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 March 31, 2015

OR

¨

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

For the transition period from              to              

Commission file number: 001-35905

 

BIOAMBER INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

98-0601045

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

Jean-François Huc

President and Chief Executive Officer

BioAmber Inc.

1250 Rene Levesque West, Suite 4110

Montreal, Quebec, Canada H3B 4W8

Telephone: (514) 844-8000

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

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.    Yes  x    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 (§ 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).    Yes  x    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.

 

Large accelerated filer

 

¨

  

Accelerated filer

 

x

 

 

 

 

Non-accelerated filer

 

¨  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No   x

As of May 11, 2015, there were 25,843,671 shares of the registrant’s Common Stock, $0.01 par value per share, outstanding.

 

 

 

1

 


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains or incorporates by reference statements that are not historical facts and are considered forward-looking within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements may contain projections of our future results of operations or of our financial position or state other forward-looking information. In some cases you can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “continue,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” “would,” “plan,” “projected” or the negative of such words or other similar words or phrases. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. You are cautioned not to unduly rely on forward-looking statements because they involve risks and uncertainties, and actual results may differ materially from those discussed as a result of various factors, including, but not limited to:

 

 

 

the expected funding sources of our Sarnia, Ontario plant under construction and commissioning and our other planned manufacturing facilities and the expected timing of the completion of construction and the start of commercial operations at each of these facilities;

 

 

 

our joint venture with Mitsui & Co. Ltd., or Mitsui;

 

 

 

our take-or-pay agreements with Vinmar International Ltd., or Vinmar, related to bio-based 1,4 butanediol(1,4 BDO), tetrahydrofuran (THF), and bio-based succinic acid, and with PTTMCC Biochem for bio-succinic acid;

 

 

 

the expected market applications for our products and the sizes of these addressable markets;

 

 

 

our ability to gain market acceptance for bio-succinic acid, its derivatives including 1,4 BDO and THF and other building block chemicals;

 

 

 

the benefits of our transition from our E. coli bacteria to our yeast;

 

 

 

our ability to commence commercial sales and execute on our commercial expansion plan, including the timing and volume of our future production and sales;

 

 

 

the expected cost-competitiveness and relative performance attributes of our bio-succinic acid and the products derived from it;

 

 

 

our ability to cost-effectively produce and commercialize bio-succinic acid, its derivatives and other building block chemicals;

 

 

 

customer qualification, approval and acceptance of our products;

 

 

 

our ability to maintain and advance strategic partnerships and collaborations and the expected benefits and accessible markets related to those partnerships and collaborations;

 

 

 

the impact of our off-take agreements on our business with our customers, our distributors and our current and future equity partners;

 

 

 

our ability to economically obtain feedstock and other inputs;

 

 

 

the achievement of advances in our technology platform;

 

 

 

our ability to obtain and maintain intellectual property protection for our products and processes and not infringe on others’ rights;

 

 

 

government regulatory and industry certification approvals for our facilities and products; and

 

 

 

government policymaking and incentives relating to bio-chemicals;

and other risks and uncertainties referenced under “Risk Factors” in this Report and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. You should not place undue reliance on our forward-looking statements. These forward-looking statements speak only as of the date on which the statements were made and are not guarantees of future performance. Except as may be required by applicable law, we do not undertake or intend to update any forward-looking statements after the date of this prospectus supplement or the respective dates of documents incorporated by reference herein or therein that include forward-looking statements.

 

 

 

2

 


BIOAMBER INC.

Form 10-Q

For the Quarter Ended March 31, 2015

Table of Contents

 

 

 

 

  

Page

 

 

 

Special Note Regarding Forward-looking Statements

  

2

 

Part I—Financial Information

 

Item 1.

 

 

Condensed Financial Statements

  

4

 

 

 

Consolidated Statements of Operations (Unaudited)

  

4

 

 

Consolidated Statements of Comprehensive Loss (Unaudited)

  

5

 

 

Consolidated Balance Sheets (Unaudited)

  

6

 

 

Consolidated Statements of Shareholders’ Equity (Unaudited)

  

7

 

 

Consolidated Statements of Cash Flows (Unaudited)

  

8

 

 

Notes to Consolidated Financial Statements (Unaudited)

  

9

 

Item 2.

