agfs-20220331

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, 2022

☐ 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 Global Select Market

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 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 such files). x Yes ¨ No

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

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, 2022 was 52,649,897.

Tabl e of Contents

TABLE OF CONTENTS


			Page
PART I - FINANCIAL INFORMATION
	Item 1. Condensed Consolidated Financial Statements
		Unaudited Condensed Consolidated Balance Sheets	3
		Unaudited Condensed Consolidated Statements of Operations	4
		Unaudited Condensed Consolidated Statements of Comprehensive Loss	5
		Unaudited Condensed Consolidated Statement of Stockholders' Equity	6
		Unaudited Condensed Consolidated Statement of Cash Flows	7
		Notes to Unaudited Condensed Consolidated Financial Statements	8
	Item 2. Management's Discussion and Analysis of Financial Condition and Result of Operations		22
	Item 3. Quantitative and Qualitative Disclosures About Market Risk		31
	Item 4. Controls and Procedures		31
PART II - OTHER INFORMATION			32
	Item 1. Legal Proceedings		32
	Item 1A. Risk Factors		32
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		33
	Item 3. Defaults Upon Senior Securities		33
	Item 4. Mine Safety and Disclosures		33
	Item 5. Other Information		33
	Item 6. Exhibits		34
SIGNATURES			35

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PART I - FINANCIAL INFORMATION

AgroFresh Solutions, Inc.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)


	March 31, 2022	December 31, 2021

ASSETS
Current Assets:
Cash and cash equivalents	$59,266	$61,930
Accounts receivable, net of allowance for doubtful accounts of $1,640 and $2,143, respectively	55,754	53,538
Inventories	22,357	19,780
Other current assets	23,549	19,878
Total Current Assets	160,926	155,126
Property and equipment, net	11,699	11,986

Intangible assets, net	535,970	546,652
Deferred income tax assets	7,402	7,392
Other assets	12,892	11,406
TOTAL ASSETS	$728,889	$732,562

LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$17,124	$16,969
Current portion of long-term debt	3,378	3,362
Income taxes payable	2,297	2,382
Accrued expenses and other current liabilities	27,277	26,994
Total Current Liabilities	50,076	49,707
Long-term debt	253,807	254,194
Other noncurrent liabilities	8,118	6,256
Deferred income tax liabilities	33,663	34,833
Total Liabilities	345,664	344,990

Commitments and contingencies (see Note 20)
Temporary Equity:
Series B convertible preferred stock, par value $0.0001; 150 shares authorized and designated and 145 shares outstanding at March 31, 2022 and December 31, 2021, respectively	151,800	149,386
Redeemable non-controlling interest	7,705	7,787
Stockholders’ Equity:
Common stock, par value $0.0001; 400,000 shares authorized, 53,244 and 53,080 shares issued and 52,583 and 52,418 outstanding at March 31, 2022 and December 31, 2021, respectively	5	5
Preferred stock, par value $0.0001; 0.001 share authorized and outstanding at March 31, 2022 and December 31, 2021	—	—
Treasury stock, par value $0.0001; 661 shares at March 31, 2022 and December 31, 2021	(3,885)	(3,885)
Additional paid-in capital	523,544	529,303
Accumulated deficit	(251,747)	(248,660)
Accumulated other comprehensive loss	(44,197)	(46,364)
Total Stockholders' Equity	223,720	230,399
TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY	$728,889	$732,562

See accompanying notes to unaudited condensed consolidated financial statements.

