Bioceres Crop Solutions (BIOX) - 2021 Q4 - Annual Report

PART I This part details the company's formation, business operations, risk factors, and financial performance Introductory Note and Presentation of Financial and Other Information The company was formed via a business combination, changed its fiscal year, and reports under IFRS in USD - On March 14, 2019, Union Acquisition Corp (UAC) completed a business combination with Bioceres, Inc, subsequently changing its name to Bioceres Crop Solutions Corp and becoming the holding company for the Bioceres crop business[6][9] - Concurrently with the business combination, the company exercised the Rizobacter Call Option, increasing its indirect ownership in Rizobacter to 80%[9] - The company's fiscal year end was changed from December 31 to June 30, with financial statements prepared under IFRS as issued by the IASB[11][12] Cautionary Note Regarding Forward-Looking Statements This section warns that the report contains forward-looking statements subject to risks and uncertainties - The report includes forward-looking statements concerning future business results, financial conditions, and growth strategies, which are inherently subject to risks and uncertainties[20] - Specific forward-looking topics include the ability to commercialize biotechnology products, the success of the HB4 technology, obtaining regulatory approvals, and the impact of health epidemics like COVID-19[21] Item 3. Key Information This section presents key information for investors, with a primary focus on extensive risk factors Risk Factors - The company's business is subject to significant risks, including challenges in developing marketable technologies, obtaining regulatory approvals, dependence on the licensed HB4 technology, a lengthy and uncertain product development cycle, and reliance on collaborators[25][32] - Intellectual property risks include the potential inability to adequately protect IP rights globally, changes in patent law, and potential litigation for infringing on third-party IP[29] - Operations in Latin America expose the company to risks from adverse economic and political conditions, government intervention, currency fluctuations, high inflation, and exchange controls, particularly in Argentina[30] - Risks related to the company's securities include potential price volatility, dilution from convertible notes, and governance implications of being a "controlled company" under Nasdaq rules, with Bioceres SA holding majority voting power[31] Item 4. Information on the Company The company is an integrated crop productivity provider focused on its HB4 technology and three core business segments History and Development of the Company - The company was formed through a business combination between Union Acquisition Corp and Bioceres, Inc on March 14, 2019, and is a Cayman Islands exempted company[279][280] - A key historical event was the acquisition of an 80% stake in Rizobacter, a global leader in biological products, which significantly enhanced the company's market access and product portfolio[280][284] - In November 2020, the company acquired the remaining 50% interest in Verdeca LLC from Arcadia Biosciences, gaining full control over the HB4 Soy technology platform and other related assets[282] - On April 26, 2021, the company voluntarily transferred its stock exchange listing from the NYSE American to The Nasdaq Global Select Market to enhance its visibility as an Ag-Tech company[283] Business Overview - The company's business model is based on three pillars: Technology Sourcing (partnering with research institutions), Product Development Partnering (creating joint ventures), and Production and Market Access (leveraging proprietary channels and licensing)[313] - The product development process is lengthy, averaging 5 to 12 years, and is structured in phases: Discovery, Proof of Concept, Early Development, Advanced Development, Pre-Launch, and Product Launch[319][49] - The company operates through three main segments: Crop Protection (adjuvants, insecticides), Seed & Integrated Products (HB4 seed traits, germplasm), and Crop Nutrition (inoculants, micro-beaded fertilizers)[332] Segment Financials (Year Ended June 30, 2021) | Segment | Key Products | Total Revenue (USD Million) | Gross Margin (%) | | :--- | :--- | :--- | :--- | | Crop Protection | Adjuvants, Pest control molecules | 114.1 | 34% | | Seed & Integrated Product | Seed treatment packs, Seed germplasm, HB4 Wheat/Soy | 34.8 | 63% | | Crop Nutrition | Micro-bead fertilizers, Inoculants | 60.6 | 50% | - The HB4 technology is a core asset, demonstrating increased yields in soybean and wheat under drought conditions[337][373] - HB4 Soy is approved in markets covering ~85% of global soy acreage, while HB4 Wheat has been approved in Argentina, contingent on Brazilian import approval[337][373] Organizational Structure Main Subsidiaries and Ownership Interest (as of report date) | Name | Country of Incorporation | Ownership Interest (%) | | :--- | :--- | :--- | | BCS Holding Inc | USA | 100% | | Rasa Holding LLC | USA | 100% | | Bioceres Semillas S.A.U | Argentina | 100% | | Rizobacter Argentina S.A. | Argentina | 80% | | Verdeca LLC | USA | 100% | | Trigall Genetics S.A. | Uruguay | 50% | Property, Plant and Equipment - The company's main manufacturing and distribution facilities are located in Pergamino, Argentina, with