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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission File Number: 001-36316
AgroFresh Solutions, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 46-4007249
(State or other jurisdiction of incorporation) (IRS Employer Identification Number)
One Washington Square
510-530 Walnut Street, Suite 1350
Philadelphia, PA 19106
(Address of principal executive offices)
(267) 317-9139
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.0001 per share AGFS The Nasdaq Stock Market LLC
Warrants to purchase shares of Common Stock AGFSW The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). ☐ Yes x No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
The number of shares of common stock outstanding as of April 27, 2020 was 51,071,123.


TABLE OF CONTENTS
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2
PART I - FINANCIAL INFORMATION
AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
  March 31,
2020 		December 31,
2019
ASSETS    
Current Assets:
Cash and cash equivalents $ 28,300    $ 29,288   
Accounts receivable, net of allowance for doubtful accounts of $2,079 and $2,232, respectively
58,551    68,634   
Inventories 23,154    22,621   
Other current assets 12,889    11,802   
Total Current Assets 122,894    132,345   
Property and equipment, net 12,739    13,177   
Goodwill 6,246    6,323   
Intangible assets, net 620,225    631,369   
Deferred income tax assets 13,523    10,317   
Other assets 11,549    12,161   
TOTAL ASSETS $ 787,176    $ 805,692   
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Current Liabilities:
Accounts payable $ 14,586    $ 15,105   
Current portion of long-term debt 4,966    4,675   
Income taxes payable 5,113    5,648   
Accrued expenses and other current liabilities 21,991    24,350   
Total Current Liabilities 46,656    49,778   
Long-term debt 398,157    398,064   
Other noncurrent liabilities 6,636    7,246   
Deferred income tax liabilities 15,156    16,574   
Total liabilities 466,605    471,662   
Commitments and contingencies (see Note 19)
Stockholders’ Equity:    
Common stock, par value $0.0001; 400,000,000 shares authorized, 51,835,988 and 51,839,527 shares issued and 51,174,607 and 51,178,146 outstanding at March 31, 2020 and December 31, 2019, respectively
5    5   
Preferred stock, par value $0.0001; 1 share authorized and outstanding at March 31, 2020 and December 31, 2019, respectively
—    —   
Treasury stock, par value $0.0001; $661,381 shares at March 31, 2020 and December 31, 2019, respectively
(3,885)   (3,885)  
Additional paid-in capital 561,483    561,006   
Accumulated deficit (203,269)   (199,621)  
Accumulated other comprehensive loss (41,182)   (31,060)  
Total AgroFresh Stockholders’ Equity 313,152    326,445   
Non-controlling interest 7,419    7,585   
Total Stockholders' Equity 320,571    334,030   
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 787,176    $ 805,692   

 See accompanying notes to unaudited condensed consolidated financial statements.
3
AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)

Three Months Ended
March 31, 2020 		Three Months Ended
March 31, 2019
Net sales $ 33,023    $ 38,940   
Cost of sales (excluding amortization, shown separately below) 8,528    11,335   
Gross profit 24,495    27,605   
Research and development expenses 2,642    3,897   
Selling, general and administrative expenses 13,709    15,898   
Amortization of intangibles 10,957    11,616   
Change in fair value of contingent consideration —    190   
Operating loss (2,813)   (3,996)  
Other income (expense) 1,507    (12)  
Gain (loss) on foreign currency exchange 627    (419)  
Interest expense, net (6,966)   (8,745)  
Loss before income taxes (7,645)   (13,172)  
Income taxes benefit (3,831)   (587)  
Net loss including non-controlling interests $ (3,814)   $ (12,585)  
Less: Net loss attributable to non-controlling interests (166)   34   
Net loss attributable to AgroFresh Solutions, Inc $ (3,648)   $ (12,619)  
Net loss per share:
Basic $ (0.08)   $ (0.25)  
Diluted $ (0.08)   $ (0.25)  
Weighted average shares outstanding:    
Basic 50,525,781    50,042,054   
Diluted 50,525,781    50,042,054   
 
See accompanying notes to unaudited condensed consolidated financial statements.

4
AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(In thousands)

Three Months Ended
March 31, 2020 		Three Months Ended
March 31, 2019
Net loss $ (3,814)   $ (12,585)  
Other comprehensive loss:  
Unrealized loss on hedging activity, net of tax of $198 and $—, respectively
(745)   —   
Recognition of gain on hedging activity reclassified to net loss, net of tax of $78 and $75, respectively
(279)   (278)  
Foreign currency translation adjustments (9,098)   (4,303)  
Comprehensive loss $ (13,936)   $ (17,166)  
 
See accompanying notes to unaudited condensed consolidated financial statements.

5
AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In thousands, except share and per share data)

Preferred Stock Common Stock Treasury Stock Additional Paid-in Capital Accumulated
Deficit 		Accumulated
Other
Comprehensive
Loss 		Non-Controlling Interest Total
Stockholders’
Equity
Shares Amount Shares Amount Amount
Balances, December 31, 2019 1    $ —    51,839,527    $ 5    $ (3,885)   $ 561,006    $ (199,621)   $ (31,060)   $ 7,585    $ 334,030   
Stock-based compensation —    —    —    —    —    643    —    —    —    643   
Issuance of stock, net of forfeitures —    —    26,829    —    —    —    —    —    —    —   
Shares withheld for taxes —    —    (30.368)   —    —    (166)   —    —    —    (166)  
Comprehensive loss —    —    —    —    —    —    (3,648)   (10,122)   (166)   (13,936)  
Balances, March 31, 2020 1    $ —    51,835,988    $ 5    $ (3,885)   $ 561,483    $ (203,269)   $ (41,182)   $ 7,419    $ 320,571   


Preferred Stock Common Stock Treasury Stock Additional Paid-in Capital Accumulated
Deficit 		Accumulated
Other
Comprehensive
Loss 		Non-Controlling Interest Total
Stockholders’
Equity
Shares Amount Shares Amount Amount
Balances, December 31, 2018 1    $ —    51,071,573    $ 5    $ (3,885)   $ 535,819    $ (138,789)   $ (28,837)   $ 8,263    $ 372,576   
Stock-based compensation —    —    —    —    —    588    —    —    —    588   
Issuance of stock, net of forfeitures —    —    354,161    —    —    —    —    —    —    —   
Comprehensive loss —    —    —    —    —    —    (12,619)   (4,581)   34    (17,166)  
Balances, March 31, 2019 1    $ —    51,425,734    $ 5    $ (3,885)   $ 536,407    $ (151,408)   $ (33,418)   $ 8,297    $ 355,998   

See accompanying notes to unaudited condensed consolidated financial statements.

6
AgroFresh Solutions, Inc.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(in thousands) Three Months Ended
March 31, 2020 		Three Months Ended
March 31, 2019
Cash flows from operating activities:
Net loss $ (3,814)   $ (12,585)  
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 11,577    12,061   
Provision for bad debts —    (392)  
Stock-based compensation 643    588   
Amortization of deferred financing costs 577    630   
Interest income on interest rate swap (357)   (356)  
Accretion of contingent consideration —    884   
Change in fair value of contingent consideration —    190   
Deferred income taxes (5,231)   (1,781)  
Loss on sales of property 15    49   
Changes in operating assets and liabilities:
Accounts receivable 5,773    2,159   
Inventories (3,503)   823   
Prepaid expenses and other current assets (2,414)   986   
Accounts payable 421    654   
Accrued expenses and other liabilities (1,995)   6,291   
Income taxes payable 125    650   
Other assets and liabilities (763)   (1,873)  
Net cash provided in operating activities $ 1,054    $ 8,978   
Cash flows from investing activities:
Cash paid for property and equipment (438)   (2,586)  
Other investments —    (250)  
Net cash used in investing activities $ (438)   $ (2,836)  
Cash flows from financing activities:
Proceeds from long-term debt 1,070    —   
Repayment of long-term debt (1,305)   (722)  
Net cash used in financing activities $ (235)   $ (722)  
Effect of exchange rate changes on cash and cash equivalents and restricted cash (1,369)   (277)  
Net decrease in cash and cash equivalents and restricted cash $ (988)   $ 5,143   
Cash and cash equivalents and restricted cash, beginning of period 29,817    34,852   
Cash and cash equivalents and restricted cash, end of period $ 28,829    $ 39,995   
Supplemental disclosures of cash flow information:
Cash paid for:
Cash paid for interest $ 6,600    $ 27   
Cash paid for income taxes $ 1,441    $ 599   
Supplemental schedule of non-cash investing and financing activities:
Accrued purchases of property and equipment $ 32    $ 102   
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents $ 28,300    $ 39,995   
Restricted cash within other current assets 529    —   
Total cash and cash equivalents and restricted cash 28,829    39,995   

See accompanying notes to unaudited condensed consolidated financial statements.
7
AgroFresh Solutions, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

AgroFresh Solutions, Inc. (the “Company”) is a global leader in delivering innovative food preservation and waste prevention solutions for fresh produce. The Company is empowering the food industry with a range of integrated solutions designed to help growers, packers and retailers improve produce freshness and quality while preventing waste. The Company has an extensive portfolio of solutions to extend freshness across the produce supply chain from near-harvest up to the point-of-sale. These include HarvistaTM for near-harvest optimization and the SmartFreshTM Quality System, the Company's flagship post-harvest freshness solution. Additional post-harvest freshness solutions include fungicides that can be applied to meet various customer operational requirements in both foggable (ActiMist™) and liquid (ActiSeal™) delivery options. The Company has a controlling interest in Tecnidex Fruit Protection, S.A. (“Tecnidex”), a leading regional provider of post-harvest fungicides, waxes, disinfectants and packinghouse equipment for the citrus market. Beyond apples, SmartFresh technology can provide ready-to-eat freshness for other fruits and vegetables including avocados, bananas, melons, tomatoes, broccoli and mangos. Additionally, LandSpringTM eases transplant shock for higher potential yields. RipeLock is the Company's packaging-based freshness technology solutions for fruits and vegetables, including modified atmosphere packaging. The Company has key products registered in over 50 countries and supports customers with over 25,000 storage rooms globally.

