-step model, as outlined below:

●

Identify the customer contract: A customer contract is identified when there is mutual approval and commitment between the Company and its customer, the rights and obligations are clear, payment terms are set, the contract has commercial substance, and collectability is probable. Written or electronic signatures on contracts and purchase orders are obtained if such orders are issued in the normal course of business by the customer.

●

Identify performance obligations that are distinct: The Company identifies distinct performance obligations in each contract. A performance obligation is considered distinct if the customer can benefit from the good or service on its own or with readily available resources, and if it is separately identifiable from other promises in the contract. The Company’s revenue-generating activities typically have a single performance obligation.

●

Determine the transaction price: The transaction price is the amount of consideration the Company expects to receive in exchange for the sale of the product. This amount is determined excluding sales taxes collected on behalf of government agencies and net of any sales discounts, incentives, and returns.

●

Allocate the transaction price to distinct performance obligations: The transaction price is allocated to each distinct performance obligation based on the relative standalone selling prices (“SSP”) of the goods or services provided. If a contract involves multiple performance obligations, each is accounted for separately if distinct, and the SSP reflects the price the Company would charge if the good or service were sold separately in similar circumstances and to similar customers.

●

Recognize revenue as the performance obligations are satisfied:

Revenue from the sale of hemp-derived THC products is recognized when control of the product transfers to the customer, typically upon delivery or shipment, as the customer assumes the risks and rewards of ownership. Payment terms vary by customer, but the time between revenue recognition and payment due is generally not significant. For products sold under consignment arrangements, revenue is recognized only when control is transferred to the end customer. The Company does not maintain a specific reserve for returns due to the limited circumstances under which returns are permitted in customer agreements. Payments for slotting, listing fees, or other marketing or promotional activities, where legally permitted, are recorded as a reduction in revenue unless a distinct good or service is received in exchange.

In accordance with ASC 606-10-55-65 through 55-65B, royalty revenue is recognized only when the underlying sale by the licensee occurs, and the performance obligation has otherwise been satisfied. This approach ensures that revenue is recognized in the period in which it is earned and determinable, consistent with the transfer of control of the intellectual property to the licensee.

Net (Loss) Income Per Share

The Company presents basic and diluted net (loss) income per share attributable to Common Stockholders in conformity with the one-class method. The Company computes basic (loss) income per share by dividing net (loss) income available to Common Stockholders by the weighted-average number of Common Stock outstanding. Diluted (loss) income per share adjusts basic loss per share for the potentially dilutive impact of convertible notes, stock options, restricted stock units and warrants. For the six months ended June 30, 2024, the Company adjusts the net income available to common stockholders and the weighted average common stock outstanding for the effective of dilutive securities as presented within Note 15 – Net (Loss) Income Per Share. As the Company has reported losses for the three months ended June 30, 2025 and 2024 and the six months ended June 30, 2025, all potentially dilutive securities including convertible notes, stock options, restricted stock units and warrants, are anti-dilutive, and accordingly, basic net loss per share equals diluted net loss per share for those periods.

Net (loss) income per share calculations for all periods have been adjusted to reflect the reverse stock split effected on October 8, 2024.

Recently Adopted Accounting Pronouncements

On December 14, 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Improvements to Income Tax Disclosures, a final standard on improvements to income tax disclosures. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard applies to all entities subject to income taxes and is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. For public business entities (PBEs), the new requirements will be effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. The Company adopted this new standard on January 1, 2025 and the effect of this guidance will be reflected in the financial statements for the year ending December 31, 2025.

Recently Announced Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income – Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses. This guidance requires additional disclosure of certain amounts included in the expense captions presented on the Statement of Operations as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted for annual financial statements that have not yet been issued. The Company is currently evaluating the impact of this ASU on its condensed consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (“ASU 2024-04”), which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. ASU 2024-04 is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. Adoption can be on a prospective or retrospective basis. The Company is currently evaluating the disclosure impact that ASU 2024-04 may have on its condensed consolidated financial statement presentation and disclosures.

Other recent accounting pronouncements did not or are not believed by management to have a material impact on the Company’s present or future condensed consolidated financial statements.

Note 2 — Revenue

Revenue

The Company generates revenue from continuing operations from hemp-derived THC products sales and royalty revenue.

For the three and six months ended June 30, 2025, the Company generated revenue from continuing operations from hemp-derived product sales and sales-based royalty revenue. Revenue from hemp-derived product sales is recognized at a point-in-time when control transfers to the customer. Royalty revenue is recognized over time as the underlying sales occurs in accordance with the terms of the related party license agreements. For the three and six months ended June 30, 2024, the Company had no revenue from continuing operations.

