bioa-10q_20160331.htm

 

 

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, 2016

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 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

 

¨

  

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 6, 2016, there were 28,781,753  shares of the registrant’s Common Stock, $0.01 par value per share, outstanding.

 

 

 


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 future 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 offtake agreements with Vinmar International Ltd., or Vinmar, related to bio-based 1,4-butanediol, which we refer to as 1,4 BDO or BDO, tetrahydrofuran, which we refer to as THF, and bio-based succinic acid, and with PTTMCC Biochem Company Limited, or 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;

 

 

 

our ability to ramp up 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;

 

 

 

government policymaking and incentives relating to bio-chemicals; and

 

 

 

 

our ability to maintain an effective system of internal controls and prevent future material weaknesses or significant deficiencies from occurring;

 

 

our ability to maintain and secure adequate funding for our current business activities;

 


and other risks and uncertainties referenced under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015. 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 Quarterly Report on Form 10-Q or the respective dates of documents incorporated by reference herein or therein that include forward-looking statements.

 

 

 

3

 


BIOAMBER INC.

Form 10-Q

Table of Contents

 

 

 

 

  

Page

 

 

 

Special Note Regarding Forward-looking Statements

  

2

 

Part I—Financial Information

 

Item 1.

 

 

Condensed Consolidated Financial Statements (Unaudited)

  

5

 

 

 

Consolidated Statements of Operations (Unaudited)

  

5

 

 

Consolidated Statements of Comprehensive Loss (Unaudited)

  

6

 

 

Consolidated Balance Sheets (Unaudited)

  

7

 

 

Consolidated Statements of Shareholders’ Equity (Unaudited)

  

8

 

 

Consolidated Statements of Cash Flows (Unaudited)

  

9

 

 

Notes to Consolidated Financial Statements (Unaudited)

  

10

 

Item 2.

 

 

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

  

25

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

  

34

Item 4.

 

Controls and Procedures

  

34

 

Part II—Other Information

  

 

 

Item 1.

 

 

Legal Proceedings

  

35

Item 1A.

 

Risk Factors

  

35

Item 2.

 

Use of Proceeds

  

35

Item 5.

 

Other Information

  

35

Item 6.

 

Exhibits

  

37

 

Signatures

  

38

 

 

 

4


PART I—FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements

BIOAMBER INC.

Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

 

2016

 

 

2015

 

 

 

 

$

 

 

$

 

 

Revenues

 

 

 

 

 

 

 

 

 

Product sales

 

 

1,458,485

 

 

 

367,249

 

 

Total revenues

 

 

1,458,485

 

 

 

367,249

 

 

Cost of goods sold excluding depreciation and amortization

 

 

3,062,390

 

 

 

310,089

 

 

Gross (loss) profit

 

 

(1,603,905

)

 

 

57,160

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

General and administrative

 

 

2,623,663

 

 

 

2,627,565

 

 

Research and development, net

 

 

1,849,142

 

 

 

4,608,745

 

 

Sales and marketing

 

 

1,156,181

 

 

 

1,152,722

 

 

Depreciation of property and equipment and amortization of intangible assets

 

 

1,153,451

 

 

 

71,840

 

 

Foreign exchange loss

 

 

121,070

 

 

 

55,952

 

 

Operating expenses

 

 

6,903,507

 

 

 

8,516,824

 

 

Operating loss

 

 

8,507,412

 

 

 

8,459,664

 

 

Amortization of debt discounts

 

 

601,035

 

 

 

66,250

 

 

Financial charges (income), net (Note 9)

 

 

3,445,946

 

 

 

570,858

 

 

Other (income) expense, net

 

 

(24,691

)

 

 

(21,567

)

 

Loss before income taxes

 

 

12,529,702

 

 

 

9,075,205

 

 

Income taxes (Note 13)

 

 

6,038

 

 

 

33,319

 

 

Net loss

 

 

12,535,740

 

 

 

9,108,524

 

 

Net loss attributable to:

 

 

 

 

 

 

 

 

 

BioAmber Inc. shareholders

 

 

10,945,687

 

 

 

8,398,230

 

 

Non-controlling interest

 

 

1,590,053

 

 

 

710,294

 

 

 

 

 

12,535,740

 

 

 

9,108,524

 

 

Net loss per share attributable to BioAmber Inc. shareholders - basic and diluted

 

$

0.39

 

 

$

0.38

 

 

Weighted-average of common shares outstanding -  basic and diluted

 

 

28,181,753

 

 

 

21,837,592

 

 

 

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

 

5


BIOAMBER INC.

