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 June 30, 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 |
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98-0601045 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
Jean-François Huc
President and Chief Executive Officer
BioAmber Inc.
1250 Rene Levesque West, Suite 4310
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 |
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¨ |
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Accelerated filer |
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x |
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Non-accelerated filer |
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¨ (Do not check if a smaller reporting company) |
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Smaller reporting company |
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¨ |
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 August 5, 2015, there were 25,857,671 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:
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• |
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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; |
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• |
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our joint venture with Mitsui & Co. Ltd., or Mitsui; |
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• |
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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; |
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the expected market applications for our products and the sizes of these addressable markets; |
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• |
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our ability to gain market acceptance for bio-succinic acid, its derivatives including 1,4 BDO and THF and other building block chemicals; |
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the benefits of our transition from our E. coli bacteria to our yeast; |
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• |
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our ability to commence commercial sales and execute on our commercial expansion plan, including the timing and volume of our future production and sales; |
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• |
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the expected cost-competitiveness and relative performance attributes of our bio-succinic acid and the products derived from it; |
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• |
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our ability to cost-effectively produce and commercialize bio-succinic acid, its derivatives and other building block chemicals; |
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• |
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customer qualification, approval and acceptance of our products; |
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• |
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our ability to maintain and advance strategic partnerships and collaborations and the expected benefits and accessible markets related to those partnerships and collaborations; |
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• |
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the impact of our off-take agreements on our business with our customers, our distributors and our current and future equity partners; |
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• |
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our ability to economically obtain feedstock and other inputs; |
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the achievement of advances in our technology platform; |
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• |
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our ability to obtain and maintain intellectual property protection for our products and processes and not infringe on others’ rights; |
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• |
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government regulatory and industry certification approvals for our facilities and products; and |
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• |
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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
Form 10-Q
Table of Contents
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Item 1. |
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4 |
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4 |
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5 |
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6 |
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7 |
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8 |
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9 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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25 |
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Item 3. |
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36 |
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Item 4. |
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36 |
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Item 1. |
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37 |
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Item 1A. |
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37 |
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Item 2. |
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38 |
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Item 5. |
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38 |
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Item 6. |
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39 |
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40 |
3
BIOAMBER INC.
Consolidated Statements of Operations
(Unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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||||||||||
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2015 |
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2014 |
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2015 |
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2014 |
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$ |
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$ |
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$ |
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$ |
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Product sales |
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341,900 |
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414,600 |
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709,149 |
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765,261 |
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Cost of goods sold excluding depreciation and amortization |
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752,323 |
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2,251,101 |
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1,062,412 |
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2,530,961 |
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Gross loss |
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(410,423 |
) |
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(1,836,501 |
) |
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(353,263 |
) |
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(1,765,700 |
) |
Operating expenses |
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General and administrative |
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2,963,708 |
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2,865,175 |
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5,591,273 |
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5,784,238 |
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Research and development, net |
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4,959,725 |
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4,258,554 |
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9,568,470 |
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7,572,803 |
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Sales and marketing |
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1,124,185 |
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1,737,458 |
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2,276,907 |
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2,848,860 |
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Depreciation of property and equipment and amortization of intangible assets |
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92,854 |
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59,909 |
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164,694 |
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119,583 |
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Write-off of intangible assets ( Note 5) |
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1,141,000 |
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— |
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1,141,000 |
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— |
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Foreign exchange loss (gain) |
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202,181 |
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(379,442 |
) |
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258,133 |
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(211,814 |
) |
Operating expenses |
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10,483,653 |
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8,541,654 |
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19,000,477 |
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16,113,670 |
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Operating loss |
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10,894,076 |
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10,378,155 |
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19,353,740 |
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17,879,370 |
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Amortization of deferred financing costs and debt discounts |
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91,810 |
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71,909 |
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158,060 |
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144,709 |
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Financial charges (income), net (Note 9) |
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3,828,765 |
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3,870,799 |
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4,259,575 |
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16,223,520 |
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Equity participation in losses of equity method investments (Note 2) |
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— |
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(162 |
) |
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— |
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(108 |
) |
Other expense (income), net |
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517 |
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(185,000 |
) |
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(21,050 |
) |
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(185,000 |
) |
Loss before income taxes |
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14,815,169 |
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14,135,701 |
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23,750,325 |
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34,062,491 |
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Income taxes (Note 13) |
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10,603 |
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9,439 |
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43,923 |
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34,690 |
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Net loss |
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14,825,772 |
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14,145,140 |
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23,794,248 |
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34,097,181 |
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Net loss attributable to: |
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BioAmber Inc. shareholders |
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14,025,558 |
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13,992,561 |
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22,283,740 |
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33,903,606 |
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Non-controlling interest |
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800,214 |
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152,579 |
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1,510,508 |
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193,575 |
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14,825,772 |
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14,145,140 |
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23,794,248 |
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34,097,181 |
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Net loss per share attributable to BioAmber Inc. shareholders - basic |
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$ |
0.58 |
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$ |
0.75 |
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$ |
0.97 |
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$ |
1.83 |
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Weighted-average of common shares outstanding - basic |
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24,283,275 |
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18,574,690 |
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23,067,190 |
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18,567,213 |
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The accompanying notes are an integral part of the consolidated financial statements.
