Q3 2021 Agrify Corp Earnings Call

November 10, 2021

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Good morning, and welcome to <unk> third quarter 2021 earnings call with US on today's call are renal Chang Chief Executive Officer, David Kessler, Chief Science Officer, and Neal quick calls are you Party Chief Financial Officer.

Operator: Good morning, and welcome to Agrify's Q3 2021 Earnings Call. With us on today's call are Raymond Chang, Chief Executive Officer, David Kessler, Chief Science Officer, and Niv Krikov, our departing Chief Financial Officer. Today, management will review the highlights and financial results for the third quarter and provide a business and operational update. Following management's prepared remarks, there will be a question-and-answer session. A reminder that today's conference call is being recorded. Before we begin, we would like to remind everyone that prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. Such statements involve a number of known and unknown risks and uncertainties, many of which are outside the company's control, that could cause its future results, performance or achievements to differ significantly from the results, performance or achievement expressed or implied by such forward-looking statements.

Speaker 1: Good morning and welcome to AgriFi's third quarter 2021 earnings call. With us on today's call are Raymond Chang, Chief Executive Officer, David Gessler, Chief Science Officer, and Neel Krikov, our departing Chief Financial Officer.

Today management will review the highlights and financial results for the third quarter and provide a business and operational update.

Speaker 1: Today, management will review the highlights and financial results for the third quarter and provide a business and operational update.

Speaker 1: following management's prepared remarks, there will be a question and answer session. A reminder that today's conference call is being recorded.

Following managements prepared remarks, there will be a question and answer session. A reminder, today's conference call is being recorded.

Speaker 1: Before we begin, we would like to remind everyone that prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your question.

Before we begin we would like to remind everyone that prepared remarks contain forward looking statements and management.

Make additional forward looking statements in response to your questions.

Speaker 1: such statements involve a number of known and unknown risks and uncertainties.

Such statements involve a number of known and unknown risks and uncertainties.

Speaker 1: many of which are outside the company's control that could cause its future results, performance or achievements to differ significantly from the results, performance or achievement expressed by the implied by such forward-looking statements.

Many of which are outside the company's control that could cause its future results performance or achievements to differ significantly from the results performance or achievements expressed by the implied by such forward looking statements.

Speaker 1: Important factors that could cause or contribute such differences include risks detailed in our public filings with the Securities and Exchange Commission and those mentioned in the

Operator: Important factors that could cause or contribute to such differences includes risks detailed in our public filings with the Securities and Exchange Commission, and those mentioned in the earnings release. Except as required by law, we undertake no obligation to update any forward-looking or other statements herein, whether as a result of any new information, future events, or otherwise. Now, at this time, it is my pleasure to turn the call over to Mr. Raymond Chang, Agrify's CEO. Sir, you may begin.

Important factors that could cause or contribute to such differences.

Reese is detailed in our public filings with the Securities and Exchange Commission.

And those mentioned in the earnings release, except as required by law, we undertake no obligation to update any forward looking or other statements herein, whether as a result of new information future events or otherwise.

Speaker 1: except, as required by law, we undertake no obligation to update any forward-looking or other statements herein, whether as a result of new information, future events, or other rights.

Speaker 1: Now at this time, it is my pleasure to turn the call over to Mr. Raymond Chang, AgriFi's CEO . Sir, you may begin.

Now at this time, it's my pleasure to turn the call over to Mr. Raymond Huang.

Face CEO, Sir you may begin.

Thank you operator.

Raymond Chang: Thank you, operator. Before we get started, I would like to thank everyone for joining us on the call today. During our prepared remarks, we will be referring to information that's contained within our press releases and our call slides, which can be accessed on our investor relations website at ir.agrify.com. On this call today, I will provide you with an update on our continued successful execution of our growth strategy during Q3, including our key achievements from the quarter. I will highlight some recent company developments. My Chief Science Officer, David Kessler, will discuss some of our customers' VFU-enabled successes. He will also walk you through the game-changing improvements we are making to our technology.

Before we get started.

Speaker 2: I would like to thank everyone for joining us on the call today. In our prepare remarks, we will be ref-

I would like to think.

One for joining us on the call today.

During our prepared remarks.

We will be referring to information.

That's contained within our press releases.

And I'll call it flight.

Which can be accessed on our investor relations website at IR.

Speaker 2: which can be accessed on our investor relations website at ir.agrify.com

<unk> Dot com.

Speaker 2: On this call today, I will provide you with an update on our continued successful execution of our growth strategy during Q3, including our key achievements from the quarter. And I will highlight some recent events that have been

On this call today.

We'll provide you with an update on our continued success.

Execution of our growth strategy during Q3.

Including our key achievements from the quarter.

And I will highlight some recent company developments.

My Chief Science Officer, David Kessler.

We will discuss some of our customers.

Speaker 2: we'll discuss some of our customers' VSU-enabled success.

Unable testers.

Speaker 2: He will also walk you through the game-changing improvements we are making to our technology.

He will also walk you through the game changing improvements, we are making to our technology.

Speaker 2: need Cricov, our departing CFO , who has served Agrabah with purpose and purpose.

Nicole.

Raymond Chang: Niv Krikov, our departing CFO, who has served Agrify with purpose and professionalism through our initial public offering and the subsequent public offering, as well as our recent acquisition, will follow with a detailed review of our financial results for Q3. As announced this morning, Tim Oakes, who has been a valued member of our board and a chair of our audit committee, will begin transitioning to the Chief Financial Officer role effective today. Niv will graciously stay on board for the next few months as an advisor to ensure that both Tim and Agrify are set up for success in 2022. We look forward to introducing Tim to many of you in the near future.

Our departing CFO.

Who has served amplified with purpose.

And professionalism.

Initial public offering.

Speaker 2: and the subsequent public offerings, as well as our recent.

A subsequent public offering as well as our recent acquisition.

Speaker 2: We'll follow up with a detailed review of our financial results for the third quarter. As announced this morning, we will be following the results of our financial results for the third quarter.

I'll follow with a detailed review of our financial results for the third quarter.

As announced this morning.

Kim.

Who has been a valued member of our board.

Its share of our audit committee.

Speaker 2: again transitioning to the chief financial officer role effective today.

We'll begin transitioning to the chief financial officer role effective today.

Nieve will risk graciously stay onboard for the next few months.

Speaker 2: need will graciously stay on board for the next few months.

As an adviser to ensure that both him and agriculture are set up for success in 2022.

Speaker 2: an advisor to ensure that both Tim and AgriFi are set up for success in 2022.

Speaker 2: We look forward to introducing Tim to many of you in the near future.

We look forward to introducing him to many of you in the near future.

For information on him and his impressive track record.

Speaker 2: for information on Tim and his impressive track record.

Raymond Chang: For information on Tim and his impressive track record, please refer to the press release that we issued earlier this morning, highlighting the exciting changes in addition to our executive team to help us further accelerate our growth. Now, let's dive into our Q3 highlights. We are thrilled to share with you that the third quarter of 2021 was yet another strong and record quarter for Agrify. We saw revenue soar to $15.8 million, our best record to date, with 460% year-over-year growth and up 33% sequentially from Q2 of 2021. Besides our revenue, record revenue, I am pleased to report that we generated $32.2 million in new bookings. Our backlog at the end of the quarter now stands at $117.5 million, up from $101 million at the end of Q2 2021.

Please refer to the press release that we issued earlier this morning.

Speaker 2: please refer to the press release that we issued earlier this morning.

Speaker 2: highlighting the exciting changes in addition to our executive team to help us further accelerate our growth.

Highlighting the exciting changes and additions to our executive team to help us further acceleration of growth.

Now.

Let's dive into our Q3 highlights.

We are thrilled to share with you that the third quarter of 2021.

Speaker 2: We are thrilled to share with you that the third quarter of 2021 was yet another strong

With yet another strong.

A record quarter for <unk>.

Speaker 2: We saw revenue soar to $15.8 million, our best record to date.

We saw revenue sorts of 15 8 million.

Our best Records to date.

With 460% year over year growth.

Speaker 2: and up 33% sequentially from Q2 of 2021.

And up 33%.

Sequentially from Q2 of 2021.

Besides of our revenue record revenue.

I am pleased to report that we generated $32 2 million in new bookings.

Speaker 2: I am pleased to report that we generated 32.2 million in new bookings. And our backlog at the end of the quarter now stands at 117.5 million.

And our backlog at the end of the quarter now stands at $117 5 million.

Up from $101 million at the end of Q2 2021.

The improvement in our financial results.

Raymond Chang: The improvement in our financial results continues to be driven by the healthy and growing partnership we have cultivated with our existing customers and our robust pipeline of new business opportunities. Over the summer, we accomplished a wide range of business objectives. We moved our headquarters to Billerica, Massachusetts, where we also opened Agrify University. This location now serves as a cultivation and production R&D facility, training center, product showcase facility, and corporate office. We also signed our second TTK partnership with True House Cannabis for the installation of now up to 214 VFUs. With the recently updated and increased VFU count, this partnership is now anticipated to generate more than $73 million in revenue over the next 10 years. In addition, we established a multi-year vertical farming R&D partnership with Curaleaf to study the impact of cultivation environment on plant health and harvest yields.

Speaker 2: continues to be driven by the healthy and growing partnership we have cultivated with our existing customers and our robust pipeline.

Continues to be driven by the healthy and growing partnership we have cultivated with our existing customers.

And our robust pipeline of new business opportunities.

Over the summer.

Speaker 2: Over the summer, we accomplished a wide range of business objectives. We move our headquarters to direct a mass...

We accomplished a wide range of business objectives.

We move our headquarter direct Massachusetts.

Where we also opened as it by University.

Dislocation now serves as the cultivation and production R&D facility.

Speaker 2: This location now serves as a cultivation and production R&D facility, training center, and the R&D Center.

Training Center.

Product showcase facility and corporate office.

We also signed up a second ttk partnership with throughout Canada.

Speaker 2: We also signed a second TTK partnership with Truehouse Canada.

For the installation of now up to 214 Vlccs.

Speaker 2: for the installation of now up to 214 V of use.

With the recently updated and increased via few counts. This partnership is now anticipated to generate more than $73 million in revenue over the next 10 years.

Speaker 2: This partnership is now anticipated to generate more than $73 million in revenue over the next ten years.

Speaker 2: In addition, we established a multi-year vertical farming R&D partnership with Carol.

In addition, we established and multiyear vertical farming R&D partnership with <unk>.

To study the impact of cultivation environment unplanned health and.

Speaker 2: to study the impact of cultivation environment on plant health.

And harvest yields.

Speaker 2: we expanded our existing partnership with White Cloud's Botanical Center.

And we expanded our existing partnership with white clouds Botanicals.

Raymond Chang: We expanded our existing partnership with WhiteCloud Botanicals, shipping another 114 new 3.6 VFUs for Phase 2 of their facility expansion in Nevada. I would also like to acknowledge the dedication, character, and resolve that our team displayed during Q3. While our financials and public announcements generally get most of the attention, we worked incredibly hard behind the scenes in Q3 to combat major global supply chain issues, to deliver on important customer promises, to mobilize for scale-up manufacturing, and to push for discussions with MSOs and negotiations with potential TTK and cash customers, and to finalize our transformative and strategic acquisition of Precision Extraction Solutions and Cascade Sciences.

Speaker 2: shipping another 114 new 3.6 DSEs for phase two of their facility expansion in Nevada.

Shipping another 114, new three six <unk>, both phase two of their facility expansion in Nevada.

I would also like to acknowledge the dedication.

Speaker 2: character and results that our team displayed during Q3. This video was created in projectree with team closely links to the first person I answered

Character and results that our team displayed during Q3.

While our financial and public announcements generally get most of the attention we've.

Speaker 2: We worked incredibly hard behind the scenes in the third quarter to combat major global supply chain issues to deliver on important customer promises.

We've worked incredibly hard behind the scene in the third quarter to combat major global supply chain issues.

To deliver on important customer promises.

Mobilized for skin.

Manufacturing.

Speaker 2: and to push for discussions with MSOs and negotiations with potential TDK and cash customers and to finalize...

And to push for discussions with Msos and negotiation with potential TDK and touch cash customers and finalized our transformative and strategic acquisition of precision extraction and Cascade Sciences.

Speaker 2: acquisition of precision extraction and cascade sciences.

Based on all of these efforts.