The following table provides the Company’s revenue from continuing operations disaggregated by revenue type:

	Three months ended June 30,				Six months ended June 30,
(In thousands)	2025		2024		2025		2024
Hemp-derived products	$	1,794	$	—	$	2,332	$	—
Royalty revenue		248		—		248		—
Total revenue	$	2,042	$	—	$	2,580	$	—

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 because 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.

Note 3 — Supplemental Condensed Consolidated Balance Sheet Information

Accounts Receivable, Net

Accounts receivable, net, consisted of the following as of June 30, 2025 and December 31, 2024:

	June 30,		December 31,
(In thousands)	2025		2024
Accounts receivable, gross	$	1,572	$	30
Less allowance for credit losses		—		—
Accounts receivable, net	$	1,572	$	30

There is nil allowance for credit losses as of June 30, 2025 and December 31, 2024.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of June 30, 2025 and December 31, 2024:

	June 30,		December 31,
(In thousands)	2025		2024
Prepaid materials	$	536	$	—
Prepaid marketing		551		—
Other receivables		280		170
Prepaid insurance		86		86
Prepaid expenses, other		136		142
Total prepaid expenses and other current assets	$	1,589	$	398

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following as of June 30, 2025 and December 31, 2024:

	June 30,		December 31,
(In thousands)	2025		2024
Accrued consulting fees	$	1,293	$	383
Compensation related fees		488		1,112
Accrued fulfillment and manufacturing related costs		411		—
Accrued marketing fees		251		—
Litigation reserve		132		1,628
Accrued professional fees		128		802
Sales tax payable		13		4
Accrued interest expense		—		161
Other current liabilities		313		—
Total accrued expenses and other current liabilities	$	3,029	$	4,090

During the six months ended June 30, 2025, the company paid $1.5 million into escrow related to Cultivation Sale Agreement. See related legal matters in Note 16.

As of June 30, 2025 and December 31, 2024, the Company had related party accrued consulting fees with Green Thumb of approximately $1.3 million and $332 thousand, respectively.

Note 4 — Fair Value Measures

Fair Values of Assets and Liabilities

In accordance with ASC Topic 820, Fair Value Measurement, the Company measures fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the assumptions that market participants would use in pricing an asset or liability (the inputs) are based on a tiered fair value hierarchy consisting of three levels, as follows:

Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.

Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar instruments in active markets or for similar markets that are not active.

Level 3: Unobservable inputs for which there is little or no market data which require the Company to develop its own assumptions about how market participants would price the asset or liability.

Valuation techniques for assets and liabilities include methodologies such as the market approach, the income approach or the cost approach, and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs are only utilized to the extent that observable inputs are not available or cost-effective to obtain.

At June 30, 2025 and December 31, 2024, the Company’s assets and liabilities measured at fair value on a recurring basis were as follows:

	June 30, 2025								December 31, 2024
	Fair Value Measurements Using Input Types								Fair Value Measurements Using Input Types
(In thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liabilities	$	—	$	—	$	704	$	704	$	—	$	—	$	996	$	996
Total liabilities	$	—	$	—	$	704	$	704	$	—	$	—	$	996	$	996

Fair Value of Financial Instruments

The Company has certain financial instruments which consist of cash and cash equivalents, accounts receivable, contingent consideration, operating lease liabilities, long-term debt, related party debt, and warrant liabilities. Fair value information for each of these instruments as well as other balances of the Company are as follows:

●

Cash and cash equivalents approximate their fair value based on the short-term nature of these instruments.

●

Accounts receivable is presented net of an allowance for estimated credit losses, which approximates fair value.

●

The carrying value of lease liabilities approximates fair value due to the implicit discount rates used in the determination of the lease liabilities being consistent with the Company’s incremental borrowing rates at the time of lease inception and accounting for the duration of the leases.

●

Long-term debt and related party debt, including the debt that has undergone troubled debt restructuring, is carried at amortized cost, dictated by the prevailing market interest rates at the time of each transaction in accordance with ASC Topic 470, Debt (“ASC 470”).

●

The Company’s warrant liabilities are marked-to-market at each reporting period with the changes in fair value of warrant liabilities recorded in other income (expense), net in the accompanying unaudited condensed consolidated statements of operations until the warrants are exercised or expire. The fair value of the warrant liabilities is estimated using a Black-Scholes option-pricing model.

●

The Company has pre-funded warrants issued to a related party. As of result of the latest amendment executed as of December 31, 2024, the warrants met the requirements for equity classification and were marked to fair value as of December 31, 2024. The warrants will not be marked to fair value on a recurring basis.

