F-1/A: Agroz Inc. Eyes Nasdaq with $10 Million IPO: Vertical Farming Firm Seeks Expansion Capital

Agroz Inc., a vertically integrated agricultural technology company, is planning an initial public offering to raise $10 million for capital expenditures, operating expenses, research and development, marketing, and potential acquisitions.

Summary

• Agroz Inc., a Cayman Islands-based company with operations in Malaysia, is planning an initial public offering (IPO) of 2,500,000 Ordinary Shares at an expected price of $4.00 per share.
• The company aims to raise $10 million before expenses, with net proceeds estimated at $7,750,440 if the underwriters do not exercise their over-allotment option, and $9,130,440 if the option is exercised in full.
• The IPO includes registering 125,000 Ordinary Shares underlying warrants to be issued to the underwriter's representative.
• Agroz intends to allocate the net proceeds as follows: 15% for capital expenditures, 25% for operating expenses, 20% for research and development, 15% for marketing, and 25% for acquisitions.
• The company's business model includes designing and constructing indoor CEA vertical farms, operating and managing these farms, selling the farms, and selling fresh produce.
• Agroz faces risks including a limited operating history, uncertainties in the vertical farming industry, potential operating losses, and material weaknesses in internal controls.
• The company is an emerging growth company and a foreign private issuer, which allows for reduced reporting requirements.
• Agroz has reserved the ticker symbol AGRZ for its shares on the Nasdaq Stock Market, with listing being a condition for completing the offering.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While it highlights the company's innovative approach and growth potential in the agricultural technology sector, it also acknowledges significant risks and uncertainties, including a limited operating history, potential operating losses, and material weaknesses in internal controls. The auditor's disclosure about the company's ability to continue as a going concern further tempers the overall sentiment.

Positives

• Agroz is a vertically integrated agricultural technology company, offering design, construction, operation, management, and fresh produce sales.
• The company has a strategic partnership with AEON, a leading Malaysian retailer, providing access to a large customer base.
• Agroz's EduFarm has received recognition from the Malaysian government for meeting Malaysian Good Agricultural Practices (myGAP.PF) requirements in being pesticide-free.
• The company is recognized by the United Nations Development Programme (UNDP) as an active CEA market player.
• Agroz is a Microsoft Independent Software Vendor (ISV) and a Microsoft AI Cloud partner, leveraging Microsoft Azure and AI technologies.
• The company has successfully grown 50 different crops and is currently offering 21 varieties for sale.

Negatives

• Agroz has a limited operating history and operates in a relatively new and uncertain industry.
• The company may incur significant operating costs in the near future and cannot assure profitability.
• Agroz faces strong competition in the agricultural technology and vertical farming industries.
• The audit report includes a disclosure from the auditors that there is substantial doubt about the company's ability to continue as a going concern.
• Management has identified certain material weaknesses in internal controls.
• Agroz Inc. and Agroz Group, on a consolidated basis, have had and continue to have significant related party transactions.

Risks

• The company's ability to achieve successful financial performance is limited by the restricted range of crops that can be produced using CEA vertical farming.
• The company may not be able to maintain a steady labor supply of personnel with sophisticated knowledge necessary for CEA vertical farm operation and management.
• The company may become subject to additional regulation of agricultural products.
• The company could be adversely affected by a change in consumer preferences, perception and spending habits in the food industry.
• The company may not be able to adequately protect its intellectual property and other proprietary rights that are material to its business.
• The company may be unable to successfully implement its future business plans and objectives.
• The company depends on key management personnel and its operation may suffer if it is unable to retain or replace them.

Future Outlook

The company aims to improve food safety, food security, and sustainability by creating a reliable, accessible food supply through its AgTech products and services. Agroz anticipates full deployment of its AI agent system by Q2 of 2025.

Industry Context

The global agricultural technology market is projected to grow to over $75.87 billion by 2032, a compound annual growth rate (CAGR) of 13.1%. The market size of CEA vertical farming in the Asia-Pacific region reached US$2.43 billion in 2023 and is projected to experience growth at a CAGR of 29.2% from 2024 to 2030.

Comparison to Industry Standards

• The Global AgriTech Market was valued at $22.1 billion in 2022, and is projected to grow to over $75.87 billion by 2032, a compound annual growth rate (CAGR) of 13.1% according to Spherical Insights.
• Future Market Insights reports that the global indoor farming market is expected to reach a value of USD 10.69 billion in 2033, with a CAGR of 9.8% from 2023.
• Statista reported that the global market size of vertical farming was valued at USD $5.6 billion in 2022 and according to J&A Capital Markets Report by Jahani & Associates, the market is projected to experience a compounded annual growth rate (CAGR) of 20.8%, reaching $21 billion by the year 2029.
• The market size of CEA vertical farming in the Asia-Pacific region reached US$2.43 billion in 2023 and is projected to experience growth at a CAGR of 29.2% from 2024 to 2030.
• Within Malaysia, agricultural production is projected to grow at a CAGR of 0.6% from 2021 to 2026, reaching USD 24.9 billion by 2026, compared to USD 23.9 billion in 2021, according to ReportLinker.

Related Party Transactions

• Agroz Group sold CEA vertical farm solutions to Agroz Ventures in the aggregate amount of $871,403 in the 2023 Fiscal Year.
• Agroz Group provided CEA vertical farm design and construction services to Agroz Vertical Farms in the aggregate amount of $222,678 during the six months ended June 30, 2024.
• Agroz Group purchased fresh produce from Agroz Vertical Farms in the aggregate amount of $411,369 during the six months ended June 30, 2024.
• Agroz Group has two software development service contracts with Braiven Co., Ltd., an entity significantly influenced by our Chief Technology Officer, in amounts of approximately $500,000 and $4,000,000.

Stakeholder Impact

• Shareholders will experience immediate and substantial dilution in the book value of their Ordinary Shares.
• The company's ability to pay dividends is subject to the discretion of the Board of Directors and the availability of dividends from its subsidiaries.
• The company's success depends on its ability to attract and retain customers, manage costs, and adapt to changes in the agricultural technology industry.
• The company's operations are subject to certain Malaysian laws and regulations, including the Food Act 1983 and the Federal Agricultural Marketing Authority Act 1965.

Next Steps

• The company intends to complete the IPO and list its shares on the Nasdaq Capital Market.
• Agroz plans to use the net proceeds of the offering for capital expenditures, operating expenses, research and development, marketing, and acquisitions.
• The company anticipates full deployment of its AI agent system by Q2 of 2025.

Key Dates

Keywords

vertical farming, CEA, AgTech, IPO, Agroz, agriculture, Malaysia, produce, farming, technology