Agroz Inc.

Agroz Inc. is a vertically integrated agricultural technology (AgTech) company focused on designing, innovating, developing, building, operating, and managing large, commercial-scale, industrial-grade indoor Controlled Environment Agriculture (CEA) vertical farms using CEA practices. The company's mission is to improve food safety, food security, and sustainability by creating a reliable, accessible food supply through its AgTech products and services. Agroz operates in the relatively new vertical farming industry, which is subject to uncertainties, including the emergence of new market participants and the challenge of growing staple crops due to current technology limitations. The global agricultural technology market was valued at USD 18.24 billion ⁸ in 2024 and is projected to grow to USD 43.37 billion ⁹ by 2029, representing a CAGR of 16.63% ¹⁰. The global indoor farming market size was valued at USD 45.97 billion ¹¹ in 2024 and is expected to reach USD 138.09 billion ¹² by 2033, with a CAGR of 13% ¹³. The global vertical farming market was valued at USD $5.6 billion ¹⁴ in 2022 and is projected to experience a CAGR of 20.8% ¹⁵, reaching $21 billion ¹⁶ by 2029. The market size of vertical farming in the Asia Pacific region reached US$2.43 billion ¹⁷ in 2023 and is projected to grow at a CAGR of 29.2% ¹⁸ from 2024 to 2030. Within Malaysia, agricultural production is projected to grow at a CAGR of 0.6% ¹⁹ from 2021 to 2026, reaching USD 24.9 billion ²⁰ by 2026, compared to USD 23.9 billion ²¹ in 2021. The Malaysian agricultural sector's forecasted revenue for 2027 is MYR 161 billion ²².

Agroz believes its core competitive strength is its status as a fully vertically integrated agricultural technology provider, offering services for the design and/or construction of vertical farms, services for the operation and management of vertical farms, and fresh produce. The company states that, to its knowledge, no other company in Malaysia or Southeast Asia currently holds this vertically integrated status. Agroz also highlights its innovative and advanced AgTech solutions, including proprietary CEA software (Agroz OS) and its relationships with Microsoft as an Independent Software Vendor (ISV) and AI Cloud partner. The company's CEA methods and technology solutions enable it to yield approximately three (3) tons ²³ of green produce annually for every 300 square feet ²⁴ of space, stacked 8 levels high ²⁵, while using only five percent (5%) ²⁶ of the water and nutrients required compared to conventional agricultural methods. Agroz also emphasizes its commitment to delivering healthy, clean, and fresh vegetables grown without harmful chemicals, pesticides, fungicide, insecticide, or herbicide, utilizing non-GMO seeds and organic nutrients. Strategic partnerships, such as with AEON Co. (M) Berhad, a leading Malaysian retailer, are also considered a competitive strength, allowing Agroz to build an EduFarm within a shopping mall and introduce a "Farm In Supermarket" concept. The company's positive public image, including recognition by the United Nations Development Programme (UNDP) as an active CEA market player and membership in the ESG Association of Malaysia, further differentiates it.

The company generates revenue primarily from four activities: (i) designing and/or constructing indoor CEA vertical farms, (ii) operating and managing indoor CEA vertical farms, (iii) selling CEA vertical farms, and (iv) selling fresh produce. Revenue from farm solutions includes design services, construction services, and farm sales. Revenue from fresh produce sales comes from produce grown in leased CEA vertical farms and produce outsourced from client farms and other suppliers, distributed directly to wholesale distributors and retailers. The company focuses on maximizing production efficiency and sustainability through CEA methods, minimizing food miles, and reducing carbon footprint. It also supports safety and health by growing pesticide-free produce with rigorous quality control. Agroz leverages advanced technologies like IoT, big data science, machine learning, and artificial intelligence to transform agriculture. Strategic partnerships are crucial for accessing resources, expertise, and market opportunities.

Agroz's product and service lines include CEA vertical farms, which it designs and/or constructs for clients, incorporating its proprietary Agroz OS. Agroz OS integrates digitally automated hardware systems for environmental control, water management, irrigation, nutrient fertigation, LED lighting, and energy monitoring, along with software solutions for email and communication. The company is developing an AI agent system for autonomous farm operation and Agroz ERP for business activity tracking, both expected to be integrated into Agroz OS in 2025. Agroz also offers operation and management services for CEA vertical farms, utilizing its intellectual property. The company sells fully operational and optimized CEA vertical farms to buyers. Additionally, Agroz sells fresh produce, having successfully grown over 50 different crops and currently offering 21 varieties on the market. In 2024, the company focused on the superfood category, including baby spinach and microgreens, which sell at an average price of MYR 9.50 ²⁷ with a gross profit margin of 9% ²⁸, compared to non-superfoods with an average price of MYR 3.37 ²⁹ and a gross profit margin of 5% ³⁰.