Raymond Chang: Based on all these efforts, Q4 is already shaping up to be yet another record quarter for us, which I will elaborate little bit more later on this, in this call. Now at this point, I would like to turn the call over to David, my Chief Science Officer, who will give an update on our customer success and horticulture initiatives, as well as our new product enhancements. David?

Fourth quarter is already shaping up to be yet another record quarter for us.

Speaker 2: Fourth quarter is already shaping up to be yet another record quarter.

Which I will elaborate a little bit more later on in this call.

Speaker 2: which I will elaborate a little bit more later on in this call.

Speaker 2: Now at this point, I would like to turn the call over to David, my Chief Science Officer, who will give an update on our customer success and horticulture initiatives, as well as our new product enhancements. David? David, thank you so much for joining us today.

Now at this point I would like to turn the call over to David My Chief Science Officer, who will give an update on our customer success and horticulture initiatives as well as our new product enhancements David.

Thank you Raymond.

David Kessler: Thank you, Raymond. In Q3, our clients continued to see improvements in consistency in yield, achieving new leaps in cultivation performance using our VFUs. This quarter, the highest yield one of our customers recorded with 99 grams per square foot of canopy, an incredible 50% increase over the next highest yield from the past three quarters. In more practical terms, if 3 VFUs are stacked in configuration, then the potential yield per square foot of facility floor space would be 594 grams per crop cycle, or 2,970 grams per year for each square foot of facility allocated. Agrify customers continue to see exceptional cannabinoid consistency of Agrify VFU-grown flower as well.

In Q3, our clients continued to see improvements in consistency and yield achieving new lease and cultivation performance using <unk>.

Speaker 3: In Q3, our clients continue to see improvements in consistency and yield, achieving new leaps in cultivation performance using our BFU.

Speaker 3: This quarter, the highest yield one of our customers recorded with 99 grams per square foot of canopy. An incredible 50% increase over the next highest yield from the past three quarters.

This quarter, the highest yield one of our customers recorded with 99 grams per square foot of candidate.

Incredible 50% increase over the next highest yield from the past three quarters.

In more practical terms, it's <unk> use our stacked and configuration than the potential yield per square foot a facility floor space would be 594 grams per crop cycle or 2970 grams per year for each square foot of book.

Speaker 3: In more practical terms, if three BFUs are stacked in configuration, then the potential yield per square foot of facility floor space would be 594 grams per crop cycle or 2,970 grams per year for each square foot of facility allocation.

Facility allocated.

Speaker 3: Agri-Fi customers continue to see exceptional cannabinoid consistency of Agri-Fi VFE-grown flour as well. Across five harvest batches in the prior three months, one of Agri-Fi's customers saw less than 0.94% variation in the cannabinoid concentration across all five batches.

<unk> customers continue to see exceptional cannabinoid consistency of <unk> grown flower as well across five harvests batches in the prior three months, one <unk> customers saw less than 0.94% variation in the cannabinoid concentration across all five batches.

David Kessler: Across five harvest batches in the prior three months, one of Agrify's customers saw less than 0.94% variation in the cannabinoid concentration across all five batches. This level of consistency is propelling the industry towards branded products that deliver reproducible consumer and patient experiences. This quarter, we also launched Agrify University, an immersive online and in-person project-based learning experience that empowers Agrify customers with the knowledge and best practices to succeed. Utilizing our vast data sets and technological innovations, Agrify University offers a curriculum designed to support the long-term growth of the industry. To improve efficiency, Agrify has incorporated a plug-and-play system for automated harvest waste data capture, which effectively eliminates the need to manually enter data into Metrc or other compliance software, reducing human error and fostering faster, more accurate data input and collection.

This level of consistency is propelling the industry towards branded products that deliver reproducible consumer and patient experiences.

Speaker 3: This level of consistency is propelling the industry towards branded products that deliver reproducible consumer and patient experience.

Speaker 3: This quarter, we also launched AgriFi University, an immersive online and in-person project-based learning experience that empowers AgriFi customers with the knowledge and best practices.

This quarter, we also launched aggravated university and immersive online and in person project based learning experience.

Power's <unk> customers with the knowledge and best practices to succeed you.

Speaker 3: Utilizing our vast data sets and technological innovations, AgriPhi University offers a curriculum designed to support the long-term growth of the entire university.

Utilizing our vast data set and technological innovations aggravated University offers a curriculum designed to support the long term growth of the industry.

To improve efficiency aggravated has incorporated a plug and play system for automated harvest waste data capture which effectively eliminates the need to manually enter data into metric or other compliant software, reducing human error and fostering faster and more accurate data input and collection.

Speaker 3: To improve efficiency, AgriFi has incorporated a plug and play system for automated harvest waste data capture, which effectively eliminates the need to manually enter data into metric or other compliance software.

Speaker 3: reducing human error and fostering faster, more accurate data input and collect.

We've made exciting advancements to our <unk> technology as well leading to our recent launch of the improved VF U generation $3 seven with enhanced features for increased efficiency and higher quality yield, including lighting with industry leading performance.

David Kessler: We've made exciting advancements to our VFU technology as well, leading to our recent launch of the improved VFU Generation 3.7 with enhanced features for increased efficiency and higher quality yield, including lighting with industry-leading performance, media, electrical conductivity, and water sensing capability, as well as integration of intelligent camera technology. Developed with our contract manufacturer, Mack Molding, the new features of the Generation 3.7 VFU include durable, adjustable spectrum lights that can be precisely tailored to serve the specific needs of different cannabis varieties. The new lights deliver approximately a 40% increase in light output with best-in-class power efficiency of 3 micromoles per joule after lensing and loss.

Speaker 3: We've made exciting advancements to our VFU technology as well, leading to our recent launch of the improved VFU Generation 3.7 with enhanced features for increased efficiency and higher quality yield, including lighting with industry-leading performance.

Speaker 3: media, electrical conductivity, and water sensing capability, as well as integration of intelligent camera technology.

Media.

Electrical conductivity and water sensing capability as well as integration of intelligent camera technology.

Developed with our contract manufacturer Mac molding. The new features of the generation $3 70. If you include durable adjustable spectrum lights that can be precisely tailored to serve the specific needs of different candidates varieties.

Speaker 3: Developed with our contract manufacturer, MAC Molding, the new features of the generation 3.7VFU include durable adjustable spectrum lights that can be precisely tailored to serve the specific needs of different cannabis varieties.

Speaker 3: The new lights deliver approximately a 40% increase in light output with best in class power efficiency of 3 micromoles per joule after lensing and loss.

The new lights deliver approximately a 40% increase in output with best in class power efficiency, three micro molds per jewel after lengthening in loss.

Our camera system integrated with <unk> insights, enabling ongoing image analysis to proactively identify issues before they can be seen with the naked eye.

Speaker 3: A camera system integrated with AgriFi Insights, enabling ongoing image analysis to proactively identify issues before they can be seen with the naked eye.

David Kessler: A camera system integrated with Agrify Insights, enabling ongoing image analysis to proactively identify issues before they can be seen with the naked eye, as well as growing media monitoring via moisture and electrical conductivity sensing, enabling granular control over the fertigation events and optimizations based on environmental feedback, which minimize potential risks from facility anomalies, nutrient deficiencies, and improper irrigation fertigation schedules. To foster biosecurity, 3.7 generation VFUs have incorporated a heat sanitation mode to automatically sanitize our VFUs in between crop cycles, helping to eliminate one of the most underperformed and important tasks in any facility. We expect to begin delivery of the Generation 3.7 VFUs during Q1 2022, and we look forward to seeing the real-world improvements that these latest advancements will bring to our clients. With that, I will turn the call back to Raymond.

Speaker 3: as well as growing media monitoring via moisture and electrical conductivity sensors.

As well as growing media monitoring via moisture and electrical conductivity sensing.

Speaker 3: enabling granular control over the fertigation events and optimizations based on environmental feedback, which minimize potential risks from facility anomalies, nutrient deficiencies, and improper irrigation fertigation schedules.

Enabling granular control over the <unk> event, and optimizations based on environmental feedback, which minimize potential risks from facility anomalies nutrient deficiencies and improper irrigation <unk> schedules.

Speaker 3: To foster biosecurity, 3.7 generation VFUs have incorporated a heat sanitation mode to automatically sanitize our VFUs in between crop cycles, helping to eliminate one of the most underperformed and important tasks in any facility.

To foster bio security $3 seven generation <unk> have incorporated it keeps sanitation mode to automatically sanitize, our VF using between crop cycles, helping to eliminate one of the most underperformed in important tasks in any facility.

We expect to begin delivery of the generation $3 70, if used during the first quarter of 2022, and we look forward to seeing the real world improvements that these latest advancements will bring to our clients.

Speaker 3: We expect to begin delivery of the generation 3.7 VFUs during the first quarter of 2022, and we look forward to seeing the real-world improvements that these latest advancements will bring to our clients. With that, I will turn the call back to...

With that I will turn the call back to Raymond.

Thank you David.

Raymond Chang: Thank you, David. We are confident that we will begin shipments of our 3.7 VFU in Q1 of next year. Our most advanced solutions to date are expected to drive our growth well through 2022 and beyond. We are already noticing a marked increase in interest from major operators in the indoor ag space, and we expect that interest to intensify. As we continually strive to improve our VFUs for enhanced performance, we remain laser-focused on our core mission of providing the highest yields, the highest consistency, the highest quality at the lowest possible cost. As I've stated before, this mission is as integral to our success as it is to the success of our customers. With that, I'd like to pass this over to Niv, who will review the financial results.

Speaker 2: We are confident that we will begin shipments of our 3.7 VSU in the first quarter.

We will we are confident that we will begin shipments of our <unk>.

First quarter of next year.

Speaker 2: our most advanced solutions to date are expected to drive our growth well through 2022 and beyond.

Our most advanced solution to date are expected to drive our growth well through 2022 and beyond.

And we are already noticing.

Speaker 2: marked increase in interest from major operators in the indoor ag space. And we expect

<unk> increase in interest from major operators in the indirect space.

And we expect that interest to intensify.

Speaker 2: as we continually strive to improve our VFDs for enhanced performance.

As we continually strive to improve our VIP useful for enhanced performance.

Speaker 2: We remain laser focused on our core mission of providing the highest yield, the highest consistency.

We remain laser focused on our core mission of providing the highest yields.

The highest consistency.

The highest quality at the lowest possible cost.

As I've stated before.

Speaker 2: This mission is an integral to our success.

This mission is an integral to our success.

It did to the success of our customers.

Speaker 2: With that, I'd like to pass this over to Niamh, who will review the financial...

With that I'd like to pass this over to <unk>, who will review the financial results.

Speaker 4: Thank you, Raymond, and good morning, everyone. Today, I'll provide you with an overview of our third quarter 2021 financial year.

Thank you Amy and good morning, everyone.

Niv Krikov: Thank you, Raymond, and good morning, everyone. Today, I'll provide you with an overview of our Q3 2021 financial results. Before I begin, I would like to welcome Tim Oakes to the team again in his new role as incoming Chief Financial Officer. As I reflect on my time at Agrify, I'm immensely proud of all the things we have accomplished during my tenure with the company. I've worked with Tim very closely over the past year, and I'm excited to see what the future holds for Agrify with Tim taking an expanded responsibility. I look forward to continuing to work closely alongside Tim and the team to ensure seamless transition so that Agrify can continue its momentum through a strong Q4 and into a bright 2022.

Today I'll provide you with an overview of our third quarter 2021 conventional diesel.

Speaker 4: Before I begin, I would like to welcome Tim Oakes to the team again in his new role as incoming chief financial officer.

Before I begin I would like to welcome to most of the team again.

In his new role as incoming Chief financial Officer.

Speaker 4: As I reflect on my time at Agify, I'm immensely proud of all the things we have accomplished during my tenure with the company.

As I reflect on my time at target.

Immensely proud of all the things we have accomplished during my tenure with the company.

Speaker 4: I've worked with Tim very closely over the past year, and I'm excited to see what the future holds for AgriFi with Tim taking an extended responsibility.

<unk> worked with them very closely over the past year and I'm excited to see what the future holds for Agri site.

Taking an extended responsibilities.

I look forward to continuing to work closely alongside <unk> and the team to ensure a seamless transition.

Speaker 4: I look forward to continuing to work closely alongside team and the team to ensure seamless transition, so that AgriFi can continue its momentum to a strong Q4 and into a bright 2022.

If I can continue its momentum for a strong Q4 and into a bright 2022.

For the quarter ended September 32021, total revenue increased by 460% to $15 $8 million compared to $2 8 million for the same period in 2020.

