Form 4: Agrify Corp CEO Acquires $1.5 Million Convertible Note Through Controlled Entity

Raymond Nobu Chang, CEO of Agrify Corp, indirectly acquired a $1.5 million junior secured promissory note convertible into common stock or pre-funded warrants through CP Acquisitions, LLC.

Summary

• Raymond Nobu Chang, the CEO of Agrify Corp, has reported a transaction involving a junior secured promissory note.
• On August 14, 2024, Agrify issued a junior secured promissory note to CP Acquisitions, LLC, an entity controlled by Chang.
• The note allows CP Acquisitions to lend up to $1.5 million to Agrify.
• The note bears interest at 10% per annum and matures on July 1, 2025.
• It can be prepaid without any fee or penalty.
• The note is secured by Agrify's assets and ranks junior to existing secured indebtedness.
• The note is convertible into Agrify common stock or pre-funded warrants at a conversion price of $0.2633.
• The exercise of pre-funded warrants is subject to a 49.99% beneficial ownership limitation.
• Chang disclaims beneficial ownership of the reported securities except to the extent of his pecuniary interest.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While the financing provides capital, it also introduces debt and potential dilution. The junior secured status and 10% interest rate are not overwhelmingly positive.

Positives

• The $1.5 million note provides Agrify with additional capital.
• The note can be prepaid without penalty, offering flexibility to Agrify.
• The conversion option could reduce Agrify's debt burden if converted into equity.

Negatives

• The note is secured by Agrify's assets, potentially increasing financial risk.
• The note ranks junior to existing secured indebtedness, indicating higher risk for the lender.
• The 10% interest rate represents a cost to Agrify.

Risks

• The junior status of the note could make it riskier for CP Acquisitions.
• Agrify's ability to repay the note depends on its future financial performance.
• The conversion price of $0.2633 may not be attractive if Agrify's stock price remains low.

Future Outlook

The document does not contain explicit forward-looking statements beyond the terms of the promissory note.

Management Comments

• Raymond Nobu Chang disclaims beneficial ownership of the reported securities except to the extent of his pecuniary interest.

Industry Context

Agrify operates in the cannabis industry, which often requires companies to seek various forms of financing to fund growth and operations. Convertible notes are a common financing tool in this sector.

Comparison to Industry Standards

• Convertible notes are a fairly common financing mechanism, especially for growth companies or those in emerging industries like cannabis.
• The 10% interest rate is within the typical range for secured promissory notes, but the junior status may imply a slightly higher risk premium compared to senior secured debt.
• Comparable companies in the cannabis industry, such as Canopy Growth or Aurora Cannabis, have also utilized convertible notes as part of their capital structure.

Related Party Transactions

• The transaction involves CP Acquisitions, LLC, an entity controlled by Agrify's CEO, Raymond Nobu Chang, making it a related party transaction.

Stakeholder Impact

• Shareholders may experience dilution if the note is converted into common stock.
• Employees may benefit from the company's increased financial stability due to the capital injection.
• Creditors should be aware of the junior secured status of the note.

Key Dates