Consolidated Statements of Comprehensive Loss
(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

 

2016

 

 

2015

 

 

 

 

$

 

 

$

 

 

Net loss

 

 

12,535,740

 

 

 

9,108,524

 

 

Foreign currency translation adjustment

 

 

(6,555,010

)

 

 

6,885,834

 

 

Total comprehensive loss

 

 

5,980,730

 

 

 

15,994,358

 

 

Total comprehensive loss attributable to:

 

 

 

 

 

 

 

 

 

BioAmber Inc. shareholders

 

 

6,660,983

 

 

 

11,595,580

 

 

Non-controlling interest

 

 

(680,253

)

 

 

4,398,778

 

 

 

 

 

5,980,730

 

 

 

15,994,358

 

 

 

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

 

 

 

6


BIOAMBER INC.

Consolidated Balance Sheets

(Unaudited)

 

 

 

As of

 

 

As of

 

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

$

 

 

$

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and Cash equivalents

 

 

14,058,710

 

 

 

6,973,591

 

Accounts receivable

 

 

1,430,032

 

 

 

978,634

 

Inventories (Note 3)

 

 

2,187,563

 

 

 

1,749,224

 

Prepaid expenses and deposits

 

 

900,048

 

 

 

579,864

 

Valued added tax, income taxes and other receivables

 

 

1,561,104

 

 

 

562,800

 

Total current assets

 

 

20,137,457

 

 

 

10,844,113

 

Property and equipment, net (Note 4)

 

 

129,126,842

 

 

 

122,542,688

 

Investment in equity method and cost investments (Note 2)

 

 

447,035

 

 

 

447,035

 

Intangible assets, net (Note 5)

 

 

6,300,731

 

 

 

6,352,091

 

Goodwill

 

 

625,364

 

 

 

625,364

 

Restricted cash

 

 

575,925

 

 

 

540,975

 

Deferred financing costs

 

 

469,616

 

 

 

434,941

 

Total assets

 

 

157,682,970

 

 

 

141,787,207

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities (Note 6)

 

 

4,733,532

 

 

 

15,834,274

 

Income taxes payable (Note 13)

 

 

95,082

 

 

 

112,256

 

Deferred grants (Note 8)

 

 

3,664,412

 

 

 

3,437,791

 

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

 

 

10,104,215

 

 

 

10,297,542

 

Total current liabilities

 

 

18,597,241

 

 

 

29,681,863

 

Long-term debt (Note 7)

 

 

28,082,475

 

 

 

28,491,549

 

Warrants financial liability (Note 12)

 

 

15,066,327

 

 

 

12,231,906

 

Other long-term liabilities

 

 

459,881

 

 

 

443,135

 

Total liabilities

 

 

62,205,924

 

 

 

70,848,453

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

Redeemable non-controlling interest (Note 11)

 

 

42,989,888

 

 

 

24,583,636

 

Equity

 

 

 

 

 

 

 

 

Share capital

 

 

 

 

 

 

 

 

Common stock:

 

 

 

 

 

 

 

 

$0.01 par value per share; 250,000,000 authorized, 28,781,753 and 26,181,753

   issued and outstanding at March 31, 2016 and December 31, 2015,

   respectively

 

 

287,817

 

 

 

261,817

 

Additional paid-in capital

 

 

271,559,194

 

 

 

258,792,171

 

Warrants

 

 

748,075

 

 

 

748,075

 

Accumulated deficit

 

 

(209,235,584

)

 

 

(198,289,897

)

Accumulated other comprehensive loss

 

 

(10,872,344

)

 

 

(15,157,048

)

Total BioAmber Inc. shareholders’ equity

 

 

52,487,158

 

 

 

46,355,118

 

Total liabilities and equity

 

 

157,682,970

 

 

 

141,787,207

 

 

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

 

 

 

7


BIOAMBER INC.