significant production capacity for adjuvants, inoculants, insecticides, and micro-beaded fertilizers[496] - The company is expanding its international footprint with plans to build a new high-tech adjuvant facility in Londrina, Brazil, with a planned investment of approximately US$8 million[498] Item 5. Operating and Financial Review and Prospects Management analyzes financial results, liquidity, and capital resources for fiscal years 2019 through 2021 Operating Results - Key factors affecting results include market demand for crop products, seasonality tied to planting seasons in the Southern Hemisphere, fluctuations in agricultural commodity prices, and macroeconomic conditions in Latin America, especially inflation and currency exchange rates in Argentina[508][509][512] Consolidated Results of Operations (FY2021 vs. FY2020) | Metric | FY 2021 (USD) | FY 2020 (USD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 209,526,177 | 173,092,172 | +21.0% | | Gross Profit | 90,884,374 | 79,516,584 | +14.3% | | Operating Income | 38,382,888 | 39,145,980 | -1.9% | | Profit (Loss) for the year | (3,820,622) | 4,236,628 | -190.2% | | Adjusted EBITDA | 48,325,782 | 46,517,201 | +3.9% | - For FY2021, revenue growth was driven by all three segments, particularly Crop Protection; however, a net loss was recorded primarily due to a significant increase in income tax expense[534][545][546] Consolidated Results of Operations (FY2020 vs. FY2019) | Metric | FY 2020 (USD) | FY 2019 (USD) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 173,092,172 | 160,605,296 | +7.8% | | Gross Profit | 79,516,584 | 73,640,415 | +8.0% | | Operating Income | 39,145,980 | 32,085,610 | +22.0% | | Profit (Loss) for the year | 4,236,628 | (16,358,891) | N/A | | Adjusted EBITDA | 46,517,201 | 41,345,206 | +12.5% | Liquidity and Capital Resources Cash Flow Summary | Cash Flow Activity (USD Million) | FY 2021 | FY 2020 | FY 2019 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | (6.2) | 9.3 | 29.7 | | Net cash used in investing activities | (8.3) | (7.8) | (3.3) | | Net cash from (used in) financing activities | 7.4 | 33.5 | (26.9) | - As of June 30, 2021, total indebtedness was $173.4 million, including $124.8 million in borrowings and $48.7 million from convertible notes[572][587] - In March 2020, the company issued $42.5 million in secured convertible notes maturing in March 2023 with a conversion price of $8.00 per share[593] Contractual Obligations as of June 30, 2021 (USD Million) | Obligation Type | Total | Due within 1 Year | Due in 1-3 Years | Due in 3-5 Years | | :--- | :--- | :--- | :--- | :--- | | Trade and other payables | 72.1 | 72.1 | — | — | | Borrowings | 122.1 | 73.3 | 48.8 | — | | Convertible notes | 49.1 | — | 49.1 | — | | Consideration for acquisitions | 12.7 | 4.0 | 3.1 | 5.6 | | Total | 256.0 | 149.4 | 101.0 | 5.6 | Item 6. Directors, Senior Management and Employees This section provides information on the company's leadership, board structure, and compensation policies - The company is led by CEO Federico Trucco, Ph.D., and CFO Enrique Lopez Lecube, with an eight-member Board of Directors[605][630] Summary Compensation for Top Executives (FY2021) | Name and Principal Position | Salary (USD) | Share Based Incentives (USD) | Total (USD) | | :--- | :--- | :--- | :--- | | Federico Trucco, CEO | 131,159 | 528,259 | 659,418 | | Enrique Lopez Lecube, CFO | 129,892 | 242,323 | 372,215 | | Ricardo Yapur, Managing Director of Rizobacter | 260,004 | 145,402 | 405,406 | - The company has an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee, and qualifies for "controlled company" exemptions from Nasdaq governance requirements[631][634][637] Employee Count by Role | Role | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Management and administrative | 283 | 266 | 250 | | Sales | 177 | 146 | 122 | | Research and development services | 37 | 35 | 37 | | Total | 497 | 447 | 409 | - As of September 30, 2021, Bioceres LLC is the major shareholder with 57.4% ownership, making Bioceres Crop Solutions a "controlled company"[643] Item 7. Major Shareholders and Related Party Transactions This section details the company's ownership structure and transactions with related parties - The Parent company, Bioceres S.A., owns approximately 57.4% of Bioceres Crop Solutions' voting power, making it the controlling shareholder[644] - The company has a written policy for reviewing and approving related party transactions exceeding US$120,000[645] - Significant related party transactions include R&D service agreements with Instituto de Agrobiotecnología Rosario S.A (INDEAR), where Bioceres Semillas and Rizobacter paid INDEAR US$0.3 million and US$0.9 million, respectively, for services in FY2021[647][648][649] Item 8. Financial Information This section discloses a material legal proceeding and the company's dividend policy - The company is involved in a material legal proceeding concerning a contingent payment of US$17.3 million related to the Rizobacter acquisition, with a judicial injunction affecting 29% of its owned shares in Rizobacter[674] - The company does not intend to pay cash dividends on its ordinary shares in the foreseeable future, planning to retain earnings for business operations and growth[675] Item 10. Additional Information This section provides details on corporate structure, material contracts, and the regulatory environment Memorandum