Niv Krikov: For the quarter ended 30 September 2021, total revenue increased by 460% to $15.8 million compared to $2.8 million for the same period in 2020. Our Q3 2021 revenue consisted of facility build-out revenue as well as hardware revenue from the delivery of new VFU to our customers. This revenue mix is consistent with our expectations for 2021, as this year has deliberately been about kicking off new projects and ensuring that our existing customers are successful with their expansion and growth needs. This has led to a higher concentration of facility build-out revenue in the short term, but we fully anticipate this will shift more towards hardware, SaaS, and other recurring revenue streams as more and more facilities come online in H2 of fiscal 2022.

Speaker 4: For the quarter ended September 30, 2021, total revenue increased by 460% to $15.8 million compared to $2.8 million for the same period in 2020.

Speaker 4: Our Q3 2021 revenue consisted of facility build-out revenue, as well as hardware revenue from the delivery of new VSU to our customers.

Our Q3 2021 revenue consisted of a facility built outside the U S.

Hardware revenue from the delivery of new <unk> to our customers.

This revenue mix is consistent with our expectations for 'twenty 'twenty. One is this year has deliberately about kicking off new projects and ensuring that our existing customers are successful there.

Speaker 4: This revenue mix is consistent with our expectations for 2021, as this year has deliberately been about kicking off new projects and ensuring that our existing customers are successful with their expansion and growth.

Pension and growth needs.

Speaker 4: This has led to a higher concentration of facility build-out revenue in the short term, but we fully anticipate this will shift more towards hardware, SaaS, and other recurring revenue streams as more and more facilities come online in the second half of fiscal 2022.

This has led to a higher concentration of facility build out revenue in the short term, but we fully anticipate this will shift more towards hardware.

And other recurring revenue stream as more and more facilities come online in the second half of fiscal 2022.

Speaker 4: Gross loss for the third quarter was $380,000 compared to a gross loss of $200,000 for the same period in 2020, resulting in a negative gross profit margin of 2.4% for Q3 2021, compared to a negative gross profit margin of 7.1% in Q3 2020.

Gross loss for the third quarter was $390000 compared to a gross loss of $200000 for the same period in 2020, resulting in a negative gross profit margin of two 4% for Q3 2021.

Niv Krikov: Gross loss for the third quarter was $380,000 compared to a gross loss of $200,000 for the same period in 2020, resulting in a negative gross profit margin of -2.4% for Q3 2021, compared to a negative gross profit margin of -7.1% in Q3 2020. In Q3, our cost of goods and gross margins were mainly impacted by continued global supply chain disruption, which are unfortunately increasing the cost of our production materials and also delaying receipt of the materials. We took extraordinary effort and incurred significant short-term costs, including production labor costs, to ensure the timely delivery of our VFU to our customers.

<unk> to a negative gross profit margin of seven 1% in Q3 2020.

In Q3, our cost of goods and gross margin were mainly impacted by continued global supply chain disruption, which are unfortunately, increasing the cost of our production materials and also delaying receivables the materially.

Speaker 4: In Q3, our cost of goods and gross margins were mainly impacted by continued global supply chain disruptions, which are unfortunately increasing the cost of our production materials and also delaying receipt of the materials.

Speaker 4: We took extraordinary effort and increased significant short-term costs, including production labour costs, to ensure the timely delivery of our VFE toolcuffs.

We took extraordinary effort and incurred significant short term cost, including production labor cost to ensure the timely delivery of our <unk>.

To our customers.

Speaker 4: We understand how important it is to get our customers' facility up and running as quickly as possible, as our business model is not driven by short-term hardware sales, but by the future recurring sales and production fees resulting from our customers' success.

We understand how important it is to get our customers facility up and running as quickly as possible.

Niv Krikov: We understand how important it is to get our customers' facility up and running as quickly as possible, as our business model is not driven by short-term hardware sales, but by the future recurring SaaS and production fees resulting from our customers' success. Looking ahead, we are proactively taking steps to secure all the currently required VFU production materials for Q4 2021 and Q1 2022. Further, as we begin to shift our production from the current 3.6 to the 3.7 VFU model, we are anticipating not only improved performance, but the additional benefit of a cost reduction on LED lights of up to $2,000 per VFU, or roughly 10% of the overall cost. We anticipate that we will see the benefits from this expected cost reduction in late Q1 2022.

Business model is not driven by short term hardware sales.

But the future recurring set and production fees, resulting from our customer success.

Looking ahead, we are proactively taking steps to secure all the currently required <unk> production materials for the fourth quarter of 2021, and the first quarter of 2022.

Speaker 4: Looking ahead, we are proactively taking steps to secure all the currently required VFE production materials for the fourth quarter of 2021 and the first quarter of 2022.

Speaker 4: Further, as we begin to shift our production from the current 3.6 to the 3.7 VFU model, we are anticipating not only improved performance, but the additional benefit of the cost reduction on LED lights of up to $2,000 per VFU, or roughly 10% of the overall cost.

There is.

We begin to ship our production from the current three six to $3 70, a few model youre anticipating not only improved performance, but the additional benefit of the cost reduction on any delights of up to $2000. If you will roughly 10% of the overall cost.

We anticipate we anticipate that we will see the benefits from the expected cost reduction in late Q1 2022.

Speaker 4: We anticipate that we will see the benefits from this expected cost reduction in late Q1 2020.

Speaker 4: STMA for the third quarter of 2021 was $8.6 million, up from $1.9 million for the same period in 2020.

SG&A for the third quarter of 2021 was $8 $6 million up from $1 90.

Niv Krikov: SG&A for Q3 2021 was $8.6 million, up from $1.9 million, up $1.9 million for the same period in 2020. The increase in SG&A expenses was primarily attributed to the $2.4 million breakup fee associated with the cancellation of Maxim Group's right of first refusal on future stock offerings and an increase in payroll costs associated with the accelerated hiring of additional senior executives and staff necessary to support the company's significant growth. Additional increases also include stock-based compensation expenses, insurance costs directly related to being a publicly traded company, and legal and other professional services in connection with the due diligence and closing of the Precision Extraction Solutions and Cascade Sciences acquisition.

One 9 million for the same period in 2020.

Speaker 4: The increase in SPNA expenses was primarily attributed to the $2.4 million breakup fee associated with a cancellation of Maxin Group's right of first refusal on future stock offerings and an increase in payroll costs associated with the accelerated hiring of additional senior executives and staff necessary to support the company's significant growth.

The increase in SG&A expenses was primarily primary activity due to the $2 4 million breakup fee associated with the cancellation of Mexican groups right of first refusal on future stock offering.

And an increase in payroll costs associated with the accelerated hiring of additional senior executives and staff necessary to support the company's significant growth.

Speaker 4: Additional increases also include stock-based compensation expenses, insurance costs directly related to being a public traded company, and legal and other professional services in connection with the due diligence and closing of the precision cascade acquisition.

Additionally increases also include stock based compensation expenses.

<unk> costs directly related to being a public traded company and legal and other professional services in connection with the due diligence and closing of the precision to escape acquisition.

Speaker 4: Research and development costs were $827,000 in Q3 2021, up from $449,000 in Q3 2020. Total operating expenses for the quarter were $9.4 million compared with $2.4 million for the same period in 2020.

Research and development costs were $827000 in Q3 2021 up from $449000 in Q3 2020.

Niv Krikov: Research and development costs were $827 thousand in Q3 2021, up from $449 thousand in Q3 2020. Total operating expenses for the quarter were $9.4 million, compared with $2.4 million for the same period in 2020. Net loss attributable to Agrify for Q3 2021 was $9.8 million, compared to $2.7 million in Q3 2020. Adjusted EBITDA loss for Q3 2021 was $5.6 million, compared to an adjusted EBITDA loss of $2.1 million in the same period of 2020. With a positive contribution from Precision Cascade, we anticipate our EBITDA will significantly improve in Q4 2021. This concludes my remarks on the financials. Thank you all again.

Total operating expenses for the quarter were $9 4 million compared with $2 4 million for the third.

For the same period in 2020.

Speaker 4: Net loss attributable to AgriFi for Q3 2021 was $9.8 million compared to $2.7 million in Q3 2020.

Net loss attributable to <unk> for Q3, 2021 was nine 8 million compared.

Compared to $2 7 million in Q3 2020.

Speaker 4: Adjusted EBITDA loss for Q3 2021 was $5.6 million compared to an adjusted EBITDA loss of $2.1 million in the same period of 2020. With a projected contribution from Precision Cascade, we anticipate our EBITDA will significantly improve in the fourth quarter of 2021.

Adjusted EBITDA loss for Q3, 2021 was $5 6 million compared to an adjusted EBITDA loss of $2 1 million in the same period of 'twenty 'twenty.

With a positive contribution from precision Cascade, we anticipated, we anticipate our EBITDA would significantly improve in the fourth quarter of 2021.

Speaker 4: This concludes my remarks on the financials. Thank you all again. I will now turn the call back to Raymond for his closing statement. Thank you, Niese. During the third quarter of 2021, we achieved several significant milestones.

This concludes my remarks on the financials.

You all again I will now turn the call back to Raymond for closing statements.

Niv Krikov: I will now turn the call back to Raymond for his closing statement.

Thank you Neil.

Raymond Chang: Thank you, Niv. During Q3 of 2021, we achieved several significant milestones. As we continue to forge ahead through the rest of the year, we anticipate our Q4 bookings to exceed hundreds of millions of dollars. Revenues to be approximately $26 to 28 million, a pace that is equivalent to $104 to 112 million annual run rate. A full year revenue of $60 to 62 million, up from our previous guidance of $48 to 50 million. We further anticipate our EBITDA margins to improve significantly as we continue to see positive synergies and contributions from our newly acquired extraction division. So far, during Q4, we have increased our production capacity between our Georgia facility and Mack Molding to roughly 220 to 240 VFU production per month.

During the third quarter of 2021.

We achieved several significant milestones.

As we continue to forge ahead through the rest of the year.

We anticipate our Q4 bookings.

Exceed.

$100 million.

Speaker 2: revenues to be approximately 26 to 28 million.

Revenues to be approximately $26 million to $28 million.

The pace that it's equivalent.

104 $212 million annual run rates.

Speaker 2: to a 104 to 112 million annual run.

Speaker 2: and a full year revenue of 60 to 62 million up from our previous guidance of

And in full year revenue of $60 million to $62 million.

Up from our previous guidance of 48 to 50.

Speaker 2: we further anticipate our effort of margin to improve significant

We further anticipate EBITDA margins to improve significantly.

Speaker 2: as we continue to see positive synergies and contributions from our newly acquired

As you can continue to see positive synergies and contribution.

Our newly acquired construction division.

So far during Q4, we have increased our production capacity.

Speaker 2: So far during Q4, we have increased our production capacity between our Georgia...

Between our Georgia facility and Mac moldings.

Speaker 2: to roughly 220 to 240 VSU production.

Roughly 220 to 240 <unk> production per month.

Speaker 2: And we are confident that the VSP production will continue to ramp up to support.

Raymond Chang: We are confident that the VFU production will continue to ramp up to support our accelerated growth. We also secured a ten-year TTK partnership that we announced earlier this week with Kief USA, including the installation of 485 VFUs at their Massachusetts facility. We also secured an order earlier this month for 400 VFUs from Olive El Mirage, which is our first deal in the attractive Arizona market. We've always expected that the H2 of this year would be a meaningful reshape of our company in profound ways, and we believe our performance in Q3 and so far in Q4 shows that we are right on the mark.

And we are confident that the <unk> production will continue to ramp up to support our accelerated growth.

Speaker 2: We also secured a 10-year TTK partnership that we announced earlier this week.

We also secured a tenure ttk partnership that we announced earlier this week with Keith USA.

Speaker 5: including the installation of 485 VSU's at their Massachusetts facility. We also secured an order earlier this month for 400 VSU's at the Massachusetts facility.

Including the installation of 485 DSP at their Massachusetts facility.

We also secured an order earlier this month.

400 <unk>.

From El Mirage.

Our first deal any attractive Arizona markets.

We've always expected that second half of this year will be meaningful reshaping of our company in profound ways.

Speaker 2: We've always expected that the second half of this year would be a meaningful reshape of our company in profound ways.

And we believe our performance in Q3, and so far in Q4 shows that we are right on the Mark.

Speaker 2: And we believe our performance in Q3 and so far in Q4 shows that we are right on the mark.

We continue to have advanced discussions with now over 20 Msos.

