Company Quick10K Filing
AgroFresh
Price2.25 EPS-1
Shares51 P/E-3
MCap115 P/FCF-13
Net Debt389 EBIT-45
TEV503 TEV/EBIT-11
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-13
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-07
10-K 2018-12-31 Filed 2019-03-11
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-15
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-03-22
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-09
10-K 2016-12-31 Filed 2017-03-16
10-Q 2016-09-30 Filed 2016-11-09
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-03-11
10-Q 2015-09-30 Filed 2015-11-16
10-Q 2015-06-30 Filed 2015-08-14
10-Q 2015-03-31 Filed 2015-05-15
10-K 2014-12-31 Filed 2015-02-27
10-Q 2014-09-30 Filed 2014-11-13
10-Q 2014-06-30 Filed 2014-08-14
10-Q 2014-03-31 Filed 2014-05-15
10-K 2013-12-31 Filed 2014-03-31
8-K 2020-06-13
8-K 2020-05-11
8-K 2020-04-23
8-K 2020-03-12
8-K 2020-01-14
8-K 2019-12-23
8-K 2019-12-20
8-K 2019-11-07
8-K 2019-11-06
8-K 2019-10-14
8-K 2019-08-30
8-K 2019-08-08
8-K 2019-06-05
8-K 2019-03-31
8-K 2019-02-01
8-K 2018-12-31
8-K 2018-11-07
8-K 2018-10-22
8-K 2018-10-01
8-K 2018-08-30
8-K 2018-08-09
8-K 2018-06-07
8-K 2018-05-10
8-K 2018-03-14
8-K 2018-02-23
8-K 2018-01-18

AGFS 10Q Quarterly Report

Part I - Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 agfs3312020exhibit311.htm
EX-31.2 agfs3312020exhibit312.htm
EX-32.1 agfs3312020exhibit321.htm

AgroFresh Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
1.10.90.70.40.20.02014201620182020
Assets, Equity
0.10.10.0-0.0-0.1-0.12013201520172020
Rev, G Profit, Net Income
0.50.30.1-0.1-0.3-0.52014201620182020
Ops, Inv, Fin

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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)
Delaware46-4007249
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareAGFSThe Nasdaq Stock Market LLC
Warrants to purchase shares of Common StockAGFSWThe 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.


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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  
Inventories23,154  22,621  
Other current assets12,889  11,802  
Total Current Assets122,894  132,345  
Property and equipment, net12,739  13,177  
Goodwill6,246  6,323  
Intangible assets, net620,225  631,369  
Deferred income tax assets13,523  10,317  
Other assets11,549  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 debt4,966  4,675  
Income taxes payable5,113  5,648  
Accrued expenses and other current liabilities21,991  24,350  
Total Current Liabilities46,656  49,778  
Long-term debt398,157  398,064  
Other noncurrent liabilities6,636  7,246  
Deferred income tax liabilities15,156  16,574  
Total liabilities466,605  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 capital561,483  561,006  
Accumulated deficit(203,269) (199,621) 
Accumulated other comprehensive loss(41,182) (31,060) 
Total AgroFresh Stockholders’ Equity313,152  326,445  
Non-controlling interest7,419  7,585  
Total Stockholders' Equity320,571  334,030  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$787,176  $805,692  

 See accompanying notes to unaudited condensed consolidated financial statements.
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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  $38,940  
Cost of sales (excluding amortization, shown separately below)8,528  11,335  
Gross profit24,495  27,605  
Research and development expenses2,642  3,897  
Selling, general and administrative expenses13,709  15,898  
Amortization of intangibles10,957  11,616  
Change in fair value of contingent consideration  190  
Operating loss(2,813) (3,996) 
Other income (expense)1,507  (12) 
Gain (loss) on foreign currency exchange627  (419) 
Interest expense, net(6,966) (8,745) 
Loss before income taxes(7,645) (13,172) 
Income taxes benefit(3,831) (587) 
Net loss including non-controlling interests$(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:  
Basic50,525,781  50,042,054  
Diluted50,525,781  50,042,054  
 
See accompanying notes to unaudited condensed consolidated financial statements.

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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.

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

Preferred StockCommon StockTreasury StockAdditional Paid-in CapitalAccumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Non-Controlling InterestTotal
Stockholders’
Equity
SharesAmountSharesAmountAmount
Balances, December 31, 20191  $  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, 20201  $  51,835,988  $5  $(3,885) $561,483  $(203,269) $(41,182) $7,419  $320,571  


Preferred StockCommon StockTreasury StockAdditional Paid-in CapitalAccumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Non-Controlling InterestTotal
Stockholders’
Equity
SharesAmountSharesAmountAmount
Balances, December 31, 20181  $  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, 20191  $  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.

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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 amortization11,577  12,061  
Provision for bad debts  (392) 
Stock-based compensation 643  588  
Amortization of deferred financing costs577  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 property15  49  
Changes in operating assets and liabilities:
Accounts receivable5,773  2,159  
Inventories(3,503) 823  
Prepaid expenses and other current assets(2,414) 986  
Accounts payable421  654  
Accrued expenses and other liabilities(1,995) 6,291  
Income taxes payable125  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) $(2,836) 
Cash flows from financing activities:
Proceeds from long-term debt1,070    
Repayment of long-term debt(1,305) (722) 
Net cash used in financing activities$(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 period29,817  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 assets529    
Total cash and cash equivalents and restricted cash28,829  39,995  

See accompanying notes to unaudited condensed consolidated financial statements.
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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
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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)
RegionNorth 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 time422  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)
RegionNorth 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 time435  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.

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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
AdditionsDeductionsBalance 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
AdditionsDeductionsBalance 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
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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, 2020Three Months Ended March 31, 2019
Ongoing costs of transition services agreement$30  $30  
Other expenses    
Total incurred expenses$30  $30  

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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, 2020December 31, 2019
Raw material$2,788  $3,401  
Work-in-process7,736  7,278  
Finished goods11,573  10,974  
Supplies1,057  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, 2020December 31, 2019
VAT receivable$4,927  $4,925  
Prepaid income tax asset4,021  3,616  
Prepaid and other current assets3,941  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, 2020December 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 progress777  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:
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(in thousands)March 31, 2020December 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, 2020December 31, 2019
(in thousands)Gross Carrying
Amount
Accumulated
Amortization
ImpairmentNetGross Carrying
Amount
Accumulated
Amortization
ImpairmentNet
Other intangible assets:
Developed technology$757,858  $(215,851) $—  $542,007  $758,760  $(206,998) $—  $551,762  
In-process research and development39,000  (7,764) —  31,236