Basis of Presentation and Summary of Significant Accounting Policies | Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and entities in which the Company has a controlling voting interest. All intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current year presentation. The Company's common stock trades on the NASDAQ Global Select Stock Market under the symbol "AGFS". As discussed in Note 3 - Related Party Transactions, on November 21, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among Project Cloud Holdings, LLC (“Parent”), Project Cloud Merger Sub, Inc. (“Merger Sub”) and the Company. Parent and Merger Sub are affiliates of investment funds managed by Paine Schwartz Partners, LLC (“Paine Schwartz”). Upon the terms and subject to the conditions set forth in the Merger Agreement, among other things, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger (the “Surviving Corporation”). As a result of the Merger, the Company will cease to be a publicly traded company, and investment funds managed by Paine Schwartz will become the indirect owner of all the Company’s outstanding capital stock. Use of Estimates The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management believes that such estimates have been based on reasonable and supportable assumptions and the resulting estimates are reasonable for use in the preparation of the consolidated financial statements. Actual results could differ from these estimates. The Company’s significant estimates include impairment of identifiable intangible assets, stock-based compensation, contingent liabilities and income tax valuation allowances. The inputs into certain of our estimates, assumptions, and judgments considered the economic implications of the COVID-19 pandemic on our critical and significant accounting estimates. The actual results experienced by us may differ from our estimates. As the COVID-19 pandemic continues to develop, many of our estimates could require increased judgment and carry a higher degree of variability and volatility, and may change materially in future periods. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES COVID-19 The global health crisis caused by COVID-19 and the related government actions and stay at home orders have negatively impacted economic activity and increased political instability across the globe. The outbreak could have a continued material adverse impact on economic and market conditions and trigger a period of global economic slowdown. There have been numerous obstacles presented and some localized financial impacts of the pandemic, including fluctuations in customer demand and spending pattern changes. During the year ended December 31, 2022, the COVID-19 pandemic did not have a significant adverse impact on the Company’s results of operations. While the Company is following the requirements of governmental authorities and taking additional preventative and protective measures to ensure the safety of its workforce, including remote working arrangements and varying procedures for essential workforce, the outbreak presents some uncertainty and risk with respect to the Company and its performance and financial results. Adoption of Highly Inflationary Accounting in Argentina and Turkey GAAP requires the use of highly inflationary accounting for countries whose cumulative three-year inflation rate exceeds 100 percent. The Company closely monitors the inflation data and currency volatility where there are multiple data sources for measuring and reporting inflation in applicable countries. 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 elected to adopt highly inflationary accounting as of July 1, 2018 for its subsidiary in Argentina. As the three-year cumulative inflation rate exceeded 100 percent as of December 31, 2022, there is no change to highly inflationary accounting in Argentina. In the first half of 2022, the Turkish lira 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 April 1, 2022. As a result, the Company elected to adopt highly inflationary accounting as of April 1, 2022 for its subsidiary in Turkey. Under highly inflationary accounting, the functional currencies of the Company's subsidiaries in Argentina and Turkey became the U.S. dollar, and their income statements and balance sheets will be measured in U.S. dollars using both current and historical rates of exchange. The effect of changes in exchange rates in the currencies of these countries on monetary assets and liabilities are reflected in earnings. As of December 31, 2022, and 2021, the Company’s subsidiary in Argentina had net assets of ($12.2) million and ($9.8) million, respectively. Net sales attributable to Argentina were approximately 3.4% and 3.2% of the Company’s consolidated net sales for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, the Company’s subsidiary in Turkey had net assets of $12.1 million. Net sales attributable to Turkey were approximately 2.7% of the Company’s consolidated net sales for the year ended December 31, 2022. Revenue Recognition The Company accounts 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. 