Raymond Chang: We continue to have advanced discussions with now over 20 MSOs, particularly following the successful MJBizCon in Las Vegas, and are actively exploring sales opportunities and partnerships with more than 15 potential cash and TTK customers across 8 states. On the extraction side, we are very excited about the recent accretive acquisition of Precision Extraction Solutions and Cascade Sciences, both leading brands in the cannabis extraction industry. Since the completion of the acquisition on 1 October 2021, we have been executing a very thoughtful and meaningful merger integration plan. This acquisition is yet another major milestone to our goal of becoming the world's most vertically integrated solution provider in the cannabis and hemp industry. Agrify is already embracing multiple cross-selling and upselling opportunities, and we believe there are significant organic growth opportunities that lie ahead in 2022 and beyond.

Speaker 2: to have advanced discussions with now over 20 MS...

Particularly following the successful MJ biz in Las Vegas.

Speaker 2: Particularly following the successful MJ BizCon in last week.

And are actively exploring sales opportunities and partnerships with more than 15 potential cash in ttk customers across eight states.

Speaker 2: and are actively exploring sales opportunities and partnerships with more than 15 potential cash and TTK customers across each state. On the extraction side,

On the extraction site.

We are very excited about the recent accretive acquisition of precision extraction and Cascade Sciences.

Both leading brands in the cannabis extraction industry.

Speaker 2: both leading brands in the cannabis extraction industry. Since the completion of the acquisition on October 1st, we have been...

Since the completion of the acquisition on October one.

We have been executing a very thoughtful.

Meaningful merger integration plan.

Speaker 2: This acquisition is yet another major mouth.

This acquisition is yet another major milestone.

So our goal of becoming the world's most vertically integrated solution provider in the cannabis and hemp industry.

Speaker 2: for our goal of becoming the world's most vertically integrated solution provider in cannabis and hemp.

I realize already embracing multiple cross selling and up selling opportunities.

Speaker 2: AgriFi is already embracing multiple cross selling and upselling opportunities. And we believe there are significant organic growth opportunities.

And we believe there are significant organic growth opportunities that lie ahead in 2022 and beyond.

We remain very much focused on finishing 2021 strong.

Raymond Chang: We remain very much focused on finishing 2021 strong, with a foothold on the market for continued growth, both organically and through strategic and smart accretive acquisitions. We look forward to updating you on these developments and reporting on our continued positive progress, as well as initiating our 2022 guidance during our Q4 and year-end call. This concludes my remarks. Now, I would like to open up for questions from our audience. Operator, please go ahead.

Speaker 2: We remain very much focused on finishing 2021 strong.

Speaker 2: with a foothold on the market for continued growth.

With a foothold on the market for continued growth.

Both organically.

Speaker 2: and through strategic and smart at the creative acquisition.

And it's too strategic and smart and accretive acquisition.

We look forward to updating you on these developments.

Speaker 2: We look forward to updating you on these developments and reporting on our continued positive progress.

Reporting on our continued positive progress as well as initiating our 2022 guidance during our fourth quarter and year end call.

Speaker 2: as well as initiating our 2022 guidance during our fourth quarter and year-end call. This concludes my remark. Now I would like to...

This concludes my remark.

Now I would like to open up for questions from our audience.

Operator, Please go ahead.

As a reminder to ask a question you will need to press star one on your telephone. So we draw your question press the pound key.

Speaker 1: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key.

Operator: As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Your first question comes from Aaron Grey of Alliance Global. Your line is now open.

Speaker 1: Your first question comes from Aaron Gray of Alliance Global.

Your first question comes from Aaron Grey of Alliance Global.

Your line is now open.

Yeah.

Aaron Grey: Hi, good morning, and congrats on the strong quarter and what looks to be a strong Q4 as well.

Speaker 6: Hi, good morning, and congrats on the strong quarter on what looks to be a strong 4Q as well.

Hi, good morning, and congrats on the strong quarter, and what looks to be a strong <unk> as well.

Speaker 2: Thank you, Aaron. Very much appreciate it. Absolutely. So first question for me just on the 4Q bookings, I believe you said about, you know, 100 million, just want to make sure I understood it correctly, just given the recent Precision and Cascade acquisitions. Is that 100 million, is that, could you break it up between the legacy AgriFi business or if some of that's also attributed to the new attraction businesses with 100 million 4Q bookings? Thanks. Yeah, we're...

Thank you very much appreciate it.

Raymond Chang: Thank you, Aaron. Very much appreciate it.

Aaron Grey: Absolutely. First question from me, just on the Q4 bookings, I believe you said about, you know, $100 million. Just want to make sure I understood it correctly, just given the recent Precision and Cascade acquisitions. Is that $100 million? Could you break it out between the legacy Agrify business or if some of that's also attributed to the new extraction businesses with the $100 million Q4 bookings? Thanks.

Absolutely. So first question for me just on the <unk> bookings I believe you said about 100 million I just wanted to make sure I understood. It correctly just given the recent precision and Cascade acquisition is $100 million is that could you break it out between the legacy <unk> business or if some of that is also attributed to the new attraction businesses with the $100 million.

<unk> bookings thanks.

Yeah.

Raymond Chang: Yeah. We're expecting somewhere between 80 to 85% coming from Agrify's core business and the remainder coming in from Precision, Cascade. Agrify core business will continue to be the main contributor, but we are very excited to see an uptick from Precision and Cascade as well. Aaron, you know, I wanted just to reiterate that the most recent MJBizCon attendance was a super positive one for Agrify as a whole. In fact, you know, Precision and Cascade were literally taking orders, you know, on the floor. We're just seeing positive synergies, cross-selling opportunities. I believe that our showcase for the latest 3.7 VFU technology was probably also one of the highlights this year.

Expecting.

Somewhere between.

Hmm.

Speaker 2: 80 to 85% coming from AgriFi's core business and the remainder coming in from

80% to 85% coming from <unk> core business.

And the remainder coming in from.

Precision.

Escapes.

Speaker 2: So, Fagrify core business will continue to be.

Sacrifice core business will continue to be.

Speaker 2: the main contributor, but we are very excited to see an uptick.

The <unk>.

Main contributor.

But we are very excited to see an uptick.

Speaker 5: from a positioning cascade as well.

From.

Our position and Cascade as well.

Speaker 5: And Aaron, I wanted just to reiterate that the most recent ChemJBizCon attendance...

And Erinn.

Sure.

I wanted just to reiterate that the most recent 10-K beds con.

Tendance.

Speaker 2: was a super positive one for AgriFi as a whole.

What's a super positive one.

<unk> as a whole.

And.

Speaker 2: And in fact, you know, positioning cascades were literally taking orders, you know, on the floor. And we're just seeing positive synergies, cost-selling opportunities.

And in fact position and Cascade will literally taking orders on the floor.

And what are you seeing positive synergies cross selling opportunities and I believe that our showcase of the latest three seven <unk> technology was probably also wanted to highlight this year.

Speaker 2: And I believe that our showcase of the latest 3.7 VSU technology was probably also one of the highlights.

Thanks for that and Thats really helpful color and really strong growth in the organic bookings there.

Aaron Grey: Thanks for that. That's really helpful color and really strong growth in the organic bookings there. Second, you know, going off your commentary on MJBiz, you know, great to hear you know, the strong demand and interest there. You talked about conversations, advanced conversations with 20 MSOs, you know, another 15 potential TTK partnerships. Just wanna think about, you know, your guys own, you know, bandwidth right now. You're expanding, you're getting more production in the VFUs.

Speaker 6: Thanks for that. That's really helpful color and really strong growth in the organic bookings there. So second, you know, going off, you know, your commentary on MJBiz, you know, great to hear, you know, the strong demand and interest there. So he talks about conversations, advanced conversations with 20 MSOs, you know, another 15 potential TTK partnerships. Just want to think about

So second going off your commentary on M&A page no great to hear the strong demand and interest there. So you talked about conversations advanced conversations with 20 Msos. Another 15 pencil ttk partnerships.

One thing about.

Speaker 6: you know, your guys own, you know, bandwidth right now, you're expanding, you're getting more production, the VFUs. But just as you think about and vet which ones potentially take on, you know, how do we think about...

Your guys own bandwidth right now youre, expanding youre getting more production to VF use, but just as you think about and which ones potentially take on how do we think about.

Aaron Grey: Just as you think about and vet which ones to potentially take on, you know, how do we think about your manpower and the amount, the mind share on your end in terms of how many you'll be able to take on, you know, over the next, you know, few quarters, you know, with this high demand, particularly, you know, between the MSOs and TTKs, it seems like the TTKs might take, you know, more manpower on your side, you know, to help ramp those up because they might not have the cultivation expertise on their end. Any kind of helpful color there would be appreciated. Thank you.

Speaker 6: your manpower and the amount you share on your end in terms of how many you'll be able to take on over the next few quarters with this high demand, particularly between the MSOs and TTKs. It seems like the TTKs might take more manpower on your side to help ramp those up because they might not have the cultivation expertise on their end. So any kind of helpful color there would be appreciated. Thank you.

Your manpower into Mcnamara each year on year and in terms of how many you'll be able to take on over the next few quarters. You know what this high demand, particularly you know between the Msos and Ttk's. It seems like the Ttk's might take more manpower on your side.

To help ramp those up because they might not have the cultivation expertise on Darren so any kind of helpful color there would be appreciated. Thank you.

Yeah.

Speaker 2: Yeah, and Aaron, you're absolutely correct.

Raymond Chang: Yeah. Aaron Grey, you absolutely correct. We now have probably more inbound than you know what we can handle at this point, which obviously is a great problem to have. Internally, as we announced earlier this morning, I am very pleased to actually bring on world-class operators, a new CFO, as well as other high caliber and new executives to the team. That is going to help us to be able to scale our business in a tremendous way, right? Internally, you know, we're getting ready for what I believe is yet to be another very strong 2022 and beyond. Externally, we obviously having all these discussions, and we wanna stay focused.

And Eric.

You're absolutely correct.

Speaker 2: We now have probably more inbound than, uh, then, you know, what we can handle at this point, which obviously is a great problem to have.

We now have probably more imbalanced.

And then what we can handle at this point, which obviously is a it's a great problem to have.

Speaker 5: So internally, as we announced earlier this morning,UN adult age, they're doing a team webinar every week,

So internally.

As we announced earlier this morning.

I am very very pleased.

Speaker 2: to actually bring on world-class operators, new CFO , as well as other high caliber and new executives to the table.

To actually bring on.

World Class operators.

Our new CFO.

As well as other high caliber of new executives to the team.

Speaker 2: That is going to help us to be able to scale our business in a tremendous tremendous

That is going to help us to be able to scale our business in a tremendous tremendous way.

Speaker 2: So internally, we're getting ready for what is, I believe, yet to be another very strong 2022.

So internally, we're getting ready for what I believe yet to be another.

A very strong 2022 and beyond.

Speaker 2: Externally, we obviously having all these discussions.

Externally.

We.

Obviously, having all of these discussions and we want to stay focused.

Speaker 2: I believe 50% of our resources will continue to develop to the MSL.

Raymond Chang: I believe 50% of our resources will continue to devote to the MSOs, and the remainder, 50%, will be for these TTK opportunities. Now, around the TTK opportunities, we are not going to entertain anything less than, you know, maybe 200, 300 units. Most of the TTK opportunities are actually getting bigger in size, which is actually a good thing. It really kind of shows the scalability, and the advantage actually of the modular and scalable VFU design that we have. We believe we have probably Massachusetts very much under our belt. As you know, we now have three TTK partnerships, and I believe with maybe one or two more, we would have a significant production volume into the Massachusetts market.

I believe 50% of our resources will continue to devote to the msos.

Speaker 2: and the remainder, 50%, will be for these TTK opportunities. Now,

And the remainder 50%.

Well before Covid ttk opportunities.

Now the around the TK opportunity.

Speaker 2: We are not going to entertain anything less than maybe 200-300 units.

We are not going to entertain anything less than they maybe choose 300 units.

Speaker 2: Most of the TTK opportunities are actually getting bigger in size, which is actually a good thing. It really shows the scalability and the advantage of the modular and scalable VF-U design that we have.

Most of the TDK opportunities are actually getting bigger insight, which is actually a good thing I really kind of shows the scalability and the advantage actually of the modular and scalable via few designs that we have.

Speaker 2: We believe we have probably Massachusetts very much under our belt. As you know, we now have three TTK partnerships. And I believe with maybe one or two more, we would have a significant production volume into the Massachusetts market. We announced that we're getting into Arizona.