The end-markets that the Company serves are seasonal and are generally aligned with the seasonal growing patterns of the Company’s customers. For those customers growing, harvesting or storing apples and pears, the Company’s core crops, the peak season in the southern hemisphere is the first and second quarters of each year, while the peak season in the northern hemisphere is the third and fourth quarters of each year. Within each half-year period (i.e., January through June for the southern hemisphere, and July through December for the northern hemisphere) the growing season has historically occurred during both quarters. A variety of factors, including weather and fruit quality, may affect the timing of the growing, harvesting and storing patterns of the Company’s customers and therefore shift consumption of the Company’s services and products between the first and second quarters primarily in the southern hemisphere or between the third and fourth quarters primarily in the northern hemisphere.

2. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. These financial statements include all adjustments that are necessary for a fair presentation of the Company's condensed consolidated results of operations, financial condition and cash flows for the periods shown, including normal, recurring accruals and other items. The condensed consolidated results of operations for the interim periods presented are not necessarily indicative of results for the full year. For additional information, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2019.

COVID-19

In March 2020, the World Health Organization characterized the coronavirus ("COVID-19") a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The rapid spread of the pandemic and the continuously evolving responses to combat it have had an increasingly negative impact on the global economy. For the three months ended March 31, 2020, the Company did not experience significant disruptions to operations or supply chains and results have not been materially impacted. However, there were numerous obstacles presented and some localized financial impacts of the pandemic, including the weakening of foreign currencies. While the Company is following the requirements of governmental authorities and taking additional preventative and protective measures to ensure the safety of its workforce, including implementing remote working arrangements and varying procedures for essential workforce, the Company cannot be certain that these measures will be successful in ensuring the health of its workforce which may impact its ability to maintain operations. The rapid development and fluidity of this situation precludes any prediction as to the ultimate material adverse impact of the coronavirus outbreak, although the Company operates in an industry that thus far has not been as severely impacted as others. Nevertheless, the outbreak presents some uncertainty and risk with respect to the Company and its performance and financial results.

Adoption of Highly Inflationary Accounting in Argentina

GAAP requires the use of highly inflationary accounting for countries whose cumulative three-year inflation rate exceeds 100 percent. The Company closely monitors the inflation data and currency volatility in Argentina, where there are multiple data sources for measuring and reporting inflation. In the second quarter of 2018, the Argentine peso rapidly devalued relative to the U.S. dollar, which along with increased inflation, indicated that the three-year cumulative inflation rate in that country exceeded
8
100 percent as of June 30, 2018. As a result, the Company adopted highly inflationary accounting as of July 1, 2018 for its subsidiary in Argentina. Under highly inflationary accounting, the functional currency of the Company's subsidiary in Argentina became the U.S. dollar, and its income statement and balance sheet are measured in U.S. dollars using both current and historical rates of exchange. The effect of changes in exchange rates on Argentine peso-denominated monetary assets and liabilities will be reflected in earnings. As the three-year cumulative inflation rate exceeded 100 percent as of March 31, 2020, there is no change to highly inflationary accounting. As of March 31, 2020, the Company’s subsidiary in Argentina had a net asset position of $5.0 million. Net sales attributable to Argentina were approximately 15% of the Company’s consolidated net sales for each of the three months ended March 31, 2020 and 2019.

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers into geographic region, product and timing of transfer of goods and services. The Company determined that disaggregating revenue into these categories achieves the disclosure objective of depicting how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Revenues for the three months ended March 31, 2020
(in thousands)
Region North America
(1) 		EMEA
(2) 		Latin America
(3) 		Asia Pacific (4) Total Revenue
Product
1-MCP based $ 561    $ 5,320    $ 16,582    $ 4,815    $ 27,278   
Fungicides, waxes, coatings, sanitizers —    3,873    594    —    4,467   
Other* 442    439    355    42    1,278   
$ 1,003    $ 9,632    $ 17,531    $ 4,857    $ 33,023   
Pattern of Revenue Recognition
Products transferred at a point in time $ 581    $ 9,203    $ 17,439    $ 4,815    $ 32,038   
Services transferred over time 422    429    92    42    985   
$ 1,003    $ 9,632    $ 17,531    $ 4,857    $ 33,023   

Revenues for the three months ended March 31, 2019
(in thousands)
Region North America
(1) 		EMEA
(2) 		Latin America
(3) 		Asia Pacific (4) Total Revenue
Product
1-MCP based $ 2,602    $ 6,781    $ 19,469    $ 4,353    $ 33,205   
Fungicides, waxes, coatings, sanitizers —    4,887    565    —    5,452   
Other* 123    12    139    9    283   
$ 2,725    $ 11,680    $ 20,173    $ 4,362    $ 38,940   
Pattern of Revenue Recognition
Products transferred at a point in time $ 2,290    $ 11,074    $ 20,143    $ 4,329    $ 37,836   
Services transferred over time 435    606    30    33    1,104   
$ 2,725    $ 11,680    $ 20,173    $ 4,362    $ 38,940   

*Other includes FreshCloud, technical services and sales-type leases related to Tecnidex.
———————————————————————————————————
(1)         North America includes the United States and Canada.
(2)          EMEA includes Europe, the Middle East and Africa.
(3)          Latin America includes Argentina, Brazil, Chile, Costa Rica, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Peru and Uruguay.
(4)          Asia Pacific includes Australia, China, India, Japan, New Zealand, the Philippines, South Korea, Taiwan and Thailand.

9
Contract Assets and Liabilities

ASC 606 requires an entity to present a revenue contract as a contract asset when the entity performs its obligations under the contract by transferring goods or services to a customer before the customer pays consideration or before payment is due. ASC 606 also requires an entity to present a revenue contract as a contract liability in instances when a customer pays consideration, or an entity has a right to an amount of consideration that is unconditional (e.g. receivable), before the entity transfers a good or service to the customer. The following table presents changes in the Company’s contract assets and liabilities during the three months ended March 31, 2020 and the year ended December 31, 2019:

(in thousands) Balance at
January 1, 2020 		Additions Deductions Balance at
March 31, 2020
Contract assets:
     Unbilled revenue $ 1,666    734    (100)   $ 2,300   
Contract liabilities:           
     Deferred revenue $ 1,175    2,539    (835)   $ 2,879   

(in thousands) Balance at
January 1, 2019 		Additions Deductions Balance at
December 31, 2019
Contract assets:
     Unbilled revenue $ 1,956    10,029    (10,319)   $ 1,666   
Contract liabilities:
     Deferred revenue $ 1,280    3,032    (3,137)   $ 1,175   

The Company recognizes contract assets in the form of unbilled revenue in instances where services are performed by the Company but not billed by period end. The Company recognizes contract liabilities in the form of deferred revenue in instances where a customer pays in advance for future services to be performed by the Company. The Company generally receives payments from its customers based on standard terms and conditions. No significant changes or impairment losses occurred to contract balances during the three months ended March 31, 2020. Amounts reclassified from unbilled revenue to accounts receivable for the three months ended March 31, 2020 and for the year ended December 31, 2019 were $0.1 million and $10.3 million, respectively. Amounts reclassified from deferred revenue to revenue for the three months ended March 31, 2020 and the year ended December 31, 2019 were $0.8 million and $3.1 million, respectively.

Recently Issued Accounting Standards and Pronouncements

In January 2017, the Financial Accounting Standards Board ("FASB") issued ASU No. 2017-04, "Intangibles - Goodwill and Other", which simplifies the test for goodwill impairment. The guidance is effective for the Company beginning in the first quarter of fiscal year 2020. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on the condensed consolidated financial statements of the Company.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments”, which introduces a new
current expense credit loss model to measure impairment on certain types of financial instruments. This update requires an entity to use a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. In addition, the FASB issued various amendments during 2018 and 2019 to clarify the provisions of ASU 2016-13. The standard is effective for fiscal years beginning January 1, 2020, including interim periods. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on the financial statements of the Company.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which is part of the FASB disclosure framework project to improve the effectiveness of disclosures in the notes to the financial statements. The amendments in the new guidance remove, modify and add
certain disclosure requirements related to fair value measurements covered in Topic 820. The new standard was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on the notes to condensed consolidated financial statements of the Company.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, "Income Taxes" and also improve consistent application by clarifying and amending existing guidance. The new standard is
10
effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, with the amendments to be applied on a retrospective, modified retrospective or prospective basis, depending on the specific amendment. The Company is currently evaluating the impact of adopting this guidance.

