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United States securities and exchange commission logo
September 8, 2020
Niv Krikov
Chief Financial Officer
Agrify Corporation
101 Middlesex Turnpike
Suite 6, PMB 326
Burlington, MA 01803
Re: Agrify Corp
Draft Registration
Statement on Form S-1
Submitted August
12, 2020
CIK No. 0001800637
Dear Mr. Krikov:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 submitted August 12, 2020
Cover Page
1. Please revise to
clarify whether you will proceed with the offering in the event you are not
approved for listing on
Nasdaq Capital Market. In this regard, we note your disclosure
that you intend to
apply for listing on Nasdaq, and your disclosure on page 30 that you
may be a penny stock if
you do not obtain a listing.
Niv Krikov
FirstName LastNameNiv Krikov
Agrify Corporation
Comapany 8,
September NameAgrify
2020 Corporation
September
Page 2 8, 2020 Page 2
FirstName LastName
Prospectus Summary
Overview, page 1
2. Please revise your summary so that it is brief, concise, and avoids
repeating information
about your business and related matters provided later in your
document. In this regard,
we note your disclosure focuses on the AFVU offering and associated
software to the
exclusion of the product offerings that represent a material portion
of your revenues to
date. Revise your summary to provide a view of all of your material
product offerings. In
doing so, clarify where container farms fit within your product
offerings, including how
they differ from vertical farming units. We note the references to
container farms in the
footnote on page 15, and on pages 42, 46 and F-10.
3. In revising your summary, clarify the products that have generated
your revenues to date.
We note from page 51 that you have started taking pre-orders for
the newest version of
[y]our flagship hardware product, the AVFU. Clarify whether this
the first version of
this product you have sold, or was there an earlier version. In this
regard, to the extent
your core business model discussed on page 53 is prospective,
revise your document to
clarify. Also clarify what percentage of your revenues for 2020 relate
to your acquisition
of your customer, TriGrow, disclosed on pages 19 and 40.
4. Please clarify in your Summary whether your software is required to
operate your
hardware product offerings, including but not limited to the AFVU.
Please also clarify
whether your software product can be used independently or if it is
only designed to work
with the equipment you sell.
5. Explain the following defined terms at their first use:
SaaS, page 1;
OpEx, page 8;
Sandler Training sales process, page 9;
Container Farms, page 15; and
PCT, page 24.
Our Competitive Strengths, page 7
6. Provide the bases for the statements on page 7 that you have market
leading technology
and on page 8 that Valiant-American is a leading consulting and
general contractor of
industrial facilities.
7. On page 7 you include the strength that your shareholder base
includes large Asian scale-
up manufacturers that grant us access to their resources and
accordingly should enable us
to mass produce our products with the support we need. Clarify if
you refer to your
distribution agreements with Bluezone Products and Enozo, or if there
are other
agreements. We note the agreement with Sonneteck TJ Co., Ltd. listed
in your exhibit
index, but see no reference to that company in the document. Revise
the appropriate
section of your registration statement to disclose the material terms
of the Sonneteck
Niv Krikov
FirstName LastNameNiv Krikov
Agrify Corporation
Comapany 8,
September NameAgrify
2020 Corporation
September
Page 3 8, 2020 Page 3
FirstName LastName
agreement.
8. We note the discussion of the joint venture with Valiant-America,
disclosed on page 8.
Tell us what, if any, of the turnkey product revenues you discuss in
your summary are
attributable to Valiant s role in your joint venture. We note from
page 70 that you
consolidate 100% of the revenues that go through the joint venture,
and [you] recognize
60% of all the net profits . . . . after the agreed upon work has been
completed.
Industry Overview, page 8
9. We note references to third-party market data from MarketsandMarkets,
Allied Market
Research, Market Watch and several other sources. Please provide us
with copies of any
materials that support third-party statements and advise us if any of
the data cited was
commissioned by the company.
Our Growth Strategy, page 9
10. Clarify the upward trajectory to which you refer given the
history of losses and
expect[ed] significant increases in our costs discussed in the
risk factors on pages 11
and 17.
Summary Financial and Other Data, page 14
11. Please revise to remove the "Pro Forma" label from your interim March
31, 2020
Statement of Operations financial information included on pages 14, 16
and 38 as
it represents your historical results.
12. Please revise to provide Balance Sheet data for the current interim
period in this tabular
presentation as well as on page 38.
