UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2017~~2018


o	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)

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 x	Non-accelerated filer ¨	Smaller reporting company ¨x	Emerging growth company x
		~~(Do not check if a~~ ~~smaller reporting 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 November ~~3, 2017~~5, 2018 was ~~50,337,382.~~50,439,210.

TABLE OF CONTENTS



			Page
PART I - FINANCIAL INFORMATION
	Item 1. Condensed Consolidated Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets	3
		Condensed Consolidated Statements of ~~Income (Loss)~~Operations	4
		Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~Loss	5
		Condensed Consolidated Statement of Stockholders' Equity	6
		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		2023
	Item 3. Quantitative and Qualitative Disclosures About Market Risk		3032
	Item 4. Controls and Procedures		3132
PART II - OTHER INFORMATION			3233
	Item 1. Legal Proceedings		3233
	Item 1A. Risk Factors		3233
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		3335
	Item 3. Defaults Upon Senior Securities		3335
	Item 4. Mine Safety and Disclosures		3335
	Item 5. Other Information		3335
	Item 6. Exhibits		3436
SIGNATURES			35
~~INDEX TO EXHIBITS~~			3637

PART I - FINANCIAL INFORMATION

AgroFresh Solutions, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)


							September 30, 2018			December 31, 2017
	September 30, 2017			December 31, 2016
ASSETS
Current Assets:
Cash and cash equivalents	$	75,418		$	77,312		$	26,022		$	64,533
Accounts receivable, net of allowance for doubtful accounts of $1,502 and $1,242, respectively	78,787			63,675
Accounts receivable, net of allowance for doubtful accounts of $1,907 and $1,550, respectively							96,477			71,509
Inventories	16,952			15,467			18,307			24,109
Other current assets	14,319			14,047			19,247			18,684
Total current assets	185,476			170,501			160,053			178,835
Property and equipment, net	9,299			8,048			13,929			12,200
Goodwill							6,528			9,402
Intangible assets, net	748,793			776,584			725,653			757,882
Deferred income tax assets	7,694			8,459			7,020			8,198
Other assets	2,043			2,252			16,857			16,746
TOTAL ASSETS	$	953,305		$	965,844		$	930,040		$	983,263

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	14,438		$	12,133		$	14,916		$	15,014
Current portion of long-term debt	5,313			15,250			8,717			7,926
Income taxes payable	6,017			3,121			5,753			5,931
Accrued expenses and other current liabilities	48,094			66,366			62,200			65,809
Total current liabilities	73,862			96,870			91,586			94,680
Long-term debt	402,333			392,996			399,960			402,868
Other noncurrent liabilities	70,397			140,833			38,518			38,505
Deferred income tax liabilities	22,790			—			30,806			31,130
Total liabilities	569,382			630,699			560,870			567,183

Commitments and contingencies (see Note 17)
Stockholders’ equity:
Common stock, par value $0.0001; 400,000,000 shares authorized, 51,001,395 and 50,698,587 shares issued and 50,340,014 and 50,037,206 shares outstanding at September 30, 2017 and December 31, 2016, respectively	5			5
Preferred stock; par value $0.0001, 1 share authorized and outstanding at September 30, 2017 and December 31, 2016	—			—
Treasury stock; par value $0.0001, 661,381 shares at September 30, 2017 and December 31, 2016	(3,885		)	(3,885		)
Common stock, par value $0.0001; 400,000,000 shares authorized, 51,100,591 and 51,002,234 shares issued and 50,439,210 and 50,340,853 shares outstanding at September 30, 2018 and December 31, 2017, respectively							5			5
Preferred stock; par value $0.0001, 1 share authorized and outstanding at September 30, 2018 and December 31, 2017							—			—
Treasury stock; par value $0.0001, 661,381 shares at September 30, 2018 and December 31, 2017							(3,885		)	(3,885		)
Additional paid-in capital	532,337			475,598			535,043			533,015
Accumulated deficit	(132,076		)	(132,200		)	(136,611		)	(108,729		)
Accumulated other comprehensive loss	(12,458		)	(4,373		)	(33,383		)	(12,769		)
Total AgroFresh stockholders’ equity							361,169			407,637
Non-controlling interest							8,001			8,443
Total stockholders' equity	383,923			335,145			369,170			416,080
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	953,305		$	965,844		$	930,040		$	983,263

See accompanying notes to unaudited condensed consolidated financial statements.

AgroFresh Solutions, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME (LOSS)~~OPERATIONS

(Unaudited)

(In thousands, except share and per share data)


	Three Months Ended September 30, 2017			Three Months Ended September 30, 2016			Nine Months Ended September 30, 2017			Nine Months Ended September 30, 2016			Three Months Ended September 30, 2018			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Net sales	$	60,772		$	61,200		$	109,891		$	107,996		$	68,698		$	60,772		$	125,470		$	109,891
Cost of sales (excluding amortization, shown separately below)	11,620			8,905			21,365			48,558			16,662			11,620			32,910			21,365
Gross profit	49,152			52,295			88,526			59,438			52,036			49,152			92,560			88,526
Research and development expenses	3,071			2,983			10,103			11,220			3,491			3,071			10,293			10,103
Selling, general, and administrative expenses	14,462			15,173			44,328			49,385			18,212			14,462			50,133			44,328
Amortization of intangibles	10,445			10,080			31,335			29,878			12,002			10,445			34,342			31,335
Change in fair value of contingent consideration	(1,424		)	(1,569		)	(2,420		)	(4,969		)	307			(1,424		)	543			(2,420		)
Operating income (loss)	22,598			25,628			5,180			(26,076		)	18,024			22,598			(2,751		)	5,180
Other (expense) income	(295		)	(38		)	(40		)	16
Other (loss) income													(189		)	(295		)	419			(40		)
(Loss) gain on foreign currency exchange	(487		)	924			10,584			682			(4,731		)	(487		)	472			10,584
Interest expense, net	(8,638		)	(14,526		)	(27,495		)	(43,850		)	(9,132		)	(8,638		)	(26,250		)	(27,495		)
Income (loss) before income taxes	13,178			11,988			(11,771		)	(69,228		)	3,972			13,178			(28,110		)	(11,771		)
Income tax expense (benefit)	3,632			4,676			(11,895		)	(26,239		)	1,018			3,632			214			(11,895		)
Net income (loss)	$	9,546		$	7,312		$	124		$	(42,989	)
Net income (loss) including non-controlling interests													$	2,954		$	9,546		$	(28,324	)	$	124
Less: Net loss attributable to non-controlling interests													(516		)	—			(442		)	—
Net income (loss) attributable to AgroFresh Solutions, Inc													$	3,470		$	9,546		$	(27,882	)	$	124

Net income (loss) per share:
Basic	$	0.19		$	0.15		$	—		$	(0.87	)	$	0.06		$	0.19		$	(0.57	)	$	—
Diluted	$	0.19		$	0.15		$	—		$	(0.87	)	$	0.06		$	0.19		$	(0.57	)	$	—
Weighted average shares outstanding:
Basic	49,676,923			49,567,735			49,852,337			49,385,733			49,853,181			49,676,923			49,671,648			49,852,337
Diluted	50,169,434			49,627,800			50,134,591			49,385,733			50,309,979			50,169,434			49,671,648			50,134,591

See accompanying notes to unaudited condensed consolidated financial statements.

AgroFresh Solutions, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

(Unaudited)

(In thousands)


	Three Months Ended September 30, 2017		Three Months Ended September 30, 2016			Nine Months Ended September 30, 2017			Nine Months Ended September 30, 2016			Three Months Ended September 30, 2018			Three Months Ended September 30, 2017		Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Net income (loss)	$	9,546	$	7,312		$	124		$	(42,989	)	$	2,954		$	9,546	$	(28,324	)	$	124
Other comprehensive income (loss):
Other comprehensive (loss) income:
Unrealized gain on hedging activity, net of tax of $158 and $989												558			—		3,509			—
Foreign currency translation adjustments	2,200		(114		)	(8,085		)	4,619			(11,088		)	2,200		(24,123		)	(8,085		)
Comprehensive income (loss)	$	11,746	$	7,198		$	(7,961	)	$	(38,370	)
Comprehensive (loss) income												$	(7,576	)	$	11,746	$	(48,938	)	$	(7,961	)

See accompanying notes to unaudited condensed consolidated financial statements.

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 Income (Loss)			Total Stockholders’ Equity			Preferred Stock			Common Stock			Treasury Stock			Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
	Shares	Amount		Shares	Amount																Shares	Amount		Shares	Amount
Balance at December 31, 2015	1	$	—	49,940,548	$	5	$	(2,397	)	$	472,494	$	(20,640	)	$	(5,559	)	$	443,903
Balance at December 31, 2016																					1	$	—	50,698,587	$	5	$	(3,885	)	$	475,598	$	(132,200	)	$	(4,373	)	$	335,145
Stock-based compensation	—	—		—	—		—			2,901		—			—			2,901			—	—		—	—		—			1,318		—			—			1,318
Transfer of director compensation from liability to equity																					—	—		—	—		—			332		—			—			332
Issuance of restricted stock	—	—		644,395	—		—			—		—			—			—			—	—		302,808	—		—			—		—			—			—
Repurchase of stock for treasury	—	—		—	—		(1,488		)	—		—			—			(1,488		)
Settlement of Dow Liabilities, net of income tax																					—	—		—	—		—			55,089		—			—			55,089
Comprehensive loss	—	—		—	—		—			—		(42,989		)	4,619			(38,370		)	—	—		—	—		—			—		124			(8,085		)	(7,961		)
Balance at September 30, 2016	1	$	—	50,584,943	$	5	$	(3,885	)	$	475,395	$	(63,629	)	$	(940	)	$	406,946
Balance at September 30, 2017																					1	$	—	51,001,395	$	5	$	(3,885	)	$	532,337	$	(132,076	)	$	(12,458	)	$	383,923

Preferred Stock Common Stock Treasury Stock Additional Paid-in Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
Shares Amount Shares Amount Amount
Balance at December 31, 2016 1
$ —
50,698,587
$ 5
$ (3,885 ) $ 475,598
$ (132,200 ) $ (4,373 ) $ 335,145
Stock-based compensation —
—
—
—
—
1,318
—
—
1,318
Transfer of director compensation from liability to equity —
—
—
—
—
332
—
—
332
Issuance of restricted stock —
—
302,808
—
—
—
—
—
—
Settlement of Dow liabilities, net of income tax —
—
—
—
—
55,089
—
—
55,089
Comprehensive loss —
—
—
—
—
—
124
(8,085 ) (7,961 )
Balance at September 30, 2017 1
$ —
51,001,395
$ 5
$ (3,885 ) $ 532,337
$ (132,076 ) $ (12,458 ) $ 383,923



	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			Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Non-Controlling Interest			Total Stockholders’ Equity
Balance at December 31, 2017	1	$	—	51,002,234	$	5	$	(3,885	)	$	533,015	$	(108,729	)	$	(12,769	)	$	8,443		$	416,080
Stock-based compensation	—	—		—	—		—			2,028		—			—			—			2,028
Issuance of stock, net of forfeitures	—	—		98,357	—		—			—		—			—			—			—
Comprehensive loss	—	—		—	—		—			—		(27,882		)	(20,614		)	(442		)	(48,938		)
Balance at September 30, 2018	1	$	—	51,100,591	$	5	$	(3,885	)	$	535,043	$	(136,611	)	$	(33,383	)	$	8,001		$	369,170

See accompanying notes to unaudited condensed consolidated financial statements.

AgroFresh Solutions, Inc.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


(in thousands)	Nine Months Ended September 30, 2017			Nine Months Ended September 30, 2016			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Cash flows from operating activities:
Net income (loss)	$	124		$	(42,989	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net (loss) income							$	(28,324	)	$	124
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	33,102			31,777			35,486			33,102
Provision for bad debts	260			—			599			260
Stock-based compensation for equity classified awards	1,318			2,901
Stock-based compensation							1,965			1,318
Pension expense	227			—			71			227
Amortization of inventory fair value adjustment	—			30,377
Amortization of deferred financing costs	1,764			1,696			1,842			1,764
Cash received on interest rate swap							4,041			—
Accretion of contingent consideration	7,297			22,931			2,894			7,297
Decrease in fair value of contingent consideration	(2,420		)	(4,969		)
Increase (decrease) in fair value of contingent consideration							543			(2,420		)
Deferred income taxes	(16,445		)	(24,910		)	(97		)	(16,445		)
Loss on sales of property	81			21			—			81
Other	93			850			81			93
Changes in operating assets and liabilities:
Accounts receivable	(8,699		)	(8,520		)	(30,124		)	(8,699		)
Inventories	(1,363		)	(2,191		)	260			(1,363		)
Prepaid expenses and other current assets	(321		)	(19,627		)	(4,137		)	(321		)
Accounts payable	(9,486		)	341			(7,208		)	(9,486		)
Accrued expenses and other liabilities	7,691			5,272			7,115			7,691
Income taxes payable	3,050			1,206			(1,467		)	3,050
Other assets and liabilities	(1,354		)	711			245			(1,354		)
Net cash provided by (used in) operating activities	14,919			(5,123		)
Net cash (used in) provided by operating activities							(16,215		)	14,919
Cash flows from investing activities:
Cash paid for property and equipment	(5,281		)	(5,449		)	(3,179		)	(5,281		)
Proceeds from sale of property	99			8			—			99
Asset Acquisition							(1,587		)	—
Other investments	(1,050		)	—			—			(1,050		)
Net cash used in investing activities	(6,232		)	(5,441		)	(4,766		)	(6,232		)
Cash flows from financing activities:
Payment of Dow liabilities settlement	(10,000		)	—			(10,000		)	(10,000		)
Repayment of long term debt	(2,125		)	(3,188		)	(3,517		)	(2,125		)
Repurchase of stock for treasury	—			(1,488		)
Net cash used in financing activities	(12,125		)	(4,676		)	(13,517		)	(12,125		)
Effect of exchange rate changes on cash and cash equivalents	1,544			2,152			(4,013		)	1,544
Net decrease in cash and cash equivalents	(1,894		)	(13,088		)	(38,511		)	(1,894		)
Cash and cash equivalents, beginning of period	77,312			57,765			$	64,533		77,312
Cash and cash equivalents, end of period	$	75,418		$	44,677		$	26,022		$	75,418

Supplemental disclosures of cash flow information:
Cash paid for:
Cash paid for interest	$	12,309		$	18,460		$	23,280		$	12,309
Cash paid for income taxes	$	1,811		$	2,487		$	5,304		$	1,811
Supplemental schedule of non-cash investing and financing activities:
Accrued purchases of property and equipment	$	1,422		$	35		$	316		$	1,422
Settlement of Dow liabilities not resulting from cash payment, net of deferred income taxes	$	55,089		$	—		$	—		$	55,089

See accompanying notes to unaudited condensed consolidated financial statements.