4
Consolidated Statements of Comprehensive Loss
(Unaudited)
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Three Months ended |
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Six Months ended |
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June 30, |
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June 30, |
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2015 |
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2014 |
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2015 |
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2014 |
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$ |
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$ |
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$ |
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$ |
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Net loss |
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14,825,772 |
|
|
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14,145,140 |
|
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23,794,248 |
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34,097,181 |
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Foreign currency translation adjustment |
|
(1,719,473 |
) |
|
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(1,378,656 |
) |
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|
5,166,361 |
|
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(530,548 |
) |
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Total comprehensive loss |
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13,106,299 |
|
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12,766,484 |
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28,960,609 |
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33,566,633 |
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Total comprehensive loss attributable to: |
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BioAmber Inc. shareholders |
|
14,370,876 |
|
|
|
12,972,600 |
|
|
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24,156,177 |
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33,473,419 |
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|
Non-controlling interest |
|
(1,264,577 |
) |
|
|
(206,116 |
) |
|
|
4,804,432 |
|
|
|
93,214 |
|
|
|
|
13,106,299 |
|
|
|
12,766,484 |
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|
|
28,960,609 |
|
|
|
33,566,633 |
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|
The accompanying notes are an integral part of the consolidated financial statements.
5
(Unaudited)
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As of |
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As of |
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June 30, |
|
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December 31, |
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|
2015 |
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2014 |
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$ |
|
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$ |
|
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Assets |
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Current assets |
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Cash |
|
48,665,225 |
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51,042,752 |
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Accounts receivable |
|
406,559 |
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|
476,851 |
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Inventories (Note 3) |
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1,312,228 |
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1,801,826 |
|
Prepaid expenses and deposits (Note 3) |
|
903,307 |
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|
765,539 |
|
Valued added tax, income taxes and other receivables |
|
3,442,468 |
|
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3,005,153 |
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Total current assets |
|
54,729,787 |
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|
57,092,121 |
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Property and equipment, net (Note 4) |
|
126,962,707 |
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|
88,664,899 |
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Investment in equity method and cost investments (Note 2) |
|
447,682 |
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|
34,817 |
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Intangible assets, net (Note 5) |
|
5,313,260 |
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|
4,332,911 |
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Goodwill |
|
625,364 |
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|
625,364 |
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Restricted cash |
|
607,050 |
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|
646,500 |
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Deferred financing costs (Note 7) |
|
1,386,472 |
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|
1,043,788 |
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Total assets |
|
190,072,322 |
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|
152,440,400 |
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Liabilities |
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Current liabilities |
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Accounts payable and accrued liabilities (Note 6) |
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17,172,075 |
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16,459,918 |
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Income taxes payable (Note 13) |
|
204,181 |
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|
204,096 |
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Accounts payable Agro-industries Recherches et Développements (“ARD”) |
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— |
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|
983,465 |
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Deferred grants (Note 8) |
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5,161,808 |
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2,274,802 |
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Short-term portion of long-term debt (Note 7) |
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12,025,123 |
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2,977,707 |
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Total current liabilities |
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34,563,187 |
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22,899,988 |
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Long-term debt (Note 7) |
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46,186,934 |
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34,653,101 |
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Warrants financial liability (Note 12) |
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15,776,000 |
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13,040,000 |
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Other long-term liabilities |
|
458,622 |
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|
127,500 |
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Total liabilities |
|
96,984,743 |
|
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|
70,720,589 |
|
Commitments and contingencies (Note 10) |
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Redeemable non-controlling interest (Note 11) |
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25,358,535 |
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24,190,412 |
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Shareholders’ equity |
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Share capital |
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Common stock: |
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$0.01 par value per share; 250,000,000 authorized, 25,857,671 and 21,836,046 issued and outstanding at June 30, 2015 and December 31, 2014, respectively |
|
258,576 |
|
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|
218,360 |
|
Additional paid-in capital |
|
256,528,245 |
|
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|
220,460,559 |
|
Warrants |
|
2,867,170 |
|
|
|
2,949,018 |
|
Accumulated deficit |
|
(183,749,650 |
) |
|
|
(161,465,910 |
) |
Accumulated other comprehensive loss |
|
(8,175,297 |
) |
|
|
(4,632,628 |
) |
Total BioAmber Inc. shareholders’ equity |
|
67,729,044 |
|
|
|
57,529,399 |
|
Total liabilities and equity |
|
190,072,322 |
|
|
|
152,440,400 |
|
The accompanying notes are an integral part of the consolidated financial statements.