We believe we have publicly Massachusetts.

Very much under our belts.

No. We now have three ttk's partnerships and I believe with maybe one or two more.

Would have significant production volume each of the Massachusetts.

Our markets.

Raymond Chang: We announced that we're getting into Arizona, so we're also looking at Florida, New York, New Jersey, Illinois, and Michigan. The focus will continue to be in limited licensed states with very attractive high wholesale pricing. We're gonna basically stay focused on these attractive and robust markets. Again, like I said, it's probably gonna be 50% resources dedicated to the MSOs and about 50% to the TTK programs.

We announced that we are getting into Arizona.

And we're also looking at Florida.

New York New Jersey.

Speaker 2: New York, New Jersey, Illinois and Michigan.

Illinois and Michigan.

Speaker 2: The focus will continue to be in limited license states with very attractive wholesale pricing.

The focus will continue to be in limited license states.

With very attractive high.

Wholesale wholesale pricing.

Speaker 2: and we're going to basically stay focused on these attractive and robust.

And we're going to basically stay focused on these attractive and robust markets.

Speaker 2: But again, like I said, it's probably going to be 50% resources dedicated to the MSO and about 50% to the TDK.

But again like I said, it's probably going to be 50%.

Resources dedicated to the Msos and about 50% to the GTK programs.

Speaker 6: Very helpful caller there and congratulations on the quarter and continued success. I'll jump in with the queue.

Very helpful.

Aaron Grey: Very helpful color there and congrats again on the quarter and continued success. I'll jump back into the queue.

For color, there and congrats on the quarter and continuing success I'll jump back into the queue.

Speaker 1: Your next question comes from Eric Gillers of Craig Hallam Capital. Sir, your line is now open.

Your next question comes from Eric diverse of Craig Hallum Capital. Sir Your line is now open.

Operator 2: Your next question comes from Eric Des Lauriers of Craig-Hallum Capital. Sir, your line is now open.

Operator: Your next question comes from Eric Des Lauriers of Craig-Hallum Capital. Sir, your line is now open.

Speaker 7: Great, thanks for taking my questions and all for my congrats as well. Following up on your opportunities with the MSOs, can you help us understand a bit more what stage those discussions are in right now? Is it more so validating the solution still at this point? Should we think of these as R&D partnerships similar to the one announced by Keir Alief at this stage?

Eric Des Lauriers: Great. Thanks for taking my questions and offer my congrats as well. Following up on your opportunities with the MSOs, could you help us understand a bit more, sort of what stage those discussions are in right now? You know, is it more so kind of validating the solution still at this point? You know, should we think of these really as kind of R&D partnerships similar to the one announced by Curaleaf at this stage?

Great. Thanks for taking my questions and offer my congrats as well.

Following up on the.

On your opportunities with the Msos could you help us understand a bit more.

Sort of what stage those discussions are in right now is it more so kind of validating the solution. So at this point should we think of these really is kind of R&D partnerships similar to the one announced bye bye.

By carefully but at this stage.

Alright, great question.

Raymond Chang: Eric, great question. Since the, you know, we're basically having more than 20+ discussions, the opportunities come in various stages, right? Obviously, a good chunk of them are very similar to kind of the 10, 20 units R&D opportunities. I can also tell you that there are other discussions that are far more advanced and, a lot of the operators are now fully convinced, and they are ready to go and not having to go through the similar R&D exercise. We have opportunities, again, in the early, you know, sort of discussions around 20, 10, 20 units R&D, but we also have real discussion about a full rollout. It's sort of all over the map at this point.

Speaker 5: Since the other we're basically having more than 20 plus discussion.

Since the <unk>.

Basically having more than 20 plus discussion.

Speaker 5: So the opportunities come in various stages, right? Obviously, a good chunk of them are very similar to kind of the 10, 20 units R&D opportunities. But I can also tell you that there are other discussions.

So the.

The opportunities come in various stages right obviously.

A good chunk of them.

It's very similar to kind of the 10 20 units R&D.

Opportunities.

But I can also tell you that there are other discussions.

<unk> are far more events and a lot of the operators are now fully come back and they are ready to go and not having to go to the sum of R&D exercise.

Speaker 2: And a lot of the operators are now fully convinced. And they are ready to go and not having to go through the similar R&D exercise.

Speaker 2: So we have opportunities again in the early, you know, sort of discussion around 2010, 2020 units R&D, but we also have real discussion about a full rollout. So it's sort of over the map.

So we have opportunities.

Again in the early sort of discussion around 2010 to 80 20 units R&D, but we also have real discussion about a full rollout.

So it's sort of over the map at this point.

Okay, Alright, that's great to hear and then.

Eric Des Lauriers: Okay. All right. No, that's great to hear. Would each of these be announceable agreements, do you think? Are there some of these MSOs you're in discussions with looking to sort of keep this under wraps if they do go forward with an R&D partnership with you guys?

Speaker 7: Would each of these be announceable agreements, do you think? Or are some of these MSOs they are in discussions with looking to keep this under wraps if they do go forward with an R&D partnership with you guys?

Each of these be.

Announcer Bowl agreements do you think or are there are.

Are some of these msos are in discussions with looking to sort of keep this under wraps if they do go forward with.

And R&D partnership with you guys.

Yes, I think it's a combination app.

Speaker 5: Yeah, I think it's a combination of, you know, obviously a lot of.

Raymond Chang: Yeah. I think it's a combination of, you know, obviously a lot of the MSOs, they like to start the relationship, but not in such a public way. Obviously the ones that are probably will be full rollout, you know, those are the ones that probably we're gonna definitely announce. You know, again, I think, Eric, as you know, our business model is all about the installed user base, right? We wanna have discussions with as many as possible. I do believe, and I'm very confident that once they switch over to our VFUs, it's very hard to turn back. It's all about getting as many partnership as possible, getting the VFUs out there because we're confident that once they start using it, this is definitely going to be the default on a going forward basis.

Obviously a lot of the.

Speaker 5: MSLs, they like to start the relationship but not in such a public way. But obviously the ones that are public will be full rollouts. Those are the ones that we're going to definitely...

<unk> I'd like to start the relationship with Nike, such a public way, but obviously the ones that are public.

Probably won't be full Rollouts you know those are the ones that probably we're going to definitely announce.

Speaker 2: But again, I think Eric, as you know, our distance model is all about the installing.

But again I think Eric as you know our business model is all about the installed user base right. So we wanted to have discussions with as many as possible.

Speaker 2: So we want to have discussions with as many as possible. And I do believe, and I'm very confident that once they switch over to our VSEs.

And I do believe and I'm very confident that once they switch over to you <unk>.

Hard to turn back.

Speaker 2: So it's all about getting as many partnerships as possible, getting the VSPs out there, because we're confident that once they start...

So it's all about getting as many partnership as possible getting the VSP is out there because we're confident that once they start using it. This is this is definitely going to be the default on a going forward basis.

Speaker 2: This is definitely going to be the default on a going forward basis.

Eric Des Lauriers: Mm-hmm. Okay. That's great to hear. Just last one for me, just an update on the Cascade and Precision integration. I know it's still very early days here, but any kind of timing goals for how we should think about, you know, you guys layering in some of those hardware sensors and, you know, getting these up to a place where you can start to charge recurring revenue on the extraction solutions as well. Just any kind of timeline would be great. Thanks.

Mhm.

Speaker 7: Okay, that's great to hear. And then just last one for me, just an update on the Cascade and Precision integration. Any kind of time. I know it's still very early days here, but any kind of

That's great to hear and then just last one for me just an update on the.

The Cascade and precision.

Integration any kind of timing.

Still very early days here, but any kind of timing.

Speaker 7: timing goals for how we should think about you guys layering in some of those hardware sensors and getting these up to a place where you can start to charge recurring revenue on the extraction solutions as well. Any kind of timeline would be great. Thanks. Sure, Eric.

Goals for how we should think about.

Layering in some of those hardware sensors.

Getting these up too.

The place where you can start to charge recurring revenue on the attraction solutions as well just any kind of timeline would be great. Thanks.

Sure Eric.

Raymond Chang: Sure, Eric. You know, very pleased to say that Thomas Massie, our incoming Chief Operating Officer, president and COO, he's also taking on the interim extraction division GM role as well. His first assignment is to really kind of focus on making sure that the integration will go very smoothly. Thus far, he's doing a fantastic job. I think there are basically several, you know, sort of key milestones, right? Number one, we see a lot of low-hanging fruits. We're helping them to essentially improve the sales processes, basically instead of just being a order-taking entity to now becoming, you know, more aggressive, yeah, out there hunt for opportunities. Just being, kind of give you an example, right? They've never done this.

So.

Speaker 5: I'm very pleased to say that Thomas Massey, our incoming chief operating officer, president and COO, he's also taking on the interim extraction division GM role as well. So his first assignment is to really focus on making sure that the integration will go very smoothly and this far he's doing a fantastic job.

Very pleased to say that Thomas Massie, our incoming chief operating officer, President and COO. He's also taking on the interim extraction division GM growth as well. So his first assignment is its really kind of focus on making sure that the integration.

I will go very smoothly and thus far he's doing a fantastic job.

Speaker 5: I think there are basically several key milestones. Number one, we see a lot of low-hanging fruits. We're helping them to essentially improve the sales process.

I think they are basically several.

Sort of key milestones right number one we see a lot of low hanging fruits were helping them to essentially improve the sales processes.

Speaker 2: basically instead of just being a order taking entity to now becoming more aggressive, yeah, and out there hunt while the

Basically instead of just being a order taken entity.

To now becoming more aggressive.

And out their Huntsville opportunities.

Speaker 2: Just being okay, I kind of give you an example, right? They've never done this. At MJBiz, people have always kind of looked at this as kind of just a trace.

Just kind of give you an example, right.

They've never done this MJ biz people always kind of looked at this as kind of just a just a tradeshow.

Raymond Chang: At MJBizCon, you know, people have always kind of looked at this as kind of just a trade show. In our case this year, literally our salespeople were taking orders, right? You know, that's that itself I believe, you know, will see a significant organic growth. We're also now beginning to look at some potential integration of both our supply chain, as well as our software team has already actually sat down with the Precision and Cascade team. In fact, we have the entire development program already mapped out. I believe that, you know, by, I would say Q2, end of Q2, Q3 of 2022, we will have some demonstrable prototyping.

Speaker 2: But in our case, this year, literally, our salespeople were taking orders.

In our case this year literally our salespeople were taking orders.

Right.

Speaker 5: And then, you know, so that's the, that's that itself, I believe, you know, we'll see a significant or.

And then so that that itself I believe we'll see a significant organic growth.

Speaker 2: We're also now beginning to look at the potentially integration of supply...

We're also now.

Beginning to look at potentially integration of silica supply chain.

Speaker 2: as well as our software team has already actually sat down with the precision and cascade team and in fact we have the entire development program already mapped.

As well as our software team has already actually sat down with the positioning Cascade team and in fact, we have the entire development program already mapped out.

Speaker 5: I believe that by, I would say, Q2, end of Q2, Q3 of 2022, we will have some demonstrable prototypes.

I believe.

By I would say Q2 end of Q2 Q3 of 2022, we will have some demonstrated bowl prototyping.

Speaker 5: Obviously, we want to test out the model, turning essentially these hardware to intelligent hardware, and basically have nice recurring SaaS revenue as well as production revenue attached to it. I believe by the end of Q2 and Q3, we will begin to experiment and we'll begin to be able to grow this out to some of our customers.

Raymond Chang: Obviously, we wanna test out, you know, the model turning, you know, essentially these hardware to intelligent hardware and basically have nice recurring SaaS revenue as well as production revenue attached to it. I believe by the end of Q2 and Q3, we will begin to experiment, and we'll begin to be able to roll this out to some of our customers.

Obviously, we want to test out the model turning essentially these hardware to intelligent hardware and basically have nice recurring SaaS revenue as well as production revenue attached with I believe by the end of Q2 and Q3, we will begin to experiment and will begin to be able to grow this out to some of our.

Some of our customers.

That's great to hear congrats again guys.

Eric Des Lauriers: It's great to hear. Congrats again, guys.

Speaker 1: Your next question comes from Scott Fortune of Ross Capital Partners. Your line is now open.

Your next question comes from Scott Fortune of Roth Capital Partners. Your line is now open.

Operator 2: Your next question comes from Scott Fortune of ROTH Capital Partners. Your line is now open.

Operator: Your next question comes from Scott Fortune of ROTH Capital Partners. Your line is now open.