Consolidated Statements of Shareholders’ Equity

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

(Unaudited)

 

 

 

Common stock

 

 

Additional paid-in capital

 

 

Warrants

 

 

Accumulated deficit

 

 

Accumulated other comprehensive loss

 

 

Total shareholders' equity

 

 

 

Shares

 

 

Par value

 

 

 

 

 

 

Shares

 

 

Par value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

$

 

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

 

Balance at December 31, 2015

 

 

26,181,753

 

 

 

261,817

 

 

 

258,792,171

 

 

 

491,236

 

 

 

748,075

 

 

 

(198,289,897

)

 

 

(15,157,048

)

 

 

46,355,118

 

Stock-based compensation (Note 12)

 

 

 

 

 

 

 

 

949,961

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

949,961

 

Issuance of shares , net of issuance costs

 

 

2,600,000

 

 

 

26,000

 

 

 

11,817,062

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,843,062

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,945,687

)

 

 

 

 

 

(10,945,687

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,284,704

 

 

 

4,284,704

 

Balance at March 31, 2016

 

 

28,781,753

 

 

 

287,817

 

 

 

271,559,194

 

 

 

491,236

 

 

 

748,075

 

 

 

(209,235,584

)

 

 

(10,872,344

)

 

 

52,487,158

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,398,230

)

 

 

 

 

 

(8,398,230

)

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

 

 

 

(169,864,140

)

 

 

(7,829,978

)

 

 

47,444,328

 

 

 

 

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

 

 

 

8


BIOAMBER INC.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

Three Months Ended March 31,

 

 

 

 

2016

 

 

2015

 

 

 

 

$

 

 

$

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Net loss

 

 

(12,535,740

)

 

 

(9,108,524

)

 

Adjustments to reconcile net loss to cash:

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

949,961

 

 

 

1,507,695

 

 

Depreciation of property and equipment

   and amortization of intangible assets

 

 

1,153,451

 

 

 

71,840

 

 

Amortization of debt discounts

 

 

601,035

 

 

 

66,250

 

 

Other long-term liabilities

 

 

(310

)

 

 

11,250

 

 

Financial charges (income), net (Note 9)

 

 

2,448,757

 

 

 

(8,077

)

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

 

Change in accounts receivable

 

 

(312,139

)

 

 

56,467

 

 

Change in inventories

 

 

(346,350

)

 

 

(178,105

)

 

Change in prepaid expenses and deposits

 

 

(265,060

)

 

 

76,273

 

 

Change in value added tax, income taxes and other receivables

 

 

(961,658

)

 

 

1,400,142

 

 

Change in accounts payable to ARD

 

 

 

 

 

(983,465

)

 

Change in accounts payable and accrued liabilities

 

 

(11,016,301

)

 

 

1,165,302

 

 

Net cash used in operating activities

 

 

(20,284,354

)

 

 

(5,922,952

)

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

Acquisition of property and equipment and intangible asset

 

 

(26,082

)

 

 

(29,055,502

)

 

Investment in equity method and cost investments (Note 2)

 

 

 

 

 

(412,864

)

 

Net cash used in investing activities

 

 

(26,082

)

 

 

(29,468,366

)

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

Deferred financing costs

 

 

(197,789

)

 

 

(144,260

)

 

Issuance of long-term debt (Note 7)

 

 

 

 

 

5,415,545

 

 

Repayment of long-term debt (Note 7)

 

 

(2,382,533

)

 

 

 

 

Government grants (Note 8)

 

 

 

 

 

4,075,947

 

 

Net proceeds from issuance of common shares

 

 

11,859,175

 

 

 

2,814

 

 

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

 

 

17,725,999

 

 

 

2,062,458

 

 

Net cash provided by financing activities

 

 

27,004,852

 

 

 

11,412,504

 

 

Foreign exchange impact on cash

 

 

390,703

 

 

 

(1,038,861

)

 

Increase (decrease) in cash

 

 

7,085,119

 

 

 

(25,017,675

)

 

Cash and cash equivalents, beginning of period

 

 

6,973,591

 

 

 

51,042,752

 

 

Cash and cash equivalents, end of period

 

 

14,058,710

 

 

 

26,025,077

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Non-cash transactions:

 

 

 

 

 

 

 

 

 

Construction in-progress costs and fixed assets not yet paid

 

 

15,474

 

 

 

13,753,341

 

 

Amortization of debt discounts capitalized to fixed assets

 

 

 

 

 

412,061

 

 

Interest paid

 

 

434,714

 

 

 

488,195

 

 

 

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

 

 

9


BIOAMBER INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

1. Summary of significant accounting policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Securities and Exchange (“SEC”) rules and regulations and using the same accounting policies as described in Note 2 of the audited consolidated financial statements included in BioAmber Inc. (BioAmber or the Company) Annual Report on Form 10-K for the fiscal year ended December 31, 2015, except for the adoption of the Accounting Standard Update 2015-03, as referenced in paragraph Retrospective changes below. Accordingly, these unaudited condensed 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, 2015.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The Company’s 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, 2016 are not necessarily indicative of results to be expected for the fiscal year ending December 31, 2016 or any other future period.