AgroFresh Solutions, Inc.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.	Description of Business

AgroFresh Solutions, Inc. (the “Company”) is a global leader in ~~the~~delivering innovative food ~~quality~~ preservation and waste reduction ~~space, providing~~solutions for fresh produce, including apples, pears, citrus, kiwifruit, avocados and bananas among others. The Company is empowering the food industry with Smarter Freshness^TM, a range of proprietary ~~advanced technologies~~ and innovative ~~data-driven specialty~~ solutions ~~aimed at enabling~~that are designed to help growers, packers and ~~packers of fresh~~retailers improve produce freshness and quality while reducing waste.

The Company’s solutions range from pre-harvest offerings, such as Harvista^TM and LandSpring^TM, to ~~preserve and enhance~~ its freshness, quality and value to maximize the percentage of produce supplied to the market relative to the amount of produce grown, as well as increase consumer appeal of product at retail. The Company currently offers marqueeSmartFresh^TM ~~applications at~~Quality System, which includes SmartFresh^TM, AdvanStore^TM and ActiMist^TM, working together to maintain the quality of stored produce. The Company has a controlling interest in Tecnidex Fruit Protection, S.A.U. (“Tecnidex”), a leading provider of post-harvest fungicides, waxes, coatings and biocides for the citrus market. Additionally, the Company’s initial retail solution, RipeLock^TM, optimizes banana ripening for the benefit of retailers and consumers. The recent launch of FreshCloud^TM provides customers with real-time access to unique insights in the condition of their stored fruit with proprietary sensor technology and data analytics in the storage room. The Company's key products are registered in over 45 countries, support approximately 3,700 direct customers and service over 25,000 storage rooms globally.

The Company’s core business is providing produce preservation and waste reduction solutions for growers and packers. SmartFresh^TM, the Company's current principal solution, preserves the texture, firmness, taste and appearance of produce during storage, transportation and retail display. It allows growers and packers to deliver “just harvested” freshness on a year-round basis and enables retailers to increase customer ~~sites through~~satisfaction with fresh, high quality produce. An integral part of the SmartFresh^TM value proposition is a direct service model providing customers with on-site applications of SmartFresh^TM at their storage facilities together with mission-critical and ~~provides~~value-added advisory ~~services relying on its extensive knowledge on the use of its products over thousands of monitored applications.~~ services.

The Company ~~operates in~~has extended its post-harvest leadership with the acquisition of Tecnidex. For over ~~40 countries~~35 years, Tecnidex has been helping fruit and ~~currently derives~~vegetable producers offer clean, safe and high-quality products to customers, now reaching 18 countries. Tecnidex brought a broad catalogue of solutions that enhanced the ~~majority~~Company's fungicide offering, ActiMist^TM, an innovative delivery system of foggable fungicides. The Company's fungicide offerings further diversify its revenue ~~working with customers~~by expanding the Company's ability to ~~protect the value of apples, pears, and other produce during storage. Additionally the Company has a number of different~~provide solutions and ~~application technologies that have either been launched (Harvista, RipeLock, LandSpring) or will be launched in~~service to the ~~future that will seek to extend its footprint to other crops and steps of the global produce supply chain.~~citrus industry.

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, the Company’s primary ~~target~~ market, 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 apple growing season has historically occurred during both quarters. A variety of factors, including weather, may affect the timing of the growing, harvesting and storing patterns of the Company’s customers and therefore shift the 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.

The Company was originally incorporated as Boulevard Acquisition Corp. (“Boulevard”), a blank check company, in Delaware on October 24, 2013, and was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination. On July 31, 2015, the Company completed a ~~business combination (the "Business Combination") with The Dow Chemical Company ("Dow")~~Business Combination (refer to Note 3) and changed its name to AgroFresh Solutions, Inc. Prior to consummation of the Business Combination, the Company’s efforts were limited to organizational activities, its initial public offering and related financings, and the search for suitable business acquisition transactions.


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.

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 has been closely monitoring 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 100 percent as of June 30, 2018. As a result, the Company has elected to adopt highly inflationary accounting as of July 1, 2018 for subsidiaries in Argentina. Under highly inflationary accounting, the functional currency of subsidiaries in Argentina became the U.S. dollar, and their income statement and balance sheet will be 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 of September 30, 2018, the Company’s subsidiaries in Argentina had a net asset position of $23.3 million. Net sales attributable to Argentina were approximately 5 percent of the Company’s consolidated net sales for each of the nine months ended September 30, 2018 and 2017.

Revenue Recognition

On January 1, 2018, the Company began to account for revenue in accordance with Accounting Standards Codification ("ASC") 606, which requires revenue recognized to represent the transfer of promised goods or services to customers at an amount that reflects the consideration which is expected to be received in exchange for those goods or services. The Company utilized the modified retrospective method of adoption to all contracts that were not completed as of January 1, 2018. Prior period results were not adjusted and continue to be reported under the accounting standards in effect for the prior period. The Company has not made any significant changes to judgments in applying ASC 606 during the nine months ended September 30, 2018.

Performance Obligations

The Company derives revenue from the sale of products created with proprietary technology to regulate the ripening of produce and through performing post application technical services for its customers. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of the Company’s contracts have multiple performance obligations primarily related to product application and post application services, which the Company provides. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract. The method used to estimate standalone selling price is the expected cost plus a margin approach, under which the Company calculates the costs of satisfying a performance obligation and factors in an appropriate margin for that distinct good or service.

The transaction price is primarily fixed, as prices are governed by the terms and conditions of the Company's contracts with customers, and payment is typically made under standard terms. The Company has certain transactions that provide for variable consideration through rebate and customer loyalty programs. Depending on the program, the customer may elect to receive either a credit against its account or a cash payment. The Company recognizes an accrued provision for estimated rebates and customer loyalty program payouts at the time services are provided. The primary factors considered when estimating the provision for rebates and customer loyalty programs are the average historical experience of aggregate credits issued, the historical relationship of rebates as a percentage of total gross product sales, and the contract terms and conditions of the various rebate programs in effect at the time services are performed. The Company provides standard warranty provisions.

Performance obligations related to product application are typically satisfied at a point in time when the customer obtains control upon application. Performance obligations related to post-application services are satisfied over time and revenue is recognized using the output method, as control of the service transfers to the customer over time during and after storage of the produce. The Company believes that this method provides a faithful depiction of the transfer of value over the term of the performance obligation because the level of effort in providing these services is consistent during the service period. Performance obligations related to Tecnidex sales-type leases are satisfied at the point in time that equipment is installed at the customer site.

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 September 30, 2018 (in thousands)
Region	North America		EMEA		Latin America		Asia Pacific		Total Revenue
Product
1-MCP based	$	26,029	$	34,284	$	779	$	2,387	$	63,479
Fungicides, waxes, coatings, biocides	270		4,047		—		—		4,317
Other*	614		134		154		—		902
	$	26,913	$	38,465	$	933	$	2,387	$	68,698

Pattern of Revenue Recognition
Products transferred at a point in time	$	26,774	$	38,342	$	907	$	2,176	$	68,199
Services transferred over time	139		123		26		211		499
	$	26,913	$	38,465	$	933	$	2,387	$	68,698



Revenues for the nine months ended September 30, 2018 (in thousands)
Region	North America		EMEA		Latin America		Asia Pacific		Total Revenue
Product
1-MCP based	$	28,378	$	43,508	$	26,185	$	12,228	$	110,299
Fungicides, waxes, coatings, biocides	270		12,981		—		—		13,251
Other*	1,236		349		335				1,920
	$	29,884	$	56,838	$	26,520	$	12,228	$	125,470

Pattern of Revenue Recognition
Products transferred at a point in time	$	29,701	$	56,658	$	26,448	$	11,784	$	124,591
Services transferred over time	183		180		72		444		879
	$	29,884	$	56,838	$	26,520	$	12,228	$	125,470

*Other includes RipeLock, AdvanStore, LandSpring, Verigo (as defined in Note 3), technical services and sales-type leases related to Tecnidex

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 nine months ended September 30, 2018:



	Balance at January 1, 2018		Additions		Deductions			Balance at September 30, 2018
(in thousands)
Contract assets:
Unbilled revenue	$	739	$	5,736	$	(1,613	)	$	4,862
Contract liabilities:
Deferred revenue	$	100	$	3,717	$	(890	)	$	2,927

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 nine months ended September 30, 2018. Amounts reclassified from unbilled revenue to accounts receivable for the nine months ended September 30, 2018 were $1.6 million. Amounts reclassified from deferred revenue to revenue were $0.9 million for the nine months ended September 30, 2018.

Practical Expedients Elected

The Company has elected the following practical expedients in applying ASC 606 across all reportable segments:

Unsatisfied Performance Obligations. Because all of its performance obligations relate to contracts with a duration of less than one year, the Company has elected to apply the optional exemption provided in ASC 606 and, therefore, is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

Contract Costs. All incremental customer contract acquisition costs are expensed as they are incurred as the amortization period of the asset that the Company otherwise would have recognized is one year or less in duration.

Significant Financing Component.The Company does not adjust the promised amount of consideration for the effects of a significant financing component as the Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

Sales Tax Exclusion from the Transaction Price. The Company excludes from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from the customer.

Shipping and Handling Activities. The Company accounts for shipping and handling activities it performs after a customer obtains control of the good as activities to fulfill the promise to transfer the good, which are recognized in cost of goods sold.

Modified Retrospective Method. The Company adopted ASC 606 on January 1, 2018 utilizing the modified retrospective method, which meant the Company did not retrospectively adjust prior periods. The Company applied the modified retrospective method only to contracts that were not completed at January 1, 2018 and accounted for the aggregate effect of any contract modifications upon adoption. No cumulative adjustment to retained earnings was recorded upon adoption. The following table summarizes the amounts by which the consolidated financial statements are affected in the current reporting period by ASC 606 as compared with the guidance that was in effect before the change.



Balance at September 30, 2018 (in thousands)	As reported			ASC 606 Adjustments			Balances without adoption of ASC 606
Consolidated Balance Sheet
Liabilities
Accrued expenses and other current liabilities	$	62,200		$	(1,209	)	$	60,991

Equity
Accumulated deficit	$	(136,611	)	$	1,209		$	(135,402	)



Three months ended September 30, 2018 (in thousands)	As reported		ASC 606 Adjustments		Balances without adoption of ASC 606
Consolidated Statements of Operations
Revenue
Net sales	$	68,698	$	166	$	68,864

Net income attributable to AgroFresh Solutions, Inc	$	3,470	$	129	$	3,599



Nine months ended September 30, 2018 (in thousands)	As reported			ASC 606 Adjustments		Balances without adoption of ASC 606
Consolidated Statements of Operations
Revenue
Net sales	$	125,470		$	1,209	$	126,679

Net loss attributable to AgroFresh Solutions, Inc	(27,882		)	$	943	$	(26,939	)

For additional information, these condensed consolidated financial statements should be read in conjunction with the consolidated and combined financial statements and notes included in the Company's Annual Report ~~filed~~ on Form 10-K for the year ended December 31, ~~2016.~~2017.

Recently Issued Accounting ~~Guidance~~Standards and Pronouncements

In ~~May~~August 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-12 Targeted Improvements to Accounting for Hedging Activities. This update makes more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness. This update will be effective for the Company for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted upon its issuance. The Company is currently assessing the impact of the future adoption of this standard on its financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation, ~~(Topic 718)~~ Scope of Modification ~~Accounting.~~ Accounting. ASU 2017-09 addresses the changes to the terms and conditions of share-based awards. ~~The~~ ASU 2017-09 is effective for periods beginning after December 15, 2017 and interim periods therein on a modified retrospective basis. The Company ~~is currently evaluating~~adopted the ~~impact this guidance will have on its financial statements.~~

~~In May 2014, the FASB issued~~new ASU ~~2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~(“ASU 2014-09”), which has been updated through several revisions and clarifications since its original issuance. The standard will require revenue recognized to represent the transfer~~as of promised goods or services to customers at an amount that reflects the consideration which a company expects to receive in exchange for those goods or services. The standard also requires new, expanded disclosures regarding revenue recognition. The standard will be effective January 1, 2018, ~~with early adoption permissible beginning January 1, 2017.~~

~~The Company is continuing to evaluate the~~and it did not have a material impact that ASU 2014-09 will have on its consolidated financial statements and related disclosures. As the Company continues the evaluation and implementation process, it expects that there will be an impact to the Company’s financial reporting disclosures as well as any related business operations processes and internal controls over financial reporting. As part of the assessment performed through the date of this filing, the Company has created an implementation working group, which includes internal and third-party resources. As part of its implementation plan, the Company has adopted implementation controls that will allow it to properly and timely adopt the new revenue accounting standard on its effective date. In particular, the Company adopted implementation controls related to the following:

~~Developed a detailed project plan with key milestone dates;~~

~~Performed education of the new accounting standard;~~

~~Outlined the revenue generating activities that fall within the scope of ASU 2014-09, and is continuing to assess what impact the new accounting standard will have on those activities; and~~

~~Monitoring and assessment of the impact of changes to ASU 2014-09 and its interpretations as they become available.~~

~~Specific considerations made to date~~ on the ~~impact of adopting ASU 2014-09 include:~~

Collectibility - The valuation of revenue and accounts receivable, including whether negotiated contractual prices constitute price concessions or acceptance of the customer’s credit risk and how this impacts the timing of the Company’s revenue recognition. Currently, the Company recognizes revenue for the entire sales price and separately records a provision for bad debt as a component of operating expenses.

Performance Obligations - The treatment of the Company’s customer contracts, including whether the various goods and services promised in these contracts are distinct performance obligations, and the timing of revenue recognition for these goods and services. Currently, revenue is recognized at the time the product is applied to the fruits or vegetables as this represents the point at which the Company’s performance obligation to the customer has been completed.

Variable Consideration - The estimation and constraining of variable consideration, including rebates and how the Company will allocate these items to the performance obligations to its customer contracts. Currently, revenue is recognized net of estimated payments that are expected to be paid under rebate programs.