For the fiscal year ended December 31, 2024, Agroz Inc. reported total revenue of MYR 40,860,882 ³¹ (USD 9,142,159 ³²). Cost of revenue was MYR 26,045,710 ³³ (USD 5,827,433 ³⁴), resulting in a gross profit of MYR 14,815,172 ³⁵ (USD 3,314,726 ³⁶). Operating profit for the year was MYR 8,019,120 ³⁷ (USD 1,794,187 ³⁸). Net profit for the year was MYR 3,512,168 ³⁹ (USD 785,807 ⁴⁰). Basic and diluted earnings per share were MYR 0.18 ⁴¹ (USD 0.04 ⁴²). Cash at the end of the year was MYR 390,500 ⁴³ (USD 87,370 ⁴⁴). Total non-current liabilities were MYR 8,348,419 ⁴⁵ (USD 1,867,864 ⁴⁶), and current liabilities were MYR 28,976,527 ⁴⁷ (USD 6,483,171 ⁴⁸). Redeemable convertible preference shares (RCPS) totaled MYR 9,590,370 ⁴⁹ (USD 2,145,737 ⁵⁰), with MYR 6,213,040 ⁵¹ (USD 1,390,097 ⁵²) non-current and MYR 3,377,330 ⁵³ (USD 755,640 ⁵⁴) current.

Total revenue for the 2024 fiscal year increased by 121.2% ⁵⁵ to MYR 40,860,882 ⁵⁶ (USD 9,142,159 ⁵⁷) from MYR 18,471,272 ⁵⁸ in the 2023 fiscal year. This increase was driven by a rise in design services revenue from MYR 8,412,500 ⁵⁹ to MYR 17,434,500 ⁶⁰ (USD 3,900,772 ⁶¹), and a significant increase in vegetable sales from MYR 2,058,772 ⁶² to MYR 20,026,208 ⁶³ (USD 4,480,637 ⁶⁴), representing an increase of MYR 17,967,436 ⁶⁵. Cost of revenue increased from MYR 10,207,774 ⁶⁶ in 2023 to MYR 26,045,710 ⁶⁷ (USD 5,827,433 ⁶⁸) in 2024, primarily due to additional costs incurred in tandem with increased fresh produce sales. Selling and promotion expenses decreased from MYR 434,345 ⁶⁹ in 2023 to MYR 208,618 ⁷⁰ (USD 46,676 ⁷¹) in 2024, mainly due to a one-off marketing agency engagement in 2023. General and administrative expenses increased from MYR 1,475,338 ⁷² in 2023 to MYR 6,099,464 ⁷³ (USD 1,364,685 ⁷⁴) in 2024, largely due to higher director fees, professional fees for IPO preparation, and increased wages and benefits from new staff recruitment. Finance costs increased from MYR 505,826 ⁷⁵ in 2023 to MYR 1,673,335 ⁷⁶ (USD 374,390 ⁷⁷) in 2024, driven by increased shareholder subscriptions for RCPS.

During the fiscal year 2024, Agroz continued to operate and manage its 10,021 square foot ⁷⁸ indoor CEA vertical farm in Kota Damansara and the 5,239 square foot ⁷⁹ EduFarm at AEON Mall Alpha Angle. The EduFarm received myGAP.PF certification from the Malaysian government in June 2024, recognizing it as pesticide-free and meeting standards for 20 types of vegetables. The company expanded its fresh produce distribution to Village Grocer, in addition to existing retailers like AEON. Agroz made significant investments in intangible assets, including MYR 6,723,078 ⁸⁰ (USD 1,504,213 ⁸¹) for the development of an AI software platform, an e-commerce website, and the Agroz ERP system, all intended for integration into Agroz OS. The company also initiated a pilot rollout for Agroz Copilot, a generative AI application supported by Microsoft Azure OpenAI Service, which is still under development. Agroz issued 714,979 units ⁸² of AI RCPS for MYR 7,989,890 ⁸³ (USD 1,787,647 ⁸⁴) and converted 419,929 units ⁸⁵ of AI RCPS into ordinary shares. The company also incurred MYR 621,400 ⁸⁶ (USD 139,031 ⁸⁷) in IPO-related costs.