6
Consolidated Statements of Shareholders’ Equity
(in U.S. dollars, except for shares data)
(Unaudited)
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Common stock |
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Additional paid-in capital |
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Warrants |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Non-controlling interest |
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Total shareholders' equity |
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Shares |
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Par value |
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Shares |
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Par value |
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$ |
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$ |
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$ |
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$ |
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$ |
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|
$ |
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|
$ |
|
|||||||
Balance at January 1, 2014 |
|
|
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 |
|
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|
|
|
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|
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|
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|
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|
|
|
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|
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Stock-based compensation (Note 12) |
|
|
— |
|
|
|
— |
|
|
|
6,949,205 |
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|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,949,205 |
|
Reclassification of non-controlling interest to redeemable non-controlling interest (Note 11) |
|
|
— |
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|
|
— |
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|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
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|
|
(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) |
|
|
— |
|
|
|
— |
|
|
|
3,012,813 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,012,813 |
|
Issuance of shares , net of issuance costs of |
|
|
3,900,000 |
|
|
|
39,000 |
|
|
|
32,741,069 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
32,780,069 |
|
Warrants exercised/expired (Note 12) |
|
|
107,625 |
|
|
|
1,076 |
|
|
|
233,584 |
|
|
|
(107,695 |
) |
|
|
(81,848 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
152,812 |
|
Stock options exercised |
|
|
14,000 |
|
|
|
140 |
|
|
|
80,220 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
80,360 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(22,283,740 |
) |
|
|
— |
|
|
|
— |
|
|
|
(22,283,740 |
) |
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,542,669 |
) |
|
|
— |
|
|
|
(3,542,669 |
) |
Warrants adjustment (Note 12) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,124 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance at June 30, 2015 |
|
|
25,857,671 |
|
|
|
258,576 |
|
|
|
256,528,245 |
|
|
|
1,145,555 |
|
|
|
2,867,170 |
|
|
|
(183,749,650 |
) |
|
|
(8,175,297 |
) |
|
|
— |
|
|
|
67,729,044 |
|
The accompanying notes are integral part of the consolidated financial statements.
7
Consolidated Statements of Cash Flows
(Unaudited)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2015 |
|
|
2014 |
|
||
|
|
$ |
|
|
$ |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
|
(23,794,248 |
) |
|
|
(34,097,181 |
) |
Adjustments to reconcile net loss to cash: |
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
3,012,813 |
|
|
|
4,521,641 |
|
Depreciation of property and equipment and amortization of intangible assets |
|
|
164,694 |
|
|
|
119,583 |
|
Write-off of intangible assets (Note 5) |
|
|
1,141,000 |
|
|
|
— |
|
Amortization of deferred financing costs and debt discounts |
|
|
158,060 |
|
|
|
144,709 |
|
Equity participation in losses of equity method investments |
|
|
— |
|
|
|
(108 |
) |
Other long-term liabilities |
|
|
25,147 |
|
|
|
22,500 |
|
Financial charges (income), net |
|
|
3,079,750 |
|
|
|
15,114,362 |
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Change in accounts receivable |
|
|
70,374 |
|
|
|
127,479 |
|
Change in inventories |
|
|
489,020 |
|
|
|
(1,562,258 |
) |
Change in prepaid expenses and deposits |
|
|
(163,090 |
) |
|
|
1,252,076 |
|
Change in valued added tax, income taxes and other receivables |
|
|
(530,725 |
) |
|
|
(1,246,416 |
) |
Change in accounts payable to ARD |
|
|
(983,465 |
) |
|
|
2,606,462 |
|
Change in accounts payable and accrued liabilities |
|
|
1,760,106 |
|
|
|
5,046,282 |
|
Net cash used in operating activities |
|
|
(15,570,564 |
) |
|
|
(7,950,869 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Acquisition of property and equipment and intangible asset |