Significant Financing Component - Assessing whether certain contracts with customers provide a service of financing in addition to the delivery of the goods or services. In addition, the Company is assessing whether it can apply the practical expedient alleviating the application of the significant financing component requirements if the period between when the transfers of promised goods or services to a customer and when the customer pays for that good or service is one year or less. Currently, the Company does not recognize imputed interest on its accounts receivables due to its customary trade terms that do not exceed one year.

Contract Costs - The Company is continuing to assess the impact of ASU 2014-09 on the costs to acquire and fulfill its customer contracts, including whether the Company can apply the practical expedient of expensing contract costs when incurred if the amortization period of the asset that the Company would have recognized is one year or less. Currently, the Company’s accounting policy is to expense contract costs as they are incurred.

Transition Method - The Company is expecting to use a modified retrospective method of adoption, which would require a cumulative adjustment to opening retained earnings at the date of adoption (January 1, 2018), as opposed to a full retrospective application which would require a restatement of each comparable period presented within the financial statements. The Company is continuing to assess whether a material cumulative adjustment is necessary.

~~The significant assessment and implementation matters to be addressed prior to adopting ASU 2014-09 are as follows:~~

~~Completing the Company’s review of customer contracts in scope of ASU 2014-09;~~

~~Calculating the transition method adjustment;~~

~~Determining the impact that the new accounting standard will have on the Company’s consolidated financial statements and related disclosures; and~~

~~Updating, as needed, the Company’s business processes, systems and controls required to comply with ASU 2014-09 upon its effective date of January 1, 2018.~~

~~The Company anticipates completing its evaluation of the impact of ASU 2014-09 during the next three months and will adopt ASU 2014-09 when it becomes effective on January 1, 2018.~~

~~In March 2017, the FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.”~~ ASU No. 2017-07 requires employers to separate the service cost component from other components of net periodic benefit costs and to disclose the amounts of net periodic benefit costs that are included in each income statement line item. The amendments of this ASU are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently in the process of assessing the impact this guidance will have on its financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations, ~~(Topic 805):~~ Clarifying the Definition of a Business~~, in an effort to clarify~~. The new accounting guidance clarifies the definition of a business ~~with the objective of adding~~and provides additional guidance to assist entities with evaluating whether transactions should be accounted for as asset acquisitions (or asset disposals) or business combinations (or disposals of a business). Under the new guidance, an entity first determines whether substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or ~~businesses.~~a group of similar identifiable assets. If this criterion is met, the transaction should be accounted for as an asset acquisition as opposed to a business combination. This distinction is important because the accounting for an asset acquisition significantly differs from the accounting for a business combination. The ~~amendments~~new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2017, with early adoption permitted. During the second quarter of 2018, the Company adopted this standard in connection with the acquisition of Verigo (refer to Note 3).

In January 2017, the FASB issued ASU 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. Early adoption is permitted for interim or annual goodwill impairments tests after January 1, 2017. This standard will impact future financial statements when adopted.

In February 2016, the FASB issued ASU 2016-02, Leases. The main objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU ~~are~~is effective for fiscal years beginning after December 15, ~~2017, and~~2018, including interim periods within those fiscal years. The ~~adoption~~Company will adopt ASU 2016-02 on a modified retrospective basis, applying the transition requirements as of January 1, 2019.

The Company is currently in the process of reviewing lease contracts, establishing new processes and internal controls and evaluating the impact of certain accounting policy elections. Until this ~~guidance~~effort is ~~not expected~~completed, the Company cannot fully determine the impact of adopting ASU 2016-02; however, the Company expects ASU 2016-02 to have a material impact on the ~~Company's~~Company’s consolidated financial ~~statements.~~position but not have a material impact on the Company’s consolidated results of operations or cash flows. The Company expects to complete its assessment of the full financial impact shortly after December 31, 2018, and will include all required presentation and disclosures under ASU 2016-02 in its Form 10-Q for the three months ending March 31, 2019.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments.~~ ASU 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017. The Company is currently evaluating the impact this guidance will have on its financial statements.

~~In February 2015, the FASB issued ASU 2016-2,~~ ~~“Leases.”~~ This update requires management to recognize lease assets and lease liabilities by lessees for all operating leases. The ASU is effective for periods beginning after December 15, 2018 and interim periods therein on a modified retrospective basis. The Company is currently evaluating the impact this guidance will have on its financial statements.


3.	~~Settlement with Dow~~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.

On April 4, 2017, the Company entered into an agreement (the “Amendment Agreement”) with Dow, ~~Rohm and Haas Company (“~~R~~&H”),~~&H, Boulevard Acquisition Sponsor, LLC (the “Sponsor”), AgroFresh Inc., ~~a wholly-owned subsidiary of the Company,~~ Avenue Capital Management II, L.P. (“Avenue”) and, solely as to certain sections of the Amendment Agreement, Joel Citron, Darren Thompson and Robert J. Campbell (collectively, the “Founding Holders”), Marc Lasry and Stephen Trevor. Pursuant to the Amendment Agreement and certain related agreements entered into on the same date (as described below), among other things, the Company and Dow agreed to modify certain obligations of the Company pursuant to (i) the ~~Stock~~ Purchase Agreement, ~~dated April 30, 2015 (the “Purchase Agreement”), between the Company and Dow,~~ (ii) the Tax Receivables Agreement, dated July 31, 2015 (the “Tax Receivables Agreement”), among the Company, Dow, R&H and AgroFresh Inc., and (iii) the Warrant Purchase Agreement, dated July 31, 2015 (the “Warrant Purchase Agreement”), among the Company, Dow, R&H and the Sponsor. ~~Each of~~ Mr. Campbell ~~and Mr. Lasry~~ is a member of the Company's board of directors, each of Mr. Lasry and Mr. Trevor was a member of the Company’s board of directors at the time the Amendment Agreement was entered into, ~~and each of~~ Dow ~~and the Sponsor~~ is a significant stockholder of the ~~Company.~~Company and the Sponsor was a significant stockholder of the Company at the time the Amendment Agreement was entered into.

Amendment Agreement

Pursuant to the Amendment Agreement, the Company agreed to pay Dow the aggregate amount of $20.0 million, of which $10.0 million was paid on April 4, 2017 and the remaining $10.0 million ~~is payable~~was paid on ~~or before~~ January 31, 2018, in full satisfaction of the Company’s obligations with respect to (i) the working capital adjustment under the Purchase Agreement, (ii) certain transfer and value added tax reimbursement obligations under the Purchase Agreement, and (iii) the amount payable to Dow pursuant to the Tax Receivables Agreement on account of the 2015 tax year. ~~As of March 31, 2017, these liabilities, inclusive of accrued interest, were approximately $17.0 million, $9.3 million, and $12.0 million, respectively.~~ During the nine months ended September 30, ~~2017, the~~2018, these liabilities were ~~reduced by approximately $18.2 million.~~extinguished.

Also pursuant to the Amendment Agreement, each of Avenue and Dow agreed to make available to the Company a credit facility, providing for loans of up to $50.0 million each, for use to complete one or more potential acquisitions prior to December 31, 2019, in each case subject to approval by both Avenue and Dow.

First Amendment to Tax Receivables Agreement

The Company, Dow, R&H and AgroFresh Inc. entered into a First Amendment to the Tax Receivables Agreement (the “TRA Amendment”). The TRA Amendment ~~reduces,~~reduced, from 85% to 50%, the percentage that the Company is required to pay to Dow pursuant to the Tax Receivables Agreement of the annual tax savings, if any, in U.S. ~~Federal,~~federal, state and local income tax or franchise tax that the Company actually realizes 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 ~~transactions contemplated by the Purchase Agreement. During the nine months ended September 30, 2017 the liability to Dow was reduced by approximately $75.3 million as a result of the TRA Amendment.~~

Business Combination.

Stock Buyback Agreement

The Company and Dow entered into a letter agreement (the “Stock Buyback Agreement”), pursuant to which Dow agreed to use its reasonable best efforts to purchase up to 5,070,358 shares of the Company’s common stock in the open market (representing approximately 10% of the total number of shares of the Company’s common stock then outstanding), over a period of up to 18 months.

Termination of Warrant Purchase Agreement

~~The~~In April 2017, the Company, Dow, R&H and the Sponsor entered into a letter agreement, pursuant to which the Warrant Purchase Agreement was terminated effective immediately.

As a result of the Amendment Agreement, the TRA Amendment and the termination of the Warrant Purchase Agreement, the Company ~~reduced the related~~recorded a reduction of liabilities ~~during the first nine months~~ of ~~2017 as follows:~~

(amounts in millions) Nine Months Ended
September 30, 2017
Amendment Agreement $ 18.2
Warrant Purchase Agreement 1.6
TRA Amendment 75.3
Deferred tax adjustment related to Dow settlement (40.0 )
Total reduction in related liabilities $ 55.1

~~The Company recorded an increase to additional paid in capital,~~$95.1 million net of deferred income taxes of $40.0 million. The net impact of $55.1 million ~~as an offset~~has been recorded to ~~the reduction in related liabilities,~~additional paid-in capital as the ~~Company entered into the April 4, 2017~~ agreements were with related parties and the transaction has been 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 provider of post-harvest fungicides, waxes, coatings, and biocides 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 the third quarter of 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 will be paid in the fourth quarter of 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 nine months ended September 30, 2018 there was an adjustment made to consideration payable to holders of Tecnidex which resulted in a measurement period adjustment of $2.8 million to the purchase price allocation.

Acquisition of Verigo

On April 9, 2018, the Company acquired the assets of Comm-n-Sense Corp., d/b/a Verigo ("Verigo"), pursuant to the terms of an Asset Purchase Agreement, for approximately $1.8 million. Verigo, a privately-held organization, provided hardware in the form of wireless data receptors along with cloud-based software to synchronize data pulled from the hardware to support and provide tools for monitoring environmental and quality factors, such as temperature and relative humidity. The transaction was accounted for as an asset acquisition because substantially all of the fair value of the gross assets acquired was concentrated in a singular asset, the acquired software. Asset acquisitions are accounted for using a cost accumulation approach, whereby the total consideration paid is allocated to the individual assets acquired and liabilities assumed on a relative fair value basis.


4.	Related Party Transactions

Pursuant to the Business Combination the Company consummated on April 30, 2015 with Dow, a related party, the Company agreed to certain obligations with Dow pursuant to the Purchase Agreement, the Tax Receivables Agreement, and the Warrant Purchase Agreement, dated July 31, 2015. On April 4, 2017 the Company and Dow amended the Purchase Agreement and the Tax Receivables Agreement pursuant to the Amendment Agreement and TRA Amendment, and entered into the Stock Buyback Agreement, each as described under Note 3 above.

The Company is ~~also~~ a party to ongoing agreements with Dow, a related party, including, but not limited to, operating-related agreements for certain transition services and seconded ~~employees and occupancy.~~employees. In ~~connection with a transition services agreement entered into in connection with~~addition, during the ~~Business Combination,~~nine months ended September 30, 2018, the Company paid $0.6 million to Dow ~~a $5.0 million set-up fee which is being amortized from September 2015 through December 2017, which is~~in order to terminate the ~~period during which the~~provision of IT services ~~are expected to be provided.~~provided by Dow.

The Company incurred expenses for such services for the nine months ended September 30, ~~2017~~2018 and September 30, ~~2016~~2017 as follows:


(amounts in thousands)	Nine Months Ended September 30, 2017		Nine Months Ended September 30, 2016		Nine Months Ended September 30, 2018		Nine Months Ended September 30, 2017
Amortization of prepayment related to set-up of transition services	$	620	$	1,319	$	—	$	620
Ongoing costs of transition services agreement	2,228		3,604		251		2,228
Rent expense	693		951		—		693
Amortization of prepayment related to Dow importation services	—		397
Other expenses	379		835		1,484		379
Total incurred expenses	$	3,920	$	7,106	$	1,735	$	3,920

As of September 30, ~~2017~~2018 and September 30, ~~2016,~~2017, the Company had an outstanding payable to Dow of ~~$0.7~~$0.5 million and ~~$2.5~~$0.3 million, respectively. ~~See Notes 9 and 11 for other related party disclosures.~~

~~The~~Refer to Note 3 regarding the contingent consideration owed to Dow as part of the Business Combination.

In addition, during 2016, the Company ~~has~~made a minority investment in RipeLocker, ~~LCC~~LLC ("RipeLocker"), a company led by George Lobisser, a director of ~~AgroFresh.~~the Company. On November 29, 2016, the Company entered into a Mutual Services Agreement (the “Services Agreement”) with George Lobisser and ~~RipeLocker, LLC.~~RipeLocker. Pursuant to the Services Agreement, (i) the Company agreed to provide RipeLocker with technical support, in the form of access to the Company’s research and development personnel for a specified number of hours for purposes of providing advice and input relating to RipeLocker’s products and services, and (ii) Mr. Lobisser ~~is entitled~~agreed to provide consulting services to the Company as may be reasonably requested by the Company from time to time. The Services Agreement provided for Mr. Lobisser to receive a consulting fee of $5,000 per full day for time spent performing consulting services under ~~this~~the Services Agreement (pro-rated for any partial day), plus reimbursement for out-of-pocket ~~expenses.~~expenses, provided that for each hour of technical support provided by the Company to RipeLocker, Mr. Lobisser agreed to provide one-half hour of consulting services for no consideration. In February 2017, the Company and Mr. Lobisser agreed to substantially curtail any mutual consulting services to be provided under the Services Agreement, and that any further services would be provided at no charge. For the nine months ended September 30, ~~2017,~~2018, there were no

material amounts paid and as of September 30, ~~2017,~~2018, there were no material amounts owed to RipeLocker or Mr. Lobisser for consulting services.