3.  Business Combinations and Asset Acquisition

Business Combination with Dow

On July 31, 2015 (the "Closing Date"), the Company consummated a business combination (the “Business Combination”) pursuant to the Stock Purchase Agreement, dated April 30, 2015 (the “Purchase Agreement”), by and between the Company and The Dow Chemical Company ("Dow") providing for the acquisition by the Company of the AgroFresh business from Dow, resulting in AgroFresh Inc. becoming a wholly-owned, indirect subsidiary of the Company. Pursuant to the Purchase Agreement, the Company paid the following consideration to Rohm and Haas Company (“R&H”), a subsidiary of Dow: (i) 17.5 million shares of common stock and (ii) $635 million in cash.

Pursuant to a Tax Receivables Agreement among the Company, Dow, R&H and AgroFresh Inc. entered into in connection with the consummation of the Business Combination, as amended on April 4, 2017 (as so amended, the “Tax Receivables Agreement”), the Company was required to pay to Dow 50% of the annual tax savings, if any, in U.S. federal, state and local income tax or franchise tax that the Company actually realized as a result of the increase in tax basis of the AgroFresh assets resulting from a Section 338(h)(10) election that the Company and Dow made in connection with the Business Combination. In December 2019, the Tax Receivables Agreement was terminated, and the Company paid to Dow an aggregate of $16 million in settlement of all past and estimated future liabilities that would have been owed under the Tax Receivables Agreement. Based on this termination, the Company recorded a reduction of liabilities of $27.9 million. This reduction, net of deferred income taxes of $5.9 million, has been recorded to additional paid-in capital since the Tax Receivable Agreement was with a related party and is treated as a capital transaction.

Acquisition of Tecnidex
On November 7, 2017, the Company entered into a definitive agreement to acquire a controlling interest in Tecnidex. The transaction was closed on December 1, 2017. Tecnidex is a leading regional provider of post-harvest fungicides, waxes, coatings, and sanitizers for the citrus market, with clients in 18 countries. For over 35 years, Tecnidex has been helping fruit and vegetable producers offer clean, safe and high-quality products to their regional clients. The acquisition was accounted for as a purchase in accordance with ASC 805, Business Combination.
At the effective date of the acquisition, the Company agreed to pay holders of Tecnidex an estimated $25.0 million in cash for 75% of the outstanding capital stock, of which $20.0 million was paid on December 1, 2017. In 2018, the purchase price was finalized as $22.3 million after giving effect to working capital, net debt and other adjustments. The remaining $2.3 million was paid during 2018.
In accordance with the acquisition method of accounting, the Company has allocated the purchase price to the estimated fair values of the identifiable assets acquired and liabilities assumed, with any excess allocated to goodwill. The preliminary assessment of fair value of the contingent consideration payments on the acquisition date was approximately $0.7 million and was estimated by applying a probability-based income approach utilizing an appropriate discount rate. This estimation was based on significant inputs that are not observable in the market, referred to as Level 3 inputs. During the year ended December 31, 2019 there was a final adjustment made to consideration payable to holders of Tecnidex which resulted in a fair value adjustment of $0.4 million.

4. Related Party Transactions
The Company is a party to an ongoing transition services agreement with Dow, a related party. The Company incurred expenses for such transition services for the three months ended March 31, 2020 and March 31, 2019 as follows:
(in thousands) Three Months Ended March 31, 2020 Three Months Ended March 31, 2019
Ongoing costs of transition services agreement $ 30    $ 30   
Other expenses —    —   
Total incurred expenses $ 30    $ 30   

11
As of March 31, 2020, the Company had an outstanding payable to Dow of $0.02 million related to the Transition Services Agreement. There were no outstanding amounts payable as of March 31, 2019.

Refer to Note 3 regarding the contingent consideration owed to Dow as part of the Business Combination, as well as certain other agreements entered into in connection with the Business Combination, including the termination of the Tax Receivables Agreement in 2019.

During 2016, the Company made a minority investment in RipeLocker, LLC ("RipeLocker"), a company led by George Lobisser, a director of the Company. In February 2019, the Company made a further minority investment in RipeLocker. For the three months ended March 31, 2020, there were no material amounts paid and as of March 31, 2020, there were no material amounts owed to RipeLocker or Mr. Lobisser.

5. Inventories
Inventories at March 31, 2020 and December 31, 2019 consisted of the following:
(in thousands) March 31, 2020 December 31, 2019
Raw material $ 2,788    $ 3,401   
Work-in-process 7,736    7,278   
Finished goods 11,573    10,974   
Supplies 1,057    968   
Total inventories $ 23,154    $ 22,621   

6.  Other Current Assets
The Company's other current assets at March 31, 2020 and December 31, 2019 consisted of the following:
(in thousands) March 31, 2020 December 31, 2019
VAT receivable $ 4,927    $ 4,925   
Prepaid income tax asset 4,021    3,616   
Prepaid and other current assets 3,941    3,261   
Total other current assets $ 12,889    $ 11,802   

7. Property and Equipment
Property and equipment at March 31, 2020 and December 31, 2019 consisted of the following:
(in thousands, except for useful life data) Useful life
(years) 		March 31, 2020 December 31, 2019
Buildings and leasehold improvements
7-20
$ 6,405    $ 6,508   
Machinery & equipment
1-12
10,971    10,954   
Furniture
1-12
2,867    2,681   
Construction in progress 777    902   
$ 21,020    $ 21,045   
Less: accumulated depreciation (8,281)   (7,868)  
Total property and equipment, net $ 12,739    $ 13,177   

Depreciation expense was $0.6 million and $0.4 million for the three months ended March 31, 2020 and 2019, respectively. Depreciation expense is recorded in cost of sales, selling, general and administrative expense and research and development expense in the condensed consolidated statements of operations.

8. Goodwill and Intangible Assets
Changes in the carrying amount of goodwill for the three months ended March 31, 2020 and the twelve months ended December 31, 2019 were as follows:
12
(in thousands) March 31, 2020 December 31, 2019
Beginning balance $ 6,323    $ 6,670   
Foreign currency translation
(77)   (347)  
Ending balance $ 6,246    $ 6,323   

The Company’s intangible assets at March 31, 2020 and December 31, 2019 consisted of the following:
March 31, 2020 December 31, 2019
(in thousands) Gross Carrying
Amount 		Accumulated
Amortization 		Impairment Net Gross Carrying
Amount 		Accumulated
Amortization 		Impairment Net
Other intangible assets:
Developed technology $ 757,858    $ (215,851)   $ —    $ 542,007    $ 758,760    $ (206,998)   $ —    $ 551,762   
In-process research and development 39,000    (7,764)   —    31,236    39,000    (7,222)   —    31,778   
Trade name 26,950    —    —    26,950    27,200    —    27,200   
Service provider network 2,000    —    —    2,000    2,000    —    —    2,000   
Customer relationships 17,786    (2,668)   —    15,118    18,058    (2,993)   —    15,065   
Software 9,736    (6,859)   —    2,877    9,861    (5,347)   (992)   3,522   
Other 100    (63)   —    37    100    (58)   —    42   
Total intangible assets $ 853,430    $ (233,205)   $ —    $ 620,225    $ 854,979    $ (222,618)   $ (992)   $ 631,369   

During 2019, the Company recognized an impairment charge of $1.0 million associated with Verigo software following a partnership agreement with a new technology provider. During the Company's annual impairment testing conducted for the year ended December 31, 2019, the Company accelerated the amortization of Ripelock developed technology based on the Company's remaining expected useful life of the technology. This resulted in an increase to amortization expense of $34.0 million.

At March 31, 2020, the weighted-average amortization periods remaining for developed technology, in-process R&D, customer relationships, software and other was 15.2, 12.6, 14.4, 1.3, and 2.3 years, respectively, and the weighted-average amortization period remaining for these finite-lived intangible assets was 14.9 years.

Estimated annual amortization expense for finite-lived intangible assets subsequent to March 31, 2020 is as follows:
(in thousands) Amount
2020 (remaining) $ 34,097   
2021 44,129   
2022 43,297   
2023 43,196   
2024 43,196   
Thereafter 383,360   
Total $ 591,275   

Amortization expense for intangible assets was $11.0 million and $11.6 million for the three months ended March 31, 2020 and 2019, respectively.