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 AgroFresh Fruit Protection 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 year ended December 31, 2022 (in thousands) Region North America EMEA Latin America Asia Pacific Total Revenue Product 1-MCP based $28,532 $56,796 $27,039 $18,187 $130,554 Fungicides, disinfectants and coatings 1,799 17,948 7,289 93 27,129 Other* 298 2,149 1,736 71 4,254 Total $30,629 $76,893 $36,064 $18,351 $161,937 Pattern of Revenue Recognition Products transferred at a point in time $29,861 $75,886 $35,470 $18,138 $159,355 Services transferred over time 768 1,007 594 213 2,582 Total $30,629 $76,893 $36,064 $18,351 $161,937 Revenues for the year ended December 31, 2021 (in thousands) Region North America EMEA Latin America Asia Pacific Total Revenue Product 1-MCP based $29,966 $63,874 $25,860 $17,195 $136,895 Fungicides, disinfectants and coatings 2,084 17,403 6,720 — 26,207 Other* 585 1,052 1,030 220 2,887 Total $32,635 $82,329 $33,610 $17,415 $165,989 Pattern of Revenue Recognition Products transferred at a point in time $32,147 $81,297 $33,022 $17,225 $163,691 Services transferred over time 488 1,032 588 190 2,298 Total $32,635 $82,329 $33,610 $17,415 $165,989 *Other includes FreshCloud, technical services and sales-type equipment leases related to AgroFresh Fruit Protection. (1) North America includes the United States and Canada. (2) EMEA includes Europe, the Middle East and Africa. (3) Latin America includes Argentina, Brazil, Chile, Costa Rica, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Peru and Uruguay. (4) Asia Pacific includes Australia, China, India, Japan, New Zealand, the Philippines, South Korea, Taiwan and Thailand. Contract Assets and Liabilities Accounting Standards Codification ("ASC") 606 Revenue from contracts with Customers 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 year ended December 31, 2022: (in thousands) Balance at December 31, 2021 Additions Deductions Balance at December 31, 2022 Contract assets: Unbilled revenue $795 20,282 (19,535) $1,542 Contract liabilities: Deferred revenue $635 5,574 (4,989) $1,220 The following table presents changes in the Company’s contract assets and liabilities during the year ended December 31, 2021: (in thousands) Balance at December 31, 2020 Additions Deductions Balance at December 31, 2021 Contract assets: Unbilled revenue $1,484 17,617 (18,306) $795 Contract liabilities: Deferred revenue $1,474 4,123 (4,962) $635 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 year ended December 31, 2022. Amounts reclassified from unbilled revenue to accounts receivable for the years ended December 31, 2022 and 2021 were $19.5 million and $18.3 million, respectively. Amounts reclassified from deferred revenue to revenue were $5.0 million and $5.0 million for the years ended December 31, 2022 and 2021, respectively. 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. Cost of Sales The Company's cost of sales consists of cost of materials, cost of equipment, application costs and certain supply chain costs. The Company's primary costs of sale are related to applications at customer sites through a direct service model primarily utilizing third-party service providers. Amounts recorded as cost of sales relate to direct costs incurred in connection with the purchase, delivery and application of the product. Such costs are recorded as the related revenue is recognized. Cash and Cash Equivalents The Company considers short-term, highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Accounts Receivable, Net Accounts receivable, net consists primarily of (i) outstanding amounts invoiced to end-users, re-sellers and third-party contractors and (ii) unbilled revenue in arrangements where the earnings process has been completed but invoices have not been issued as of the reporting date. The allowance for doubtful accounts is based on forecasted losses and a review on a specific identification basis of the collectability of outstanding receivables. Inventories Inventories, consisting primarily of chemical products and packaging materials, are valued at the lower of cost (under the first-in, first-out method) or net realizable value. Raw materials are valued using the first-in, first-out method. Property and Equipment Property and equipment includes leasehold improvements, machinery and equipment and furniture. Property and equipment acquired in business combinations are initially recorded at their estimated fair value. Property and equipment acquired or constructed in the normal course of business are initially recorded at cost. The Company provides for depreciation and amortization based on the estimated useful lives of assets using the straight-line method. Estimated useful lives are as follows: Leasehold improvements Shorter of useful life or lease term Machinery & Equipment 1—12 years Furniture 1—12 years Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the related lease term, which generally includes reasonably assured option periods expected to be exercised by the Company when the Company would suffer an economic penalty if not exercised. Gains and losses on the disposal of assets are recorded as the difference between the net proceeds received and net carrying values of the assets disposed. Impairment of Long-Lived Assets Company management continually evaluates whether events or changes in circumstances might indicate that the remaining estimated useful life of long-lived