|
|
(52,433,486 |
) |
|
|
(32,728,279 |
) |
Change in restricted cash |
|
|
— |
|
|
|
(678,450 |
) |
Capital investment in cost investment (Note 2) |
|
|
(412,433 |
) |
|
|
675,000 |
|
Net cash used in investing activities |
|
|
(52,845,919 |
) |
|
|
(32,731,729 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Deferred financing costs |
|
|
(490,477 |
) |
|
|
(561,100 |
) |
Issuance of long-term debt (Note 7) |
|
|
21,967,288 |
|
|
|
2,191,218 |
|
Government grants (Note 8) |
|
|
7,946,840 |
|
|
|
792,111 |
|
Net proceeds from issuance of common shares |
|
|
33,114,135 |
|
|
|
143,990 |
|
Proceeds from issuance of shares by a subsidiary (Note 11) |
|
|
4,302,196 |
|
|
|
8,120,700 |
|
Net cash provided by financing activities |
|
|
66,839,982 |
|
|
|
10,686,919 |
|
|
|
|
|
|
|
|
|
|
Foreign exchange impact on cash |
|
|
(801,026 |
) |
|
|
571,096 |
|
Decrease in cash |
|
|
(2,377,527 |
) |
|
|
(29,424,583 |
) |
Cash, beginning of period |
|
|
51,042,752 |
|
|
|
83,728,199 |
|
|
|
|
|
|
|
|
|
|
Cash, end of period |
|
|
48,665,225 |
|
|
|
54,303,616 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Non-cash transactions: |
|
|
|
|
|
|
|
|
Deferred financing costs related to the second public offering not yet paid |
|
|
60,000 |
|
|
|
93,559 |
|
Construction in Progress costs not yet paid |
|
|
12,323,000 |
|
|
|
8,113,000 |
|
Amortization of debt discounts and interests capitalized to CIP |
|
|
1,255,600 |
|
|
|
303,635 |
|
The accompanying notes are an integral part of the consolidated financial statements.
8
Notes to Consolidated Financial Statements
for the three and six months ended June 30, 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 and six months ended June 30, 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 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.
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, 2017, and either full retrospective adoption or modified retrospective adoption is permitted. The Company is in the process of evaluating the impact of the standard.
In April 2015, the FASB issued ASU No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs," ("ASU 2015-03"). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The standard is effective for interim and
9
annual periods beginning after December 15, 2015, with early adoption permitted. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements and footnote disclosures.
2. Equity and Cost Investments
AmberWorks had a net loss of $nil and $(324), for the three months ended June 30, 2015 and 2014, respectively. Sinoven’s share of the net loss amounted to $nil and $(162) for those periods, respectively.
AmberWorks had a net loss of $nil and $(216) for the six months ended June 30, 2015 and 2014, respectively. Sinoven’s share of the net loss amounted to $nil and $(108) for those periods, respectively.
AmberWorks had total assets of $70,496 and $69,634 and total liabilities of nil as of June 30, 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 our wholly-owned subsidiary, Sinoven and a third-party, 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 $412,434 (CAD$ 500,000) in a start-up private company, which represents a 6.6% ownership interest.
3. Inventories and Prepaid expenses and deposits
The Company had approximately $1,312,228, and $1,801,826 of finished goods inventory as of June 30, 2015 and December 31, 2014, respectively. The Company recorded an inventory reserve of approximately $300,000 in the three and six months ended June 30, 2015.
The Company had approximately $903,307 million and $765,539 of prepaid expenses and deposits as of June 30, 2015 and December 31, 2014 respectively, 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 |
|
June 30, |
|
|
|
December 31, |
|
||
|
Life |
|
2015 |
|
|
|
2014 |
|
||
|
(years) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
||
Land |
|
|
|
272,632 |
|
|
|
|
290,349 |
|
Furniture and fixtures |
5 - 8 |
|
|
113,212 |
|
|
|
|
77,448 |
|
Machinery and equipment |
5 - 15 |
|
|
1,283,684 |
|
|
|
|
1,215,561 |
|
Computers, office equipment and peripherals |
3 - 7 |
|
|
199,431 |
|
|
|
|
134,248 |
|
Leasehold improvement |
7 - 10 |
|
|
369,117 |
|
|
|
|
12,342 |
|
Construction in-progress |
|
|
|
145,554,611 |
|
|
|
|
101,664,351 |
|
Grants applied to construction in-progress |
|
|
|
(20,369,861 |
) |
|
|
|
(14,362,312 |
) |
|
|
|
|
127,422,826 |
|
|
|
|
89,031,987 |
|
Less: accumulated depreciation |
|
|
|
(460,119 |
) |
|
|
|
(367,088 |
) |
Property and equipment, net |
|
|
|
126,962,707 |
|
|
|
|
88,664,899 |
|
Depreciation expense is recorded as an operating expense in the consolidated statements of operations and amounted to $72,740 and $59,909 for the three months ended June 30, 2015 and 2014, respectively, and to $132,918 and $119,583 for the six months ended June 30, 2015 and 2014 respectively.
10
|
June 30, |
|
|
December 31, |
|
||
|
2015 |
|
|
2014 |
|
||
|
$ |