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

28

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

  

37

Item 4.

 

Controls and Procedures

  

38

 

Part II—Other Information

  

 

 

Item 1.

 

 

Legal Proceedings

  

39

Item 1A.

 

Risk Factors

  

39

Item 2.

 

Use of Proceeds

  

39

Item 5.

 

Other Information

  

39

Item 6.

 

Exhibits

  

40

 

Signatures

  

41

 

 

 

3


PART I—FINANCIAL INFORMATION

 

Item 1.

Condensed Financial Statements

BIOAMBER INC.

Consolidated Statements of Operations

for the three months ended March 31, 2015 and 2014

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

 

2014

 

 

 

$

 

 

$

 

 

Revenues

 

 

 

 

 

 

 

 

Product sales

 

367,249

 

 

 

350,661

 

 

Total revenues

 

367,249

 

 

 

350,661

 

 

Cost of goods sold excluding depreciation and amortization (Note 16)

 

310,089

 

 

 

279,860

 

 

Gross profit

 

57,160

 

 

 

70,801

 

 

Operating expenses

 

 

 

 

 

 

 

 

General and administrative

 

2,627,565

 

 

 

2,919,063

 

 

Research and development, net

 

4,608,745

 

 

 

3,314,249

 

 

Sales and marketing

 

1,152,722

 

 

 

1,111,402

 

 

Depreciation of property and equipment and

   amortization of intangible assets

 

71,840

 

 

 

59,674

 

 

Foreign exchange loss

 

55,952

 

 

 

167,628

 

 

Operating expenses

 

8,516,824

 

 

 

7,572,016

 

 

Operating loss

 

8,459,664

 

 

 

7,501,215

 

 

Amortization of deferred financing costs and debt

   discounts

 

66,250

 

 

 

72,800

 

 

Financial charges (income), net (Note 9)

 

430,810

 

 

 

12,352,721

 

 

Equity participation in losses of equity method

   investments (Note 2)

 

 

 

 

54

 

 

Other expense (income), net

 

(21,567

)

 

 

 

 

Loss before income taxes

 

8,935,157

 

 

 

19,926,790

 

 

Income taxes (Note 13)

 

33,319

 

 

 

25,251

 

 

Net loss

 

8,968,476

 

 

 

19,952,041

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to:

 

 

 

 

 

 

 

 

BioAmber Inc. shareholders

 

8,258,182

 

 

 

19,911,045

 

 

Non-controlling interest

 

710,294

 

 

 

40,996

 

 

 

 

8,968,476

 

 

 

19,952,041

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to BioAmber Inc.

   shareholders - basic

$

0.38

 

 

$

1.07

 

 

Weighted-average of common shares

   outstanding - basic

 

21,837,592

 

 

 

18,559,652

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

4


BIOAMBER INC.

Consolidated Statements of Comprehensive Loss

For the three months ended March 31, 2015 and 2014

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months ended

 

 

 

March 31,

 

 

 

 

2015

 

 

 

2014

 

 

 

$

 

 

$

 

 

Net loss

 

8,968,476

 

 

 

19,952,041

 

 

Foreign currency translation adjustment

 

6,885,834

 

 

 

848,108

 

 

Total comprehensive loss

 

15,854,310

 

 

 

20,800,149

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss attributable to:

 

 

 

 

 

 

 

 

BioAmber Inc. shareholders

 

11,455,532

 

 

 

20,166,639

 

 

Non-controlling interest

 

4,398,778

 

 

 

633,510

 

 

 

 

15,854,310

 

 

 

20,800,149

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

5


BIOAMBER INC.