Risk and uncertainties

BioAmber is an industrial biotechnology company producing sustainable chemicals. The Company’s activities since inception have consisted principally of raising capital for performing research and development activities, developing markets 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 from its Sarnia facility, and building its Sarnia facility. The attainment of profitable operations is dependent upon future events, including 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.

 

Retrospective changes

The Company adopted Accounting Standards Update ("ASU") 2015-03 Simplifying the Presentation of Debt Issuance Costs, on a retrospective basis in the three months ended March 31, 2016. In accordance with the adoption of this guidance, prior year amounts related to deferred debt issuance costs associated with long-term debt have been adjusted for the retrospective change in accounting principle. As of December 31, 2015, the Company has reclassified $1.3 million of deferred financing costs associated with long-term debt in the consolidated balance sheet, against the long-term debt. Refer to Note 7 for further information.

 

 

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.

10


Recently adopted and recently issued accounting guidance

In May 2014, the FASB issued 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 on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (“ASU-2015-11”). ASU 2015-11 applies to inventory that is measured using first-in, first-out (“FIFO”) or average cost.  ASU 2015-11 requires inventory to be measured at the lower of cost and net realizable value.  Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.  The amendments in ASU 2015-11 more closely align the measurement of inventory in U.S. GAAP with the measurement of inventory in International Financial Reporting Standards (“IFRS”).  ASU 2015-11 is effective for fiscal years beginning after December 31, 2016.  The Company is in the process of evaluating the impact of the standard on its consolidated financial statements.

 

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which among other changes in accounting and disclosure requirements, replaces the cost method of accounting for non-marketable equity securities with a model for recognizing impairments and observable price changes, and also eliminates the available-for-sale classification for marketable equity securities. Under the new guidance, other than when the consolidation or equity method of accounting is utilized, changes in the fair value of equity securities are to be recognized in earnings. This guidance will be effective for interim and annual reporting periods beginning after December 15, 2017. The Company is in the process of evaluating the impact of the standard on its consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of the standard on its consolidated financial statements.

 

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718). This standard makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. The Company is in the process of evaluating the impact of the standard on its consolidated financial statements.

 

 

2. Equity and Cost Investments

 

Sinoven, the Company’s wholly-owned subsidiary and a third-party, NatureWorks LLC, are both 50% holders of the joint venture AmberWorks.

 

AmberWorks had a net loss of $nil for the three months ended March 31, 2016 and 2015, respectively. Sinoven’s share of the net loss amounted to $nil for those periods.

 

AmberWorks had total assets of $69,202 and total liabilities of $nil as of March 31, 2016 and December 31, 2015, respectively. Sinoven’s share of net assets amounted to $34,601 as of those periods, respectively.

 

On February 5, 2015, the Company invested $412,434 (CAD$ 500,000) in Comet Biorefining Inc., a start-up private company, which represented a 6.6% ownership interest. This investment is recorded using the cost investment method.  

 

11


 

3. Inventories

 

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

$

 

 

$

 

Finished goods

 

 

1,254,208

 

 

 

904,846

 

Work in progress

 

 

80,901

 

 

 

94,675

 

Raw material

 

 

699,872

 

 

 

610,773

 

Supplies and spare parts

 

 

152,582

 

 

 

138,930

 

Total

 

 

2,187,563

 

 

 

1,749,224

 

 

 

4. Property and equipment

 

 

 

Estimated

 

 

 

 

 

 

 

 

 

 

Useful

 

March 31,

 

 

December 31,

 

 

 

Life

 

2016

 

 

2015

 

 

 

(years)

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

$

 

Land

 

 

 

 

274,127

 

 

 

242,957

 

Building

 

40

 

 

90,426,780

 

 

 

85,597,851

 

Machinery and equipment

 

5 - 20

 

 

33,308,341

 

 

 

31,407,524

 

Furniture and fixtures

 

5 - 8

 

 

127,881

 

 

 

122,285

 

Computers, office equipment and peripherals

 

3 - 7

 

 

189,361

 

 

 

182,720

 

Leasehold improvement

 

10

 

 

350,824

 

 

 

330,283

 

Construction in-progress

 

 

 

 

6,828,748

 

 

 

5,902,054

 

 

 

 

 

 

131,506,062

 

 

 

123,785,674

 

Less: accumulated depreciation

 

 

 

 

(2,379,220

)

 

 

(1,242,986

)

Property and equipment, net

 

 

 

 

129,126,842

 

 

 

122,542,688

 

 

Depreciation expense is recorded as an operating expense in the consolidated statements of operations and amounted to $1,100,510 and $60,178 for the three months ended March 31, 2016 and 2015, respectively.