13. We see here and on page 38 that you present a blank line item, "Net
income (loss) per
share, basic and diluted" that is not otherwise included or discussed
in the filing. Please
tell us whether you intend to include this earnings per share
information in a future
amendment or revise to remove it. In this regard, tell us your
consideration of presenting
pro forma earnings per share information which reflects the conversion
of your recently
issued preferred stock.
Reconciliation of Non-GAAP Measures, page 15
14. Your computation of EBITDA excludes a loss from the sale of fixed
assets in addition to
interest, taxes, depreciation and amortization. Please revise the
title of this non-GAAP
measure to clearly distinguish it from EBITDA. Refer to Question
103.01 of the Non-
GAAP Compliance and Disclosure Interpretations.
15. We see that your presentation of Adjusted EBITDA includes a write off
of assets of
approx. $662,000 but do not see where this is presented in you interim
income statement
or see any related discussion. Please revise to explain the nature of
the write-off, where it
Niv Krikov
FirstName LastNameNiv Krikov
Agrify Corporation
Comapany 8,
September NameAgrify
2020 Corporation
September
Page 4 8, 2020 Page 4
FirstName LastName
is included in your financial statements and why you believe it is
appropriate to adjust
EBIDTA in this presentation.
16. We note the discussion that the most directly comparable measures for
your non-GAAP
financial measures are net income and diluted net income per share.
However, we see no
non-GAAP measures presented or reconciled on a per share basis and
diluted net income
per share is not provided in the filing. Please revise to only
reference measures presented
and discussed in the filing.
17. We note the heading of this reconciliation refers to the amounts as
presented "in
thousands" when it appears the amounts are whole numbers. Please
revise.
Risk Factors
Risks Related to our Business and Industry, page 17
18. In the COVID-19-related risk factor on pages 18-19, you state you were
forced to limit
store business hours. On page 49, you reference retail products.
Revise your business
section and any other relevant section to disclose what retail
operations you maintain.
Also clarify the statement that the pandemic has caused temporary
or long-term
disruptions in our supply chains.
19. On page 19, you state you rely on limited suppliers for your software,
however, on page
66 you state you developed your software in-house. Please clarify.
Cautionary Note Regarding Forward-Looking Statements, page 30
20. You state, neither we nor any other person assumes responsibility
for the accuracy and
completeness of the forward-looking statements. Clarify this
statement. While safe
harbors apply to required statements concerning the future effect of
known trends,
demands, commitments, events or uncertainties, as well as to optional
forward-looking
statements, you have a duty to disclose known trends that are
reasonably likely to be
material. Refer to Section II.B of Release No. 33-6835 (May 18, 1989).
Acquisition of TriGrow, page 40
21. We note the profit interest investment you are obligated to make
as a result of the
purchase of TriGrow. Revise the appropriate section of the prospectus
to disclose the
material terms of this investment and file it as an exhibit or tell us
why it is not material.
See Item 601(b)(10) of Regulation S-K.
Impact of the coronavirus pandemic ("COVID-19"), page 41
22. Revise to further describe the ways in which the pandemic caused
disruptions in your
supply chain and your expectations, noting you are obligated to
disclose forward looking
information to the extent it is known and reasonably certain. If you
cannot provide
additional information, tell us why not.
Niv Krikov
Agrify Corporation
September 8, 2020
Page 5
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations, page 45
23. Tell us whether the build out services revenue is attributable to
Valiant, and the amount
potentially payable to Valiant pursuant to your agreement.
24. Expand the discussion throughout this section to not only recite the
changes in your
results, but to provide an analysis by which potential investors may
better understand the
results. Refer to Item 303 of Regulation S-K and Release Nos. 33-6835
(May 18, 1989)
and 33-8350 (Dec. 29, 2003).
Business
Overview, page 50
25. Please provide disclosure here and in Risk Factors, as appropriate,
regarding restrictions
and regulations relating to your operations in China and how it
impacts your business.
26. On page 53, you state, we have $96 million of carefully vetted
potential sales
opportunities (which refer to as our qualified pipeline), and we
expect a significant
percentage of this pipeline to be converted into confirmed bookings
during the second half
of 2020 and first half of 2021. Tell us what you consider to be a
significant
percentage.