Agroz Inc. anticipates continued growth in the AgTech and CEA vertical farming markets, both globally and within Southeast Asia, particularly in Malaysia. The company plans to maintain its focus on maximizing production efficiency and sustainability through CEA methods, aiming for higher production rates per square meter and minimizing environmental impact by locating farms closer to consumption areas. A key growth area is the further development and launch of its advanced technology solutions. The company is currently integrating an AI agent system into Agroz OS, which is supported by Microsoft AI and is designed to present complex agricultural decisions to farm managers and owners, autonomously executing them after human approval. Agroz anticipates the full deployment of this AI agent system by Q2 of 2025 ⁸⁸. This system is expected to enable vertical farms to be independently and automatically operated. Additionally, Agroz OS will include proprietary software solutions for tracking all business activities through Agroz ERP and financial accounting/bookkeeping via Intuit Quickbooks, with full integration expected in 2025 ⁸⁹.

Another significant growth vector is the planned launch of Agroz Copilot, a proprietary software application supported by generative artificial intelligence (Gen AI) technology through Microsoft Azure OpenAI Service. While a pilot rollout for Agroz Copilot has commenced, the official public launch date is not yet certain. Agroz believes Agroz Copilot will enhance efficiency for human vertical farm operators and contribute to increasing existing revenue streams. The company also plans to increase its promotion of existing superfood products such as kale, arugula, and wild rocket, as these items are nutrient-rich and command higher prices and profit margins.

Operationally, Agroz is focusing on improving efficiency and implementing strict cost controls and budget management, alongside enhancing internal controls to synergize the Group's resources. The company's capital expenditure commitments amounted to MYR 13,313,961 ⁹⁰ (USD 2,978,848 ⁹¹) as of December 31, 2024, primarily for IT software purchases like e-commerce website design, Enterprise Resource Planning (ERP) system, and the development of a comprehensive Robotics AI Platform. The majority of this contractual commitment is due within five years ⁹² and upon project progress. The Robotics AI Platform is designed to facilitate the creation, deployment, and management of intelligent robotic systems, enabling autonomous and robotic decision-making.

Agroz is actively seeking additional financing from both public and private markets to meet its cash requirements for the next 12 months from the audit report issuance date. The company's ability to continue as a going concern is subject to substantial doubt due to insufficient cash flows from operations and the need to raise additional funds to meet obligations and sustain operations. As of December 31, 2024, the Group recognized a liability of MYR 9,590,370 ⁹³ (USD 2,145,737 ⁹⁴) in respect of redeemable convertible preference shares, with an aggregate redemption amount of MYR 10,055,481 ⁹⁵ (USD 2,249,800 ⁹⁶) by December 31, 2024. The company also intends to build strategic partnerships to expand its reach, access new technologies, and leverage complementary strengths through joint ventures, collaborations, or licensing agreements.