Consolidated Balance Sheets

March 31, 2015 and December 31, 2014

(Unaudited)

 

 

As of

 

 

As of

 

 

March 31,

 

 

December 31,

 

 

2015

 

 

2014

 

 

$

 

 

$

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash (Note 7 vii))

 

26,025,077

 

 

 

51,042,752

 

Accounts receivable

 

420,384

 

 

 

476,851

 

Inventories (Note 3)

 

1,979,931

 

 

 

1,801,826

 

Prepaid expenses and deposits (Note 3)

 

750,528

 

 

 

765,539

 

Valued added tax, income taxes and other receivables

 

1,799,143

 

 

 

3,005,153

 

Total current assets

 

30,975,063

 

 

 

57,092,121

 

Property and equipment, net (Note 4)

 

105,092,502

 

 

 

88,664,899

 

Investment in equity method and cost investments (Note 2)

 

447,681

 

 

 

34,817

 

Intangible assets, net (Note 5)

 

5,493,380

 

 

 

4,332,911

 

Goodwill

 

625,364

 

 

 

625,364

 

Restricted cash (Note 1)

 

593,250

 

 

 

646,500

 

Deferred financing costs (Note 7)

 

1,108,126

 

 

 

1,043,788

 

Total assets

 

144,335,366

 

 

 

152,440,400

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable and accrued liabilities (Note 6)

 

17,153,289

 

 

 

16,459,918

 

Income taxes payable (Note 13)

 

223,014

 

 

 

204,096

 

Accounts payable Agro-industries Recherches et Développements (“ARD”) (Note 16)

 

 

 

 

983,465

 

Deferred grants (Note 8)

 

2,087,434

 

 

 

2,274,802

 

Short-term portion of long-term debt (Note 7)

 

6,142,931

 

 

 

2,977,707

 

Total current liabilities

 

25,606,668

 

 

 

22,899,988

 

Long-term debt (Note 7)

 

36,431,480

 

 

 

34,653,101

 

Warrants financial liability (Note 12)

 

12,720,000

 

 

 

13,040,000

 

Other long-term liabilities

 

138,750

 

 

 

127,500

 

Total liabilities

 

74,896,898

 

 

 

70,720,589

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

Redeemable non-controlling interest (Note 11)

 

21,854,092

 

 

 

24,190,412

 

Shareholders’ equity

 

 

 

 

 

 

 

Share capital

 

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

 

$0.01 par value per share; 250,000,000 authorized, 21,838,671 and 21,836,046 issued and

   outstanding at March 31, 2015 and December 31, 2014, respectively

 

218,386

 

 

 

218,360

 

Additional paid-in capital

 

221,973,090

 

 

 

220,460,559

 

Warrants

 

2,946,970

 

 

 

2,949,018

 

Accumulated deficit

 

(169,724,092

)

 

 

(161,465,910

)

Accumulated other comprehensive loss

 

(7,829,978

)

 

 

(4,632,628

)

Total BioAmber Inc. shareholders’ equity

 

47,584,376

 

 

 

57,529,399

 

Total liabilities and equity

 

144,335,366

 

 

 

152,440,400

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

6


BIOAMBER INC.

Consolidated Statements of Shareholders’ Equity

for the period from January 1, 2013 to March 31, 2015

(in U.S. dollars, except for shares data)

(Unaudited)

 

 

 

Common stock

 

 

Additional paid-in capital

 

 

Warrants

 

 

Accumulated deficit

 

 

Accumulated other comprehensive loss

 

 

Non-controlling interest

 

 

Total shareholders' equity

 

 

 

Shares

 

 

Par value

 

 

 

 

 

 

Shares

 

 

Par value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

$

 

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Balance at January 1, 2013

 

 

10,349,815

 

 

 

103,498

 

 

 

113,780,846

 

 

 

1,457,855

 

 

 

3,074,957

 

 

 

(81,826,192

)

 

 

(94,969

)

 

 

2,759,435

 

 

 

37,797,575

 

Release of shares - Sinoven

 

 

63,000

 

 

 

630

 

 

 

(630

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelation of shares - Sinoven

 

 

 

 

 

 

 

 

(140,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(140,000

)

Stock-based compensation (Note 12)

 

 

 

 

 

 

 

 

6,731,539

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,731,539

 

IPO proceeds

 

 

8,000,000

 

 

 

80,000

 

 

 

79,920,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80,000,000

 

IPO costs

 

 

 