assets may warrant revision, or that the remaining balance may not be recoverable. When factors indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of the related undiscounted cash flows in measuring whether the long-lived asset should be written down to fair value. Measurement of the amount of impairment would be based on generally accepted valuation methodologies, as deemed appropriate. Leases The Company determines whether a contract contains a lease at contract inception. A contract contains a lease if there is an identified asset and the Company has the right to control the asset. Operating lease right-of-use (“ROU”) assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses the incremental borrowing rate in determining the present value of lease payments. Leases with a term of 12 months or less at the commencement date are not recognized on the balance sheet and are expensed as incurred. In the consolidated statements of operations, lease expense for operating lease payments is recognized on a straight-line basis over the lease term. See Note 11 - Leases for additional information. Selling, General and Administrative Expenses The Company expenses selling, general and administrative costs as incurred. Selling, general and administrative expense consists primarily of compensation, benefits and other employee-related expenses for personnel in the Company’s administrative, finance, legal, business development, commercial, sales, marketing and human resource functions. Other expenses include professional fees from outside service providers. Debt Issuance Costs Debt issuance costs are capitalized and presented as a reduction of the principal balance of the debt and costs associated with the revolving loan are capitalized in Other Assets. All issuance costs are accreted through interest expense for the duration of the respective debt facilities. Goodwill and Indefinite-lived Intangible Assets The Company’s goodwill and indefinite-lived trade names are not amortized, but tested annually for impairment, and more frequently, if events and circumstances indicate that the asset might be impaired. The Company conducts annual impairment tests on its goodwill and indefinite lived trade names on the last day of each fiscal year or whenever an indicator of impairment exists. As part of the Company’s goodwill impairment analysis, the fair value of its reporting unit is determined considering two valuation approaches: (1) the income approach and (2) the market approach. The income approach requires management to make significant estimates and assumptions related to the future cash flows of the reporting unit and the discount rate commensurate with the risks involved in the asset. The market approach estimates fair value using comparable marketplace fair value data from within a comparable industry grouping. If the fair value of the reporting unit exceeds its carrying value, we do not consider the goodwill impaired. If the carrying value is higher than the fair value, we recognize the difference as an impairment loss. As a result of the operating segment realignment discussed in Note 19 - Segment and Geographical Information, the Company completed its annual evaluation of goodwill impairment and fully impaired its goodwill balance of $6.4 million during the year ended December 31, 2021. The Company’s indefinite-lived intangible assets other than goodwill, which primarily relate to AgroFresh and SmartFresh trade names, are not amortized, but are tested at least annually for impairment using a quantitative or qualitative impairment analysis, and more frequently if events and circumstances indicate that the asset might be impaired. The quantitative impairment analysis compares the fair value of each indefinite-lived intangible asset, based on future revenues using a relief-from-royalty methodology with the carrying value of the asset. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized equal to the difference between the estimated fair value of the indefinite-lived intangible asset and its carrying amount. During the year ended December 31, 2022, the Company did not have any impairment charges. Finite-Lived Intangible Assets Intangible assets subject to amortization primarily consist of acquired technology and customer relationships and are amortized on a straight-line basis over their estimated useful lives. Stock-Based Compensation The Company grants various stock-based compensation awards to its officers, employees and board of directors with time-based and/or performance-based vesting conditions. Awards without cash settlement conditions are equity-classified. The Company measures and recognizes compensation expense over the vesting period based on their estimated grant date fair values. Phantom stock awards and stock appreciation rights either require or provide the holder of the award with the option to settle in cash. The Company's awards with cash settlement conditions are accounted for as liabilities, and the Company measures and recognizes compensation expense over the vesting period based on their estimated fair values as of the most recent reporting date. Fair values for options and stock appreciation rights are estimated using an option pricing model. Fair values for restricted stock and phantom stock awards are based on the closing price of the Company’s common stock on the grant date and the measurement date. Compensation expense for the Company’s stock-based compensation awards is generally recognized on a straight-line basis over the vesting period of the award. For awards with performance conditions, compensation expense is recognized only if satisfaction of the performance condition is considered probable of being achieved. Compensation expense for the Employee Stock Purchase Plan is recognized based on the employee contributions and market price of the stock as of the grant date. Research and Development Expenditures for research and development costs, which primarily relate to internal compensation costs and professional service fees, are charged to expense as incurred. Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize our deferred tax assets in the future in excess of their net recorded amount, it would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that a tax position will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. Contingencies The Company recognizes liabilities for loss contingencies when it is probable that an asset has been impaired or that a liability has been incurred and the amount of impairment or loss can be reasonably estimated. The Company’s ultimate legal and financial liability with respect to such matters cannot be estimated with certainty and requires the use of estimates. When the reasonable estimate is a range, the recorded loss will be the best estimate within the range. The Company records legal settlement costs when those costs are probable and reasonably estimable. Redeemable Non-Controlling Interest Non-controlling interest that is redeemable upon the occurrence of an event that is not solely within the Company's control is reported in the temporary equity section between total liabilities and shareholders' equity in the Company's consolidated balance sheets. The Company adjusts the Redeemable non-controlling interest balance to reflect the redemption amount each reporting period. Credit Concentration Risk Financial instruments, which potentially subject the Company to a concentration of credit risk, consist principally of cash deposits. The Company maintains cash balances at financial institutions with strong credit ratings. Generally, amounts invested with financial institutions are in excess of FDIC insurance limits. Fair Value of Financial Instruments Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be either recorded or disclosed at fair value, the Company considers the principal or most advantageous market in which we would transact, and the Company also considers assumptions that market participants would use when pricing the asset or liability. The accounting guidance for fair value measurement requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. We use inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of assets or liabilities. Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The fair values are determined based on model-based techniques such as discounted cash flow models using inputs that we could not corroborate with market data. Foreign Currency An entity’s functional currency is the currency of the primary economic environment in which the entity operates; normally, that is the currency of the environment in which an entity primarily generates and expends cash. Assets and liabilities are translated at period-end rates; income statement amounts are translated at average rates during the course of the period. Translation gains and losses of those operations that use local currency as the functional currency, are included in accumulated other comprehensive (loss) income in the consolidated balance sheets. Foreign currency exchange transaction gain (loss) is the result of remeasuring transactions denominated in a currency other than our primary currency and is reported in the consolidated statements of operations as a separate line within other income (expense). Recently Issued Accounting Standards and Pronouncements In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which introduces a new current expense credit loss model to measure impairment on certain types of financial instruments. This update requires an entity to use a forward-looking expected credit loss model for accounts receivables, loans and other financial instruments. In addition, the FASB issued various amendments during 2018 and 2019 to clarify the provisions of ASU 2016-13. The Company adopted the new guidance on January 1, 2020. The adoption of this standard did not have a material impact on the financial statements of the Company. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, "Income Taxes" and also improve consistent application by clarifying and amending existing guidance. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted the new guidance on January 1, 2021. The adoption of the new guidance did not have a material impact on the consolidated financial statements of the Company. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments are intended to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. The Company adopted the new guidance on December 31, 2022. The adoption of the new guidance did not have a material impact on the consolid |