5.	Inventories

Inventories at September 30, ~~2017~~2018 and December 31, ~~2016~~2017 consisted of the following:


(in thousands)	September 30, 2017		December 31, 2016		September 30, 2018		December 31, 2017
Raw material	$	1,143	$	1,649	$	1,867	$	2,148
Work-in-process	6,323		7,963		4,715		6,585
Finished goods	8,694		5,132		10,400		14,647
Supplies	792		723		1,325		729
Total inventories	$	16,952	$	15,467	$	18,307	$	24,109


6.	Other Current Assets

The Company's other current assets at September 30, ~~2017~~2018 and December 31, ~~2016~~2017 consisted of the following:


(in thousands)	September 30, 2017		December 31, 2016		September 30, 2018		December 31, 2017
VAT receivable	$	9,783	$	9,306	$	8,089	$	14,088
Prepaid income tax asset	2,066		1,910		5,054		2,314
Other	2,470		2,831
Prepaid and other current assets					6,104		2,282
Total other current assets	$	14,319	$	14,047	$	19,247	$	18,684


7.	Property and Equipment

Property and equipment at September 30, ~~2017~~2018 and December 31, ~~2016~~2017 consisted of the following:


(in thousands, except for useful life data)	Useful life (years)	September 30, 2017			December 31, 2016			Useful life (years)	September 30, 2018			December 31, 2017
Leasehold improvements	7-20	$	1,775		$	1,463		7-20	$	3,033		$	2,976
Machinery & equipment	1-12	7,105			6,066			1-12	8,456			7,853
Furniture	1-12	967			843			1-12	1,734			1,698
Construction in progress		1,463			781				4,195			2,075
		11,310			9,153				17,418			14,602
Less: accumulated depreciation		(2,011		)	(1,105		)		(3,489		)	(2,402		)
Total property and equipment, net		$	9,299		$	8,048			$	13,929		$	12,200

Depreciation expense for the three and nine months ended September 30, 2018 was $0.4 million and $1.2 million, respectively.

Depreciation expense for the three and nine months ended September 30, 2017 was $0.3 million and $0.9 ~~million, respectively.~~

~~Depreciation expense for the three and nine months ended September 30, 2016 was $0.2 million and $0.6~~ million, 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 ~~income (loss).~~

operations.


8.	Goodwill and Intangible Assets

Changes in the carrying amount of goodwill for the nine months ended September 30, 2018 are as follows:



(in thousands)	Goodwill
Balance as of December 31, 2017	$	9,402
Measurement period adjustment	(2,807		)
Foreign currency translation	(67		)
Balance as of September 30, 2018	$	6,528

See Note 3 for a description of the measurement period adjustment.

The Company’s intangible assets at September 30, ~~2017~~2018 and December 31, ~~2016~~2017 consisted of the following:


	September 30, 2017							December 31, 2016										September 30, 2018							December 31, 2017
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Impairment			Net		Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Other intangible assets:
Developed technology	$	757,000	$	(85,071	)	$	671,929	$	757,000	$	(55,623	)	$	—		$	701,377	$	759,367	$	(124,335	)	$	635,032	$	759,374	$	(94,886	)	$	664,488
In-process research and development	39,000		(2,347		)	36,653		39,000		(722		)	—			38,278		39,000		(4,514		)	34,486		39,000		(2,889		)	36,111
Trade name	26,000		—			26,000		35,500		—			(9,500		)	26,000		29,580		—			29,580		29,816		—			29,816
Service provider network	2,000		—			2,000		2,000		—			—			2,000		2,000		—			2,000		2,000		—			2,000
Customer relationships	8,000		(722		)	7,278		8,000		(472		)	—			7,528		20,409		(2,338		)	18,071		20,306		(806		)	19,500
Software	1,200		(320		)	880		660		(104		)	—			556		8,496		(2,075		)	6,421		1,274		(404		)	870
Software not yet placed in service	3,974		—			3,974		753		—			—			753		—		—			—		5,022					5,022
Other	100		(21		)	79		100		(8		)	—			92		100		(37		)	63		100		(25		)	75
Total intangible assets	$	837,274	$	(88,481	)	$	748,793	$	843,013	$	(56,929	)	$	(9,500	)	$	776,584	$	858,952	$	(133,299	)	$	725,653	$	856,892	$	(99,010	)	$	757,882

At September 30, ~~2017,~~2018, the weighted-average amortization period remaining for the finite-lived intangible assets was ~~17.6~~16.7 years. At September 30, ~~2017,~~2018, the weighted-average amortization periods remaining for developed technology, customer relationships, in-process R&D, software and other was ~~17.6, 21.9, 17.0, 3.3,~~16.6, 20.9, 16.0, 2.3, and ~~4.8~~3.8 years, respectively.

Estimated annual amortization expense for finite-lived intangible assets, excluding amounts ~~not placed~~ in ~~service,~~Work in Progress, subsequent to September 30, ~~2017~~2018 is as follows:


(in thousands)	Amount		Amount
2017 (remaining)	$	10,518
2018	42,071
2018 (remaining)			$	12,062
2019	42,052		46,113
2020	41,919		45,996
2021	41,814		43,705
2022			43,235
Thereafter	538,445		502,962
Total	$	716,819	$	694,073


9.	Accrued and Other Current Liabilities

The Company’s accrued and other current liabilities at September 30, ~~2017~~2018 and December 31, ~~2016~~2017 consisted of the following:


(in thousands)	September 30, 2017		December 31, 2016		September 30, 2018		December 31, 2017
Warrant consideration	$	—	$	1,080
Tax amortization benefit contingency	3,744		17,535		$	11,651	$	11,820
Working capital settlement	—		17,000
Additional consideration due seller	—		9,263		1,215		693
Dow settlement liability	10,000		—		—		10,000
Accrued compensation and benefits	7,628		6,352		10,103		8,932
Accrued rebates payable	5,931		4,701		6,712		5,027
Insurance premium financing payable	953		578		1,074		639
Severance	412		1,564		1,714		113
Deferred revenue					2,927		100
Notes payable					2,118		5,056
Accrued taxes	8,561		4,598		7,967		7,848
Accrued interest					4,814		6,321
Other	10,865		3,695		11,905		9,260
Total accrued and other current liabilities	$	48,094	$	66,366	$	62,200	$	65,809

~~Refer to Note 3 regarding the contingent consideration owed to Dow as part of the Business Combination.~~Other current liabilities include primarily professional services, litigation and research and development accruals.


10.	Debt

The Company’s debt, net of unamortized discounts and deferred financing fees, at September 30, 2018 and December 31, 2017 consisted of the following:



(in thousands)	September 30, 2018		December 31, 2017
Total Term Loan outstanding	$	405,525	$	407,109
Tecnidex loan outstanding	3,152		3,685
Less: Amounts due within one year	8,717		7,926
Total long-term debt due after one year	$	399,960	$	402,868

At September 30, 2018, the Company evaluated the amount recorded under the Term Loan (defined below) and determined that the fair value was approximately $410.7 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 September 30, 2018 there were $6.7 million of unamortized deferred issuance costs.

Scheduled principal repayments of debt subsequent to September 30, 2018 are as follows:



(in thousands)	Amount
2018 (remaining)	$	4,465
2019	5,059
2020	4,250
2021	401,625
Total	$	415,399

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, entered into a Credit Agreement with Bank of Montreal, as administrative agent (the “Credit Facility”). The Credit Facility consists of a ~~$425~~$425.0 million term loan (the “Term Loan”), with an amortization equal to 1.00% per year, and a ~~$25~~$25.0 million revolving loan facility (the “Revolving Loan”). The Revolving Loan includes a ~~$10~~$10.0 million letter-of-credit sub-facility, issuances against which reduce the available capacity for borrowing. As of September 30, ~~2017,~~2018, the Company has issued $0.5 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 has a scheduled maturity date of July 31, 2019. 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). ~~At September 30, 2017, the effective interest rate was 6.68%.~~ 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.

~~Certain restrictive covenants are contained in the Credit Facility, which the Company was in compliance with as of September 30, 2017.~~ The Credit Facility imposes an overall cap on the total amount of dividends the Company can pay, together with the total amount of shares and warrants the Company can repurchase, of $12 million per fiscal year, and imposes certain other conditions on the Company’s ability to pay dividends.

~~The Company’s debt,~~ net ~~of unamortized discounts and deferred financing fees, at September 30, 2017 and December 31, 2016 consisted of the following:~~

(in thousands) September 30,
2017 December 31,
2016
Total Term Loan outstanding $ 407,646
$ 408,246
Less: Amounts due within one year 5,313
15,250
Total long-term debt due after one year $ 402,333
$ 392,996

At September 30, 2017, the Company evaluated the amount recorded under the Term Loan and determined that the fair value was approximately $416.5 million. The fair value of the debt is based on quoted inactive market prices and is therefore classified as Level 2 within the fair value 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~~proceeds of the Term Loan were ~~$12.9 million and as~~used to fund a portion of ~~September 30, 2017 there were $8.9 million of unamortized deferred issuance costs.~~

~~Scheduled principal repayments~~the purchase price payable to R&H in connection with the Business Combination. Amounts available under the ~~Term~~Revolving Loan ~~subsequent to September 30, 2017 are~~may also be used for working capital, general corporate purposes, and other uses, all as ~~follows:~~

(in thousands) Amount
2017 (remaining) $ 2,125
2018 4,250
2019 4,250
2020 4,250
2021 401,625
Total $ 416,500

~~Beginning with~~more fully set forth in 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 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), (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 and (iv) the aggregate amount of cash dividends paid by the Company or Holdings to Holdings or Boulevard for the payment of the Seller Earnout; 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 million. The amount due under this provision for the year ended December 31, 2016 was originally estimated to be $11.0 million, but it was subsequently determined that no amount was payable for such year. There are no amounts due under this provision as of September 30, 2017.

Credit Agreement. At September 30, ~~2017,~~2018, there was ~~$416.5~~$413.3 million outstanding under the Term Loan and no balance outstanding under the Revolving Loan.

~~In July 2015,~~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 and nine months ended September 30, ~~2017~~2018 was approximately $0.6 million and $1.8 million, respectively.

On November 18, 2015, the Credit Facility was amended. An existing provision in the credit agreement permitted the Company, subject to an overall cap of $12.0 million per fiscal year and certain other conditions, to pay dividends to the Company’s public stockholders and to redeem or repurchase, through July 31, 2016, the Company’s outstanding warrants for an aggregate purchase price of up to $10.0 million. The amendment expanded the scope of this provision to also permit the repurchase of shares of the Company’s outstanding common stock or other equity securities (subject to the same overall cap and other conditions).

Certain restrictive covenants are contained in the Credit Facility, which the Company was in compliance with as of September 30, 2018, other than certain covenants that would apply only to the extent the Company draws against the Revolving Loan and has an outstanding balance at a calendar quarter-end. There were no outstanding draws against the Revolving Loan as of September 30, 2018.

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 September 30, 2018.


11.	Other Noncurrent Liabilities

The Company’s other noncurrent liabilities at September 30, ~~2017~~2018 and December 31, ~~2016~~2017 consisted of the following:


(in thousands)	September 30, 2017		December 31, 2016		September 30, 2018		December 31, 2017
Tax amortization benefit contingency	$	65,855	$	132,724	$	34,628	$	31,562
Deferred payment	—		2,498
Other	4,542		5,611		3,890		6,943
Total other noncurrent liabilities	$	70,397	$	140,833	$	38,518	$	38,505

Other noncurrent liabilities include long-term rebates and deferred rent.


12.	Severance

The Company expensed $1.7 million and $2.1 million for severance for the three and nine months ended September 30, 2018, respectively. There was ~~$0.2 million and $0.3 million~~no severance expense for the three and nine months ended September 30, ~~2017, respectively. For the three and nine months ended September 30, 2016, there was $1.2 million and $2.6 million of severance expense, respectively.~~2017. This amount, which does not include stock compensation expense, was recorded in selling, general and administrative expense in the condensed consolidated statements of ~~income (loss).~~operations. As of September 30, ~~2017,~~2018, the Company had ~~$0.6~~$1.7 million of severance liability, of which ~~$0.4~~$1.7 million will be paid out over the next year.


13.	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 September 30, ~~2017,~~2018, there were ~~50,340,014~~50,439,210 shares of common stock outstanding. As of September 30, ~~2017,~~2018, 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 (not counting 1,201,928 warrants that 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 ~~Rohm and Haas~~R&H one share of Series A Preferred Stock. ~~Rohm and Haas,~~R&H, voting as a separate class, is entitled to appoint one director to the Company’s board of directors for so long as ~~Rohm and Haas~~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.


14.	Stock-based Compensation

Stock compensation expense for both equity-classified and liability-classified awards for the three and nine months ended September 30, ~~2017~~2018 was ~~$0.5~~$0.2 million and ~~$1.7~~$2.0 million, respectively. Stock compensation expense for both equity-classified and liability-classified awards for the three and nine months ended September 30, ~~2016~~2017 was ~~$1.3~~$0.5 million and ~~$3.2~~$1.7 million, respectively. Stock compensation expense is recognized in cost of goods sold, selling, general and administrative expenses, and research and development expenses. At September 30, ~~2017,~~2018, there was ~~$5.0~~$5.2 million of unrecognized compensation cost relating to outstanding unvested equity instruments expected to be recognized over the weighted average period of ~~2.03~~1.9 years.


15.	Earnings Per Share

Basic ~~income (loss)~~loss per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. ~~In computing~~Due to the loss for the nine months ended September 30, 2018, dilutive ~~income (loss) per share, basic income (loss)~~loss per share is ~~adjusted~~the same as basic loss per share as the adjustment for the assumed issuance of all potentially dilutive share-based awards, including stock options, restricted stock and ~~warrants.~~warrants would be anti-dilutive.

The following is a reconciliation of the weighted-average common shares outstanding used for the computation of basic and diluted net income (loss) per common share:


	Three Months Ended September 30, 2017	Three Months Ended September 30, 2016	Nine Months Ended September 30, 2017	Nine Months Ended September 30, 2016	Three Months Ended September 30, 2018	Three Months Ended September 30, 2017	Nine Months Ended September 30, 2018	Nine Months Ended September 30, 2017
Basic weighted-average common shares outstanding	49,676,923	49,567,735	49,852,337	49,385,733	49,853,181	49,676,923	49,671,648	49,852,337
Effect of dilutive options, performance stock units and restricted stock	492,511	60,065	282,254	—	456,798	492,511	—	282,254
Dilute weighted-average shares outstanding	50,169,434	49,627,800	50,134,591	49,385,733
Diluted weighted-average shares outstanding					50,309,979	50,169,434	49,671,648	50,134,591

Securities that could potentially be dilutive are excluded from the computation of diluted earnings per share when a loss from continuing operations exists or when the exercise price exceeds the average closing price of the Company's common stock during the period, because their inclusion would result in an anti-dilutive effect on per share amounts.