9. Other Assets

The Company’s other assets at March 31, 2020 and December 31, 2019 consisted of the following:
(in thousands) March 31, 2020 December 31, 2019
Right-of-use asset $ 6,124    $ 6,599   
Long term sales-type lease receivable 2,191    2,501   
Other long term receivable 3,234    3,061   
Total other assets $ 11,549    $ 12,161   
13

10. Accrued and Other Current Liabilities
The Company’s accrued and other current liabilities at March 31, 2020 and December 31, 2019 consisted of the following:
(in thousands) March 31, 2020 December 31, 2019
Accrued compensation and benefits $ 4,758    $ 7,307   
Accrued rebates payable 2,479    1,377   
Insurance premium financing payable 505    1,000   
Severance 42    444   
Deferred revenue 2,879    1,175   
Accrued taxes 3,145    3,017   
Accrued interest 92    71   
Lease liability 1,418    1,493   
Other 6,673    8,466   
Total accrued and other current liabilities $ 21,991    $ 24,350   

Other current liabilities include primarily professional services, litigation and research and development accruals.

11. Debt
The Company’s debt, net of unamortized deferred issuance costs, at March 31, 2020 and December 31, 2019 consisted of the following:
(in thousands) March 31, 2020 December 31, 2019
Total Term Loan outstanding $ 404,813    $ 405,875   
Unamortized deferred issuance costs (3,297)   (3,886)  
Tecnidex loan outstanding 1,607    750   
Less: Amounts due within one year 4,966    4,675   
Total long-term debt due after one year $ 398,157    $ 398,064   

On March 23, 2020, Tecnidex entered into a €1.0 million loan agreement with Banco Santander, S.A., which provides funding through March 2023 at a 1.5% interest rate.

At March 31, 2020, the Company evaluated the amount recorded under the Term Loan (defined below) and determined that the fair value was approximately $315.8 million. The fair value of the debt is based on quoted inactive market prices and is therefore classified as Level 2 within the valuation hierarchy.

The Term Loan is presented net of deferred issuance costs, which are amortized using the effective interest method over the term of the Term Loan. Gross deferred issuance costs at the inception of the Term Loan were $12.9 million and as of March 31, 2020 there were $3.3 million of unamortized deferred issuance costs.

Scheduled principal repayments of debt subsequent to March 31, 2020 are as follows:
(in thousands) Amount
2020 (remaining) $ 3,782   
2021 402,117   
2022 417   
2023 104   
Total $ 406,420   

Credit Facility

On July 31, 2015, in connection with the consummation of the Business Combination, AgroFresh Inc. as the borrower and its parent, AF Solutions Holdings LLC (“AF Solutions Holdings”), a wholly-owned subsidiary of the Company, as the guarantor,
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entered into a Credit Agreement with Bank of Montreal, as administrative agent (as subsequently amended, the “Credit Facility”). The Credit Facility consists of a $425.0 million term loan (the “Term Loan”), with an amortization equal to 1.00% per year, and a revolving loan facility (the “Revolving Loan”). On January 31, 2019, the Revolving Loan was amended to reduce the total availability from $25.0 million to $12.5 million, to extend the maturity date from July 31, 2019 to December 31, 2020, and to amend certain financial covenants. On December 23, 2019, the Revolving Loan was further amended to extend the maturity date from December 31, 2020 to April 1, 2021 and to amend one of the financial covenants.

The Revolving Loan includes a $10.0 million letter-of-credit sub-facility, issuances against which reduce the available capacity for borrowing. As of March 31, 2020, the Company had issued $0.03 million of letters of credit, against which no funds have been drawn. The Term Loan has a scheduled maturity date of July 31, 2021. The interest rates on borrowings under the facilities are either the alternate base rate plus 3.75% or LIBOR plus 4.75% per annum, with a 1.00% LIBOR floor (with step-downs in respect of borrowings under the Revolving Loan dependent upon the achievement of certain financial ratios). The obligations under the Credit Facility are secured by liens on substantially all of the assets of (a) AgroFresh Inc. and its direct wholly-owned domestic subsidiaries, and (b) AF Solutions Holdings, including the common stock of AgroFresh Inc.

The net proceeds of the Term Loan were used to fund a portion of the purchase price payable to Dow in connection with the Business Combination. Amounts available under the Revolving Loan may also be used for working capital, general corporate purposes, and other uses, all as more fully set forth in the Credit Agreement. At March 31, 2020, there was $404.8 million outstanding under the Term Loan and no balance outstanding under the Revolving Loan. If the Company is unable to obtain additional debt or equity capital, restructure or refinance its indebtedness, or avail itself of alternative actions, the Term Loan will become a current liability in the third quarter of 2020.

As of the Closing Date, the Company incurred approximately $12.9 million in debt issuance costs related to the Term Loan and $1.3 million in costs related to the Revolving Loan. The debt issuance costs associated with the Term Loan were capitalized against the principal balance of the debt, and the Revolving Loan costs were capitalized in Other Assets. All issuance costs will be accreted through interest expense for the duration of each respective debt facility. The interest expense related to the amortization of the debt issuance costs during the three months ended March 31, 2020 and 2019 was approximately $0.6 million and $0.6 million, respectively.

Certain restrictive covenants are contained in the Credit Facility, which includes the Revolving Loan, and the Company was in compliance with these covenants as of March 31, 2020, other than covenants that apply only to the Company's ability to borrow under the Revolving Loan (excluding letters of credit).

The Company entered into an interest rate swap contract in August 2019 to hedge interest rate risk associated with the Term Loan. During the three months ended March 31, 2020, an unrealized loss of $0.9 million was recognized in connection with this swap. The interest rate swap contract matures on December 31, 2020.

Beginning with the year ended December 31, 2016, the Company is required to prepay Term Loan Borrowings and Incremental Term Loan Borrowings in an aggregate amount equal to 50% of the "Excess Cash Flow" (as defined in the Credit Facility) for the fiscal year; provided that such amount of the Excess Cash Flow in any fiscal year shall be reduced by (i) the aggregate amount of prepayments of Term Loans and Incremental Term Loans made, (ii) to the extent accompanied by permanent reductions of Revolving Commitments, the aggregate amount of prepayments of Revolving Loans (other than prepayments financed with the proceeds of Indebtedness), and (iii) repaid borrowings of Revolving Loans made on the Effective Date to account for any additional original issue discount or upfront fees that are implemented pursuant to the Fee Letter provided further that, prepayments of Term Loan Borrowings and Incremental Term Loan Borrowings shall only be required if 50% of the Excess Cash Flow for such fiscal year exceeds $5.0 million. There are no amounts due under this provision as of March 31, 2020.

12. Leases
The Company enters into lease agreements for certain facilities and vehicles that are primarily used in the ordinary course of business. These leases are accounted for as operating leases, whereby lease expense is recognized on a straight-line basis over the term of the lease.

Most leases include an option to extend or renew the lease term. The exercise of the renewal option is at the Company's discretion. The operating lease liability includes lease payments related to options to extend or renew the lease term if the Company is reasonably certain of exercising those options. The Company, in determining the present value of lease payments, uses the Company’s incremental secured borrowing rate commensurate with the term of the underlying lease.

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Lease expense is primarily included in general and administrative expenses in the condensed consolidated statements of operations. Additional information regarding the Company's operating leases is as follows:
(in thousands) Three months ended March 31, 2020 Three months ended March 31, 2019
   Operating leases $ 606    $ 601   
   Short-term leases (1)
87    31   
Total lease expense $ 693    $ 632   
(1) Leases with an initial term of twelve months or less are not recorded on the balance sheet.

Other information on operating leases Three months ended March 31, 2020 Three months ended March 31, 2019
Cash payments included in operating cash flows $ 521    $ 585   
Right-of-use assets obtained in exchange for new lease $ 21    $ 33   
Weighted average discount rate 9.33  % 9.21  %
Weighted average remaining lease term in years 5.30 years 5.83 years

The following table presents the contractual maturities of the Company's lease liabilities as of March 31, 2020:
(in thousands) Lease Liability
Remainder of 2020 $ 1,378   
2021 1,771   
2022 1,518   
2023 1,273   
2024 and thereafter 2,374   
Total undiscounted lease payments $ 8,314   
Less: present value adjustment 1,971   
Operating lease liability $ 6,343   

The following table presents the contractual maturities of the Company's lease liabilities as of December 31, 2019:
(in thousands) Future lease Payments
2020 $ 1,939   
2021 1,670   
2022 1,509   
2023 1,294   
2024 and thereafter 2,380   
Total undiscounted lease payments $ 8,792   
Less: present value adjustment 1,960   
Operating lease liability $ 6,832   
13. Other Noncurrent Liabilities
The Company’s other noncurrent liabilities at March 31, 2020 and December 31, 2019 consisted of the following:
(in thousands) March 31, 2020 December 31, 2019
Lease liability $ 4,925    $ 5,339   
Other (1)
1,711    1,907   
Total other noncurrent liabilities $ 6,636    $ 7,246   

(1) Other noncurrent liabilities include long-term rebates and pension liabilities.

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14. Severance
Severance expense was $0.04 million and $0.5 million for the three months ended March 31, 2020 and 2019. These amounts, which do not include stock compensation expense, were recorded in selling, general and administrative expense in the condensed consolidated statements of operations. As of March 31, 2020 and December 31, 2019, the Company had a $0.04 million and $0.4 million severance liability, respectively.