 

 

 

 

 

(7,136,291

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,136,291

)

Warrants issued at IPO

 

 

 

 

 

 

 

 

 

 

(16,148,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,148,000

)

Warrants exercised

 

 

145,554

 

 

 

1,456

 

 

 

268,470

 

 

 

(145,554

)

 

 

(110,622

)

 

 

 

 

 

 

 

 

 

 

 

159,304

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33,217,758

)

 

 

 

 

 

(573,524

)

 

 

(33,791,282

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(279,014

)

 

 

(59,986

)

 

 

(339,000

)

Balance at December 31, 2013

 

 

18,558,369

 

 

 

185,584

 

 

 

177,275,934

 

 

 

1,312,301

 

 

 

2,964,335

 

 

 

(115,043,950

)

 

 

(373,983

)

 

 

2,125,925

 

 

 

67,133,845

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation (Note 12)

 

 

 

 

 

 

 

 

6,949,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,949,205

 

Reclassification of non-controlling

   interest to redeemable non-controlling

   interest (Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,125,925

)

 

 

(2,125,925

)

Issuance of shares , net of issuance costs

 

 

3,220,000

 

 

 

32,200

 

 

 

36,027,708

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36,059,908

 

Warrants exercised/expired

 

 

26,976

 

 

 

269

 

 

 

23,164

 

 

 

(63,175

)

 

 

(15,317

)

 

 

 

 

 

 

 

 

 

 

 

8,116

 

Stock options exercised

 

 

30,701

 

 

 

307

 

 

 

184,548

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

184,855

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(46,421,960

)

 

 

 

 

 

 

 

 

(46,421,960

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,258,645

)

 

 

 

 

 

(4,258,645

)

Balance at December 31, 2014

 

 

21,836,046

 

 

 

218,360

 

 

 

220,460,559

 

 

 

1,249,126

 

 

 

2,949,018

 

 

 

(161,465,910

)

 

 

(4,632,628

)

 

 

 

 

 

57,529,399

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation (Note 12)

 

 

 

 

 

 

 

 

1,507,695

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,507,695

 

Warrants exercised/expired

 

 

2,625

 

 

 

26

 

 

 

4,836

 

 

 

(2,695

)

 

 

(2,048

)

 

 

 

 

 

 

 

 

 

 

 

 

2,814

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,258,182

)

 

 

 

 

 

 

 

 

(8,258,182

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,197,350

)

 

 

 

 

 

(3,197,350

)

Balance at March 31, 2015

 

 

21,838,671

 

 

 

218,386

 

 

 

221,973,090

 

 

 

1,246,431

 

 

 

2,946,970

 

 

 

(169,724,092

)

 

 

(7,829,978

)

 

 

 

 

 

47,584,376

 

 

The accompanying notes are integral part of the consolidated financial statements.

 

 

 

7


BIOAMBER INC.

Consolidated Statements of Cash Flows

for three months ended March 31, 2015 and 2014

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

 

2014

 

 

 

$

 

 

$

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

 

(8,968,476

)

 

 

(19,952,041

)

Adjustments to reconcile net loss to cash:

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

1,507,695

 

 

 

1,483,681

 

Depreciation of property and equipment

   and amortization of intangible assets

 

 

71,840

 

 

 

59,674

 

Amortization of deferred financing costs

   and debt discounts

 

 

66,250

 

 

 

72,800

 

Equity participation in losses of equity method investments

 

 

 

 

 

54

 

Other long-term liabilities

 

 

11,250

 

 

 

11,250

 

Financial charges (income), net (Note 9)

 

 

(148,125

)

 

 

11,835,870

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Change in accounts receivable

 

 

56,467

 

 

 

175,087

 

Change in inventories

 

 

(178,105

)

 

 

(1,451,615

)

Change in prepaid expenses and deposits

 

 

76,273

 

 

 

875,598

 

Change in valued added tax, income taxes and other receivables

 

 

1,400,142

 

 

 

(604,050

)

Change in accounts payable to ARD

 

 

(983,465

)

 

 

516,832

 

Change in accounts payable and accrued liabilities

 