 

 

5. Intangible assets

 

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

License with indefinite-lived

 

 

3,106,767

 

 

 

3,106,767

 

Acquired licenses with definite-lived

 

 

3,017,550

 

 

 

3,017,550

 

Computer software and licenses

 

 

404,888

 

 

 

398,048

 

Less: accumulated amortization

 

 

(228,474

)

 

 

(170,274

)

Intangible assets, net

 

 

6,300,731

 

 

 

6,352,091

 

 

Amortization expense is recorded as an operating expense in the consolidated statements of operations and amounted to $52,941 and $11,662 for the three months ended March 31, 2016 and 2015, respectively.

 

 

12


6. Accounts payable and accrued liabilities

Accounts payable and accrued liabilities consisted of the following:

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

$

 

 

$

 

Trade accounts payable

 

 

2,157,901

 

 

 

12,006,592

 

Accrued payroll and bonus

 

 

693,381

 

 

 

1,049,637

 

Consulting and legal fees

 

 

1,241,699

 

 

 

2,021,858

 

Accrued interest

 

 

221,905

 

 

 

282,506

 

Other

 

 

418,646

 

 

 

473,681

 

Total

 

 

4,733,532

 

 

 

15,834,274

 

 

7. Long-term debt

Project Financing

The Company entered into the following facilities to fund the construction of the manufacturing facility in Sarnia, Ontario:

 

i)

Sustainable Jobs and Investment Fund (“SJIF”)

On September 30, 2011, BioAmber Sarnia and the Minister of Economic Development and Trade of Ontario, Canada (Sustainable Jobs Innovation Fund) entered into an agreement pursuant to which a loan in the amount of CAD$15,000,000, or $11,518,500 when converted into U.S. dollars as of March 31, 2016, was granted to BioAmber Sarnia, according to the following principal terms:

 

 

the loan is interest free during the first five years provided BioAmber Sarnia creates or retains an average of 31 jobs per year, calculated on an annual basis;

 

the loan will bear interest from the fifth anniversary date of its disbursement at an annual rate of 3.98% (or 5.98% if BioAmber Sarnia does not fully achieve the cumulative job target for the first five years);

 

the principal will be repayable in five annual equal installments from the sixth anniversary date of the disbursement of the loan;

 

the loan is secured by a guarantee from BioAmber and Mitsui & Co., Ltd., the non-controlling shareholder of BioAmber Sarnia (the guarantee being limited to its percentage of ownership held in BioAmber Sarnia); and

 

the loan is secured by (i) a general security agreement representing a valid charge on BioAmber Sarnia’s present and future accounts receivable, inventory, equipment and other personal property and (ii) a valid charge against the leasehold interest on the portion of the real property located in Sarnia Ontario, Canada and leased to BioAmber Sarnia.

During the period ended March 31, 2016 and 2015, BioAmber Sarnia received nil and a total of CAD$ 7,750,000, or $5,951,225 when converted into U.S. dollars as of March 31, 2016, respectively.

As of March 31, 2016, all disbursements were received. The fair value of the loan was calculated using the method of the discounted future cash payments of principal and interest over the term of the loan. The discount rate used was between 12% and 15%, being the interest rates a loan with similar terms and conditions would carry.

The difference between the face value of the loan and the discounted amount of the loan was recorded as a short-term deferred grant and subsequently reclassified to reduce the cost of construction in-progress.

The discounted loan is being accreted to its face value through a charge in the consolidated statement of operations using the effective interest method over the term of the loan.