The following represents amounts ~~were not included~~that could potentially dilute basic earnings per share in the ~~calculation of net income (loss) per diluted share because their effects were anti-dilutive:~~

future:


(in thousands, except share data)	Three Months Ended September 30, 2017	Three Months Ended September 30, 2016	Nine Months Ended September 30, 2017	Nine Months Ended September 30, 2016	Three Months Ended September 30, 2018	Three Months Ended September 30, 2017	Nine Months Ended September 30, 2018	Nine Months Ended September 30, 2017
Stock-based compensation awards⁽¹⁾:
Stock options	577,500	584,375	577,500	584,375	322,158	577,500	322,158	577,500
Restricted stock to non-directors					336,286	—	278,289	—
Restricted stock to directors					84,427	—	72,655	—
Warrants:
Private placement warrants	6,160,000	6,160,000	6,160,000	6,160,000	6,160,000	6,160,000	6,160,000	6,160,000
Public warrants	9,823,072	9,823,072	9,823,072	9,823,072	9,823,072	9,823,072	9,823,072	9,823,072

———————————————————————————————


(1)	SARs and Phantom Shares are payable in cash ~~and~~so will ~~therefore,~~ have no impact on number of ~~shares.~~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. Performance share units are considered anti-dilutive if the performance targets upon which the issuance of the shares is contingent have not been achieved and the respective performance period has not been completed as of the end of the current period.


16.	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 September 30, 2018, and September 30, 2017, 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 December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted in the U.S. The TCJA represents sweeping changes in U.S. tax law. Among other changes in tax law, the TCJA permanently reduced the U.S. corporate income tax rate to 21% beginning in 2018, imposed a one-time repatriation tax on deferred foreign earnings, established a participation exemption system by allowing a 100% dividends received deduction on qualifying dividends paid by foreign subsidiaries, limited deductions for net interest expense, and expanded the U.S. taxation of foreign earned income to include “global intangible low-taxed income” (“GILTI”).

As permitted by Staff Accounting Bulletin No. 118, the tax benefit recorded in the fourth quarter of 2017 due to the enactment of the TCJA was considered “provisional”, based on reasonable estimates. The Company is continuing to collect and analyze detailed information about the earnings and profits of its non-U.S. subsidiaries, the related taxes paid, the amounts which could be repatriated, the foreign taxes which may be incurred on repatriation, and the associated impact of these items under the TCJA. The Company may record adjustments to refine those estimates during the measurement period, as additional analysis is completed. No adjustments were recorded during the nine months ended September 30, 2018.

The TCJA transitions the U.S. from a worldwide tax system to a territorial tax system. Under previous law, companies could indefinitely defer U.S. income taxation on unremitted foreign earnings. The TCJA imposes a one-time repatriation tax on deferred foreign earnings of 15.5% for liquid assets and 8% for illiquid assets, payable in defined increments over eight years. As a result of this requirement, the Company recognized provisional tax expense of $0.5 million in 2017, and provisionally expects to pay $0.3 million, net of estimated applicable foreign tax credits, and after utilization of FTC Credit carryforwards. These previously deferred foreign earnings may now be repatriated to the U.S. without additional U.S. federal taxation. However, any such repatriation could incur withholding and other foreign taxes in the source and intervening foreign jurisdictions, and certain U.S. state taxes. The Company continues to not recognize any U.S. income or foreign withholding taxes for the differences between the financial reporting and tax basis of the investments in foreign subsidiaries that are indefinitely reinvested outside the U.S. This amount may be recognized upon a sale or liquidation.

The Company's effective tax rate for the three and nine months ended September 30, ~~2017~~2018 was ~~27.6%~~25.6% and ~~101.1%~~(0.8)%, respectively compared to the effective tax rate for the three and nine months ended September 30, ~~2016~~2017 of ~~39.0%~~27.6% and ~~37.9%~~101.1%, respectively.

~~The effective tax rate for the three months ended September 30, 2017 differs from the US statutory tax rate of 35%, primarily due to certain intercompany transactions that did not have a tax effect.~~

The effective tax rate for the nine months ended September 30, ~~2017~~2018 differs from the USU.S. statutory tax rate of ~~35%~~21%, due to ~~the release~~unbenefited losses and certain provisions of the ~~valuation allowance~~TCJA. The unbenefited losses related to ~~net deferred tax assets~~the elimination of intercompany profit in inventory. In addition to the ~~U.S. tax jurisdiction. There were a series of tax adjustments as a result~~unbenefited losses, certain provisions of the ~~April 2017 settlement with Dow that resulted in $40.0 million additional U.S. deferred tax liabilities.~~TCJA impacted the Company. The reduction of the ~~Company's obligations~~U.S. corporate income tax rate to ~~Dow~~21% reduced the overall tax benefit for the Company. Other provisions like the limitation and deductibility of U.S. interest expense and the inclusion of GILTI had an immaterial impact on the ~~balance sheet impacted purchase price consideration, ultimately decreasing~~effective tax rate for the ~~Company’s intangible’s tax basis determined for ASC 740 purposes.~~nine months ended September 30, 2018. The Company ~~considered these future sources of taxable income as additional positive evidence when concluding~~has elected to account for GILTI tax in the period in which it is incurred, and therefore did not provide any deferred ~~tax assets within~~taxes in the ~~U.S. were more likely than not to be realized and reversed a valuation allowance of $15.4 million.~~consolidated financial statements at December 31, 2017 or September 30, 2018.


17.	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.

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.


18.	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~~instrument liability/(asset) that are measured at fair value on a recurring basis as of September 30, ~~2017:~~

2018:


(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Tax amortization benefit contingency⁽²⁾⁽¹⁾	—		—		69,599		69,599		$	—	$	—	$	46,276	$	46,276
Deferred acquisition payment⁽³⁾	—		—		624		624
Contingent consideration⁽²⁾									—		—		1,215		1,215
Stock appreciation rights⁽⁴⁾	—		—		57		57		—		—		108		108
Phantom shares⁽⁵⁾	—		—		32		32		—		—		323		323
Total	$	—	$	—	$	70,312	$	70,312	$	—	$	—	$	47,922	$	47,922

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, ~~2016:~~2017:


(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Warrant consideration⁽¹⁾	$	—	$	1,080	$	—	$	1,080
Tax amortization benefit contingency⁽²⁾	—		—		150,260		150,260
Deferred acquisition payment⁽³⁾	—		—		2,498		2,498
Tax amortization benefit contingency⁽¹⁾									$	—	$	—	$	43,382	$	43,382
Contingent consideration⁽²⁾									—		—		691		691
Interest rate swap ⁽³⁾									—		456		—		456
Stock appreciation rights⁽⁴⁾	—		—		22		22		—		—		268		268
Phantom shares⁽⁵⁾	—		—		4		4		—		—		186		186
Total	$	—	$	1,080	$	152,784	$	153,864	$	—	$	456	$	44,527	$	44,983

———————————————————————————————


(1)	This liability relates to warrants to purchase the Company's common stock and future obligations to deliver additional such warrants in relation to the Business Combination. The inputs used in the fair value measurement were directly observable quoted prices for identical assets in an inactive market. Refer to Note 3 for additional details.

~~(2)~~

The fair value of the tax amortization benefit contingency is measured using an income approach based on the ~~Company's~~Company’s best estimate of the undiscounted cash payments to be made, with the current portion tax effected at ~~37%~~35.3% and the non-current portion tax effected at 21.5% due to the TCJA enacted in the U.S and discounted to present value utilizing an appropriate market discount rate. Per the TRA Amendment, payments due to Dow under the Tax Receivable Agreement were reduced from 85% to 50% of the applicable tax savings realized by the Company. The valuation technique used did not change during the nine months ended September 30, ~~2017. Refer~~2018.


(2)	The fair value of the contingent consideration related to ~~Note 3 for additional details.~~the Tecnidex acquisition.


(3)	The interest rate swap relates to an interest rate derivative that is measured at fair value using observable market inputs such as interest rates, our own credit risks as well as an evaluation of the counterparts' credit risks. The swap was settled during the three months ended September 30, 2018 for $4.0 million.

(4)

The fair value of the ~~deferred acquisition payment is~~stock appreciation rights was measured using a ~~Black-Scholes option~~Black Scholes pricing model ~~and based on~~during the ~~Company's best estimate of the Company's average Business EBITDA, as defined in the Purchase Agreement (as defined in Note 3), over the two year period from January 1, 2016 to December 31, 2017.~~nine months ended September 30, 2018. The valuation technique used did not change during the nine months ended September 30, ~~2017.~~


~~(4)~~	The fair value of the stock appreciation rights were measured using a Black Scholes pricing model during the nine months ended September 30, 2017. The valuation technique used did not change during the nine months ended September 30, 2017.2018.


(5)	The fair value of phantom shares ~~are~~is based on the fair value of the Company's common stock. The valuation technique used did not change during the nine months ended September 30, ~~2017.~~2018.

There were no transfers between Level 1 and Level 2 and no transfers out of Level 3 of the fair value hierarchy during the nine months ended September 30, ~~2017.~~2018.

At September 30, ~~2017,~~2018, the Company evaluated the amount recorded under the Term Loan and determined that the fair value was approximately ~~$416.5~~$410.7 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 our Level 3 financial ~~instruments~~instrument liability/(asset) that are measured at fair value on a recurring basis. ~~These instruments relate to contingent consideration payable to Dow in connection to the Business Combination.~~

(in thousands) Tax amortization benefit contingency Deferred acquisition payment Stock appreciation rights Phantom shares Total
Balance, December 31, 2016 $ 150,260
$ 2,498
$ 22
$ 4
$ 152,784
Awards granted —
—
—
—
—
Settlement of Dow liabilities (86,931 ) —
—
—
(86,931 )
Accretion 7,297
—
—
—
7,297
Mark to market adjustment (1,027 ) (1,874 ) 35
28
(2,838 )
Balance, September 30, 2017 $ 69,599
$ 624
$ 57
$ 32
$ 70,312


~~19.~~	~~Subsequent Events~~

On November 7, 2017, the Company entered into a definitive agreement to acquire a controlling-interest in Tecnidex Fruit Protection, S.A.U. ("Tecnidex"). Tecnidex, a privately-held international company, is a leading provider of post-harvest fungicides, waxes, and biocides 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 its regional clients.

The purchase price is approximately €22.5 million (or approximately $26.1 million based on the exchange rate as of November 7, 2017), subject to customary purchase price adjustments, payable in cash. The Company expects to fund the acquisition with cash on hand, and following the acquisition the Company will own 75 percent of the outstanding Tecnidex shares. The Company has an option to purchase the remaining shares over time. The acquisition will be treated as a business combination.

Due to the timing of the acquisition, the Company has not yet completed its initial accounting analysis. As a result, the Company is unable to provide amounts recognized as of the acquisition date for major classes of assets and liabilities acquired and resulting from the transaction including any intangible assets or goodwill. The transaction is expected to close as soon as the fourth quarter of 2017.



(in thousands)	Tax amortization benefit contingency		Contingent consideration related to acquisition		Interest rate swap			Stock appreciation rights			Phantom shares		Total
Balance, December 31, 2017	$	43,382	$	691	$	456		$	268		$	186	$	44,983
Accretion	2,894		—		—			—			—		2,894
Tecnidex acquisition	—		524		—			—			—		524
Interest rate contract	—				(456		)	—			—		(456		)
Stock compensation expense	—		—		—			(160		)	137		(23		)
Balance, September 30, 2018	$	46,276	$	1,215	$	—		$	108		$	323	$	47,922

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 measure EBITDA, which is not presented in accordance with accounting principles generally accepted in the United States of America ~~(“GAAP”~~("GAAP"). This non-GAAP financial measure is being presented because management believes that it provides readers with additional insight into the Company’s operational performance relative to earlier periods and relative to its competitors. EBITDA is a key measure used by the Company to evaluate its performance. The Company does not intend for this non-GAAP financial measure to be a substitute for any GAAP financial information. Readers of this MD&A should use this non-GAAP financial measure only in conjunction with the comparable GAAP financial measure. A reconciliation of 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, ~~2016~~2017 (the ~~"2016~~"2017 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 ~~band~~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 preservation and waste reduction solutions for fresh produce, including apples, pears, citrus, kiwifruit, avocados and bananas, among others. Our proprietary and innovative solutions are designed to help growers, packers, and retailers improve produce freshness and quality while reducing waste.

AgroFresh’s market leadership is underpinned by our global footprint, extensive applied scientific expertise, customer intimacy, and a growing portfolio of value-added products and mission-critical advisory services. Our key products are registered in over 45 countries, support approximately 3,700 direct customers, and service over 25,000 storage rooms globally. In addition, we offer a comprehensive list of solutions spanning from pre-harvest to post-harvest, from storage through retail. More importantly, we believe that our direct market approach and high touch service model best position us to address our customers’ needs. We believe this is a key differentiator compared to other companies that have narrower product offerings and limited service levels.

Freshness is the most important driver of consumer satisfaction when it comes to produce, and, at the same time, food waste is a major issue in the industry. ~~About one third of~~According to the ~~total food produced worldwide is lost or wasted each year. Nearly 45 percent of all fresh~~U.N.’s Food and Agricultural Organization, fruits and vegetables ~~40 percent~~have the highest waste rates of ~~apples and 20 percent of bananas, are lost to spoilage.~~any food, estimated at 40%-50% globally. AgroFresh plays a key role in the value chain by offering products and services that maintain produce freshness and reduce waste.

AtAgroFresh’s core business is providing produce preservation and waste reduction solutions for growers and packers. SmartFresh^TM, our current principal solution, preserves the ~~core~~texture, firmness, taste and appearance of produce during storage, transportation and retail display. It allows growers and packers to deliver “just harvested” freshness on a year-round basis and enables retailers to increase customer satisfaction with fresh, high quality produce. An integral part of the SmartFresh ~~Quality System~~value proposition is a direct service model providing customers with on-site applications of SmartFresh at their storage facilities together with mission-critical and value-added advisory services.

In December 2017, AgroFresh acquired a controlling interest in Tecnidex Fruit Protection, S.A.U. ("Tecnidex"). With this acquisition, AgroFresh expanded its post-harvest leadership into additional crops, and increased its penetration of the produce market in southern Europe, Latin America and Africa. For over 35 years, Tecnidex has been helping fruit and vegetable producers offer clean, safe and high-quality products to customers, now reaching 18 countries. Tecnidex is a leading provider of fungicides, sanitizers, waxes, and coatings primarily focused on the citrus market. The Tecnidex acquisition brought a broad catalogue of solutions that enhanced AgroFresh’s fungicide offering, ActiMist^SMTM, an innovative delivery system of foggable fungicides. AgroFresh’s fungicide offerings further diversify our revenue by expanding our ability to provide solutions and service to the citrus industry. Tecnidex is based in Valencia, Spain.