Agroz Inc. faces several material risks. The company has a limited operating history, making it difficult to predict growth and future prospects, and there is no guarantee its products or services will remain attractive. The vertical farming industry is new and uncertain, with no assurance of sector growth or the company's profitability even in favorable market conditions. High startup costs are a significant concern in CEA vertical farming, requiring substantial initial investment for infrastructure and climate control systems, along with high electricity and labor costs, with no guarantee of return on investment. Failure to maintain a steady labor supply of personnel with sophisticated knowledge for CEA vertical farms could negatively impact financial performance. The company's planned growth strategy may be harmed by inadequate management, including challenges in working in a regulated environment, establishing strategic supplier relationships, and obtaining adequate capital on acceptable terms. Agroz may become subject to additional regulation of agricultural products beyond current Malaysian laws, which could impact sales or revenues. Agroz Group is currently not in compliance with certain Malaysian Occupational Safety and Health Act 1994 (OSHA 1994) requirements, such as appointing an occupational safety and health coordinator and conducting risk assessments, though the company is working to achieve compliance by June 2025 ⁹⁷. While the penalty fees for non-compliance (up to MYR 50,000 ⁹⁸ or MYR 500,000 ⁹⁹) are not considered a material financial risk, imprisonment of management members for non-compliance would negatively impact operations and financial performance. Changes in consumer preferences, perception, and spending habits in the food industry, or failure to expand product offerings, could negatively impact the business. Reliance on third parties for construction, material delivery, supply chains, and fluctuating material prices may lead to unexpected costs and delays in building CEA vertical farms. Strong competition in the agricultural technology and vertical farming industries, including from startups, established agricultural companies, and traditional farming methods, could lead to price reductions, reduced gross margins, and loss of market share. The limited range of crops currently producible by CEA vertical farming compared to staple crops is a competitive disadvantage against traditional mega-farms. Unexpected network interruptions, security breaches, malware attacks, and failures in information technology systems could negatively impact financial performance. The company may not successfully develop new products and services or improve existing ones, which could adversely affect market share and financial results, and substantial R&D expenditures may not be recouped. Related party transactions, such as significant software development service contracts with Braiven Co., Ltd. (approximately $500,000 ¹⁰⁰ and $4,000,000 ¹⁰¹) and CEA vertical farm design and construction services to Agroz Vertical Farms (approximately $313,000 ¹⁰² in 2024), present a risk of conflicts of interest or influence, despite management's belief that past transactions were on favorable terms. Disruptions to transportation channels for product distribution may adversely affect margins and profitability. Failure to adequately protect intellectual property, including copyrights for Agroz OS software components, Agroz Copilot for Farmers, and the Agroz DTC online marketplace, or trademark applications for "Freshness You Can See, Hear and Taste" which have been provisionally rejected by MYIPO, could materially affect the business. Material weaknesses in internal controls, including lack of effective IT general controls, insufficient financial reporting personnel with IFRS and SEC knowledge, inadequate segregation of duties, and lack of formal internal control policies, could cause investors to lose confidence and adversely affect stock price. The company's future business plans may be hindered by factors beyond its control, such as competition, high exposure to financial, operational, and market risks, and ability to maintain human resources. Unforeseen disasters or crises could disrupt operations, leading to business interruption and financial loss. Dependence on key management personnel means operations may suffer if they cannot be retained or replaced. Litigation, arbitration, or other legal proceedings could result in substantial costs and diversion of resources. As a holding company, Agroz relies on dividends from its operating subsidiary, Agroz Group, which are not expected in the foreseeable future, and any limitations on the subsidiary's ability to pay dividends could materially affect Agroz's ability to grow or fund its business. The existence of Redeemable Convertible Preference Shares (RCPS) may lead to dilution upon conversion or diversion of funds for redemption payments, diminishing returns for ordinary shareholders, as RCPS holders are entitled to a 10% per annum ¹⁰³ dividend prior to ordinary shareholders. The Board of Directors has complete discretion over dividend distributions, meaning investors must rely on price appreciation for returns. Judgments obtained against the company by shareholders may not be enforceable in the Cayman Islands or Malaysia due to differences in legal frameworks. Cayman Islands economic substance requirements may affect business and operations. As a foreign private issuer and emerging growth company, Agroz is exempt from certain U.S. securities rules, which may provide less protection or information to investors compared to U.S. domestic issuers.

Management's message to shareholders conveys a strong commitment to revolutionizing and transforming agricultural production through CEA technology and methods, with a mission to improve food safety, food security, and sustainability for society. They emphasize the vast market potential in AgTech and CEA vertical farming, particularly in Southeast Asia, starting with Malaysia. Management has identified several strategic priorities for the period ahead, including maximizing production efficiency and sustainability through CEA methods to achieve higher yields and lower costs, while minimizing environmental impact by locating farms closer to consumption. A second key priority is supporting safety and health by providing clean, pesticide-free produce grown with non-GMO seeds and organic nutrients. The third strategic priority is leveraging advanced technology to transform agriculture, deploying cutting-edge solutions such as CEA, IoT, big data science, machine learning, and artificial intelligence, with a focus on continuous innovation. Management also highlights the importance of strategic partnerships to access resources, expertise, and market opportunities. For the upcoming period, management anticipates the full deployment of an AI agent system into Agroz OS by Q2 of 2025 ⁸⁸, which is envisioned to enable independent and automatic operation of vertical farms. They also plan to launch Agroz Copilot, a GenAI application, in the future, which is expected to make vertical farming more efficient for clients and increase revenue. Management is actively seeking additional financing from both public and private markets to address liquidity needs and support ongoing operations, acknowledging the substantial doubt about the company's ability to continue as a going concern.