Speaker 4: Good morning, congrats on the quarter and thanks for the question. Um, just kind of following up on the precision cascade, um, you know, on the downstream extraction, you've added that total integrated solution.

Good morning, Congrats on the quarter and thanks for the questions just kind of following up on the precision Cascade.

Scott Fortune: Good morning. Congrats on the quarter, and thanks for the questions. Just kind of following up on the Precision and Cascade, you know, the downstream extraction, you've added that in a total integrated solution. Can you provide your backlog or run rate a little bit from that? But more importantly, can you provide a little color on the potential of other value add solutions into facilities and the valuations you see in that fragment market kind of continuing to add solutions for your partners going forward?

The downstream is Jackson, you've added that in total integrated solution can you provide.

Speaker 4: Can you provide a back log or run rate a little bit from that? But more importantly, can you provide a little color on the potential of other value add solutions into facilities and the valuations you see in that fragmented market kind of continuing to add solutions for your partners going forward?

Backlog or run rate, a little bit from that but more importantly can you provide a little color.

The potential of other value add solutions into facilities and the valuation do you see in that fragmented market.

<unk> to add solutions for your partners from Port.

Sure.

Raymond Chang: Sure. Scott, you know, I think as mentioned in our prior press release, we are expecting an equivalent of $40 million from Precision and Cascade for 2021. Obviously that's on a pro forma basis because, you know, the acquisition did not close until 1 October 2021. So that's the top line. Now, as I mentioned earlier, we are already seeing very, very positive pickup in both the Precision and Cascade businesses. We had a very strong showing in MJBizCon, and we look forward to updating you on the, I believe it's going to be a very, very attractive result for Q4 from the Precision Extraction division.

Speaker 5: Scott, I think as mentioned in our prior press release, we are expecting...

Scott I think as mentioned in our press release, we are expecting.

Speaker 5: an equivalent of $40 million from Precision Cascade for 2021. And obviously that's on a pro forma basis because the acquisition did not close until October 1st.

An equivalent of $40 million from precision Cascade for 2021.

And obviously, that's on a pro forma basis, because the acquisition.

Did not close and Choctaw first.

Speaker 5: So that's the top line. Now, as I mentioned earlier, we are already seeing very, very positive pickup in both the precision and cascade.

So.

<unk>.

That's the top line now as I mentioned earlier, we are already seeing very very positive pickup.

In the in both the precision and Cascade businesses, we had a very strong showing.

Speaker 2: We had a very strong showing in MJ-Vis, and we look forward to updating you on the, I believe it's going to be a very, very attractive result for Q4 from the precision extraction division.

MJ Biz, and we look forward to updating updating you on the.

I believe it's going to be very very attractive results for Q4 from the position extraction division.

Speaker 5: Now, so far, I believe the combination of precision and cascade really gives us maybe about 60 to 70 percent of the product.

Raymond Chang: Now, so far, I believe the combination of Precision and Cascade really gives us maybe about 60% to 70% of the product portfolio. We are already definitely the most vertically integrated solution provider in the industry. However, there are still about 20% or 30% of the opportunities that we would like to potentially either partner up or acquire to complete the entire solution offerings. We are aggressively, you know, working on that. Like I said, I think the combination of Precision and Cascade already has about 60% to 70% of everything we need. There will be an additional 20% or 30% of products that are currently under discussion. It will be either through a partnership, distribution partnerships, or acquisition.

Now.

So far I believe the combination of positioning Cascade.

Really gives us maybe about 60% to 70% of the product portfolio.

Speaker 5: We are already definitely the most vertically integrated solution provider in the industry. However, there are still about 20 or 30% of the opportunities that we would like to potentially either partner up or acquire to comply with the requirements of the solution.

We are already definitely.

The most vertically integrated solution provider in the industry.

However.

There are still about 20 or 30% of the opportunities that we would like to you.

Potentially either partner up or acquire.

Complete the entire solution offerings.

Speaker 5: And we are aggressively working on that.

And we are aggressively.

And working on that but.

Speaker 5: But like I said, I think the combination of precision and cascade already has about 60 to 70% of everything we need, but there will be an additional 20 or 30% of products that were currently under discussion. It will be either through a partnership, distribution partnerships, or acquisition. We look forward to completing our entire portfolio suite in the very near term.

But like I said I think the combination of precision Cascade already has about 60% to 70% of everything we eat but there will be an additional 20 or 30%.

Products that were currently under discussion it.

It will be either through a partnership distribution partnerships or acquisitions, and we look forward to completing our entire portfolio of suites.

Raymond Chang: We look forward to completing our entire portfolio suite in the very near term.

Very near term.

Great I appreciate that color and then kind of circling back on the key key key opportunity I know you said originally about $50 million for that can you provide color on Australia or initiatives on the financing side as that seems to be the bottleneck.

Scott Fortune: Great. I appreciate that color. Then kind of circling back on the TTK opportunity. I know you set aside originally about $50 million for that. Can you provide color on the strategy or initiatives on the financing side, as that seems to be the bottleneck potentially for more TTK deals in size? Congrats on moving up that size-wise. Any additional partnerships that you're looking at to drive or help finance these additional business opportunities? A little color there would be great.

Speaker 4: And then kind of circling back on the TTK opportunity, I know you said about $50 million for that. Can you provide color on the strategy or initiatives on the financing side? Has that seemed to be the bottleneck potentially for more TTK deals in size?

Q4, more <unk> deals.

Congrats on moving up to them that satisfies but any additional partnerships that you're looking at to see drive or help finance. He sees additional business African he will color there that'd be great.

Speaker 4: Congrats on moving up that size wise. But any additional partnerships that you're looking at to drive or help finance these additional business opportunities, we'll cover there. That'd be great. All right.

Raymond Chang: Yes, Scott. We're continuing to have multiple discussions with REITs and other alternative financing entities. They are very interested in becoming our partner to further expand the TTK program. In fact, most of the conversations are not just this kind of one-off financing. Essentially everyone is looking to basically provide us with, you know, a credit facility, $100+ million type of arrangements so that we don't have to be, you know, hold back because of the need to raise additional capital on a project-by-project basis. We have multiple of those discussions.

Yes, Scott.

Speaker 2: We're continuing to have multiple discussions with REITs.

We're continuing to have multiple discussions.

With me.

And other alternative financing entities.

They are very interested in becoming a partner to further expand to keep PK program and in fact, most of the conversations are not just this kind of one off financings.

Speaker 2: They are very interested in becoming a partner to further expand the TTK.

Speaker 2: And in fact, most of the conversations are not just this kind of one-off financing. Essentially, everyone is looking to basically provide us with a critical...

Essentially everyone is looking to be.

Basically provide us with.

Our credit facility.

Speaker 2: hundred plus million type of arrangements so that we don't have to be hold back because of the need to to to raise additional capital on a project by project basis. We have

100 plus million type of arrangements.

We don't have to be hold back because of.

The need you to raise additional capital on a project by project basis.

We have multiple of those discussions and as you know.

Speaker 5: And as you know, for most of the CTK projects, since at least 50 to 60 percent of the upfront is construction related, having REITs and other financing companies to kind of take on that support would be tremendous.

Raymond Chang: As you know, for most of these TTK projects, since at least, you know, 50 to 60% of the upfront is construction related, having, you know, REITs and other financing companies to kind of take on that support would be tremendous. Now, in addition, right, so for example, if you look at the most recent deal that we announced in Arizona, in fact, our partner is actually handling both the real estate and construction. There's actually no construction loan, you know, required for that particular project. They're actually stepping up. They've obtained cheaper financing, construction financing loans, and they will actually be taking care of that themselves, which is great.

For most of the ttk projects since at least 50% to 60%.

The upfront is construction related.

Having deep in other financing companies to kind of take on that support would be tremendous now. In addition, right. So for example, if you look at the most recent deal that we announced in Arizona.

Speaker 2: Now, in addition, so for example, if you look at the most recent deal that we announced in Arizona.

Fact, all partner is actually handling both the real estate and construction there is actually no construction loan.

Speaker 2: actually handling both the real estate and construction. There's actually no construction loan required for that particular project. They're actually stepping up, they've obtained cheaper construction financing loans and they will actually be taking care of that themselves, which is great.

Required for that particular project they are actually stepping up didnt obtain cheaper financing construction financing alone and then will actually be taken care of that themselves which is great.

Speaker 5: In the case of the Keith USA, the Massachusetts deal that we just announced, our partner is stepping up with 20% of not only construction loans, but also heart.

Raymond Chang: In the case of the Kief USA, the Massachusetts deal that we just announced, our partner is stepping up with 20% of not only construction loan but also hardware. People are now beginning to find other alternative financing to bring to the table, and we very much welcome that. I think it's gonna be a combination of efforts. Number one is us getting a deal done with maybe a REIT or, you know, other financing company to line up this very strong line of credit so that, you know, we could actually offer that to our partners. Simultaneously, we are also seeing our partners stepping up with their own capital as well. It's very, very positive development.

In the case of the keep USAID, the Massachusetts deal that we just announced.

Partners stepping up with 20% of not only construction alone but also hardware.

Speaker 2: So people are now beginning to find other alternatives, financing to bring to the table, and we very much welcome.

So people are now beginning to find other alternative financing to bring to the table and we very much welcome that so I think it's gonna be a combination of efforts number one is us getting a deal done with maybe a REIT or other financing company to lineup is very strong.

Speaker 5: So I think it's going to be a combination of efforts. Number one is us getting a deal done with maybe a REIT or other financing company to line up this very strong line of credit so that we could actually offer that to our partners. But simultaneously, we are also seeing our partners stepping up with their own capital as well. So it's very, very positive.

Credit so that we could actually offer that to our partners, but simultaneously. We are also seeing our partners stepping up with their own capital as well. So it's very very positive development.

Thanks, and if I can put it at.

Scott Fortune: Thanks. I have one more question real quick. You know, we've seen the industry hit with supply chain issues, but remind us kind of the manufacturing process you have in the US-based right now. You mentioned you can produce 220 to 240 VFUs per month with the contracts and pipelines. How do you view your manufacturing needs and outputs going forward here?

Speaker 4: Thanks. And if I can put, I have one more question real quick. We've seen the industry hit with supply chain issues, but remind us kind of the manufacturing process you have in the US space right now. And you mentioned you can produce 220 to 240 VFUs per month. With the contracts and pipelines, how do you view your manufacturing needs and outputs going forward?

One more question real quick when you leave.

<unk> seen the industry hit with supply chain issues.

Remind us kind of the manufacturing process you have in the U S base right now.

You are making you can produce 220 to 240 <unk> per month.

With the contract and pipeline, how do you view your manufacturing needs and output going forward here.

Sure Scott so for.

Raymond Chang: Sure, Scott. You know, for Q3 and in fact for Q4, we've actually shipped all the key components. You know, we have them already in our warehouse. What was not expected was, for example, trucking delivery all the way out to Nevada. We did not expect, for example, aluminum extrusion to be a problem. You know, we did not expect something as small as PVC pipe to be a problem. Obviously, we cannot ship the units without having these, you know, components already built in as well. You know, in Q3, we were impacted by the global supply chain, and a lot of the materials actually came in.

Speaker 2: Sure, Scott. So, you know, for Q3 and in fact for Q4.

For Q3 and in fact for Q4.

Speaker 5: We've actually shipped all the key components. We have them already in our warehouse.

We've actually have ship all of the key components.

We have them.

Already in our warehouse.

Speaker 5: What was not expected was, for example, trucking delivery all the way out to Nevada.

What was not expected was for example trucking delivery.

The way out to Nevada.

Speaker 5: we did not expect, for example, aluminum extrusion to be a problem. You know, we did not expect something as small as PVC pipe to be a problem. And obviously we cannot ship the units without having these components already.

We didn't it did not expect for example, aluminum aluminum extrusion to be a problem. We do not expect something as small as PVC pipe to be to be a problem and obviously, we cannot ship the units without having these.

No.

Our components already built in as well.

Speaker 2: So, you know, in Q3, we were impacted by the global supply chain and a lot of the materials actually came in. And non-key component materials came in late, and as a result, we have to pay overtime to complete those units, because we promised our customers that we want to get the units to them by the end of Q3, and essentially, I was committed to making sure that we live up to the problem.

So in.

In Q3, we were impacted by the global supply chain and a lot of the material is actually came in.