 

1,165,302

 

 

 

2,109,572

 

Net cash used in operating activities

 

 

(5,922,952

)

 

 

(4,867,288

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Acquisition of property and equipment and intangible asset

 

 

(29,055,502

)

 

 

(12,730,816

)

Change in restricted cash

 

 

 

 

 

(678,450

)

Capital investment in cost investment (Note 2)

 

 

(412,864

)

 

 

 

Net cash used in investing activities

 

 

(29,468,366

)

 

 

(13,409,266

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Deferred financing costs

 

 

(144,260

)

 

 

 

Issuance of long-term debt (Note 7)

 

 

5,415,545

 

 

 

 

Government grants (Note 8)

 

 

4,075,947

 

 

 

 

Net proceeds from issuance of common shares

 

 

2,814

 

 

 

3,752

 

Proceeds from issuance of shares by a subsidiary (Note 11)

 

 

2,062,458

 

 

 

8,120,700

 

Net cash provided by financing activities

 

 

11,412,504

 

 

 

8,124,452

 

 

 

 

 

 

 

 

 

 

Foreign exchange impact on cash

 

 

(1,038,861

)

 

 

(554,028

)

Decrease in cash

 

 

(25,017,675

)

 

 

(10,706,130

)

Cash, beginning of period

 

 

51,042,752

 

 

 

83,728,199

 

Cash, end of period

 

 

26,025,077

 

 

 

73,022,069

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Non-cash transactions:

 

 

 

 

 

 

 

 

Construction in Progress costs not yet paid

 

 

13,753,341

 

 

 

4,935,512

 

Amortization of debt discounts capitalized to CIP

 

 

412,061

 

 

 

142,398

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

8


BIOAMBER INC.

Notes to Consolidated Financial Statements

for the three months ended March 31, 2015 and 2014, and the year ended December 31, 2014

(Unaudited)

 

 

1. Summary of significant accounting policies

Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with SEC rules and regulations and using the same accounting policies as described in Note 2 of the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Accordingly, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management bases its estimates on various assumptions and historical experience, which are believed to be reasonable; however, due to the inherent nature of estimates, actual results may differ significantly due to changed conditions or assumptions. The results of operations for the three months ended March 31, 2015 are not necessarily indicative of results to be expected for the fiscal year ended December 31, 2015 or any other future period.

Risk and uncertainties

         BioAmber is an industrial biotechnology company producing sustainable chemicals and the Company has not yet commenced its planned, principal operations. The Company’s principal operations will start once commercial production begins at the Sarnia, Ontario facility, currently under construction. The Company’s activities since inception have consisted principally of raising capital for performing research and development activities, developing market related to its bio-succinic acid product and derived products, acquiring technology patents, producing and selling bio-succinic acid from a large-scale demonstration facility in Pomacle, France, and building its Sarnia facility. Ultimately, the Company believes that the attainment of profitable operations is dependent upon future events, including completion of the construction and future operation of the commercial-scale manufacturing facility in Sarnia, Ontario, further advancing its existing commercial arrangements with strategic partners to generate revenue from the sale of its products that will support the Company’s cost structure, gaining market acceptance for its bio-succinic acid, its derivatives and other building block chemicals, obtaining adequate financing to complete its development activities, and attracting and retaining qualified personnel.

Fair value of financial instruments

The Company applies FASB ASC 820, Fair Value Measurement, which defines fair value and establishes a framework for measuring fair value and making disclosures about fair value measurements. FASB ASC 820 establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is impacted by a number of factors, including the type of financial instruments and the characteristics specific to them. Financial instruments with readily available quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

There are three levels within the hierarchy that may be used to measure fair value:

 

Level 1

 

  

A quoted price in an active market for identical assets or liabilities.

 

Level 2

 

 

  

 

Significant pricing inputs are observable inputs, which are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources.

 

Level 3

 

 

  

 

Significant pricing inputs are unobservable inputs, which are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The fair value measurements level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used should maximize the use of observable inputs and minimize the use of unobservable inputs.

9


The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. There have been no changes in the methodologies used since December 31, 2014.

