20-F: Agroz Inc. Files 20-F Report, Highlights Growth and Future Strategies

Agroz Inc.'s 20-F filing details the company's financial performance, business strategies, and risk factors for the fiscal year ended December 31, 2024.

Summary

• Agroz Inc., a vertically integrated agricultural technology company, filed its 20-F report for the fiscal year ended December 31, 2024.
• The company focuses on designing, building, managing, and operating indoor CEA vertical farms.
• Agroz primarily generates revenue from designing/constructing farms, operating/managing farms, selling farms, and selling fresh produce.
• Revenue increased by 121.2% from MYR 18,471,272 in 2023 to MYR 40,860,882 ($9,142,159) in 2024, driven by design services and vegetable sales.
• The company is working towards compliance with Malaysian Occupational Safety and Health Act 1994 (OSHA 1994) requirements by June 2025.
• Agroz has identified material weaknesses in internal controls and plans to implement remedial measures.
• The company acknowledges substantial doubt about its ability to continue as a going concern due to redeemable convertible preference shares (RCPS) and limited cash balance.
• Agroz plans to seek additional financing and improve operational efficiency to address its liquidity concerns.
• The company is developing Agroz Copilot, a proprietary software application supported by generative artificial intelligence (Gen AI) technology.
• Agroz is committed to supporting the UN's Sustainable Development Goals (SDGs) and is recognized by the UN Development Programme (UNDP) as an active CEA market player.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While there is significant revenue growth and positive recognition, there are also concerns about internal controls, regulatory compliance, and the company's ability to continue as a going concern. The company is taking steps to address these issues, but the overall outlook is uncertain.

Positives

• Significant revenue growth of 121.2% in 2024.
• Recognition by the Malaysian government for pesticide-free farming practices.
• Strategic partnership with AEON Co. (M) Berhad.
• Commitment to sustainable farming and supporting the UN's SDGs.
• Development of innovative AgTech solutions like Agroz OS and Agroz Copilot.

Negatives

• Material weaknesses in internal controls.
• Substantial doubt about the company's ability to continue as a going concern.
• Non-compliance with certain regulatory requirements in Malaysia.
• Strong competition in the agricultural technology and vertical farming industries.
• Reliance on related party transactions.

Risks

• Limited operating history and difficulty in making accurate predictions.
• Uncertainty in the vertical farming industry and potential for new market entrants.
• Significant operating costs and potential inability to recoup these costs.
• Potential inability to maintain a steady labor supply of personnel with sophisticated knowledge.
• Failure to adequately manage planned growth strategy.
• Potential additional regulation of agricultural products.
• Risk of fines, penalties, or operational disruptions due to noncompliance with regulatory requirements.
• Change in consumer preferences, perception and spending habits in the food industry.
• Unexpected costs and delays in building CEA vertical farms due to reliance on third parties.
• Inability to adequately protect intellectual property.
• Potential disruptions and risks from unforeseen disasters or crises.
• Dependence on key management personnel.
• Potential litigation, arbitration, or other legal proceedings.
• Reliance on dividends and other distributions on equity paid by operating subsidiary.
• Risk of diminished returns on investment due to the company's issued and outstanding RCPS.
• Disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
• Certain judgments obtained against the company by shareholders may not be enforceable.
• Shareholders may have more difficulties protecting their interests than they would as a shareholder of a U.S. corporation.
• Cayman Islands economic substance requirements may have an effect on the company's business and operations.
• Potential loss of foreign private issuer status.
• Reliance on dividends and other distributions on equity paid by operating subsidiary.

Future Outlook

Agroz aims to maximize production efficiency, support safety and health through sustainable farming, leverage advanced technology, and form strategic partnerships in the agriculture technology industry. The company plans to launch Agroz Copilot in the future.

Industry Context

The AgTech and CEA vertical farming markets are projected to experience significant growth globally and in Southeast Asia. The Malaysian government is supportive of improved technology and innovation in the agricultural sector.