Raymond Chang: Non-key component materials came in late, and as a result, we have to pay overtime to complete those units because we promised our customers that we wanna get the units to them by the end of Q3. Essentially, I was committed to making sure that we live up to that promise. The good news is that the 114 units that we shipped to WhiteCloud, not only are they shipped, they are all installed and currently under commissioning at this point. Moving forward, we have actually learned from that. We're actually getting smarter in terms of, you know, supply chain management. We believe that we now have all the materials necessary for our Q4 as well as Q1 production needs.

Non key component material opinion late and as a result, we have to pay over time to complete those units because we did we promised our customers that we want to get the units to them by the end of Q3, and essentially I was committed to making sure that we live up to their promise to the good news is that the 114 units that we ship.

Speaker 5: And the good news is that the 114 units that we ship to White Cloud, not only, not only are

Two white cloud not only not only are they shipped.

Speaker 5: They are all installed and currently under commission.

They are all installed and currently under commission at this point.

Okay.

Speaker 2: Keep going forward, we have actually learned from that. We're actually getting smarter in terms of supply chain management.

Keep going forward.

We have actually learned from that we're actually getting smarter in terms of.

Supply chain management.

Speaker 2: And we believe that we now have all the material necessary for Q4 as well as Q1 production needs. Furthermore...

And we believe that we now have.

All of the materials necessary for Q4, as well as Q1 production needs.

Raymond Chang: Furthermore, as I mentioned in my script earlier, we're seeing the version 3.7 of VFU, which is our next generation of VFU. It's gonna have roughly about $2,000 cost reduction, and that's roughly about 10% of the overall BOM costs. Again, better light, right? 3 micromoles per joule. Yet, we're gonna see a $2,000 cost reduction. We're

Are there more.

As I mentioned in my script earlier.

We're seeing that.

Speaker 5: we're seeing the version 3.7 of Efio, which is

Version three seven B, a few which is our next generation of <unk>.

Speaker 5: It's going to have roughly about $2,000 cost.

It's going to have roughly about $2000 cost reduction.

Speaker 5: And that's roughly about 10% of the overall bond cost.

And that's roughly about 10% of the overall.

Bom cost.

Yeah better light.

Speaker 2: right, three micromoles per joule, and

Right.

Three Michael malls puts you.

And yes, we're going to see $2000 cost reduction.

Speaker 2: So we're, I believe we have the supply chain under control and we will continue to move and see if we can actually reduce the hardware cost on a going board basis.

So we're great <unk> behalf.

Scott Fortune: Great.

Raymond Chang: I believe we have, you know, the supply chain under control, and we will continue to move, you know, and see if we can actually reduce the hardware costs in a going forward basis.

The supply chain under control and we will continue to move.

And see if we can actually we've used it yet the hardware cautiously going forward basis.

Thanks, I will jump back in the queue.

Scott Fortune: Thanks. I will jump back in the queue.

Thank you Scott.

Raymond Chang: Thank you, Scott.

Your next question comes from Anthony Vendetti.

Operator: Your next question comes from Anthony Vendetti of Maxim Group. Your line is now open.

Speaker 1: Your next question comes from Anthony Vendetti of Maxime Group. Your line is now open.

Maxim Group your line is now open.

Speaker 4: Thank you. I was wondering if you could talk a little bit more about the TTK program. I know that originally the board approved.

Thank you I was wondering if maybe if you could talk a little bit more about the ttk program I.

Anthony Vendetti: Thank you. I was wondering if you, Raymond, if you could talk a little bit more about the TTK program. I know that originally the board approved $50 million in funding through your balance sheet, and I know you've talked about alternative sources and working with other financing options. Has the board decided to increase your capability of using additional capital? Or at this point, you're looking to just source additional capital outside of Agrify?

I know that.

Originally the board approved.

50 $50 million.

Speaker 4: $50 million in funding through your balance sheet. I know you've talked about.

And funding through your balance sheet I know you've talked about.

Speaker 4: alternative sources and working with other financing options. Has the board decided to increase

Alternative sources in working with with other financing options, but.

Has the board decided to increase.

Speaker 4: your capability of using additional capital, or at this point you're looking to just source additional capital outside of AgriFi.

Your capability of using.

Additional costs.

Or at this point Youre looking to just source additional capital outside of <unk>.

That discussion is currently.

Speaker 5: That discussion is currently underway internally.

Raymond Chang: That discussion is currently underway internally. Personally, I am working very hard to source alternative financing. As I mentioned earlier, talking to REITs, talking to other financing companies, and we are actually making very good progress on that front. Obviously the goal is to you know bring on cheaper and then alternative financing sources to help us to continue to grow, right? However, at the same time, we are also seeing such a you know a great progress on the TTK fronts. Again, our business model is all about getting the largest customer install base. The discussion is also underway internally to potentially increase the allocation to the TTK program. It's gonna be a combination of the two.

Underway internally.

Speaker 2: Um, personally I am trying, I'm working very hard to, um, source alternative financing.

Personally.

Im Im working very hard to see.

Source alternative financing.

Speaker 2: And as I mentioned earlier, talking to other finance...

And as I mentioned earlier talking to be talking to other financing companies and we're actually making very good.

Speaker 2: And we are actually making very good progress on that front.

Progress on that front.

Speaker 5: So obviously the goal is to bring on cheaper and alternative financing sources to help us to continue to grow. However, at the same time, we are also seeing such a great progress on the TTK front. And again, our business model is all about getting the largest customer installed.

So obviously the goal is to.

Bring on cheaper than an alternative financing sources to.

To help us to continue the growth.

However at the same time, we are also seeing such a.

Great progress on the Ttk fronts and again, our business model is all about getting the largest.

Customer install base. So the discussion is also underway internally to potentially increase the allocation.

Speaker 5: So the discussion is also underway internally to potentially increase the allocation to the TTK program. So it's going to be a combination of the two.

Two the GTK program, so it's going to be a combination of tissue.

Okay excellent and then.

Anthony Vendetti: Okay, excellent. Can you talk about. I know you've been in discussions with MSOs. It looks like that the number that you're in advanced discussions with has ramped significantly in the last quarter. Would you attribute that to either the Curaleaf announced deal or a combination of that plus your expanded portfolio, particularly on the extraction side with Precision and Cascade? I was just wondering if you could talk about how those discussions have increased and the number has increased.

Can you talk about I know you were in <unk> been in discussions with Msos. It looks like the number that you are in advance discussions with has ramped significantly in the last quarter.

Speaker 4: Can you talk about, I know you were in, you've been in discussions with MSOs, it looks like that the number that you're in advanced discussions with has ramped significantly in the last quarter. Would you attribute that to either the cure relief or the cure relief that you're in?

Would you would you attribute that to.

But he's at the pure leaf.

Speaker 4: announced deal or a combination of that plus your expanded portfolio, particularly on the extraction side with precision and cascade. I was just wondering if you could talk about how those discussions have increased and the number has increased.

Announced deal or a combination of that plus.

Your expanded portfolio, particularly on the extraction side with precision cast eight I was just wondering if you could talk about how those discussions have have increased and the number has increased.

Yeah.

Raymond Chang: Yeah. Anthony, you know, it's really the combination of all that, right? It's basically us having successful, you know, customer deployment, right? Our customers, as David alluded earlier, are seeing amazing results on consistency and on yield, right? It's very hard to argue against you know these numbers. Also, you know, for just continuous inbound interests, and as well as cross-selling with through Precision, right? For example, this last MJBizCon attendance, I was actually meeting just nonstop from 7 to 11 every day and just having conversation after conversation. Our booth was probably one of the most visited.

Speaker 2: Yeah, Anthony, you know, it's really the combination of all that, right? It's basically

Anthony it's really the combination of all of that it's basically.

US having successful customer deployment.

Speaker 5: you know, customer deployment, right? Our customers, as David alluded earlier, are seeing amazing results on consistency and on yield, right? And it's very hard to argue against, you know,

Our customers as David alluded earlier.

<unk> amazing results on consistency.

Yield right and it's very hard to argue against.

These numbers.

Speaker 5: And also, you know, for just, you know, continuous inbound interests and as well as cost selling with the

And also you know.

For just continuous impound interest.

And as well as cross selling with the two acquisitions.

Precision.

Right.

Speaker 5: For example, this last MJBiz attention...

For example, this last.

The MJ biz attendance.

Speaker 5: I was actually meeting just nonstop from 7 to 11 every day.

Hi, Mike.

It's actually meeting just non stop from 711 every day.

And just having conversations about the conversation to have the conversations our booth was probably one of the most visited.

Speaker 5: Our booth was probably one of the most visited. And there's a lot of people now, you know, maybe started out with relationship on the extraction.

Raymond Chang: There's a lot of people, now, you know, maybe started out with a relationship on the extraction front, and we basically tell them that, "Look, in order for you to actually have better consistent results, you need to actually have better biomass production, right? How about using the VFUs?" Vice versa, right? We're seeing a lot of our cross synergies already happening between the cultivation division as well as the extraction division.

And Theres a lot of people now maybe you started out with a relationship on the extraction funds and we basically tell them that but in order for you to actually have better consistent results you need to actually have better vital mass production.

Speaker 5: And we basically tell them that, look, in order for you to actually have better consistent results, you need to actually have better biomass.

Alright, how about using the Vips and vice versa. So we're seeing a lot of that cross synergies already happening between the cultivation division as well as the extraction division.

Speaker 5: Right? How about using the VFUs and vice versa? Right? So we're seeing a lot of that cross-extendence.

Speaker 5: already happening between the cultivation division as well as the extraction.

Excellent and then just one last question because it's obviously impacting a number of industries.

Anthony Vendetti: Just one last question because it's obviously impacting a number of industries. You did mention a little bit about the supply chain concerns, and you're trying to get ahead of that. Can you talk a little bit more about what I guess the potential for any issues, or do you think you're, at this point, sufficiently ahead of that and have contingency plans in place?

Speaker 4: And then just one last question, because it's obviously impacting a number of industries. You did mention a little bit about the supply chain concerns, and you're trying to get ahead of that. Can you talk a little bit more about the supply chain concerns?

You did mention a little bit about the supply chain concerns and youre trying to get ahead of that.

Can you talk a little bit more about.

Well I guess the.

Speaker 4: the potential for any issues or do you think you're at this point sufficiently ahead of that and have plans in place?

The potential.

For any any any issues or do you think you are at this point.

Sufficiently ahead of that and have contingency plans in place.

Yes, I think for Q4 and most of the Q1, we have all the materials in place.

Speaker 5: Yeah, I think for Q4 and most of the Q1, we have all the materials.

Raymond Chang: Yeah. I think for Q4 and most of the Q1, we have all the materials in place. Obviously, you know, we're gonna continue to, you know, monitor and just make sure that, you know, if the global supply chain issue becomes worse, instead of basically planning for, you know, a 3-6 month lead time, we might have to do 9-12, right? You know, we have, you know, our procurement team as well as our manufacturing team is staying on top of things and making sure that, you know, looking at the sales forecast and make sure that we can deliver all the VFUs on time. Being able to deliver the VFUs on time is one of our top priorities, right?

Speaker 5: Obviously, we're going to continue to monitor.

Obviously, we would continue to.

Monitor.

Speaker 5: and just make sure that if the global supply chain issue becomes worse, instead of basically planning for a three, six months lead time, we might have to do 9-12. Right? So, we have our procurement team as well as our manufacturing team is staying on top of things and making sure that, looking at the sales forecast and make sure that we can deliver all the VFUs on time.

And just make sure that the global supply chain issue becomes worse instead of basically planning for three six months lead time, we may have to do nightclub right. So.

We have.

Our procurement team as well as our manufacturing team is staying on top of things and making sure that.

Looking at the sales forecast and make sure that we can deliver all the vlccs on time being able to deliver it on time.

Speaker 5: Being able to deliver the VFUs on time is one of our top priorities.

One of our top priorities right and so we will do everything we can to you.

Speaker 5: Right. And we'll do everything we can to fulfill the customer promise, because we know every day costs money.

Raymond Chang: We'll do everything we can to, you know, fulfill the customer promise because we know every day costs money for our customers, right? If we actually have to give a little bit on the hardware margin, you know, our business model is not hinged on short term hardware margin. It's all about the recurring revenue from SaaS and production fees. One day, if we can actually just help our customer to, you know, bring their facility up and running one day sooner, both sides will benefit. That's really kind of our number one mission, is just to get the VFUs installed as quickly as possible.

Fulfill the customer promise because we know every.

Everyday cost us money.

Customers.