 

ii)

Sustainable Chemistry Alliance (“SCA”)

In November 2011, BioAmber Sarnia entered into a loan agreement with SCA in the amount of CAD$500,000, or $383,950 when converted into U.S. dollars as of March 31, 2016. The loan was interest free until November 30, 2013, and the unpaid balance of the loan subsequently bears interest at the rate of 5% per annum compounded monthly. The loan’s principal is repayable in 20 equal quarterly installments of CAD$25,000 from November 2015 to November 2020. The loan agreement contains various legal and financial covenants including i) third party credit facilities which cannot exceed CAD$45 million in the aggregate as long as any principal of the loan remains outstanding, ii) the funds are to be used for research and development expenses only and iii) dividends may not be declared or paid without the consent of the lender. The loan agreement was amended to increase the third party credit

13


facilities from CAD$45 million to CAD$60 million in the aggregate in June 2014, and subsequently from CAD$60 million to CAD$67.5 million in the aggregate in March 2016. These covenants were met as of March 31, 2016.

The loan was originally recorded at the discounted amount of the future cash payments of principal and interest over the term of the loan. The discount rate used was 15%, being the interest rate a loan with similar terms and conditions would carry.

The difference between the face value of the loan and the discounted amount of the loan was recorded as a deferred grant, and subsequently reclassified against operating expenses during the period ended December 31, 2015.

The discounted loan is being accreted to its face value through a charge in the consolidated statement of operations using the effective interest method over the term of the loan.

 

iii)

Federal Economic Development Agency (“FEDDEV”)

On September 30, 2011, BioAmber Sarnia and FEDDEV entered into a contribution agreement pursuant to which a loan of up to a maximum amount of CAD$12,000,000 or $9,214,800 when converted into U.S. dollars as of March 31, 2016, was granted to BioAmber Sarnia. The loan is non-interest bearing with original repayment of principal from October 2013 to October 2018 in 60 monthly installments. The repayment terms were later modified as described below.

The loan agreement contains various legal and financial covenants ordinarily found in such government agency loan agreements. In addition the following specific covenants also apply:

 

(a)

the Company will carry appropriate amounts of liability and casualty insurance during the duration of the loan agreement;

 

(b)

the Company will file for and obtain all necessary permits and licenses from all required jurisdictional authorities in order to build the facility;

 

(c)

the Company will not alter the project nor project management without prior written consent of the Minister;

 

(d)

the Company will complete the project to the Minister’s satisfaction by the completion date; and

 

(e)

the Company will not allow change of control without prior written consent of the Minister.

These covenants were met as of March 31, 2016.

On March 20, 2013, BioAmber Sarnia agreed with FEDDEV to amend the repayment of principal from the period October 2013 to October 2018, to the period October 2014 to October 2019. The Company recorded the impact of the amendment in accordance with FASB ASC 470-50, Debt Modifications and Extinguishments. Accordingly, the amendment was recorded as a debt extinguishment and the issuance of new debt, with new terms. As a result, the Company recognized a gain on debt extinguishment of $314,305.

During May 2014, BioAmber Sarnia agreed with FEDDEV to amend the repayment of principal from the period October 2014 to October 2019, to the period from October 2015 to October 2020. The Company recorded the impact of the amendment in accordance with FASB ASC 470-50, Debt Modifications and Extinguishments. Accordingly, the amendment was recorded as a debt extinguishment and the issuance of new debt, with new terms. As a result, the Company recognized a gain on debt extinguishment of $451,450.

During the period ended March 31, 2016 and 2015, BioAmber Sarnia received nil and a total of CAD$1,445,000, or $1,109,616 when converted into U.S. dollars as of March 31, 2016, respectively.

As of March 31, 2016, all disbursements were received. The fair value of the loan was calculated using the method of the discounted future cash payments of principal and interest over the term of the loan. The discount rate used was between 12% and 15%, being the interest rates a loan with similar terms and conditions would carry.

 

iv)

Minister of Agriculture and Agri-Food of Canada (“AAFC”)

On March 10, 2014, BioAmber Sarnia entered into a repayable contribution agreement in the form of a non-interest bearing loan with the Minister of Agriculture and Agri-Food of Canada in the amount of CAD$10 million, or $7,679,000 when converted into U.S. dollars as of March 31, 2016, for the AgriInnovation Program. This loan provides for progressive disbursements as eligible costs are incurred for building construction, installation of equipment and start-up and commissioning of the Sarnia facility. The loan is repayable in equal, monthly installments beginning March 31, 2016 through March 31, 2026 and it contains various legal and financial covenants ordinarily found in such government agency loan agreements. These covenants were met as of March 31, 2016.

14


During the three months ended March 31, 2016 and 2015, BioAmber Sarnia received nil and an amount of CAD$2,745,000 or, 2,107,886 when converted in U.S. dollars as of March 31, 2016, respectively

As of March 31, 2016, all disbursements were received. The fair value of the loan was calculated using the method of the discounted future cash payments of principal and interest over the term of the loan. The discount rate used was 12%, being the interest rate a loan with similar terms and conditions would carry.