and Articles of Association - The company is incorporated in the Cayman Islands, and its Articles of Association grant the Board authority to issue preferred shares without shareholder approval, which could have anti-takeover effects[681][687] - On May 6, 2020, the Board approved a share buy-back program for up to US$5,000,000, under which 464,455 shares had been acquired as of June 30, 2021[688] Exchange Controls - The company's Argentine operations are subject to strict exchange controls and transfer restrictions imposed by the Argentine government, limiting the ability to move currency out of Argentina[721][722] - Argentine regulations require prior authorization from the Central Bank for numerous transactions, including payment of dividends and pre-payment of foreign debt[723][727] - The regulations mandate the repatriation into Argentina and conversion into pesos of proceeds from exports of goods and services within specified timeframes[733][734] Taxation - As a Cayman Islands company, Bioceres is not subject to income, corporate, or capital gains tax in the Cayman Islands and has received a 20-year tax-exempt undertaking from the government[737][740] - For U.S. Holders, distributions are generally taxable as dividend income; the company does not believe it should be treated as a Passive Foreign Investment Company (PFIC) for the current taxable year[748][751] PART II This part covers the company's internal controls, procedures, and corporate governance matters Item 15. Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective - Management evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2021[770] - Management assessed the effectiveness of internal control over financial reporting (ICFR) based on the COSO framework and concluded that it was effective as of June 30, 2021[775] - The report does not include an attestation report on internal controls from the independent registered public accounting firm because the company qualifies as an emerging growth company under the JOBS Act[776] Item 16 This section details audit committee expertise, accountant fees, and corporate governance exemptions Principal Accountant Fees (PwC) | Fee Category | FY 2021 (USD) | FY 2020 (USD) | | :--- | :--- | :--- | | Audit Fees | 500,000 | 1,500,000 | | Tax Fees | 23,921 | 8,232 | | All Other Fees | 0 | 0 | - The company is a "controlled company" under Nasdaq rules because its Parent controls a majority of the voting power, allowing exemptions from certain governance requirements[786] PART III This part presents the company's audited consolidated financial statements and accompanying notes Financial Statements This section contains the audited consolidated financial statements for fiscal years 2019, 2020, and 2021 Consolidated Statements of Financial Position Consolidated Statement of Financial Position (in USD) | Metric | As of June 30, 2021 | As of June 30, 2020 | As of June 30, 2019 | | :--- | :--- | :--- | :--- | | Total Assets | 394,589,957 | 297,561,369 | 242,467,297 | | Total Current Assets | 211,489,658 | 164,693,055 | 98,208,964 | | Total Non-Current Assets | 183,100,299 | 132,868,314 | 144,258,333 | | Total Liabilities | 304,299,653 | 236,811,887 | 180,372,431 | | Total Current Liabilities | 168,037,855 | 130,610,709 | 116,458,133 | | Total Non-Current Liabilities | 136,261,798 | 106,201,178 | 63,914,298 | | Total Equity | 90,290,304 | 60,749,482 | 62,094,866 | Consolidated Statements of Comprehensive Income Consolidated Statement of Comprehensive Income (in USD) | Metric | Year Ended June 30, 2021 | Year Ended June 30, 2020 | Year Ended June 30, 2019 | | :--- | :--- | :--- | :--- | | Total Revenue | 209,526,177 | 173,092,172 | 160,605,296 | | Gross Profit | 90,884,374 | 79,516,584 | 73,640,415 | | Operating Profit | 38,382,888 | 39,145,980 | 32,085,610 | | (Loss) Profit for the year | (3,820,622) | 4,236,628 | (16,358,891) | | Total Comprehensive Profit (Loss) | 6,230,696 | (5,445,488) | (12,454,526) | | Basic (Loss) Profit per share | (0.1752) | 0.0930 | (0.6027) | Consolidated Statements of Cash Flows Consolidated Statement of Cash Flows (in USD) | Metric | Year Ended June 30, 2021 | Year Ended June 30, 2020 | Year Ended June 30, 2019 | | :--- | :--- | :--- | :--- | | Net cash flows (used in) provided by operating activities | (6,205,943) | 9,318,479 | 29,694,813 | | Net cash flows used in investing activities | (8,310,118) | (7,803,391) | (3,260,852) | | Net cash flows provided by (used in) financing activities | 7,358,129 | 33,532,414 | (26,946,194) | | Net (decrease) increase in cash and cash equivalents | (7,157,932) | 35,047,502 | (512,233) | Notes to the Consolidated Financial Statements - The Argentine economy was classified as hyperinflationary since July 1, 2018, requiring the application of IAS 29 for Argentine subsidiaries[829] - Key acquisitions detailed include gaining full control of Bioceres Crops S.A. in June 2019, acquiring the remaining interest in Verdeca LLC in November 2020, and acquiring a controlling interest in Insuagro in April 2021[986][989][996] - The company's goodwill as of June 30, 2021, totaled $28.8 million, primarily allocated to the Rizobacter CGU ($22.3M), Bioceres Crops CGU ($6.0M), and Insuagro CGU ($0.5M)[1047] - In August 2020, the company completed a tender offer to exchange or redeem all 24.2 million of its outstanding warrants, which were subsequently retired[1077][1080]