Basis of Presentation and Summary of Significant Accounting Policies (Policy)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. These financial statements include all adjustments that are necessary for a fair presentation of the Company's condensed consolidated results of operations, financial condition and cash flows for the periods shown, including normal, recurring accruals and other items. The condensed consolidated results of operations for the interim periods presented are not necessarily indicative of results for the full year. For additional information, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2021. Certain prior period amounts have been reclassified to conform to the current year presentation.

Adoption of Highly Inflationary Accounting in Argentina

Adoption of Highly Inflationary Accounting in Argentina

GAAP requires the use of highly inflationary accounting for countries whose cumulative three-year inflation rate exceeds 100 percent. The Company closely monitors the inflation data and currency volatility in Argentina, where there are multiple data

sources for measuring and reporting inflation. In the second quarter of 2018, the Argentine peso rapidly devalued relative to the U.S. dollar, which along with increased inflation, indicated that the three-year cumulative inflation rate in that country exceeded 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. Under highly inflationary accounting, the functional currency of the Company's subsidiary in Argentina became the U.S. dollar, and its income statement and balance sheet 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 are reflected in earnings. As the three-year cumulative inflation rate exceeded 100 percent as of March 31, 2022, there is no change to highly inflationary accounting.

Disaggregation of Revenue and Contract Assets and Liabilities

Disaggregation of Revenue

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

Revenues for the three months ended March 31, 2022

(in thousands)
Region	North America  (1)	EMEA (2)	Latin America (3)	Asia Pacific (4)	Total Revenues
Product
1-MCP based	$1,531	$6,567	$16,539	$6,114	$30,751
Fungicides, disinfectants and coatings	—	5,853	2,120	—	7,973
Other*	314	398	384	69	1,165
	$1,845	$12,818	$19,043	$6,183	$39,889
Pattern of Revenue Recognition
Products transferred at a point in time	$1,656	$12,431	$18,935	$6,140	$39,162
Services transferred over time	189	387	108	43	727
	$1,845	$12,818	$19,043	$6,183	$39,889

Revenues for the three months ended March 31, 2021

(in thousands)
Region	North America  (1)	EMEA (2)	Latin America (3)	Asia Pacific (4)	Total Revenues
Product
1-MCP based	$1,764	$5,362	$18,741	$5,963	$31,830
Fungicides, disinfectants and coatings	14	4,546	1,547	—	6,107
Other*	156	400	451	48	1,055
	$1,934	$10,308	$20,739	$6,011	$38,992
Pattern of Revenue Recognition
Products transferred at a point in time	$1,767	$9,908	$20,627	$5,972	$38,274
Services transferred over time	167	400	112	39	718
	$1,934	$10,308	$20,739	$6,011	$38,992

*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 three months ended March 31, 2022 and the year ended December 31, 2021:

(in thousands)	Balance at December 31, 2021	Additions	Deductions	Balance at March 31, 2022
Contract assets:
Unbilled revenue	$795	4,244	(2,587)	$2,452
Contract liabilities:
Deferred revenue	$635	1,766	(702)	$1,699

(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.

Recently Issued Accounting Standards and Pronouncements

Recently Issued Accounting Standards and Pronouncements

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 condensed 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 new standard is effective on a date selected by the Company between March 12, 2020 and December 31, 2022. The Company is currently evaluating the impact of adopting this guidance.

Earnings Per Share

The Company computes (loss) earnings per share ("EPS") using the two-class method. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. The outstanding shares of Series B Preferred Stock are participating securities because holders have non-forfeitable dividend rights and participate in undistributed earnings with common stock.

Basic EPS was computed by dividing net (loss) income allocable to common stockholders, after deducting undistributed earnings allocated to participating securities, by the weighted-average number of shares of common stock outstanding.

For the calculation of diluted EPS, net income for basic EPS is adjusted by the effect of dilutive securities. Diluted EPS attributable to common stockholders is computed by dividing the resulting net income for basic EPS adjusted by the effect of dilutive preferred stock by the weighted-average number of shares adjusted for the effect of dilutive shares. The Company also applied the if-converted method to calculate dilution on the Series B Preferred Stock, which resulted in 31.0 million additional shares. This calculation was anti-dilutive.