Complementing our post-harvest solutions, Harvista^TM technology is AgroFresh’s principal product, SmartFresh, which 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 approvedused for ~~use by many domestic and global regulatory organizations. Harvista extends the Company’s proprietary technology into pre-harvest~~near harvest management of pome fruit, such as apples, pears, and ~~pears. StoreEdge~~cherries. Just as SmartFresh revolutionized post-harvest apple storage, we believe Harvista can have a similar impact in the orchard. Harvista slows ripening, reduces fruit drop, and holds fruit on the tree longer to promote better color and fruit size, thereby bringing new benefits to the grower. With maximum flexibility in application timing, it extends the harvest window by allowing growers to factor in ever-changing weather conditions and labor availability, providing peace of mind. Finally, we have found that the combination of Harvista in the orchard and SmartFresh in the storage room results in improved fruit quality metrics compared to use of either product individually.

AgroFresh provides freshness solutions across the supply chain, wherever waste occurs. For many crops, much of the waste occurs at retail. This includes bananas, one of the largest retail produce categories, where, according to internal analysis based on data from Journal of Consumer Affairs and United Nation’s Food and Agriculture Organization, it is estimated that 12-16% of banana loss occurs after the fruit reaches the grocery store. Our RipeLock^TMQuality System is a retail solution to improve the quality and ~~AdvanStore~~consumer appeal of bananas. RipeLock enables retailers to offer consumers bananas that are in better condition and maintain the consumer-preferred color and firmness longer, reducing waste and increasing sales. Additionally, through our agreement with Food Freshness Technology Holdings Limited, AgroFresh expects to market It’s Fresh!, an ethylene absorbing technology to preserve the freshness of produce for high-value crops such as berries, stone fruit, avocados, tomatoes, and cherries, to open up new opportunities to address food waste in retail.

To continue to evolve and increase the value we provide to our customers, AgroFresh recently launched our FreshCloud^TM ~~are atmospheric~~suite of produce monitoring ~~systems that leverage~~and screening solutions. FreshCloud is the ~~Company’s extensive understanding~~culmination of ~~fruit~~our decades-long history of innovation and scientific know-how in the physiology ~~fruit respiration, current controlled atmosphere~~of fruits and vegetables. FreshCloud consists of both enhancements to our existing service offerings, as well as new innovations. FreshCloud Storage Insights^TM, the next generation of AdvanStore, combines proprietary sensor technology and ~~new proprietary diagnostic tools~~data analytics in the storage room to ~~provide improved and real time guidance~~offer customers real-time access to ~~producers and packers~~unique insights into the condition of ~~fresh produce regarding~~their stored fruit. FreshCloud Predictive Screening^TM, which predicts the risk of disorder development during storage ~~conditions so corrective measures can be made on a~~by analyzing gene expression at commercial harvest, allows for more ~~timely basis.~~

~~Beyond the SmartFresh Quality System, RipeLock~~informed storage management decisions. FreshCloud Transit Insights^TM combines sensor technology and proprietary algorithms to provide insights as to the ~~technology behind SmartFresh with modified atmosphere packaging designed specifically to preserve~~condition and quality of fruit during ~~transportation and to extend the yellow shelf life of bananas and other fruits. LandSpring~~^TM is an innovative 1-MCP technology for transplanted vegetable seedlings that is currently registered for use on 14 crops in the U.S. (except California), most notably tomatoes and peppers. It reduces transplant shock, resulting in less seedling mortality and faster crop establishment, which leads to a healthier crop and improved yields. EthylBloc^TMtechnology is an ethylene action inhibitor that works naturally with flowers and plants to keep them fresh during shipping and distribution. The negative effects of ethylene have been estimated by the industry to cause up to 30 percent of losses among all flowers and plants.transit.

AgroFresh’s business is highly seasonal, driven by the timing of harvests in the northern and southern hemispheres. 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 our two core crops of apples and pears 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.

AgroFresh is a former blank check company that completed its initial public offering on February 19, 2014. Upon the closing of the ~~Business Combination~~business combination with Dow on July 31, 2015 (the "Business Combination"), the Company changed its name to AgroFresh Solutions, Inc. The Company paid Dow cash consideration of $635 million and issued Dow 17.5 million shares of common stock at a deemed value of $12 per share. The transaction included a liability to Dow to deliver a variable number of warrants between the closing and April 2016, which obligation was terminated pursuant to a letter agreement entered into on April 4, 2017. The cash consideration was funded through our initial public offering, a term loan, and a private placement of 4.9 million shares of common stock that yielded $50 million of proceeds. The transaction also ~~has~~had an earn-out feature whereby Dow iswas entitled to receive a deferred payment of $50 million in March 2018 if AgroFresh ~~achieves~~achieved a specified average level of Business EBITDA (as defined in the Stock Purchase Agreement related to the Business Combination) over 2016 and 2017. The specified level of Business EBITDA was not achieved and, accordingly, the earn-out feature is no longer payable. In addition, pursuant to a tax receivables agreement entered into in connection with the Business Combination, as amended in April 2017 (the "Tax Receivables Agreement"), Dow ~~was originally~~is entitled to receive ~~85%~~50% of the tax savings, if any, that the Company realizes as a result of the increase in the tax basis of assets acquired pursuant to the Business Combination. ~~Pursuant to an amendment to the tax receivables agreement entered into on April 4, 2017, the percentage was reduced from 85% to 50% for all tax years ending after December 31, 2015.~~

In connection with the closing of the Business Combination, AgroFresh entered into a ~~transition services agreement~~Transition Services Agreement with Dow. Under the agreement, Dow ~~provides~~provided AgroFresh a suite of services for a period of time ranging from six months to five years depending on the service. ~~However,~~While most of the ~~Company expects to terminate these~~Dow-provided services byare complete as of December 31, ~~2017.~~2017 certain services are expected to continue through 2018. The agreement also provided for a $5 million execution fee that was paid to Dow at the closing of the Business Combination.

~~Recent Development~~

On November 7, 2017, AgroFresh signed a definitive agreement to acquire a controlling-interest in Tecnidex, a leading provider of post-harvest fungicides, waxes, and biocides for the citrus market. With this acquisition, AgroFresh expands its industry-leading post-harvest presence into additional crops, and increases its penetration of the produce market in southern Europe, Latin America and Africa.

For over 35 years, Tecnidex has been helping fruit and vegetable producers offer clean, safe and high-quality products to its regional clients in 18 countries. Through its portfolio of post-harvest products, technology, consulting, and after-sale services, Tecnidex improves the quality and value of its clients’ fruit and vegetables while respecting the environment. Tecnidex is based in Valencia, Spain.

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.

Demand for the Company’s Offerings

The Company services ~~over 3,000~~ customers in over 4045 countries and derives its revenue by assisting growers, packers and retailers to maximize the value of their crops brought to ~~market and consumers.~~market. The Company's 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 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 patents on, among other things, the encapsulation of the active ingredient, 1-MCP.

The global produce market is a function of both the size and the yield of the crop harvested; 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 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 ~~offering~~offerings depending on the volume of fruit treated, or in order to address specific market trends. The SmartFresh Quality System continues to expand its platform of services, which may have an impact on price. The Company provides a ~~value added~~value-added service and does not typically price its products in relation to any underlying cost of materials; therefore, its margins can fluctuate with changes in the costs to provide its services to customers. The Company’s pricing may include rebate arrangements with customers in exchange for mutually beneficial long-term relationships and growth.

Direct Service Model

AgroFresh offers a direct service model for the Company’s commercially available products, including SmartFresh and Harvista. Sales and sales support personnel maintain direct 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. The Harvista application service, through both aerial and ground application, is also administered by third-party service providers or made by our customers directly. The combination of SmartFresh and Harvista treatments are designed to provide the best results to customers.

The Company is shifting the terms of its contracts with service providers from annual renewal periods to two or three year durations in order to have greater certainty that experienced applicators will be available for upcoming harvest seasons. 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. Northern Hemisphere growers typically harvest from August through November, and Southern Hemisphere growers typically harvest from late January to early May. 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. As the Company ~~diversifies~~continues to diversify into other crops and becomes increasingly less dependent on pome fruit, the Company expects that the impacts of seasonality will lessen.

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. See Note 2 to the condensed consolidated financial statements for a discussion of the changes to the highly inflationary accounting for Argentina as of July 1, 2018.

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~~Aside from the adoption of ASC 606, there have been no material changes to our critical accounting policies and estimates previously disclosed in ~~our 2016~~the 2017 Form ~~10-K for the year ended December 31, 2016.~~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 ~~our 2016~~the 2017 Form 10-K.

Results of Operations

The following table summarizes the results of operations for both the three and nine months ended September 30, ~~2017~~2018 and September 30, ~~2016:~~2017:


(in thousands)	Three Months Ended September 30, 2017			Three Months Ended September 30, 2016			Nine Months Ended September 30, 2017			Nine Months Ended September 30, 2016			Three Months Ended September 30, 2018			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Net sales	$	60,772		$	61,200		$	109,891		$	107,996		$	68,698		$	60,772		$	125,470		$	109,891
Cost of sales (excluding amortization, shown separately below)	11,620			8,905			21,365			48,558			16,662			11,620			32,910			21,365
Gross profit	49,152			52,295			88,526			59,438			52,036			49,152			92,560			88,526
Research and development expenses	3,071			2,983			10,103			11,220			3,491			3,071			10,293			10,103
Selling, general, and administrative expenses	14,462			15,173			44,328			49,385			18,212			14,462			50,133			44,328
Amortization of intangibles	10,445			10,080			31,335			29,878			12,002			10,445			34,342			31,335
Change in fair value of contingent consideration	(1,424		)	(1,569		)	(2,420		)	(4,969		)	307			(1,424		)	543			(2,420		)
Operating income (loss)	22,598			25,628			5,180			(26,076		)	18,024			22,598			(2,751		)	5,180
Other (expense) income	(295		)	(38		)	(40		)	16
Other (loss) income													(189		)	(295		)	419			(40		)
(Loss) gain on foreign currency exchange	(487		)	924			10,584			682			(4,731		)	(487		)	472			10,584
Interest expense, net	(8,638		)	(14,526		)	(27,495		)	(43,850		)	(9,132		)	(8,638		)	(26,250		)	(27,495		)
Income (loss) before income taxes	13,178			11,988			(11,771		)	(69,228		)	3,972			13,178			(28,110		)	(11,771		)
Income tax expense (benefit)	3,632			4,676			(11,895		)	(26,239		)	1,018			3,632			214			(11,895		)
Net income (loss)	$	9,546		$	7,312		$	124		$	(42,989	)
Net income (loss) including non-controlling interests													$	2,954		$	9,546		$	(28,324	)	$	124
Less: Net loss attributable to non-controlling interests													(516		)	—			(442		)	—
Net income (loss) attributable to AgroFresh Solutions, Inc													3,470			9,546			$	(27,882	)	$	124

Comparison of Results of Operations for the three months ended September 30, ~~2017~~2018 compared to the three months ended September 30, ~~2016.~~2017.

Net Sales

Net sales were $68.7 million for the three months ended September 30, 2018, an increase of $7.9 million, or 13.0%, as compared to net sales of $60.8 million for the three months ended September 30, ~~2017 as compared to net sales of $61.2 million for the three months ended September 30, 2016.~~2017. The ~~decrease~~increase in net sales was ~~primarily~~ driven by ~~lower volume on~~the acquisition of Tecnidex which contributed net sales of $4.1 million and growth in SmartFresh, ~~driven~~particularly in Europe, where we were favorably impacted by ~~a late~~increased penetration and crop ~~in the U.S., which was partially offset by an increase of $1.1 million in Harvista sales.~~size.

Cost of Sales

Cost of sales was $16.7 million for the three months ended September 30, 2018 as compared to $11.6 million for the three months ended September 30, ~~2017 as compared to $8.9 million~~2017. Gross profit margin was 75.7% for the three months ended September 30, ~~2016. Gross profit margin was 85.4 percent in~~2018 versus 80.9% for the ~~third quarter of 2016 versus 80.9 percent in the third quarter of~~three months ended September 30, 2017. ~~This~~The decrease in margin was primarily driven by ~~an unfavorable mix towards~~the addition of Tecnidex, which has lower ~~margin with the decrease in SmartFresh and increase in Harvista sales.~~gross margins than our other existing businesses.

Research and Development Expenses

Research and development expenses were $3.5 million and $3.1 million, ~~for~~respectively, in the three months ended September 30, ~~2017 as compared to $3.0 million for the three months ended~~2018 and September 30, ~~2016.~~2017.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $18.2 million for the three months ended September 30, 2018 compared to $14.5 million for the three months ended September 30, ~~2017 compared to $15.2 million for the three months ended September 30, 2016. This decrease in selling, general and administrative expenses~~2017. The increase was primarily driven by ~~efficiency~~the addition of Tecnidex, increased severance expense and ~~productivity improvements as we begin the transition off the Dow systems, along with lower severance~~non-recurring costs ~~partially offset by higher expenses relating~~related to ~~mergers~~strategic initiatives and ~~acquisitions ("M&A")-related activities.~~

ongoing litigation.

Amortization of Intangibles

Amortization of intangible assets was $12.0 million for the three months ended September 30, 2018 compared to $10.4 million for the three months ended September 30, 2017 compared to $10.1 million for the three months ended September 30, 2016. The increase in amortization of intangibles is primarily due to the amortization of in-process research and development for our LandSpring product line, which started in September 2016.2017.

Change in Fair Value of Contingent Consideration

The Company recorded a ~~$1.4~~$0.3 million ~~gain~~loss in the three months ended September 30, ~~2017~~2018 related to a change in the fair value of contingent consideration, as compared to a ~~$1.6~~$1.4 million gain in the three months ended September 30, ~~2016.~~2017. As discussed in Note 3 toof the ~~2016 audited~~unaudited condensed consolidated financial statements, pursuant to the Business Combination, the Company entered into various forms of contingent consideration, including the warrant consideration, ~~the deferred payment,~~ and 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. ~~For the three months ended September 30, 2017, the deferred payment and the tax amortization benefit contingency gains were $0.6 million and $0.8 million, respectively.~~

Interest Expense, Net

Interest expense was $9.1 million for the three months ended September 30, 2018, as compared to $8.6 million for the three months ended September 30, ~~2017, as compared to $14.5~~2017.