15. Stockholders’ Equity
The authorized common stock of the Company consists of 400,000,000 shares with a par value of $0.0001 per share. Holders of the Company’s common stock are entitled to one vote for each share of common stock. As of March 31, 2020, there were 51,174,607 shares of common stock outstanding. As of March 31, 2020, there were warrants to purchase 15,983,072 shares of the Company’s common stock outstanding at a strike price of $11.50. Of the 15,983,072 warrants, 9,823,072 were issued as part of the units sold in the Company's initial public offering in February 2014 (1,201,928 warrants were subsequently repurchased during 2015) and 6,160,000 warrants were sold in a private placement at the time of such public offering.

In connection with and as a condition to the consummation of the Business Combination, the Company issued R&H one share of Series A Preferred Stock. R&H, voting as a separate class, is entitled to appoint one director to the Company’s board of directors for so long as R&H beneficially holds 10% or more of the aggregate amount of the outstanding shares of common stock and non-voting common stock of the Company. The Series A Preferred Stock has no other rights.

16. Stock-based Compensation
In July 2015, the Company adopted the 2015 Incentive Compensation Plan (as amended, the “Plan”), pursuant to which the Compensation Committee of the Company is authorized to grant up to 7,150,000 shares to officers and employees of the Company, in the form of equity-based awards, including time or performance based options and restricted stock.

In June 2019, the Company's shareholders approved the 2019 Employee Stock Purchase Plan (the "ESPP"), which was effective July 1, 2019. 500,000 shares of common stock are reserved for issuance under the ESPP. As of March 31, 2020, 168,673 shares had been issued under the ESPP.

Stock compensation expense for equity-classified and liability-classified awards for the three months ended March 31, 2020 and 2019 was $0.8 million and $0.6 million, respectively. Stock compensation expense is recognized in cost of goods sold, selling, general and administrative expenses and research and development expenses. At March 31, 2020, there was $2.7 million of unrecognized compensation cost relating to outstanding unvested equity instruments expected to be recognized over the weighted average period of 1.6 years.

17. Earnings Per Share
Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. The Company had a loss for the three months ended March 31, 2020 and 2019. Therefore, the effect of stock-based awards including options, restricted stock, restricted stock units and warrants outstanding at March 31, 2020 and 2019, respectively, have not been included in the computation of diluted loss per share because their inclusion would have been anti-dilutive.

The following is a reconciliation of the weighted-average common shares outstanding used for the computation of basic and diluted net (loss) income per common share:
Three Months Ended
March 31, 2020 		Three Months Ended
March 31, 2019
Basic weighted-average common shares outstanding 50,525,781    50,042,054   
Effect of dilutive options, performance stock units and restricted stock —    —   
Diluted weighted-average shares outstanding 50,525,781    50,042,054   
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Securities that could potentially be dilutive are excluded from the computation of diluted (loss) income per share when a loss from continuing operations exists, when the exercise price exceeds the average closing price of the Company's common stock during the period, or for contingently issued shares, if the contingency is not met at the end of the reporting period, because their inclusion would result in an anti-dilutive effect on per share amounts.

The following represents the number of shares that could potentially dilute basic earnings per share in the future:
Three Months Ended
March 31, 2020 		Three Months Ended
March 31, 2019
Stock-based compensation awards(1):
Stock options 862,945    962,795   
Restricted stock to non-directors 592,833    692,947   
Restricted stock to directors —    64,369   
Warrants:
Private placement warrants 6,160,000    6,160,000   
Public warrants 9,823,072    9,823,072   
(1)          SARs and Phantom Shares are payable in cash so will have no impact on number of shares.
 
Warrants and options are considered anti-dilutive and excluded when the exercise price exceeds the average market value of the Company’s common stock price during the applicable period.

18. Income Taxes
The provision for income taxes consists of provisions for federal, state and foreign incomes taxes. The effective tax rates for the periods ended March 31, 2020 and March 31, 2019, reflect the Company’s expected tax rate on reported income from continuing operations before income tax and tax adjustments. The Company operates in a global environment with significant operations in the U.S. and various other jurisdictions outside the U.S. Accordingly, the consolidated income tax rate is a composite rate reflecting the Company’s earnings and the applicable tax rates in the various jurisdictions where the Company operates.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act includes tax changes and financial aid designed to protect the American people from the public health and economic impacts of COVID-19. The tax changes include allowing net operating losses to be carried back five years, suspending the 80% of taxable limitation on the use of net operating losses, an increase of the 30% of EBITDA limitation on the deduction of interest expense to 50%, and acceleration of the refund for alternative minimum tax credits granted under the 2017 Tax Cuts and Jobs Act (“TCJA”). Most significant to the Company are the modifications on the limitation of business interest deductions for tax years beginning in 2019 and 2020. The modifications to Section 163(j) increase the allowable business interest deduction from 30% to 50% of adjusted taxable income. This modification is expected to increase the allowable interest expense deduction of the Company in the current year.

The Company's effective tax rate for the three months ended March 31, 2020 was 50.1%, compared to the effective tax rate for the three months ended March 31, 2019 of 4.5%.

The effective tax rate for the three months ended March 31, 2020 differs from the U.S. statutory tax rate of 21%, due primarily to changes in valuation allowance positions related to the United States and certain foreign jurisdictions and the elimination of intercompany profit activity, offset by foreign exchange currency gains.

19. Segment Information
The authoritative guidance for disclosures about segments of an enterprise establishes standards for reporting information about segments. It defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. We currently operate and manage our business as two operating segments. Our chief operating decision-makers allocate resources and assess performance of the business for each segment. Accordingly, we consider ourselves to have two operating and reportable segments (i) AgroFresh core and (ii) Tecnidex. AgroFresh core business is providing produce preservation and waste prevention solutions for growers and packers. Its products include SmartFresh, Harvista, RipeLock and FreshCloud. Tecnidex is a provider of fungicides, sanitizers, waxes and coatings primarily focused on the citrus market.

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Our chief operating decision-makers do not evaluate operating segments using asset or liability information. The following table presents a breakdown of our revenues and gross profit based on reportable segments for the three months ended March 31, 2020 and 2019.
(in thousands) Three Months Ended
March 31, 2020 		Three Months Ended
March 31, 2019
AgroFresh Core
     Revenues $ 28,642    $ 33,488   
     Gross Profit 22,395    25,133   
Tecnidex
     Revenues 4,381    5,452   
     Gross Profit 2,100    2,472   
Total Revenues $ 33,023    $ 38,940   
Total Gross Profit $ 24,495    $ 27,605   


20. Commitments and Contingencies
The Company is currently involved in various claims and legal actions that arise in the ordinary course of business. The Company has recorded reserves for loss contingencies based on the specific circumstances of each case. Such reserves are recorded when it is probable that a loss has been incurred as of the balance sheet date and can be reasonably estimated. Although the results of litigation and claims can never be predicted with certainty, the Company does not believe that the ultimate resolution of these actions will have a material adverse effect on the Company’s business, financial condition or results of operations.

On October 14, 2019, the Company was awarded a verdict of $31.1 million in damages, related to, among other things, trade secret misappropriation and willful patent infringement, in its litigation against Decco Post-Harvest, Inc. ("Decco") and Decco's parent company, UPL Limited. The award is subject to post-verdict review by the Court and any appeals that may be taken by the parties in the future.
 
Purchase Commitments
 
The Company has various purchasing contracts for contract manufacturing and research and development services which are based on the requirements of the business. Generally, the contracts are at prices not in excess of current market prices and do not commit the business to obligations outside the normal customary terms for similar contracts.

21. Fair Value Measurements
Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the fair value of the Company’s financial instruments that are measured at fair value on a recurring basis as of March 31, 2020:
(in thousands) Level 1 Level 2 Level 3 Total
Liability-classified stock compensation (1)
$ —    $ —    $ 212    $ 212   
Interest rate swap —    —    848    848   
Total $ —    $ —    $ 1,060    $ 1,060   

The following table presents the fair value of the Company’s financial instruments that are measured at fair value on a recurring basis as of December 31, 2019:
(in thousands) Level 1 Level 2 Level 3 Total
Liability-classified stock compensation (1)
$ —    $ —    $ 218    $ 218   
Interest rate swap —    —    (95)   (95)  
Total $ —    $ —    $ 123    $ 123   



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(1) The fair values of phantom stock units were estimated using a Monte Carlo simulation pricing model with the assumptions described below:
March 31, 2020
Grant date fair value $2.97 — $7.28
Risk-free interest rate 2.36% — 2.39%
Expected life (years) 2.75
Estimated volatility factor 65.1% — 69.9%
Expected dividends None

There were no transfers between Level 1 and Level 2 and no transfers out of Level 3 of the fair value hierarchy during the three months ended March 31, 2020.

At March 31, 2020, the Company evaluated the amount recorded under the Term Loan and determined that the fair value was approximately $315.8 million. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value.

Changes in Financial Instruments Measured at Level 3 Fair Value on a Recurring Basis
The following table presents the changes during the period presented in the Company's Level 3 financial instrument liabilities that are measured at fair value on a recurring basis.
(in thousands) Liability-classified stock compensation Interest rate swap Total
Balance, December 31, 2019 $ 218    $ (95)   $ 123   
Stock compensation activity (6)   —    (6)  
Mark-to-market adjustment —    943    943   
Balance, March 31, 2020 $ 212    $ 848    $ 1,060   

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As used in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), the terms “Company,” “AgroFresh,” “we,” “us” and “our” refer to AgroFresh Solutions, Inc. and its consolidated subsidiaries, unless the context otherwise requires or it is otherwise indicated.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Report.