Comparison to Industry Standards

• The global agricultural technology market was valued at USD 18.24 billion in 2024 and is projected to grow to USD 43.37 billion by 2029, representing a CAGR of 16.63%.
• The global indoor farming market size was valued at USD 45.97 billion in 2024, and is expected to reach USD 138.09 billion by 2033, with a CAGR of 13% over the forecast period.
• The market size of 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.
• Agroz's CEA methods and technology solutions have allowed it to yield approximately three (3) tons of green produce every year for every 300 square feet of space, stacked 8 levels high, and use only five percent (5%) of the water and nutrients required compared to conventional agricultural methods of production.

Corporate Governance

Legal Proceedings

• As of the date of this Report, we are not a party to, and are not aware of any threat of, any legal proceedings that, in the opinion of our management, is likely to have a material adverse effect on our business, financial condition, or operations.

Related Party Transactions

• Agroz Group sold CEA vertical farm solutions to Agroz Ventures in the aggregate amount of MYR 4,000,000 in 2023.
• Agroz Group sold CEA vertical farm solutions to Agroz Vertical Farms in the aggregate amount of MYR 1,400,174 in 2024.
• Agroz Group purchased fresh produce from Agroz Vertical Farms in the aggregate amount of MYR 4,115,842 in 2024 and MYR 886,100 in 2023.
• Agroz Group purchased fresh produce from Agroz Ventures in the aggregate amount of MYR 274,733 in 2024.
• Agroz Group purchased fresh produce from EPetani Sdn. Bhd. in the aggregate amount of MYR 48,581 in 2023 and MYR 21,721 in 2022.
• Agroz Group paid operating expenses on behalf of Agroz Vertical Farms amounting to MYR 818,196 in 2024 and MYR 1,571,296 in 2023.
• Agroz Group paid expenses on behalf of Agroz Ventures amounting to MYR 751,695 in 2024 and MYR 19,000 in 2023.
• Agroz Group sold vegetables to EPetani Sdn. Bhd. in the aggregate amount of MYR 1,145,443 in 2023 and MYR 344,898 in 2022.
• Agroz Group sold fresh vegetables to Isa Wellness Marketing in the aggregate amount of MYR 32,841 in 2024 and MYR 322,776 in 2023.
• Mr. Gerard Kim Meng Lim paid for certain operating expenses of Agroz Group amounting to MYR 240 in 2024 and MYR 350,927 in 2023.
• Ms. Khoo Kwai Fun paid for certain expenses of Agroz Group amounting to MYR 120,637 in 2024 and MYR 110,289 in 2023.
• Agroz Group entered into a loan agreement with HWG Cash Berhad for MYR 1,363,000 in 2023.
• Braiven provided software development services to Agroz Group pursuant to the Software Development Agreement with Braiven dated January 18, 2023, for which Braiven invoiced Agroz Group $300,000.
• In 2024, Braiven provided AI platform and copilot testing services to Agroz Group pursuant to the IT Service Agreement with Braiven dated January 1, 2024.
• Braiven further provided additional AI and software development services to Agroz Group pursuant to the Software Development Agreement with Braiven dated April 15, 2024.

Stakeholder Impact

• Shareholders may experience diminished returns on their investment due to the company's issued and outstanding RCPS.
• Employees may be affected by potential cost-cutting measures and changes in management.
• Customers may benefit from improved food safety and sustainability.
• Suppliers may be impacted by changes in the company's supply chain.
• Creditors face increased risk due to the company's financial challenges.

Next Steps

• Seek additional financing from both the public and private markets.
• Improve operational efficiency, implement strict cost control and budget, and enhance internal controls.
• Build strategic partnerships with other businesses to expand reach, access new technologies, and leverage complementary strengths.

Key Dates

Keywords

vertical farming, agricultural technology, CEA, AgTech, Agroz, OSHA, RCPS, sustainability, food security, internal controls