Speaker 5: Right. So if we actually have to give a little bit on the hardware margin, you know, our business model is not hinge on, you know, short term, you know, hardware margin. It's all about the recurring revenue from SaaS and production fees.

Actually how could give a little bit on the hardware margin our business model is not hinged on short term hardware module.

It's all about the recurring revenue from SaaS and production fees.

And one day, if we can actually just help our customer to.

Speaker 5: to bring their facility up and running one day sooner, both sides will benefit. And that's really kind of our number one mission, is just to get the VFE, install it as quickly as possible.

Bring their facility up and running one day soon they're both sides will benefit and that's really kind of our number one mission.

Get the Vips installed as quickly as possible.

Excellent. Thank you I'll hop back in the queue.

Anthony Vendetti: Excellent. Thank you. I'll hop back in the queue. Appreciate it.

Speaker 1: Your next question comes from Gerald Pasquarelli of Colin. Your line is now open.

Your next question comes from Gerard Pascarelli of Cowen. Your line is now open.

Operator 2: Your next question comes from Gerald Pascarelli of Cowen. Your line is now open.

Operator: Your next question comes from Gerald Pascarelli of Cowen. Your line is now open.

Yes.

Speaker 8: Hi, good morning and thanks very much for taking the questions. I'd like to go back to the yield per square foot and ultimately try to tie back to the drivers behind that 50 percent increase. Is it simply due to stacking your VFUs or are there other factors and drivers to be mindful of given the notable increase? Thank you.

Gerald Pascarelli: Hi. Good morning, and thanks very much for taking the questions. I'd like to go back to the yield per square foot, and ultimately try to tie back to the drivers behind that 50% increase. Is it simply due to stacking your VFUs, or are there other factors and drivers to be mindful of given the notable increase? Thank you.

Hi, good morning, and thanks, very much for taking the questions.

I'd like to go back to the yield per square foot.

And ultimately try to to tie back to the drivers behind that 50% increase is.

Is it.

Is it simply due to stacking your V abuse.

Or are there other factors and drivers to be mindful of given given the notable increase thank you.

Right.

I think David will probably be a better person to answer that but short answer is no it's not because of the stacking.

Raymond Chang: I think David will probably be a better person to answer that. The short answer is no, it's not because of the stack, stacking. It's the actual square footage increase, and now basically hitting close to 90+ grams per sq ft. David, can you chime in here, please?

Speaker 5: I think David would probably be a better person to answer that, but the short answer is no, it's not because of the stacking....is the actual square footage increase...

Stacking is the actual square footage increase.

Speaker 5: and now basically hitting close to 90 plus grams per square foot. But David, can you chime in here, please? I'd be happy to.

And now basically hitting close to 90 plus grams per per square foot, but David can you chime in here. Please.

David Kessler: I'd be happy to. Gerald, thank you for the question. When it comes to the 99 grams per sq ft achieved by the client, the increase is really related to optimizations based on iterative cultivation cycles. Because Agrify Insights, the software program that controls our hardware, the VFU, records over 1.5 million data points, our clients are seeing things like planting density versus biomass yield per sq ft calculations that are automatically calculated. The yield that increased to 99 grams per sq ft, which is a market trend across the entire facility, is really related to a couple of things. Optimizations in plant density, an understanding of the genetic performance, tracking different recipes of cultivation across multiple cycles.

I'd be happy to Gerald Thank you for the question.

Speaker 3: When it comes to the 99 grams per square foot achieved by the client, the increase is really related to optimizations based on iterative cultivation cycles.

When it comes to the 99 grams per square foot achieved by the client. The increase is really related to optimization based on iterative cultivation cycles. So because the aggregate insight software program that controls our hardware at the VA a few records over one and a half million data point, our clients are seeing.

Speaker 3: So because AgriFi Insights, the software program that controls our hardware, the VFU, records over one and a half million data points, our clients are seeing things like planting density versus biomass yield per square foot calculations that are automatically calculated. So the yield that increased to 99 grams per square foot, which is a market trend across the entire facility.

Things like planting density versus biomass yield per square foot calculations that are automatically calculated so the yield that increased to 99 grams per square foot, which is a market trend across the entire facility.

Speaker 3: is really related to a couple of things. Optimizations in plant density, an understanding of the genetic performance, tracking different recipes of cultivation across multiple cycles. They realized that a lot of the biomass was bulking up or increasing in weight in the final weeks, and they decided to go a little bit longer after looking at the data which increased the overall harvest weight on many of the strains.

Is really related to a couple of things optimizations and plant density.

Understanding of the genetic performance tracking different recipes of cultivation across multiple cycles, they realized that a lot of the biomass.

David Kessler: They realized that a lot of the biomass was bulking up or increasing in weight in the final weeks, and they decided to go a little bit longer after looking at the data, which increased the overall harvest weight on many of the strains. On top of that, the cultivation team is now looking at water content data and being able to really optimize the fertigation and environment to steer the crop effectively. What you're seeing is actually the proliferation of data and then the application of that data towards a goal. I'm very happy to report that it's being well-received and they're being able to use that data actionably to make these improvements.

Was bulking up or increasing in weight in the final weeks and they decided to go a little bit longer after looking at the data, which increase the overall harvest weight on many of the strain on top of that the cultivation team is now looking at our water.

Speaker 3: On top of that, the cultivation team is now looking at water content data and being able to really optimize the fertigation.

Intent data and being able to really optimize the <unk>.

Speaker 3: and environment to steer the crop effectively. So what you're seeing is actually the proliferation of data and then the application of that data towards a goal. And I'm very happy to report that it's being well received and they're being able to use that data actionably to make these improvements.

And environment to steer the crop effectively so what you're seeing is actually the proliferation of data and then the application of that data towards a goal and I'm very happy to report that it is being well received and they are being able to use that data actionable to make these improvements.

Yes, Joe just if I may add to that.

Raymond Chang: Yeah. Gerald, just if I may add to that. You know, as David mentioned, on this particular genetic strain, you know, what we realized is that, basically the last week, you know, the flowers really bulked up, right? So instead of planting, for example, 54, you might actually just reduce it down to 46, but allowing more room to really kind of expand during that last week of the harvest period. Now, on the other hand, you might have a completely different genetic that actually doesn't have that, you know, sort of last week, you know, effect. Under that scenario, the plant count should be at 64, right?

Speaker 5: Yeah, Gerald, if I may add to that, as David mentioned, on this particular genetic...

As David mentioned on this particular generic strength, what we realized is that basically the last week.

Speaker 5: what we realized is that basically the last week, the flowers really, really bulked up, right? So instead of planting, for example, it's 54, you might actually just reduce it down to 46, but allowing more room to really kind of expand during that last week of the harvest.

The flowers from doesn't really bulked up right. So instead of planting for example, 64, you might actually just reduce it down to 46, but allowing more room to really kind of expand do you mean that last week.

The harvest period now on the other hand, you might have a completely different genetics that actually doesn't have that sort of last week.

Speaker 5: Now on the other hand, you might have a completely different genetic that actually doesn't have that sort of last week effect. And under that scenario, the plant count should be at 64. So again, it's being able to collect it into the plant.

And under that scenario the plant count should be at 64, right. So again, it's being able to collect these insights that allows us to get smarter on the genetic by genetic basis and the.

Raymond Chang: Again, it's being able to collect these insights that allows us to get smarter on a genetic by genetic basis and to continuously reiterate optimization, right, that we're allowing our customers to do by giving them data, giving them insights that is really the, you know, the game changer.

Speaker 5: that allows us to get smarter on genetic by genetic.

Speaker 5: And the continuous reiterate optimization, right, that we're allowing our customers to do, but giving them data, giving them insight, that is really the game changer.

Continuous iterate optimization right that we're allowing our customers to do but giving them data, giving them insight that is really the game changer.

Okay.

Speaker 8: Got it. That is that's that's super helpful color. Thanks very much. Last one for me is just on your relative price gaps. Obviously, your your last five batches incredibly consistent in terms of in terms of variance. Raymond, could you just provide some color on how your relative price gaps for premium indoor grown flower are maybe holding up relative to

Got it that is.

Gerald Pascarelli: Got it. That's super helpful color. Thanks very much. Last one for me is just on your relative price gaps. Obviously your last five batches incredibly consistent in terms of variance. Raymond, could you just provide some color on how your relative price gaps for premium indoor grown flower are maybe holding up relative to competition in the wholesale market in the current environment? Thank you.

Super helpful color, Thanks, very much.

Last one for me is just on your relative price gaps.

Obviously your last five batches incredibly consistent in terms of in terms of variance.

Jamie could you just provide some color on how your relative price gaps, but premium indoor grown flower are maybe holding up relative to comp.

Speaker 8: to competition in the wholesale market in the current environment.

Competition in the.

In the wholesale market in the current environment. Thank you.

Okay David.

Speaker 2: David, can you provide more color?

Raymond Chang: Okay. David, can you provide more color on that, please?

Can you provide more color on that please.

I'd be happy to.

David Kessler: I'd be happy to. In terms of the price gaps, I think that you are seeing some compression in maturing markets. The mature markets are not compressing as quickly, I think, as they've already experienced that. In terms of our customers' ability to hold price, it's really just driven on quality, consistency, and brand, so they're doing exceptionally well. The consistency of the flower produced and then the flower quality is allowing them to introduce more branded product into their market and ultimately retain that higher price point.

Speaker 3: I'd be happy to. In terms of the price gaps, I think that you are seeing some compression in maturing markets. The mature markets are not compressing as quickly, I think, as they've already experienced that.

Terms of the price gaps I think that you are seeing some compression and maturing markets. The mature markets are not compressing. It quickly I think as they've already experienced that in terms of our customers' ability to hold price. It's really just driven on quality consistency and brands, so they're doing exceptionally well.

Speaker 3: In terms of our customers ability to hold price, it's really just driven on quality, consistency and brand. So they're doing exceptionally well. The consistency of the flower produced and then the flower quality is allowing them to introduce more branded product into their market and ultimately retain that higher quality product.

<unk>.

Consistency the flower produced and then the flower quality is allowing them to introduce more branded products into their market and ultimately retain that higher price point.

Speaker 5: Perfect. Yeah, just to reiterate on that.

Perfect Yes.

Gerald Pascarelli: Perfect.

Raymond Chang: Yeah. Just to kind of, you know, reiterate on that. For example, you know, our customer in Nevada, this is, you know, WhiteCloud's, they're consistently selling above the, you know, average wholesale, you know, selling price, for premium flowers in Nevada. Nevada, I believe is around $2,700 to 2,800, but they are selling their flowers at, you know, $3,200 to 3,300, right? Again, it's the better consistency and better quality that allows them to actually sell at a premium, even to, you know, the rest of the market.

Two.

The rate on that.

For example.

Speaker 5: For example, our customer in Nevada, this is Whitecloud, they're consistently selling above the average selling price for premium flowers in Nevada. Nevada, I believe, is around 27, 2800, but they are selling their flowers at 32 to 33

Our customer in Nevada.

This is white clouds, they're consistently selling above the average.

Selling price for premium flowers in Nevada.

Nevada, I believe is about 27800, but they are selling their flowers that 32 to 33 months right. So again, it's a better consistency of better quality.

Speaker 2: Right. So again, it's the better consistency of better quality that allows them to actually sell at a premium, even to the rest of the market.

It allows them to actually sell at a premium even to.

The rest of the market.

Got it.

Gerald Pascarelli: Got it. Thank you. Thanks very much for the color, and I will pass it on.

Speaker 8: Got it. Thank you. Thanks very much for the color and I will pass it on.

Thanks, very much for the color and I will pass it on.

Yeah.

Operator are there any additional questions.

Speaker 5: Operator, are there any additional questions?

Raymond Chang: Operator, are there any additional questions? If not, I would like to thank everyone again for joining the call today, and for your interest in Agrify. We look forward to updating you on our continued progress, and thank you all and have a great day. Wow. Operator? All right. This concludes our call for this morning. Thank you again for your participation. Bye-bye.

Speaker 5: If not, I would like to thank everyone again for joining the call today and for your interest in AgriFi.

If not I would like to thank everyone again for joining the call today and for your interest in <unk>.

Speaker 5: We look forward to updating you on our continued progress and thank you all and have a great day.

We look forward to updating you on our continued progress.

And thank you all and have a great day.

Yeah.

Wow.

Yeah.

Operator.

Yeah.

Alright. This concludes our call for this morning. Thank you again for your participation.

Speaker 5: All right, this concludes our call for this morning. Thank you again for your participation.

Bye bye.

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