This MD&A contains the financial measures EBITDA and Adjusted EBITDA, which are not presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These non-GAAP financial measures are being presented because management believes that they provide readers with additional insight into the Company’s operational performance relative to earlier periods and relative to its competitors and they are key measures used by the Company to evaluate its performance. The Company does not intend for these non-GAAP financial measures to be a substitute for any GAAP financial information. Readers of this MD&A should use these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures. A reconciliation of EBITDA and Adjusted EBITDA to the most comparable GAAP measure is provided in this MD&A.

Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report including, without limitation, statements in this MD&A regarding the Company's financial position, business strategy and the plans and objectives of management for future operations, are forward looking statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to the Company or its management, identify forward looking statements. Such forward looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. Actual results and/or the timing of events could differ materially from those contemplated by these forward-looking statements due to a number of factors, including those discussed under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 (the "2019 Form 10-K") as well as the update to those Risk Factors disclosed in Part II, Item 1A of this Report. Any forward-looking statements included in this Report are based only on information currently available to the Company and speak only as of the date on which such statements are made. The Company undertakes no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. All subsequent written or oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are qualified in their entirety by this paragraph.

Business Overview
AgroFresh is a global leader in delivering innovative food quality preservation and waste prevention solutions for fresh produce. The Company is empowering the food industry with a range of integrated solutions designed to help growers, packers and retailers improve produce freshness and quality while reducing waste. AgroFresh has key products registered in over 50 countries and supports customers with over 25,000 storage rooms globally. AgroFresh has an extensive portfolio of freshness solutions ranging from LandSpringTM for transplanted seedlings, near-harvest with HarvistaTM and post-harvest including its flagship SmartFreshTM technology. Additional post-harvest freshness solutions include fungicides that can be applied to meet various customer operational requirements, in either a foggable (ActiMist™) or liquid (ActiSeal™) delivery form. To supplement our near- and post-harvest product solutions, our suite of FreshCloud™ analytical, diagnostic and tracking services provide a range of value-added capabilities that help customers optimize the quality of their produce. Beyond apples, SmartFresh technology can provide ready-to-eat freshness for other fruits and vegetables including avocados, bananas, melons, tomatoes, broccoli and mangos. AgroFresh is also providing customers with packaging-based advisory services and custom packaging solutions including RipeLock, our packaging-based freshness technology solutions for fruits and vegetables.

In December 2017, AgroFresh acquired a controlling interest in Tecnidex. With this acquisition, AgroFresh expanded its post-harvest presence into additional crops, and increased its penetration of the produce market in southern Europe, Latin America and Africa. This acquisition expanded AgroFresh's product portfolio into waxes and coatings and reinforced its position in fungicides. For over 35 years, Tecnidex has been helping fruit and vegetable producers offer clean, safe and high-quality produce to customers, now reaching 18 countries. Through its portfolio of post-harvest fungicides, coatings, waxes, disinfectants, equipment and associated consulting and after-sale services, Tecnidex improves the quality and value of its clients’ fruit and vegetables while respecting the environment. Tecnidex further diversified AgroFresh’s revenue by expanding the Company's ability to provide solutions and service to the citrus industry.
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Freshness is the most important driver of consumer satisfaction when it comes to produce and, at the same time, lack of freshness results in waste which is a major issue in the industry. About one third of the total food produced worldwide is lost or wasted each year. Nearly 45% of all fresh fruits and vegetables, 40% of apples and 20% of bananas, are lost to spoilage. AgroFresh plays a key role in the value chain by offering products and services that maintain produce freshness and reduce waste.
 
AgroFresh’s current flagship product, SmartFresh, regulates the post-harvest ripening effects of ethylene, the naturally occurring plant hormone that triggers ripening in certain fruits and vegetables. SmartFresh is naturally biodegradable, leaves no detectable residue and has been approved for use by many domestic and global regulatory organizations. Harvista extends the Company’s proprietary technology into the field, including treatment of cherries and blueberries early in the growing season and near-harvest management of apples and pears. FreshCloud Storage InsightsTM is an atmospheric monitoring system that leverages the Company's extensive understanding of fruit physiology, fruit respiration, controlled atmosphere technology and new proprietary diagnostic tools to provide improved real-time guidance to producers and packers of fresh produce regarding storage conditions so timely corrective measures can be taken. LandSpringTM is an innovative 1-MCP technology targeted to transplanted vegetable seedlings. It is currently registered for use on tomatoes, peppers and 14 other crops in the US. It reduces transplant shock, resulting in less seedling mortality and faster crop establishment, which leads to a healthier crop and improved yields.

AgroFresh’s business is highly seasonal, driven by the timing of harvests in the northern and southern hemispheres. For apples and pears, the first half of the year is when the southern hemisphere harvest occurs and the second half of the year is when the northern hemisphere harvest occurs. Since the northern hemisphere harvest of apples, our primary crop, is typically larger, a significant portion of our sales and profits are historically generated in the second half of the year. In addition to this seasonality, factors such as weather patterns may impact the timing of the harvest within the two halves of the year. Diversifying into other crops is a key strategy to balance seasonality, therefore there is a strategic importance of the Tecnidex acquisition since the citrus harvest in northern hemisphere countries occurs in the last and first quarters of the year.

On July 31, 2015 (the “Closing Date”), we consummated a business combination (the “Business Combination”) pursuant to a Stock Purchase Agreement, dated April 30, 2015 (the “Purchase Agreement”), with Dow, providing for the acquisition by us of the AgroFresh business from Dow. In connection with the closing of the Business Combination, we entered into a tax receivables agreement (the "TRA"), as amended in April 2017, pursuant to which Dow was entitled to receive 50% of the tax savings, if any, that the Company realized as a result of the increase in the tax basis of assets acquired pursuant to the Business Combination. The TRA was terminated in December 2019. Also in connection with the closing of the Business Combination, AgroFresh entered into a transition services agreement with Dow. Under the agreement, Dow provided AgroFresh a suite of services for a period of time ranging from six months to five years depending on the service. While most of the Dow-provided services were complete as of December 31, 2018, certain services are expected to continue through 2020.
 
Factors Affecting the Company’s Results of Operations
The Company’s results of operations are affected by a number of external factors. Some of the more important factors are briefly discussed below.

Impact of COVID-19

In March 2020, the COVID-19 outbreak was declared a National Public Health Emergency which continues to spread throughout the world and has adversely impacted global activity and contributed to significant declines and volatility in financial markets. The outbreak could have a continued material adverse impact on economic and market conditions and trigger a period of global economic slowdown. For the three months ended March 31, 2020, the Company did not experience significant disruptions to operations or supply chains and results have not been materially impacted. However, there were numerous obstacles presented and some localized financial impacts of the pandemic, including the weakening of foreign currencies. While we are following the requirements of governmental authorities and taking additional preventative and protective measures to ensure the safety of our workforce, including implementing remote working arrangements and varying procedures for essential workforce, we cannot be certain that these measures will be successful in ensuring the health of our workforce which may impact our ability to maintain our operations. The rapid development and fluidity of this situation precludes any prediction as to the ultimate material adverse impact of the coronavirus outbreak, although the Company operates in an industry that thus far has not been as severely impacted as others. Nevertheless, the outbreak presents some uncertainty and risk with respect to the Company and its performance and financial results.

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Demand for the Company’s Offerings

The Company services customers in over 50 countries and derives its revenue by assisting growers and packers to optimize the value of their crops primarily through the post-harvest period. Its products and services add value to customers by reducing food spoilage and extending the life of perishable fruits. The U.S. Food and Agriculture Organization of the United Nations has estimated that a growing global population will require a near doubling of food production in developing countries by 2050 to meet the expected demand of a worldwide population of 9 billion people.
 
This global trend, among others, creates demand for the Company’s solutions. The Company’s offerings are currently protected by patent filings in 51 countries.
 
The global produce market is a function of both the size and the yield of the crop harvested, and variations in either will affect total production. Given the nature of the agricultural industry, weather patterns may impact total production and the Company's resulting commercial opportunities. The Company supports a diverse customer base whose end markets vary due to the type of fruit and quality of the product demanded in their respective markets. Such variation across end markets also affects demand for the Company’s services.

Customer Pricing
The Company’s service offerings are priced based on the value they provide to the Company’s customers. From time to time, the Company adjusts the pricing of its offerings to address market and volume trends. The Company does not typically price its products in relation to any underlying cost of materials or services; therefore, its margins can fluctuate with changes in these costs. The Company’s pricing may include rebate arrangements with customers in exchange for mutually beneficial long-term relationships and growth.