Loss on foreign currency

Loss on foreign currency was $4.7 million for the three months ended September 30, ~~2016. Accretion on~~2018, due to the ~~potential deferred payment~~adoption of highly inflationary accounting in Argentina during the quarter and inflation in Turkey and Brazil, as compared to ~~Dow was $3.6~~a $0.5 million loss for the three months ended September 30, ~~2016, without a comparable expense in~~ 2017. ~~Lower accretion of the Tax Receivables Agreement of $2.2 million also contributed to the decrease in interest expense.~~

Income taxes

Income tax expense was $1.0 million for the three months ended September 30, 2018 compared to income tax expense of $3.6 million for the three months ended September 30, ~~2017 compared to income tax expense of $4.7 million for~~2017. During the three months ended September 30, ~~2016.~~2018, certain losses occurred that did not receive a tax benefit. The unbenefited losses related to the elimination of intercompany profit in inventory. In addition to the unbenefited losses, certain provisions of the TCJA impacted the Company, most notably the reduction of the U.S. corporate income tax rate to 21%. Other provisions like the inclusion of GILTI had an immaterial impact on the effective tax rate for the three months ended September 30, ~~2017 differs from the U.S. statutory tax rate of 35% due to certain intercompany transactions that did not have a tax effect.~~2018.

Comparison of Results of Operations for the nine months ended September 30, ~~2017~~2018 compared to the nine months ended September 30, ~~2016.~~2017.

Net Sales

Net sales were $125.5 million for the nine months ended September 30, 2018, an increase of $15.6 million, or 14.2%, as compared to net sales of $109.9 million for the nine months ended September 30, ~~2017 as compared to net sales of $108.0 million for the nine months ended September 30, 2016.~~2017. The increase in net sales was ~~primarily~~ driven by ~~SmartFresh~~the addition of Tecnidex which contributed $13.1 million of net sales and growth in ~~Brazil~~SmartFresh, particularly in Europe, where we were favorably impacted by increased penetration and ~~France and significant Harvista growth in Argentina and~~crop size. These increases were partially offset by the ~~U.S. We also saw slight~~deferral of revenue ~~increases on sales~~for future performance obligations from the adoption of ~~RipeLock, LandSpring, and EthylBloc.~~ASC 606.

Cost of Sales

Cost of sales was $32.9 million for the nine months ended September 30, 2018 as compared to $21.4 million for the nine months ended September 30, 2017 as compared to $48.6 million for the nine months ended September 30, 2016. The amount in the prior year period includes $30.4 million of amortization of inventory step up. If the amortization of inventory step-up is excluded, gross2017. Gross profit margin ~~would have been 83.2 percent~~was 73.8% in the first nine months of ~~2016~~2018 versus ~~80.6 percent~~80.6% in the first nine months of 2017. The decrease in margin was primarily driven by ~~an unfavorable mix towards lower margin with~~ the ~~decrease in SmartFresh~~addition of Tecnidex and ~~increase in Harvista sales.~~the deferral of revenue under ASC 606.

Research and Development Expenses

Research and development expenses were $10.3 million and $10.1 million, ~~for~~respectively, in the nine months ended September 30, ~~2017 as compared to $11.2 million for the nine months ended~~2018 and September 30, ~~2016. The decrease in research and development expenses reflects more targeted research activities in~~ 2017.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $50.1 million for the nine months ended September 30, 2018 compared to $44.3 million for the nine months ended September 30, ~~2017 compared to $49.4 million for the nine months ended September 30, 2016.~~2017. This ~~decrease~~increase in selling, general and administrative expenses was primarily driven by ~~lower~~the addition of Tecnidex, increased severance expense and non-recurring costs related to ~~establish ourselves as a separate public company, lower severance costs~~strategic initiatives and

~~lower stock-based compensation, which was partially offset by legal fees associated with the MirTech litigation described below and M&A-related expenses.~~ ongoing litigation.

Amortization of Intangibles

Amortization of intangible assets was $34.3 million for the nine months ended September 30, 2018 compared to $31.3 million for the nine months ended September 30, 2017 compared to $29.9 million for the nine months ended September 30, 2016. The increase in amortization of intangibles is primarily due to the amortization of in-process research and development for our LandSpring product line, which started in September 2016.2017.

Change in Fair Value of Contingent Consideration

The Company recorded a ~~$2.4~~$0.5 million ~~gain~~loss in the nine months ended September 30, ~~2017~~2018 related to a change in the fair value of contingent consideration, as compared to a ~~$5.0~~$2.4 million gain in the nine months ended September 30, ~~2016.~~2017. As discussed in Note 3 to the ~~2016 audited~~unaudited condensed consolidated financial statements, pursuant to the Business Combination, the Company entered into various forms of contingent consideration, including the warrant consideration, ~~the deferred payment,~~ and 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. ~~For~~

Gain on foreign currency

Gain on foreign currency was $0.5 million for the nine months ended September 30, ~~2017,~~2018 as compared to $10.6 million gain for the ~~warrant consideration,~~nine months ended September 30, 2017. The reduction in the ~~deferred payment, and~~gain compared to prior period was caused by the ~~tax amortization benefit contingency losses (gains) were $0.5 million, $(1.9) million, and $(1.0) million, respectively.~~adoption of highly inflationary accounting in Argentina during the quarter.

Interest Expense, Net

Interest expense was $26.3 million for the nine months ended September 30, 2018, as compared to $27.5 million for the nine months ended September 30, ~~2017, as compared to $43.9~~2017. The decrease was driven by lower accretion of the Tax Receivables Agreement.

Income taxes

Income tax expense was $0.2 million for the nine months ended September 30, ~~2016. Accretion on the potential deferred payment~~2018 compared to Dow was $10.7 million for the nine months ended September 30, 2016, without a comparable expense in 2017. Interest on the working capital settlement with Dow was $0.6 million for the nine months ended September 30, 2016, without a comparable expense in 2017. Lower accretion of the Tax Receivables Agreement of $4.9 million also contributed to the decrease in interest expense.

~~Income taxes~~

~~The~~ income tax benefit ~~was~~of $11.9 million for the nine months ended September 30, ~~2017 compared~~2017. During the nine months ended September 30, 2018, certain losses occurred that did not receive a tax benefit. The unbenefited losses related to the elimination of intercompany profit in inventory. In addition to the unbenefited losses, certain provisions of the TCJA impacted the Company, most notably the reduction of the corporate income tax ~~benefit~~rate to 21%. Other provisions like the limitation and deductibility of ~~$26.2 million~~U.S. interest expense and the inclusion of GILTI income had an immaterial impact on the effective tax rate for the nine months ended September 30, ~~2016. During the nine months ended~~2018. As of September 30, 2017, in accordance with ASC 740, Income Taxes, we released the full valuation allowance against the net deferred tax assets in the U.S. tax jurisdiction, including net operating loss deferred tax assets. During the nine months ended September 30, 2017, we increased our deferred tax liabilities ~~associated~~ with intangibles due to the ~~April 2017~~ settlement with Dow. The reduction of our obligations to Dow reduced purchase price consideration, which had a corresponding decrease to the tax basis of intangibles determined for ASC 740 purposes leading to the deferred tax liability increase. We considered these future sources of taxable income as positive evidence when concluding whether the deferred tax assets within the U.S. were more likely than not to be realized. We will continue to monitor the realizability of the U.S. deferred tax assets.

Non-GAAP Measure

The following table sets forth the non-GAAP financial measure of EBITDA. The Company believes this non-GAAP financial measure provides meaningful supplemental information as it is used by the Company’s management to evaluate the Company’s performance, is more indicative of future operating performance of the Company, and facilitates a better comparison among fiscal periods, as the non-GAAP measure excludes items that are not considered core to the Company’s operations. 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 measure of EBITDA to its most directly comparable GAAP financial measure, net income (loss):

(in thousands) Three Months Ended
September 30, 2017 Three Months Ended
September 30, 2016 Nine Months Ended
September 30, 2017 Nine Months Ended
September 30, 2016
GAAP net income (loss) $ 9,546
$ 7,312
$ 124
$ (42,989 )
Income tax expense (benefit) 3,632
4,676
(11,895 ) (26,239 )
Amortization of inventory step-up⁽¹⁾
—
—
—
30,377
Interest expense⁽²⁾
8,638
14,526
27,495
43,850
Depreciation and amortization 11,056
10,438
33,102
31,777
Non-GAAP EBITDA $ 32,872
$ 36,952
$ 48,826
$ 36,776



(in thousands)	Three Months Ended September 30, 2018		Three Months Ended September 30, 2017		Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
GAAP net income (loss) including non-controlling interests	$	2,954	$	9,546	$	(28,324	)	$	124
Provision (benefit) for income taxes	1,018		3,632		214			(11,895		)
Interest expense⁽¹⁾	9,132		8,638		26,250			27,495
Depreciation and amortization	12,533		11,056		35,486			33,102
Non-GAAP EBITDA	$	25,637	$	32,872	$	33,626		$	48,826

———————————————————————————————


~~(1)~~	~~The amortization of inventory step-up related to the acquisition of AgroFresh was charged to income based on the pace of inventory usage.~~


~~(2)~~	(1) Interest on the term loan and accretion for debt discounts, debt issuance costs and contingent consideration.

Liquidity and Capital Resources

Cash Flow

(in thousands) Nine Months Ended
September 30, 2017 Nine Months Ended
September 30, 2016
Net cash provided by (used in) operating activities 14,919
(5,123 )
Net cash (used in) investing activities (6,232 ) (5,441 )
Net cash (used in) financing activities (12,125 ) (4,676 )



(in thousands)	Nine Months Ended September 30, 2018		Nine Months Ended September 30, 2017
Net cash (used in) provided by operating activities	(16,215	)	14,919
Net cash used in investing activities	(4,766	)	(6,232	)
Net cash used in financing activities	(13,517	)	(12,125	)

Cash ~~provided by (used in)~~used in operating activities was $(16.2) million for the nine months ended September 30, 2018, as compared to cash provided by operating activities of $14.9 million for the nine months ended September 30, ~~2017, as compared~~2017. In 2018, net loss before non-cash depreciation and amortization and changes in fair value of contingent consideration (including accretion) was $10.6 million. Other non-cash charges included stock-based compensation of $2.0 million, $1.8 million of deferred financing costs, a $0.1 million increase in the net deferred taxes, cash received on the interest rate swap of $4.0 million, and other non-cash items of $0.8 million. Additionally, the change in net operating assets was $(35.3) million in 2018, due primarily to ~~$(5.1) million for~~the seasonal increase in accounts receivable during the period. For the nine months ended September 30, ~~2016. In~~ 2017, net income before non-cash depreciation and amortization and changes in fair value of contingent consideration (including accretion) was $38.1 million. Other non-cash charges included stock-based compensation ~~on equity-classified awards~~ of $1.3 million, $1.8 million of deferred financing costs, a $16.4 million increase in ~~the~~ net deferred tax asset, and other non-cash items of $0.7 million. Additionally, the change in net operating assets was $(10.5) million ~~in 2017. For~~for the nine months ended September 30, ~~2016, net income before non-cash depreciation and amortization, amortization of inventory step-up, and changes~~2017.

Cash used in ~~the fair value of contingent consideration (including accretion)~~investing activities was $37.1 million. Other non-cash charges included stock-based compensation on equity-classified awards of $2.9 million, a $24.9 million increase in the net deferred tax asset, and other non-cash items of $2.6 million. Additionally, the change in net operating assets was $(22.8)$(4.8) million for the nine months ended September 30, ~~2016.~~

~~Cash (used in) investing activities was~~2018, as compared to $(6.2) million for the nine months ended September 30, ~~2017, as compared to $(5.4) million for the nine months ended September 30, 2016.~~2017. Cash used in investing activities in 2018 was for the asset acquisition of Verigo, $(1.6) million, and purchase of fixed assets and leasehold improvements of $(3.2) million. Cash used in 2017 was for the purchase of fixed assets and leasehold improvements of $(5.3) million, and technology investments of $(1.1) million. ~~Cash used in 2016 was for the purchase of fixed assets and leasehold improvements, of $(5.4) million.~~

Cash ~~(used in)~~used in financing activities was $(13.5) million for the nine months ended September 30, 2018, as compared to $(12.1) million for the nine months ended September 30, ~~2017, as compared to $(4.7) million for the nine months ended September 30, 2016.~~2017. Cash used in financing activities in 2018 was for the payment of Dow liabilities of $(10.0) million and the repayment of debt in the amount of $(3.5) million. Cash used in 2017 was for the repayment of debt in the amount of $(2.1) million and the $(10.0) million payment related to the Dow liabilities settlement. ~~Cash used in 2016 was for the repayment of debt in the amount of $(3.2) million and the purchase of treasury stock in the amount of $(1.5) million.~~

Liquidity

Since the consummation of the Business Combination we have financed our operations primarily through the ~~sale of stock, debt financings, and~~ sales of our products and services. At September 30, ~~2017,~~2018, we had ~~$75.4~~$26.0 million of cash and cash equivalents, compared to ~~$77.3~~$64.5 million at December 31, ~~2016.~~2017.

On July 31, 2015, the Company consummated the Business Combination, pursuant to which the Company issued 17,500,000 shares of common stock at a deemed value of $12.00 per share and paid cash consideration of $635.0 million at the closing. The cash consideration was funded through the Company's initial public offering, the Term Loan (defined below) and the sale of our PIPE shares (defined below).

Term Loan

On July 31, 2015, certain of our subsidiaries entered into a Credit Agreement with Bank of Montreal, as administrative agent (the “Credit Facility”). The Credit Facility consists of a ~~$425~~$425.0 million term loan (the “Term Loan”), with an amortization equal to 1.00% per year, and a ~~$25~~$25.0 million revolving loan facility (the “Revolving Loan”). The Revolving Loan includes a $10.0 million letter-of-credit sub-facility, issuances against which reduce the available capacity for borrowing. As of September 30, ~~2017,~~2018, the Company had issued $0.5 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 has a scheduled maturity date of July 31, 2019. 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, ~~LLC,~~ 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 Rohm and Haas Company ("R&H"), a subsidiary of 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.

Certain restrictive covenants are contained in the credit facility which the company was in compliance with as of September 30, 2018, other than certain covenants that would apply only to the extent the Company draws against the revolving loan and has an outstanding balance at quarter-end. There were no outstanding draws against the revolving loan as of September 30, 2018.