 

v)

Comerica Bank, Export Development Canada and Farm Credit Canada (“EDC”)

 

On June 20, 2014, BioAmber Sarnia signed a loan agreement with a financial consortium, comprised of Comerica Bank, Export Development Canada and Farm Credit Canada for a senior secured loan in the principal amount of CAD$20.0 million, which was disbursed on May 12, 2015. The loan’s principal is repayable in 26 equal, quarterly installments beginning on September 30, 2015, and at floating interest rate per annum based on the greater of (i) the Canadian prime rate and (ii) the Canadian dealer offered rate plus 1%, in either case plus an interest spread of 5%. There was an initial interest-only period from draw down of the term loan until the first payment of principal. The disbursement of the loan, net of a 2.5% upfront loan fee CAD$500,000, or $383,950 when converted into U.S. dollars as of March 31, 2016, was recorded as debt discount and will be amortized over the estimated term of the loan using the effective interest method. BioAmber Sarnia paid a 1.0% per annum commitment fee on the undrawn amount, until the drawdown.

 

The loan was originally recorded at the discounted amount of the future cash payments of principal and interest over the term of the loan. The discount rate used was 12%, being the interest rate a loan with similar terms and conditions would carry. The difference between the face value of the loan and the discounted amount of the loan was recorded as a grant applied as reduction of the cost of construction in-progress.

 

BioAmber Sarnia may prepay all or a portion of the loan outstanding from and after the date of the first principal repayment, without penalty.

 

BioAmber Sarnia’s obligations under the loan are secured by (i) a security interest on all of BioAmber Sarnia’s assets and (ii) a pledge of all the shares of BioAmber Sarnia. In addition, the Company will provide the lenders with a guarantee representing 70% of the secured obligations under the loan, and Mitsui & Co., Ltd. will provide a guarantee representing 30% of the secured obligations under the loan that is capped at CAD$6.0 million plus all accrued interest on the secured obligations and fees and expenses. The proceeds of the loan were used by BioAmber Sarnia to complete the ongoing construction of the Sarnia Plant and fund its startup and commissioning.

 

The loan agreement contains certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for similar financings, including in connection with the disbursement of the loan. The financial covenants require BioAmber Sarnia to maintain a minimum debt service ratio of 1.75 on a historical basis, at the end of any and each quarter during the term of the loan following the commercial operation date of the Sarnia facility. The agreement also contains customary events of default (subject, in certain instances, to specified grace periods) including, but not limited to, the failure to make payments of interest or premium, if any, on, or principal under the loan, the failure to comply with certain covenants and agreements specified in the agreement, the occurrence of a material adverse effect, defaults in respect of certain other indebtedness and agreements, and certain events of insolvency. If an event of default occurs, the principal, premium, if any, interest and any other monetary obligations on all the then outstanding amounts under the loan may become due and payable immediately. All applicable covenants as of March 31, 2016 have been met.

 

 

vi)

Tennenbaum Capital Partners, LLC (“TCP”)

On December 17, 2014, the Company entered into a Loan and Security Agreement (the “Agreement”) with funds managed by TCP. The proceeds received were used to repay in full, the Loan and Security Agreement with Hercules Technology Growth Capital Inc. (“HTGC”) that was entered into on June 27, 2013, and for general corporate purposes.

The senior secured term loan of $25 million (the “Facility”) was funded on December 18, 2014, net of a 2.0% commitment fee. The term loan is repayable over 36 months after closing at a floating interest rate per annum that is the greater of 9.50% or the 3 month LIBOR rate plus 9.27%, and is subject to an end of term charge of 8.25% based on the $25 million loaned payable on the date on which the term loan is paid or becomes due and payable in full. There was an initial interest-only period until September 30, 2015.  At its option, the Company may prepay some or all of the loan balance, subject to a prepayment fee equal to 3% of the amount prepaid during the term of the Agreement (and a pro rata portion of the end of term charge if the prepayment is less than the full amount of the Facility). 

15


The loan obligations are secured by a security interest on substantially all of the Company’s assets (subject to certain exceptions), including its intellectual property, but excluding certain identified licenses from third parties and its equity interest in its subsidiary, BioAmber Sarnia subject to the conditions specified in the Agreement. The security interest does not apply to any assets owned by BioAmber Sarnia, the entity that owns the Company’s Sarnia facility.