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AgroFresh Solutions, Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


	Three Months Ended March 31,
	2022	2021
Net sales	$39,889	$38,992
Cost of sales (excluding amortization, shown separately below)	11,923	10,314
Gross profit	27,966	28,678
Research and development expenses	3,051	3,298
Selling, general and administrative expenses	11,892	13,551
Amortization of intangibles	10,718	10,763

Operating income	2,305	1,066
Other income	505	14,398

(Loss) gain on foreign currency exchange	(1,196)	433
Interest expense, net	(4,947)	(5,890)
(Loss) income before income taxes	(3,333)	10,007
Income taxes (benefit) expense	(164)	1,823
Net (loss) income including non-controlling interest	(3,169)	8,184
Less: Net loss attributable to non-controlling interests	(82)	(239)
Net (loss) income attributable to AgroFresh Solutions, Inc.	(3,087)	8,423
Less: Dividends on convertible preferred stock	6,436	6,005
Net (loss) income attributable to AgroFresh Solutions, Inc. common stockholders	($9,523)	$2,418

(Loss) earnings per share of common shares:
Basic	($0.18)	$0.03
Diluted	($0.18)	$0.03

Weighted average shares of common stock outstanding:
Basic	51,736	51,031
Diluted	51,736	52,296

See accompanying notes to unaudited condensed consolidated financial statements.

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AgroFresh Solutions, Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)


	Three Months Ended March 31,
	2022	2021
Net (loss) income	($3,169)	$8,184
Other comprehensive (loss) income:
Foreign currency translation adjustments	2,167	(6,558)


Comprehensive (loss) income, net of tax	($1,002)	$1,626

See accompanying notes to unaudited condensed consolidated financial statements.

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AgroFresh Solutions, Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands)


	Preferred Stock		Common Stock		Treasury Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss	Total Stockholders’ Equity
	Shares	Amount	Shares	Amount	Amount
Balances, December 31, 2021	—	$—	53,080	$5	($3,885)	$529,303	($248,660)	($46,364)	$230,399
Stock-based compensation	—	—	—	—	—	902	—	—	902
Issuance of stock, net of forfeitures	—	—	182	—	—	—	—	—	—
Shares withheld for taxes	—	—	(18)	—	—	(225)	—	—	(225)

Convertible preferred dividend	—	—	—	—	—	(6,436)	—	—	(6,436)

Net loss attributable to AgroFresh Solutions, Inc.	—	—	—	—	—	—	(3,087)	—	(3,087)
Comprehensive income	—	—	—	—	—	—	—	2,167	2,167
Balances, March 31, 2022	—	$—	53,244	$5	($3,885)	$523,544	($251,747)	($44,197)	$223,720


	Preferred Stock		Common Stock		Treasury Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss	Total Stockholders’ Equity
	Shares	Amount	Shares	Amount	Amount
Balances, December 31, 2020	—	$—	53,092	$5	($3,885)	$552,776	($244,836)	($31,667)	$272,393
Stock-based compensation	—	—	—	—	—	752	—	—	752
Issuance of stock, net of forfeitures	—	—	(20)	—	—	—	—	—	—
Shares withheld for taxes	—	—	(21)	—	—	(43)	—	—	(43)

Convertible preferred dividend	—	—	—	—	—	(6,005)	—	—	(6,005)

Net loss attributable to AgroFresh Solutions, Inc.	—	—	—	—	—	—	8,423	—	8,423
Comprehensive loss	—	—	—	—	—	—	—	(6,558)	(6,558)
Balances, March 31, 2021	—	$—	53,051	$5	($3,885)	$547,480	($236,413)	($38,225)	$268,962

See accompanying notes to unaudited condensed consolidated financial statements.

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AgroFresh Solutions, Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS


	Three Months Ended March 31,
(in thousands)	2022	2021
Cash flows from operating activities:
Net (loss) income	($3,169)	$8,184
Adjustments to reconcile net (loss) income to net cash provided in operating activities:
Depreciation and amortization	11,444	11,423
Stock-based compensation	902	752

Amortization of deferred financing costs	511	774
Deferred income taxes	(981)	937
Provision for bad debts	138	396
Loss on sales of property and equipment	5	7
Changes in operating assets and liabilities:
Accounts receivable	(321)	5,576
Inventories	(2,312)	1,256
Prepaid expenses and other current assets	(3,401)	(1,645)
Accounts payable	14	(2,584)
Accrued expenses and other liabilities	(292)

SEC Form 10-Q filed by AgroFresh Solutions Inc.