Integrated Service Model
AgroFresh uses a direct service model to offer the Company’s commercially available products, including SmartFresh and Harvista. Sales and technical support personnel maintain face-to-face relationships with customers year round. Technical sales and support personnel work directly with customers to provide value-added advisory services regarding the application of SmartFresh. The actual application of SmartFresh is performed by service providers that are typically third-party contractors or, for some product variations, made by our customers directly. The Harvista application service, through both aerial and ground application, is also administered by third-party service providers or made by our customers directly.
 
Most of the Company’s service providers are operating under multi-year contracts. Management believes the quality and experience of its service providers deliver clear commercial benefits.

Seasonality
 
The Company’s operations are subject to seasonal variation due to the timing of the growing seasons around the world. For our core crops of apples and pears, northern hemisphere growers harvest from August through November, and southern hemisphere growers harvest from late January to early May. As we diversify into other crops, such as citrus, we also anticipate seasonal variations in this business due to the northern hemisphere citrus harvest, which spans from October to March. Since the majority of the Company’s sales are in northern hemisphere countries, a proportionately greater share of its revenue is realized during the second half of the year. There are also variations in the seasonal demands from year to year depending on weather patterns and crop size. This seasonality and variations in seasonal demand could impact the ability to compare results between periods.
 
Foreign Currency Exchange Rates
With a global customer base and geographic footprint, the Company generates revenue and incurs costs in a number of different currencies, with the Euro comprising the most significant non-U.S. currency. Fluctuations in the value of these currencies relative to the U.S. dollar can increase or decrease the Company’s overall revenue and profitability as stated in U.S. dollars, which is the Company’s reporting currency. In certain instances, if sales in a given geography have been adversely impacted on a long-term basis due to foreign currency depreciation, the Company has been able to adjust its pricing so as to mitigate the impact on profitability.

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Domestic and Foreign Operations
The Company has both domestic and foreign operations. Fluctuations in foreign exchange rates, regional growth-related spending in research and development (“R&D”) and marketing expenses, and changes in local selling prices, among other factors, may impact the profitability of foreign operations in the future.

Critical Accounting Policies and Use of Estimates
Critical accounting policies are those accounting policies that can have a significant impact on the presentation of our financial condition and results of operations and that require the use of complex and subjective estimates based upon management’s judgment. Because of the uncertainty inherent in such estimates, actual results may differ materially from these estimates. There have been no material changes to our critical accounting policies and estimates previously disclosed in the 2019 Form 10-K. For a description of our critical accounting policies and estimates as well as a listing of our significant accounting policies, see “Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Use of Estimates” and “Note 2 - Basis of Presentation and Summary of Significant Accounting Policies” in the 2019 Form 10-K. 
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Results of Operations
The following table summarizes the results of operations for the three months ended March 31, 2020 and March 31, 2019:
(in thousands) Three Months Ended
March 31, 2020 		Three Months Ended
March 31, 2019
Net sales $ 33,023    $ 38,940   
Cost of sales (excluding amortization, shown separately below) 8,528    11,335   
Gross profit 24,495    27,605   
Research and development expenses 2,642    3,897   
Selling, general and administrative expenses 13,709    15,898   
Amortization of intangibles 10,957    11,616   
Change in fair value of contingent consideration —    190   
Operating loss (2,813)   (3,996)  
Other income (expense) 1,507    (12)  
Gain (loss) on foreign currency exchange 627    (419)  
Interest expense, net (6,966)   (8,745)  
Loss before income taxes (7,645)   (13,172)  
Income taxes benefit (3,831)   (587)  
Net loss including non-controlling interests $ (3,814)   $ (12,585)  
Less: Net (loss) gain attributable to non-controlling interests (166)   34   
Net loss attributable to AgroFresh Solutions, Inc $ (3,648)   $ (12,619)  

Comparison of Results of Operations for the three months ended March 31, 2020 compared to the three months ended March 31, 2019.

Net Sales

Net sales were $33.0 million for the three months ended March 31, 2020, as compared to net sales of $38.9 million for the three months ended March 31, 2019, a decrease of 15.2%. The impact of the change in foreign currency exchange rates compared to the first quarter of 2019 reduced revenue by $2.1 million. Excluding this impact, revenue decreased approximately 9.8%. The net sales decrease was primarily the result of adverse harvest conditions experienced in key Latin American markets, such as Brazil, Chile, Argentina and Australia which are impacting harvest timing, logistics and yields.

Cost of Sales

Cost of sales was $8.5 million for the three months ended March 31, 2020 as compared to $11.3 million for the three months ended March 31, 2019. Gross profit margin was 74.2% for the three months ended March 31, 2020 versus 70.9% for the three months ended March 31, 2019. The higher gross margin was primarily the result of supply chain efficiencies that were put in place at the end of 2019.

Research and Development Expenses

Research and development expenses were $2.6 million and $3.9 million, respectively, for the three months ended March 31, 2020 and March 31, 2019. The decrease in research and development expenses was primarily driven by $0.5 million of severance costs associated with ongoing cost optimization initiatives recognized during the three months ended March 31, 2019 along with timing of project expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $13.7 million for the three months ended March 31, 2020 compared to $15.9 million for the three months ended March 31, 2019, a decrease of 13.8%. Included in selling, general and administrative expenses were $1.7 million in the current year and $3.2 million in the prior year of costs associated with non-recurring items that include
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M&A and litigation costs. Excluding these items, selling general and administrative expenses decreased approximately 5.8% over the same period last year driven by ongoing cost optimization initiatives.

Amortization of Intangibles

Amortization of intangible assets was $11.0 million for the three months ended March 31, 2020 compared to $11.6 million for the three months ended March 31, 2019. The reduction in the amortization expense for the three months ended March 31, 2020 is due to the accelerated amortization of RipeLock in December 2019 of $38.0 million, which resulted in lower quarterly amortization of $0.6 million.

Impairment of Intangibles

There were no indicators of impairment during the three months ended March 31, 2020 and 2019, respectively.

Change in Fair Value of Contingent Consideration
 
The Company recorded no gain or loss in the three months ended March 31, 2020 related to a change in the fair value of contingent consideration, as compared to a $0.2 million gain in the three months ended March 31, 2019. As discussed in Note 3 of the unaudited condensed consolidated financial statements, pursuant to the Business Combination the Company entered into various forms of contingent consideration, including the tax amortization benefit contingency. These liabilities are measured at fair value each reporting date and any mark-to-market fluctuations are recognized in earnings. In December 2019, the TRA with Dow was terminated, and the Company paid to Dow an aggregate of $16 million in settlement of all past and estimated future liabilities that would have been owed under the TRA.

Other Income

Other income was $1.5 million for the three months ended March 31, 2020, as compared to $0.0 million expense for the three months ended March 31, 2019. The Company received $1.6 million in cash from settlement of a litigation matter during the three months ended March 31, 2020.

Interest Expense, Net
 
Interest expense was $7.0 million for the three months ended March 31, 2020, as compared to $8.7 million for the three months ended March 31, 2019. The decrease was primarily due to $1.4 million lower interest on the Term Loan (as defined below) due to a lower variable rate and $0.8 million lower accretion on the TRA due to the settlement of the TRA in December 2019.

Gain (loss) on foreign currency

Gain on foreign currency was $0.6 million for the three months ended March 31, 2020, as compared to a loss of $0.4 million for the three months ended March 31, 2019.

Income Taxes

Income tax benefit was $3.8 million for the three months ended March 31, 2020 compared to income tax benefit of $0.6 million for the three months ended March 31, 2019. During the three months ended March 31, 2020, there were changes in valuation allowance positions related to the United States and certain foreign jurisdictions and the elimination of intercompany profit activity, offset by foreign currency gains. For the three months ended March 31, 2019, the elimination of intercompany profits resulted in a smaller income tax benefit.
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Non-GAAP Measures

The following table sets forth the non-GAAP financial measures of EBITDA and Adjusted EBITDA. The Company believes these non-GAAP financial measures provide meaningful supplemental information as they are used by the Company’s management to evaluate the Company’s performance (including incentive bonuses and for bank covenant reporting), are more indicative of future operating performance of the Company, and facilitate a better comparison among fiscal periods. These non-GAAP results are presented for supplemental informational purposes only and should not be considered a substitute for the financial information presented in accordance with GAAP.
 
The following is a reconciliation between the non-GAAP financial measures of EBITDA and Adjusted EBITDA to their most directly comparable GAAP financial measure, net loss:
(in thousands) Three Months Ended
March 31, 2020 		Three Months Ended
March 31, 2019
GAAP net loss including non-controlling interests $ (3,814)   $ (12,585)  
Benefit for income taxes (3,831)   (587)  
Interest expense (1)
6,966    8,745   
Depreciation and amortization 11,577    12,061   
Non-GAAP EBITDA $ 10,898    $ 7,634   
Share-based compensation 788    557   
Severance related costs (2)
—    489   
Other non-recurring costs (3)
1,744    3,193   
(Gain) loss on foreign currency exchange (4)
(627)   419   
Mark-to-market adjustments, net (5)
—    190   
Litigation recovery (1,600)   —   
Non-GAAP Adjusted EBITDA $ 11,203    $ 12,482   

(1) Interest on the term loan and accretion for debt discounts, debt issuance costs and contingent consideration.
(2)  Severance costs related to ongoing cost optimization initiatives.
(3) Costs related to certain professional and other infrequent or non-recurring fees, including those associated with litigation and M&A related fees
(4) (Gain) loss on foreign currency exchange relates to net losses and gains resulting from transactions denominated in a currency other than the entity's functional currency.
(5)  Non-cash adjustment to the fair value of contingent consideration related to the Tecnidex acquisition.