The Agreement contains certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for similar financings. The Agreement also contains customary events of default (subject, in certain instances, to specified grace periods) including, but not limited to, the failure to make payments of interest or premium, if any, on, or principal under the Facility, the failure to comply with certain covenants and agreements specified in the Agreement, the occurrence of a material adverse change, defaults in respect of certain other indebtedness, and certain events of insolvency.  In addition, the expiration, termination or unavailability of the Company’s license agreements with Cargill, Inc. are deemed to be a default under the Agreement.  The Company was required to maintain at least $12.5 million in unrestricted cash. The Company is required to cause its subsidiary BioAmber Sarnia to make certain cash distributions to its shareholders on a quarterly basis beginning January 1, 2016, within the terms of the BioAmber Sarnia Joint Venture Agreement unless prohibited by applicable law or the BioAmber Sarnia financing agreements, such that amounts of cash will not accumulate in BioAmber Sarnia.  If any event of default occurs, the principal, premium, if any, interest and any other monetary obligations on all the then outstanding amounts under the Facility may become due and payable immediately. These covenants were met as of March 31, 2016.

On July 29, 2015, the Company signed an amendment to the TCP loan agreement (the “TCP Amendment”) to increase the permitted investment in BioAmber Sarnia from $10 million to $25 million after July 29, 2015. In exchange, the restricted cash balance requirement increased from $12.5 million to $15 million from July 29, 2015 to December 31, 2015. There is the possibility for the restricted cash balance to decrease to $12.5 million prior to December 31, 2015, if the Company’s revenues exceeds a minimum threshold or if certain conditions are met. Pursuant the TCP Amendment, a fee of $250,000 was paid during the three months ended September 30, 2015, and during the three months ended March 31, 2016.

 

On December 16, 2015, the Company signed another amendment to the TCP loan agreement to prepay approximately $12.5 million of the outstanding principal amount of the loan (the “Early Paydown”), bringing the principal outstanding balance of the loan to $10.0 million as of that date.  Further, pursuant to the amendment, the requirement that the Company maintain a minimum cash balance was eliminated.  

 

In addition, in connection with the Early Paydown, the Company paid half of the end of term charge of $514,781, and the prepayment fee of $374,386 and the remaining other half of the end of term fee associated with the Early Paydown was deferred, interest free, until the closing of the public offering in January 2016. Beginning with the payment due on February 1, 2016, the outstanding principal balance of the loan shall be repaid in equal monthly installments so that all principal and interest accrued thereon shall be repaid on the maturity date, which is December 1, 2017. In addition, pursuant to this amendment, the amount of indebtedness that the Company is permitted to allow BioAmber Sarnia to incur increased to CAD $72.5 million less the aggregate repayments of principal on such indebtedness.

 

16


The balance of the outstanding long-term debt is as follows:

 

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

$

 

 

$

 

Sustainable Chemistry Alliance:

 

 

 

 

 

 

 

 

Face value (CAD $450,000)

 

 

345,555

 

 

 

342,618

 

Less: debt discount

 

 

(185,766

)

 

 

(174,493

)

Amortization of debt discount

 

 

119,331

 

 

 

106,312

 

Less: short-term portion of debt

 

 

(76,790

)

 

 

(72,130

)

 

 

 

202,330

 

 

 

202,307

 

 

 

 

 

 

 

 

 

 

Sustainable Jobs and Investment Fund:

 

 

 

 

 

 

 

 

Face value (CAD $15,000,000)

 

 

11,518,500

 

 

 

10,819,500

 

Less: debt discount

 

 

(5,277,058

)

 

 

(4,956,820

)

Amortization of debt discount

 

 

1,194,421

 

 

 

912,491

 

 

 

 

7,435,863

 

 

 

6,775,171

 

 

 

 

 

 

 

 

 

 

Federal Economic Development Agency:

 

 

 

 

 

 

 

 

Face value (CAD $10,800,000)

 

 

8,293,320

 

 

 

8,222,820

 

Less: debt discount

 

 

(3,270,089

)

 

 

(3,071,644

)

Less: short-term portion of debt

 

 

(1,842,960

)

 

 

(1,731,120

)

Gain on debt extinguishment

 

 

(620,775

)

 

 

(583,103

)

Amortization of debt discount

 

 

1,799,357

 

 

 

1,489,949