Warrant Liabilities

The estimated fair value of the warrant liabilities on June 30, 2025 and December 31, 2024 is determined using Level 3 inputs. Inherent in a Black-Scholes option-pricing model are assumptions used in calculating the estimated fair values that represent the Company’s best estimate. The volatility rate is determined utilizing the Company’s own share price and the share price of competitors over time.

However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.

The following table summarizes the Company’s assumptions used in the valuations as of June 30, 2025 and December 31, 2024:

	June 30, 2025	December 31, 2024
Stock price	$21.17	$28.99
Exercise price	$0.14 - $22,440	$0.14 - $22,440
Expected term (in Years)	1.58-2.64	2.08 - 3.14
Volatility	166.0%	171.0%
Discount rate - treasury yield	3.72-3.97%	4.27%

The following table sets forth a summary of the changes in the fair value of the Level 3 warrant liabilities for the six months ended June 30, 2025 and for the year ended December 31, 2024 and changes in the number of outstanding warrant liabilities for the six months ended June 30, 2025:

(In thousands, except number of outstanding warrant liabilities)	Six months ended June 30, 2025			For the year ended December 31, 2024			Number of Outstanding Warrant Liabilities
Warrant liabilities - beginning of period	$	996		$	1,290			40,017
Initial fair value of warrant liabilities		—			5,601			—
Exercise of warrants		—			(3,026	)		—
Reclassification of warrant liabilities to equity		—			(20,771	)		—
Change in estimated fair value		(292	)		17,902			—
Warrant liabilities end of period	$	704		$	996			40,017

Note 5 — Inventory

Inventories are stated 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. Such costs include the acquisition cost for raw materials and operating supplies. The Company’s standard payment terms with suppliers may require making payments in advance of delivery of the Company’s products.

Inventory consisted of the following as of June 30, 2025 and December 31, 2024:

	June 30,			December 31,
(In thousands)	2025			2024
Finished goods	$	1,239		$	500
Raw materials		584			—
Packaging materials		471			—
Inventory, gross		2,294			500
Inventory reserves		(85	)		—
Total inventory, net	$	2,209		$	500

Inventory Reserves

The Company establishes an inventory reserve for obsolete, slow moving, and defective inventory. The Company calculates inventory reserves for obsolete, slow moving, or defective items as the difference between the cost of inventory and its estimated net realizable value. The reserves are based upon management’s expected method of disposition.

Note 6 — Discontinued Operations

Cultivation Business Discontinued Operations

On December 31, 2024, the Company executed and closed the Purchase Agreement with CP for the sale of assets relating to the Company’s Cultivation Business. The consideration for the sale of the Cultivation Business consisted of the assumption by CP of all the Company’s secured indebtedness currently held by CP with an aggregate amount of principal and accrued interest of approximately $7 million, as well as certain other liabilities related to the Cultivation Business. The sale represents efforts to strategically shift the Company’s direction to focus on its hemp-related business operations. As a result, the Cultivation Business has been presented as discontinued operations in the condensed consolidated financial statements for all periods presented.

The disposition resulted in a loss on sale of $11.9 million along with a loss from discontinued operations of $1.5 million for a total loss of $13.4 million, which was recorded in net loss from discontinued operations in the consolidated statement of operations for the period ended December 31, 2024. The operating results of the Cultivation Business were reported as a net loss from discontinued operations in the consolidated statements of operations through December 31, 2024, the date of disposition, and were considered material.

The assets and liabilities associated with discontinued operations with respect to the Cultivation Business consisted of the following as of June 30, 2025 and December 31, 2024, respectively:

	June 30, 2025		December 31, 2024
Assets
Current assets:
Prepaid expenses and other current assets	$	—	$	62
Current assets associated with discontinued operations		—		62
Total assets associated with discontinued operations	$	—	$	62
Liabilities
Current liabilities:
Accounts payable	$	56	$	2
Accrued expenses and other current liabilities		—		47
Current liabilities associated with discontinued operations		56		49
Total liabilities associated with discontinued operations	$	56	$	49

The following table summarizes the Company’s income from discontinued operations of the Cultivation Business for the three and six months ended June 30, 2025 and 2024, respectively:

	For the three months ended June 30,					For the six months ended June 30,
	2025		2024			2025		2024

Revenue	$	—	$	119		$	—	$	59
Cost of goods sold		—		(312	)		—		342
Gross income (loss)		—		431			—		(283	)

Selling, general and administrative		—		984			175		1,959
Gain on settlement of contingent liabilities		—		—			—		(5,935	)
Gain on early termination of lease		—		(