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Liquidity and Capital Resources
Cash Flow
(in thousands) Three Months Ended
March 31, 2020 		Three Months Ended
March 31, 2019
Net cash provided in operating activities $ 1,054    $ 8,978   
Net cash used in investing activities $ (438)   $ (2,836)  
Net cash used in financing activities $ (235)   $ (722)  

Cash provided from operating activities was $1.1 million for the three months ended March 31, 2020, as compared to cash provided from operating activities of $9.0 million for the three months ended March 31, 2019. In 2020, net income before non-cash depreciation and amortization was $7.8 million. Other non-cash charges included stock-based compensation of $0.6 million, $0.6 million of deferred financing costs, a $(5.2) million increase in net deferred taxes and interest income recognized on the interest rate swap of $(0.4) million. Additionally, the change in net operating assets was $(2.4) million in 2020. For the three months ended March 31, 2019, net income before non-cash depreciation and amortization and changes in fair value of contingent consideration (including accretion) was $0.6 million. Other non-cash charges included cash received on the Company's interest rate swap of $(0.4) million, stock-based compensation of $0.6 million, $0.6 million of deferred financing costs, a $(1.8) million increase in net deferred tax assets and other non-cash items of $(0.3) million. Additionally, the change in net operating assets was $9.7 million for the three months ended March 31, 2019.
Cash used in investing activities was $(0.4) million for the three months ended March 31, 2020, as compared to $(2.8) million for the three months ended March 31, 2019. Cash used in investing activities in 2020 was for the purchase of fixed assets and leasehold improvements of $(0.4) million. Cash used in 2019 was for the purchase of fixed assets and leasehold improvements of $(2.6) million and other investments of $(0.3) million.

Cash used in financing activities was $(0.2) million for the three months ended March 31, 2020, as compared to $(0.7) million for the three months ended March 31, 2019. Cash used in financing activities in 2020 was for the repayment of debt in the amount of $(1.3) million, offset by long-term borrowings of $1.1 million. Cash used in 2019 was for the repayment of debt in the amount of $(0.7) million.

Liquidity

At March 31, 2020, we had $28.3 million of cash and cash equivalents, compared to $29.3 million at December 31, 2019.

Term Loan

On July 31, 2015, certain of our subsidiaries entered into a Credit Agreement with Bank of Montreal, as administrative agent (as amended, the “Credit Facility”). The Credit Facility consists of a $425 million term loan (the “Term Loan”), with an amortization equal to 1.00% per year, and a revolving loan facility (the “Revolving Loan”). The Revolving Loan includes a $10 million letter-of-credit sub-facility, issuances against which reduce the available capacity for borrowing. As of December 31, 2019, the Company has issued $0.03 million of letters of credit, against which no funds have been drawn. The Term Loan has a scheduled maturity date of July 31, 2021, and the Revolving Loan, as amended on December 23, 2019, has a scheduled maturity date of April 1, 2021. The interest rates on borrowings under the facilities are either the alternate base rate plus 3.75%, or LIBOR plus 4.75% per annum, with a 1.00% LIBOR floor (with step-downs in respect of borrowings under the Revolving Loan dependent upon the achievement of certain financial ratios). The obligations under the Credit Facility are secured by liens on substantially all of the assets of (a) AgroFresh Inc. and its direct wholly-owned domestic subsidiaries, and (b) AF Solutions Holdings, including the common stock of AgroFresh Inc.

The net proceeds of the Term Loan were used to fund a portion of the purchase price payable to Dow in connection with the Business Combination. Amounts available under the Revolving Loan may also be used for working capital, general corporate purposes and other uses, all as more fully set forth in the Credit Facility.

As of March 31, 2020, the Company was in compliance with the covenants in the facility, other than covenants that apply only to the Company's ability to borrow under the Revolving Loan (excluding letters of credit). On January 31, 2019, the Credit Facility was amended to decrease the total availability from $25.0 million to $12.5 million and extend the maturity of the Revolving Loan from July 31, 2019 to December 31, 2020. An existing covenant in the credit agreement was also amended to allow the Company to have access to the Revolving Loan. Subsequently, on December 23, 2019, the Revolving Loan was further amended to extend the maturity to April 1, 2021 and included favorable revisions to the senior secured net leverage ratio covenant.
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As of the Closing Date the Company incurred approximately $12.9 million in debt issuance costs related to the Term Loan and $1.3 million in costs related to the Revolving Loan. The debt issuance costs associated with the Term Loan were capitalized against the principal balance of the debt, and the Revolving Loan costs were capitalized in Other Assets. All issuance costs will be accreted through interest expense for the duration of each respective debt facility. The interest expense related to the amortization of the debt issuance costs during the three months ended March 31, 2020 and 2019 was approximately $0.6 million and $0.6 million, respectively.

If we are unable to obtain additional debt or equity capital, restructure or refinance our indebtedness, or avail ourselves of alternative actions, our Term Loan ($404.8 million as of March 31, 2020) will become a current liability in the third quarter of 2020.

Off-Balance Sheet Arrangements
As of March 31, 2020, the Company did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations other than as disclosed in Note 20 of the unaudited condensed consolidated financial statements. The Company has not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.


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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information required to be disclosed is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There were no changes in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
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PART II- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time we are named as a defendant in legal actions arising from our normal business activities. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, we do not believe any currently pending legal proceeding to which we are a party will have a material adverse effect on our business, prospects, financial condition, cash flows or results of operations.


ITEM 1A. RISK FACTORS

Ownership of our securities involves a high degree of risk. Holders of our securities should carefully consider, in addition to the historical financial statements and related notes and other information set forth in this Report, the risk factors discussed in Part I - Item 1A - Risk Factors included in our 2019 Form 10-K, all of which could materially affect our business or future results. Other than the additional risk factor set forth below, we are not currently aware of any material changes to the risk factors disclosed in our 2019 Form 10-K. If any of the risks or uncertainties described in any of such risk factors actually occur, our business, financial condition and operating results could be adversely affected in a material way. This could cause the trading prices of our securities to decline, perhaps significantly, and you may lose part or all of your investment.

Risks associated with the current uncertainty with respect to rapid expansion of the COVID-19 pandemic

We are cognizant of the rapid expansion of the COVID-19 pandemic and the resulting global implications. To date, we have been able to manage our day-to-day operations without significant disruptions. However, there continues to be a possibility for potential developments that could adversely affect our operations, research and development and marketing plans. The impact of these restrictions on the results of our business, if implemented, is currently unknown but could be significant.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS
Exhibit No.   Description
3.1
(1) Second Amended and Restated Certificate of Incorporation, filed with the Secretary of State of the State of Delaware on July 31, 2015.
3.2
(4) Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation.
3.3
(1) Series A Certificate of Designation.
3.4
(2) Amended and Restated Bylaws.
3.5
(3) Amendment to the Amended and Restated Bylaws of AgroFresh Solutions, Inc., effective as of September 3, 2015.
3.6
(5) Amendment to the Amended and Restated Bylaws of AgroFresh Solutions, Inc., effective as of November 2, 2017.
4.1
(1) Specimen Common Stock Certificate.
4.2
(1) Specimen Warrant Certificate.
* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
* Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Act of 1934, as amended.
* Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS * XBRL Instance Document
101.SCH * XBRL Taxonomy Extension Schema Document
101.CAL * XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF * XBRL Taxonomy Extension Definition Linkbase Document
101.LAB * XBRL Taxonomy Extension Label Linkbase Document
101.PRE * XBRL Taxonomy Extension Presentation Linkbase Document

———————————————————————————————
* Filed herewith.
(1) Incorporated by reference to an exhibit to the Current Report on Form 8-K of the Company filed with the Securities and Exchange Commission on August 6, 2015.
(2) Incorporated by reference to Annex A to the Company’s definitive proxy statement (File No. 001-36197) filed with the Securities and Exchange Commission on July 16, 2015.
(3) Incorporated by reference to an exhibit to the Current Report on Form 8-K of the Company filed with the Securities and Exchange Commission on September 10, 2015.
(4) Incorporated by reference to an exhibit to the Current Report on Form 8-K of the Company filed with the Securities and Exchange Commission on June 7, 2017.
(5) Incorporated by reference to an exhibit to the Quarterly Report on Form 10-Q of the Company filed with the Securities and Exchange Commission on November 9, 2017.
(6) Incorporated by reference to an exhibit to the Current Report on Form 8-K of the Company filed with the Securities and Exchange Commission on September 6, 2019.
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  AgroFresh Solutions, Inc.
  Date: May 11, 2020
  /s/ Jordi Ferre
  By: Jordi Ferre
Title: Chief Executive Officer
 
/s/ Graham Miao
By: Graham Miao
Title: Chief Financial Officer

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