Restricted Cash

Cash amounts that are restricted to withdrawal or usage are presented as restricted cash. As of March 31, 2015 and December 31, 2014, the Company had $593,250 and $646,500, respectively, of restricted cash held in an escrow account as a guarantee to a long-term supply agreement. See also Note 10.

Revenue

The Company’s revenues represent sales of bio-succinic acid and derivative products to a limited number of customers. Revenues from two customers represented 62% of the consolidated revenue for the three months ended March 31, 2015 and revenues from two customers represented 73% of the consolidated revenue for the three months ended March 31, 2014.

Intangible assets

Costs incurred in obtaining patents are capitalized and amortized on a straight-line basis over their estimated useful lives of between 8 and 15 years. The Company’s patent portfolio was acquired as part of the spin-off transaction and the acquisition of BioAmber SAS. The cost of servicing the patents is expensed as incurred.

As required by FASB ASC 805, business combinations, acquired in-process research and development (“IPR&D”) through business combinations is accounted for as an indefinite-lived intangible asset until completion or abandonment of the associated research and development efforts. Therefore, such assets are not amortized but are tested for impairment at least annually. Once the research and development activities are deemed to be substantially complete, the assets will be amortized over the related product’s useful life. If the project is abandoned, the assets will be written off if they have no alternative future use. The Company reviews its portfolio of patents and acquired in-process research and development taking into consideration events or circumstances that may affect its recoverable value.

Long-lived asset impairment

Management assesses the fair value of its long-lived assets in accordance with FASB ASC 360, Property, Plant, and Equipment. At the end of each reporting period, it evaluates whether there is objective evidence of events or changes in business conditions which suggest that an asset may be impaired.

In such cases the Company determines the fair value based upon forecasted cash flows which the assets are expected to generate and the net proceeds expected from their sale. If the carrying amount exceeds the fair value of the assets, estimated by discounting cash flows techniques, an impairment charge is recorded. The impairment charge is determined as the difference between the fair value of the assets and their corresponding carrying value.

Warrants financial liability

The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in FASB ASC 815, Derivatives and Hedging—Contracts in Entity’s Own Equity, as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. Derivative warrant liabilities were valued using the Black-Scholes pricing model at the date of initial issuance and are valued using the closing value as quoted on the New York Stock Exchange at each subsequent balance sheet date.

The liability is presented as warrants financial liability in the consolidated balance sheet, and changes in the fair value of the warrants are reflected in the consolidated statement of operations as part of financial charges (income), net.

Redeemable non-controlling interest

The Company accounts for redeemable non-controlling interest in accordance with FASB ASC 480-10-S99, Classification and Measurement of Redeemable Securities, under which the initial carrying value of the redeemable non-controlling interest is classified as temporary equity. The redeemable non-controlling interest is presented at the greater of their carrying amount or redemption value at the end of each reporting period. The changes in the value from period to period are charged to redeemable non-controlling interest on the consolidated balance sheets, or in reduction of retained earnings and earnings available to common shareholders if the redemption value is greater than the carrying amount. Refer to Note 11.

10


Net loss per share

The Company computes net loss per share in accordance with FASB ASC 260, Earnings Per Share, under which basic net loss per share attributable to common shareholders is computed by dividing net loss attributable to common shareholders by the basic weighted-average number of common shares outstanding during the period. Shares issued and reacquired during the period are weighted for the portion of the period that they were outstanding. The computation of diluted earnings per share (“EPS”) is similar to the computation of the basic EPS except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if all of the potentially dilutive shares of common stock had been issued. In addition, in computing the dilutive effect of convertible securities, the numerator is adjusted to add back any convertible preferred dividends and the after-tax amount of interest recognized in the period associated with any convertible debt. The numerator is also adjusted for any other changes in income or loss that would result from the assumed conversion of those potential shares of common stock such as profit-sharing expenses. Common equivalent shares are excluded from the diluted EPS calculation if their effect is anti-dilutive. Losses have been incurred in each period since inception; accordingly, diluted loss per share is not presented.