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 accretion in interest expense during the three and nine months ended September 30, ~~2017~~2018 was approximately $0.6 million and $1.8 ~~million.~~million, respectively.

~~PIPE Shares~~

In connection with the closing of the Business Combination, the Company issued an aggregate of 4,878,000 shares of common stock, for an aggregate purchase price of $50.0 million, in a private placement (“PIPE”).

~~Stock Repurchase Program~~

In November 2015, the Company’s board of directors approved a Stock Repurchase Program totaling $10 million of the Company’s publicly-traded shares of common stock. The Repurchase Program was to remain in effect for a period of one year, until November 17, 2016. During the nine months ended September 30, 2016, the Company repurchased 249,047 shares of common stock at an average market price of $5.95.

Off-Balance Sheet Arrangements

As of September 30, ~~2017, we~~2018, 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 detailed below. ~~We have~~The Company has not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

Contingent Consideration

In connection with the Business Combination pursuant to the Purchase Agreement and subsequently modified by the Amendment Agreement, Dow is entitled to receive future contingent consideration and other payments from the Company in relation to (i) in 2018, a deferred payment from the Company of $50 million, subject to the Company’s achievement of a specified average Business EBITDA level over the two year period from January 1, 2016 to December 31, 2017; (ii) a Tax Receivables Agreement under which the Company is required to pay annually to Dow 50% of the amount of the tax savings, if any, in U.S. Federal, state and local income tax or franchise tax that the Company actually realizes as a result of the increase in tax basis of the AgroFresh Inc. assets resulting from a section 338(h)(10) election that the Company and Dow made in connection with the Business Combination; and (iii) the final working capital settlement where the Company agreed to pay Dow an aggregate amount of $20.0 million in full satisfaction of the Company’s obligations with respect to (i) the working capital adjustment under the Purchase Agreement, (ii) certain transfer and value added tax reimbursement obligations under the Purchase Agreement, and (iii) amounts owed under the Tax Receivables Agreement for the 2015 tax year.

See Note 3 to the unaudited condensed consolidated financial statements contained in this Report for further discussion of contingent consideration in connection with the Business Combination.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our exposure to interest rate risk for changes in interest rates relates primarily to our Term Loan and Revolving Loan. ~~We have not used derivative financial instruments in our investment portfolio.~~ The Term Loan and Revolving Loan bear interest at floating rates. For variable rate debt, interest rate changes generally do not affect the fair market value of such debt, but do impact future earnings and cash flows, assuming other factors are held constant.

In December 2017 we entered into an interest rate swap agreement that qualified for and was designated as a cash flow hedge for approximately 60% of our current outstanding Term Loan covering the next 30 months. This agreement was settled in the third quarter of 2018 and we received cash of $4.0 million upon termination. Holding debt levels constant, a 100 basis point increase in the effective interest rates would have increased the Company’s interest expense by ~~$3.1~~$1.6 million for the nine months ended September 30, ~~2017.~~2018.

Foreign Currency Risk

A portion of the Company’s operations consists of manufacturing and sales activities in foreign jurisdictions. As a result, the Company’s financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which the Company distributes its products or services. The Company’s operating results are exposed to changes in exchange rates between the US dollar and various foreign ~~currencies.~~currencies, including the impact in Argentina. As we expand internationally, our results of operations and cash flows will become increasingly subject to changes in foreign currency exchange rates.

We have not used forward contracts or currency borrowings to hedge our exposure to foreign currency risk. Foreign currency risk can be quantified by estimating the change in results of operations or financial position resulting from a hypothetical 10% adverse change in foreign exchange rates. We believe such a change would generally not have a material impact on our financial position, but could have a material impact on our results of operations. Holding other variables constant (such as interest rates and debt levels), if the U.S. dollar appreciated by 10% against the foreign currencies used by our operations in the first nine months of ~~2017,~~2018, revenues would have decreased by approximately ~~$8.0~~$5.9 million and EBITDA would have decreased by approximately ~~$4.8~~$3.5 million for the nine months ended September 30, ~~2017.~~2018.

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~~Effective January 1, 2018, we adopted the new revenue standard ASC 606. We have ~~been no~~implemented new accounting processes related to revenue recognition and related disclosures, including related control activities.

Effective January 12, 2018, the Company completed the process of installing a new ERP system. This new standalone ERP system replaced the Dow hosted ERP. This effectively ends the transition services agreement whereby Dow provided IT support to the Company. The implementation of this new ERP system involves changes to the Company’s procedures for internal control over financial reporting. The Company followed a system implementation process that required significant pre-implementation planning, design, and testing. The Company has also conducted and will continue to conduct extensive post-implementation monitoring and process modifications to ensure that internal controls over financial reporting are properly designed. A deficiency discovered in this system with respect to foreign currency translations caused us to file our quarterly report on Form 10-Q for the quarter ended June 30, 2018 late by one day. The Company has implemented new processes for such translations in the third quarter of 2018.

There were no other changes in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter ~~ended September 30, 2017~~ that has materially affected, or ~~are~~is reasonably likely to materially affect, ~~our~~the Company's internal control over financial reporting.

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 ~~2016~~2017 Form 10-K and the factors set forth below, all of which could materially affect our business or future results. Except with respect to the amended and restated risk factors set forth below, there have been no material changes to the risk factors disclosed in our ~~2016~~2017 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.

WeIf we are ~~required~~unable to ~~pay Dow for certain tax benefits we may claim,~~maintain effective internal control over financial reporting or effective disclosure controls, this could have a material adverse effect on our business and ~~these amounts are expected to be material.~~stock price.

~~Pursuant to the Tax Receivables Agreement we entered into with Dow upon the consummation of the Business Combination, as amended in April 2017 (the “Tax Receivables Agreement”),~~As a publicly traded company, we are required to ~~pay annually to Dow 50%~~comply with the SEC’s rules implementing Section 302 and 404 of the ~~amount~~Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of ~~any tax savings, if any, in U.S. federal, state and local income tax that we actually realize as a result~~controls over financial reporting. Pursuant to the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until the later of the ~~increase~~year following our first annual report required to be filed with the SEC or the date we are no longer an emerging growth company, which may be up to five full fiscal years following our initial public offering.

In December 2015, we identified a material weakness in ~~tax basis~~our internal control over financial reporting. Although that material weakness was subsequently remediated, our management may be unable to conclude in future periods that our disclosure controls and procedures are effective due to the effects of various factors, which may, in part, include unremediated material weakness in internal controls over financial reporting. In addition, a deficiency discovered in our recently implemented SAP accounting system with respect to foreign currency translations caused us to file our quarterly report on Form 10-Q for the quarter ended June 30, 2018 late by one day. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of a company that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

If we are unable to comply with the requirements of Section 404 in a timely manner or to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our ~~assets resulting from a section 338(h)(10) election that~~internal control over financial reporting once we no longer qualify as an emerging growth company, investors may lose confidence in the accuracy and ~~Dow made in connection with~~completeness of our financial reports and the ~~Business Combination.~~market price of our common stock could be negatively affected, and we could become subject to investigations by NASDAQ (the exchange on which our securities are listed), the SEC or other regulatory authorities, which could require additional financial and management resources.

We expect that the payments that we may make under the Tax Receivables Agreement could be substantial. It is possible that future transactions or events could increase or decrease the actual tax benefits realized and the corresponding Tax Receivables Agreement payments. There may be a material negative effect on our liquidity if we do not have sufficient funds to make payments under the Tax Receivables Agreement after we have paid taxes.

Dow ~~andBoulevard Acquisition Sponsor, LLC (the “Sponsor”)have~~has significant influence over us, which could limit your ability to influence the outcome of key transactions, including a change of control.

As of ~~June 30, 2017,~~November 5, 2018, Dow ~~and the Sponsor (and its affiliates)~~ owned approximately ~~35% and 7%, respectively,~~41% of our outstanding common stock. In addition, ~~each of~~ Dow ~~and the Sponsor~~ currently ~~beneficially~~ owns ~~a significant percentage~~3,000,000 of our outstanding warrants. Because of the degree of concentration of voting power (and the potential for such power to increase upon the purchase of additional stock or the exercise of warrants), your ability to elect members of our board of directors and influence our business and affairs, including any determinations with respect to mergers or other business combinations, the acquisition or disposition of assets, the incurrence of indebtedness, the issuance of any additional common stock or other equity securities, the repurchase or redemption of common stock and the payment of dividends, may be diminished.

~~Warrants are exercisable~~

We rely heavily on information technology, and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business.

Our operations rely heavily on information systems for management of our ~~common stock,~~supply chain, payment of obligations, collection of cash, credit and debit card transactions and other processes and procedures. Our FreshCloud suite of product offerings rely particularly heavily on information systems for monitoring, data collection and analysis. Our operations depend upon our ability to protect our computer equipment and systems, which, ~~if exercised, would increase the number of shares eligible for future resale~~ in the ~~public market~~case of FreshCloud, are not located within our physical control, against damage from physical theft, fire, power loss, telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses and other disruptive problems. The failure of these systems to operate effectively, maintenance problems, upgrading or transitioning to new platforms, or a breach in security of these systems could result in ~~dilution~~delays in customer service and reduce efficiency in our operations. Remediation of such problems could result in significant, unplanned capital investments.

We use hazardous materials in our business and are subject to regulation and potential liability under environmental laws.

Our business is subject to a wide range of stringent laws and regulations that relate to the raw material supply chain, environmental compliance, disposal of hazardous waste, and the manufacture, development, production, marketing and use of our products. As with any chemical manufacturing enterprise, there are inherent hazards associated with the use of our products, chemical manufacturing, and the storage and transportation of raw materials and our products. Exposure to hazardous materials, accidents or noncompliance with laws and regulations by us, the users of our products or our contract manufacturers could disrupt our operations or expose us to significant losses or liabilities.

Our suppliers or contract manufacturers may use hazardous materials in connection with producing our products. We may also from time to time send wastes to third parties for disposal.

A failure to comply with the environmental, health and safety laws and regulations to which we are subject, including any permits issued thereunder, may result in environmental remediation costs, loss of permits, fines, penalties or other adverse governmental or private actions, including regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, installation of pollution control equipment or remedial measures. We could also be held liable for any and all consequences arising out of human exposure to hazardous materials or environmental damage. In the event of a lawsuit or investigation, we could be subject to claims for liability for any injury caused to persons or property by exposure to, or release of hazardous materials or wastes related to our ~~stockholders.~~products. We may also be subject to claims associated with failure to warn users of our products of risks associated with our products. Further, we may be required to indemnify our suppliers, contract manufacturers, or waste disposal contractors against damages and other liabilities arising out of the production, handling, or storage of our products or raw materials or the disposal of related wastes. Such indemnification obligations could have an adverse effect on our business, financial condition and results of operations.

Environmental laws and regulations are complex, change frequently, have tended to become more stringent and stringently enforced over time and may be subject to new interpretation. We cannot predict the adverse impact that new environmental regulations, or new interpretations of existing regulations, might have on the research, development, production, and marketing of our products.

As of December 31, 2016, outstanding warrants to purchase an aggregate of 15,983,072 shares of our common stock were exercisable in accordance with the terms of the warrant agreement governing those securities. All of these warrants will expire at 5:00 p.m., New York time, on July 31, 2020, or earlier upon redemption or liquidation. The exercise price of these warrants is $11.50 per share. To the extent such warrants are exercised, additional shares of our common stock will be issued, which will result in dilution to the holders of our common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of our common stock.

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

On November 2, 2017, the Company’s Board of Directors amended Section 2.5(d) of the Company’s Amended and Restated Bylaws (the “Bylaws”) to implement a majority voting standard in uncontested director elections, which amendment became effective immediately. Under the amended provision, in a contested election, directors will continue to be elected by a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors.

The foregoing description of the amendment to the Bylaws does not purport to be complete, and is qualified in its entirety by reference to the full text of the amendment to the Bylaws, a copy of which is filed as Exhibit 3.6 to this Report and incorporated in this Item by reference.None.

ITEM 6. EXHIBITS


Exhibit No.		Description		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.	(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.	(4)	Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation.
3.3	(1)	Series A Certificate of Designation.	(1)	Series A Certificate of Designation.
3.4	(2)	Amended and Restated Bylaws.	(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)	Amendment to the Amended and Restated Bylaws of AgroFresh Solutions, Inc., effective as of September 3, 2015.
3.6	*	Amendment to the Amended and Restated Bylaws of AgroFresh Solutions, Inc., effective as of November 2, 2017.	(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.	(1)	Specimen Common Stock Certificate.
4.2	(1)	Specimen Warrant Certificate.	(1)	Specimen Warrant Certificate.
10.1			(6)	Offer Letter, dated August 20, 2018, between the Company and Graham Miao.
31.1	*	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 Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
31.2	*	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 Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Act of 1934, as amended.
32.1	*	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.	*	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	*	XBRL Instance Document
101.SCH	*	XBRL Taxonomy Extension Schema Document	*	XBRL Taxonomy Extension Schema Document
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document	*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	XBRL Taxonomy Extension Definition Linkbase Document	*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	XBRL Taxonomy Extension Label Linkbase Document	*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document	*	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 August 30, 2018.

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:	November ~~9, 2017~~7, 2018

	/s/ Jordi Ferre
	By:	Jordi Ferre
	Title:	Chief Executive Officer

	/s/ ~~Katherine Harper~~Graham Miao
	By:	~~Katherine Harper~~Graham Miao
	Title:	Chief Financial Officer

~~EXHIBIT INDEX~~

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 *
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.
31.1 *
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.
31.2 *
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.
32.1 *
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.~~



(amounts in millions)	Nine Months Ended September 30, 2017
Amendment Agreement	$	18.2
Warrant Purchase Agreement	1.6
TRA Amendment	75.3
Deferred tax adjustment related to Dow settlement	(40.0		)
Total reduction in related liabilities	$	55.1



(in thousands)	Tax amortization benefit contingency			Deferred acquisition payment			Stock appreciation rights		Phantom shares		Total
Balance, December 31, 2016	$	150,260		$	2,498		$	22	$	4	$	152,784
Awards granted	—			—			—		—		—
Settlement of Dow liabilities	(86,931		)	—			—		—		(86,931		)
Accretion	7,297			—			—		—		7,297
Mark to market adjustment	(1,027		)	(1,874		)	35		28		(2,838		)
Balance, September 30, 2017	$	69,599		$	624		$	57	$	32	$	70,312