Core Bundled Solution, page 58
27. On page 64 you site anecdotal evidence that one customer had increased
yields in one
season growing lettuce varieties using your lights. Tell us whether
you believe this result
is typical for this product and explain on what basis you made the
determination.
Intellectual Property, page 76
28. Revise to disclose what intellectual property rights you license from
Holden Company, as
disclosed in the risk factor on page 27, and disclose the material
terms of your license
agreement. File the license agreement as an exhibit. Refer to Item
601(b)(10) of
Regulation S-K.
Management, page 78
29. On page 83 you disclose that your founder, Mr. Liotta, resigned as of
August 5, 2020.
Please clarify this section and your Executive Compensation table.
Certain Relationships and Related-Party Transactions, page 87
FirstName LastNameNiv Krikov
30. Please expand to describe the consulting agreement between TriGrow and
Argand Group,
Comapany
LLC,NameAgrify Corporation
or tell us why you do not believe it is required to be filed.
Refer to Item 601(b)(10)
of Regulation S-K.
September 8, 2020 Page 5
FirstName LastName
Niv Krikov
FirstName LastNameNiv Krikov
Agrify Corporation
Comapany 8,
September NameAgrify
2020 Corporation
September
Page 6 8, 2020 Page 6
FirstName LastName
Shares Eligible for Future Sale, page 93
31. File the registration rights agreement disclosed on page 94 as an
exhibit. Refer to Item
601(b)(4) of Regulation S-K.
Financial Statements for the Year Ended December 31, 2019
Consolidated Statement of Cash Flows, page F-6
32. We see that your statement of cash flows reflects the issuance of a
note payable of approx.
$3.9 million. Please tell us how this note is reflected in your
Balance Sheet and where it is
discussed in the notes to the financial statements.
Statement of Cash Flows, page F-23
33. Your statement of cash flows appears to indicate a cash outflow of
$1.1 million for cash
paid for business acquisition. Please reconcile this for us with your
disclosure in footnote
11 that does not disclose any cash payment.
Note 2 - Summary of Significant Accounting Policies
Revenue Recognition, page F-26
34. We note the discussion on pages 10, 70 and 75 of your new equipment
financing program
with extended payment terms of up to two-years. Please revise the
filing to disclose your
accounting policy for these arrangements under ASC 606-10-32-15
through 32-20.
Note 11 Business Combination
Acquisition of TriGrow, page F-31
35. Please address the following related to your acquisition of TriGrow:
Tell us how you determined the $1.4 million fair value of common
stock issued as
consideration in the transaction. Explain how such valuation
represents the price that
would be received in an orderly transaction between market
participants. See the fair
value and market participant definitions in ASC 805-10-20.
Tell us how you concluded you did not need to provide audited
financial statements
of the acquiree under Rule 8-04 of Regulation S-X. In doing so,
provide us with the
results of your significance tests. If significant, please note
that it would also be
necessary to provide pro forma information pursuant to Rule 8-05
of Regulation S-X.
Note 15 - Subsequent Events
Issuance of Stock Options, page F-35
36. Once you have an estimated offering price or range, please explain to
us how you
determined the fair value of the common stock underlying your equity
issuances and the
reasons for any differences between the recent valuations of your
common stock leading
up to the IPO and the estimated offering price. This information will
help facilitate our
review of your accounting for equity issuances including stock
compensation. Please
Niv Krikov
Agrify Corporation
September 8, 2020
Page 7
discuss with the staff how to submit your response.
37. Please expand your critical accounting policy disclosures on page 44 to
provide high
level details regarding the methodologies and approaches used to value
your common
stock including the nature of the material assumptions involved. To the
extent third party
valuations were performed, please discuss the results of such valuations
and whether such
valuations corroborated any internal valuations performed. Finally,
provide additional
detail regarding the extent to which recent sales of preferred stock
and/or common stock
in arms-length transactions represented significant inputs to provide
investors with context
of the extent to which your estimates were complex and subjective.
General
38. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Julie Sherman at (202) 551-3640 or Kevin Kuhar at (202)
551-3662 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Abby Adams at (202) 551-6902 or Mary Beth Breslin at (202) 551-3625
with any other
questions.
Sincerely,
FirstName LastNameNiv Krikov
Division of
Corporation Finance
Comapany NameAgrify Corporation
Office of Life
Sciences
September 8, 2020 Page 7
cc: David Levine, Esq.
FirstName LastName