Recently adopted and recently issued accounting guidance

In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, "Revenue Recognition - Revenue from Contracts with Customers," which is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The standard is effective for interim and annual periods beginning after December 15, 2016, and either full retrospective adoption or modified retrospective adoption is permitted. The FASB proposed that a deferral of the effective date is necessary to provide adequate time to effectively implement the new revenue standard. It is important to note that the FASB’s proposed deferral is not a final decision. The Company is in the process of evaluating the impact of the standard.

In June 2014, the FASB issued ASU No. 2014-10,"Development  Stage Entities," - Elimination of Certain Financial Reporting Requirements, including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, which eliminates the concept of a development stage entity (DSE) in its entirety from current accounting guidance. Amendments to the consolidation guidance may result in more DSEs being considered variable interest entities (VIEs). The new guidance  is  effective  for  fiscal  years and  interim  periods beginning  after 15 December 2014,  with early adoption  permitted. The Company has elected to early adopt ASU No. 2014-10 for the interim period ended September 30, 2014. The adoption of this ASU allows the Company to remove the inception to date information and all references to development stage.

In August 2014, the FASB issued ASU 2014-15 “Presentation of Financial Statements— Going Concern (Subtopic 205-40) (Topic 718): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. This ASU requires an entity to evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity's ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. The new guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. The adoption of this ASU is not expected to have an impact on the Company’s consolidated financial position, results of operations or cash flows.

 

2. Equity Investments

 

AmberWorks had a net loss of $nil and $108, for the three months ended March 31, 2015 and 2014, respectively. Sinoven’s share of the net loss amounted to $nil and $54 for those periods, respectively.

 

AmberWorks had total assets of $70,496 and $69,634 and total liabilities of nil as of March 31, 2015 and December 31, 2014, respectively. Sinoven’s share of net assets amounted to $35,248 and $34,817 as of those periods, respectively.

 

          On May 6, 2014, AmberWorks made a capital distribution totaling $1,350,000, to Sinoven and NatureWorks LLC, both 50% holders of the joint venture, in proportion of their respective investments in the joint venture. This distribution was in the form of cash and was recorded as a reduction of investment.

 

On February 5, 2015, the Company invested $412,234 (CAD$ 500,000) in a start-up private company, which represents 6.6% ownership interest.

 

11


3. Inventories and Prepaid expenses and deposits

The Company had approximately $2.0 million and $1.8 million of finished goods inventory as of March 31, 2015 and December 31, 2014, respectively.

The Company had approximately $0.8 million of prepaid expenses and deposits as of March 31, 2015 and December 31, 2014, which was comprised primarily of deposits made to secure the purchase of equipment and advances for the construction of the manufacturing facility in Sarnia, Ontario.

 

4. Property and equipment

 

 

Estimated

 

 

 

 

 

 

 

 

 

Useful

 

March 31,

 

 

December 31,

 

 

Life

 

2015

 

 

2014

 

 

(years)

 

 

 

 

 

 

 

 

 

 

 

$

 

 

$

 

Land

 

 

 

266,434

 

 

 

290,349

 

Furniture and fixtures

5 - 8

 

 

63,418

 

 

 

77,448

 

Machinery and equipment

5 - 15

 

 

1,195,669

 

 

 

1,215,561

 

Computers, office equipment and peripherals

3 - 7

 

 

167,178

 

 

 

134,248

 

Leasehold improvement

10

 

 

12,342

 

 

 

12,342

 

Construction in-progress

 

 

 

121,010,284

 

 

 

101,664,351

 

Grants applied to construction in-progress

 

 

 

(17,234,554

)

 

 

(14,362,312

)

 

 

 

 

105,480,771

 

 

 

89,031,987

 

Less: accumulated depreciation

 

 

 

(388,269

)

 

 

(367,088

)

Property and equipment, net

 

 

 

105,092,502

 

 

 

88,664,899

 

 

Depreciation expense is recorded as an operating expense in the consolidated statements of operations and amounted to $60,178 and $59,674 for the three months ended March 31, 2015 and 2014, respectively.

 

5. Intangible assets

 

 

March 31,

 

 

December 31,

 

 

2015