UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended | |
OR | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to | |
OR | |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report:
Commission file number:
(Exact name of Registrant as specified in its charter)
(Jurisdiction of incorporation)
Province of Santa Fe,
(Address of principal executive offices)
Head of Investor Relations
Province of Santa Fe,
Phone:
Email:
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Copies to:
Matthew S. Poulter, Esq.
Linklaters LLP
Phone: (
Fax: (212) 903-9100
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class |
| Trading Symbol |
| Name of each exchange on which registered |
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Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Ordinary Shares
Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of business covered by the annual report.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes ☒
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.
☒
Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted 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 such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Non-accelerated filer ☐ | Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
US GAAP ☐ | Other ☐ | |
by the International Accounting Standards Board ☒ |
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes
Table of Contents
INTRODUCTORY NOTE AND PRESENTATION OF FINANCIAL AND OTHER INFORMATION | 1 | |
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Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation | 87 | |
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MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 105 | |
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Management’s Annual Report on Internal Control Over Financial Reporting | 105 | |
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 107 | |
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Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 108 | |
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PART I
INTRODUCTORY NOTE AND PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Introductory Note
Unless the context otherwise requires, “we,” “us,” “our,” “the Company,” “BIOX,” “Bioceres” and “Bioceres Crop Solutions” refers to Bioceres Crop Solutions Corp. and its subsidiaries.
Financial statement information
The consolidated statements of comprehensive income data for Bioceres for the years ended June 30, 2023, 2022 and 2021 and the consolidated statements of financial position data as of June 30, 2023, 2022 and 2021 are derived from our audited consolidated financial statements appearing elsewhere in this report. They have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (the “IASB”).
Our presentation currency is U.S. dollars.
We have applied the following standards and amendments for the first time for our annual reporting period commencing July 1, 2022:
| ● | Annual Improvements to IFRS Standards 2018–2020; |
| ● | Amendments to IAS 16 - Property, Plant and Equipment: Proceeds before intended use; |
| ● | Amendments to IFRS 3 - Reference to the Conceptual Framework; and |
| ● | Amendments to IAS 37 - Onerous Contracts – Cost of Fulfilling a Contract. |
The adoption of these amendments did not have a material impact on us. For more information see Note 3 of our audited consolidated financial statements beginning on page F-1 of this annual report on Form 20-F.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements in this report that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, results of operations, liquidity, anticipated growth strategies, anticipated trends in our industry, our potential growth opportunities, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “might,” “will,” “consider,” “estimate,” “continue,” “anticipate,” “intend,” “target,” “project,” “contemplate,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other similar terms or expressions. The statements we make regarding the following matters are forward-looking by their nature:
| ● | the impact of armed conflict in Israel and Gaza, in addition to the Ukraine, and any possible escalation of such conflicts or contagion to neighboring countries or regions; |
| ● | our beliefs with respect to the agricultural industry and related markets, including production levels, consolidation trends, and market opportunity; |
| ● | our plans and expectations regarding growth in our business, expansion to new markets, diversification of our product portfolio and strategic acquisitions and partnerships; |
| ● | our ability to integrate new products, technologies, and employee teams after any strategic acquisition; |
| ● | our ability to develop, commercialize and register biotechnology products and crop productivity technologies; |
| ● | our ability to maintain our joint venture agreements with our current partners; |
| ● | our ability to maintain a competitive position in our markets; |
| ● | our ability to protect our intellectual property; |
| ● | the success of the HB4 technology that we license and that remains subject to receipt of regulatory approval in certain jurisdictions other than Argentina; |
| ● | our or our collaborators’ ability to develop commercial products that incorporate our licensed seed traits and complete the regulatory approval process for such products; |
| ● | our expectations regarding the commercial value of our key products in yield and abiotic stress and biotic stress; |
| ● | our expectations regarding regulatory approval of products developed or licensed by us, our joint ventures and third-party collaborators; |
| ● | our ability to adapt to continuous technological change in our industry; |
| ● | our ability to effectively manage sales and marketing teams and distribution networks; |
| ● | our expectations regarding revenues and sales, including potential growth in sales, changes to sales mix and expectations regarding seasonality and the impact of weather-related conditions; |
| ● | our plans and expectations with regarding to manufacturing and production; |
| ● | our expectations that products containing our licensed seed traits will be commercialized and we will earn royalties from the sales of such products; |
| ● | our expectations to accelerate the Microstar ramp up, our leading brand in micro-granulated fertilizers; |
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| ● | our expectations regarding the future growth of the global agricultural, agricultural biotechnology, biological-based chemical and agro-industrial biotechnology markets; |
| ● | our ability to develop and exploit a proprietary channel for the sale of our licensed biotechnology products; |
| ● | our compliance with laws and regulations that impact our business and changes to such laws and regulations; |
| ● | our ability to assemble, store, integrate and analyze significant amounts of public and proprietary data; |
| ● | our ability to maintain our licensing arrangements for the products that we commercialize; |
| ● | our plans and expectations relating to our debt agreements; |
| ● | our ability to influence customer perception of biological agricultural products; |
| ● | our beliefs regarding our environmental, social, and governance leadership; |
| ● | our belief regarding our access to capital resources through equity offerings, debt financings, strategic collaborations or other means; |
| ● | our expectations with respect to our future expenditures, available cash and other financial and operating results; |
| ● | our anticipated impact of certain accounting pronouncements; |
| ● | our expectations regarding market risk, including interest rate changes, foreign currency fluctuations and commodity price changes; |
| ● | our ability to respond to health epidemics and other outbreaks, such as COVID-19, including responses by governmental bodies or regulators; |
| ● | the outcome of any known and unknown litigation and regulatory proceedings; and |
| ● | various other factors, including without limitation those described under “Item 3. Key Information – D. Risk Factors.” |
The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. The forward-looking statements are based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us. These statements are only predictions based upon our current expectations and projections about future events. There are important factors that could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels of activity, performance or achievements expressed or implied by the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations.
ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
| A. | Directors and Senior Management |
Not applicable.
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| B. | Advisors |
Not applicable.
| C. | Auditors |
Not applicable.
ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE
A. | Offer Statistics |
Not applicable.
B. | Method and Expected Timetable |
Not applicable.
ITEM 3.KEY INFORMATION
A. | [RESERVED] |
B. | Capitalization and Indebtedness |
Not applicable.
C. | Reasons for the Offer and Use of Proceeds |
Not applicable.
D. | Risk Factors |
The following risk factors apply to the business and operations of Bioceres Crop Solutions. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may have a material adverse effect on the business, cash flows, financial condition and results of operations of Bioceres Crop Solutions. You should carefully consider the following risk factors in addition to the other information included in this report, including matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.” We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business or financial condition. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.
Summary Risk Factors
You should carefully consider all of the information in this annual report before making an investment in our ordinary shares. Below please find a summary of the principal risks and uncertainties we face, organized under relevant headings. These risks are discussed more fully under “Item 3. Key Information—3.D. Risk Factors.”
Risks Related to our Business and Strategy include:
We are subject to the following risks in respect of our business and our strategy:
| ● | difficulties implementing our inorganic growth strategy and integrating the operations of the recently acquired and future businesses; |
| ● | we may not realize the benefits of future businesses or products we acquire or strategic alliances we form; |
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| ● | acquisitions may not be successful in achieving intended benefits, cost savings and synergies and may disrupt current operations; |
| ● | developing marketable or commercial technologies; |
| ● | obtaining timely necessary regulatory approvals for the business and the commercialization of our products currently under development; |
| ● | our HB4 Seed business is dependent on the success of a technology that we license; |
| ● | limited number of prospective collaborators in our market; |
| ● | for some of our technologies, we are dependent on intellectual property rights licensed to us by Bioceres Group PLC, together with its direct and indirect subsidiaries, as applicable (“Bioceres PLC”), which we do not control, to generate revenue; |
| ● | our joint venture agreements or any partnerships that we may enter into in the future may not be successful, and we or our collaborators may fail to perform our respective contractual obligations, which could result in disputes; |
| ● | difficulties in collecting payments or royalties; |
| ● | we may not have sufficient cash flow to pay interest and principal in respect of the Notes due 2026; |
| ● | ability to attract and retain qualified scientific and business personnel; |
| ● | we may be unable to prevent our competitors from benefiting from the expertise of our former employees; |
| ● | global economic conditions, including as a result of the armed conflict in Israel and Gaza and the war in the Ukraine; |
| ● | ultimate impact on our results and operations of global pandemic, such as COVID-19 pandemic, and measures adopted by the governments of the countries in which we operate in response to global pandemics; |
| ● | sales and operating results may fluctuate significantly as a result of the seasonal nature of crops and factors beyond our control; |
| ● | our results of operations from our crop productivity products may vary significantly from period to period due to circumstances beyond our control; |
| ● | certain estimates of market opportunity included in this report are based on assumptions that are inherently uncertain and subject to risks and uncertainties; |
| ● | resistance to genetically modified (“GM”) crops may negatively affect our public image and reduce sales of seeds or other products containing our licensed seed traits; |
| ● | competition in crop productivity products is intense and requires continuous technological development; |
| ● | changes in laws and regulations may materially increase our costs of operation, decrease our operating revenue and disrupt our business; |
| ● | our indebtedness could adversely affect our financial condition; |
| ● | price increases and shortages of raw materials; |
| ● | exposure of the company and its customers to market risks from commodity prices volatility; |
| ● | we may be required to pay uninsured substantial damages as a result of product liability claims; |
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| ● | various health and environmental risks associated with our use, handling and disposal of potentially toxic materials; |
| ● | requirements of being a public company may strain our resources and distract our management; |
| ● | obtaining required future financing on favorable terms to avoid delays, reductions or the termination of some of our activities; |
| ● | scrutiny under the Convention on Biological Diversity Treaty; |
| ● | failure to accurately forecast and manage inventory; |
| ● | IT disruptions or failures in our operating system can affect our reputation and business; |
| ● | computer system failures, cyber-attacks or a deficiency in our cyber-security; |
| ● | labor union disputes may arise; |
| ● | reliance on third parties to grow our seeds; |
| ● | non-compliance with anti-corruption and anti-money laundering laws can subject us to criminal and civil liability; |
| ● | recently introduced economic substance legislation of the Cayman Islands may adversely impact us or our operations; |
| ● | taxation in the Cayman Islands; and |
| ● | our “foreign private issuer” status under the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). |
Risks Related to our Intellectual Property
We are subject to the following risks in respect of our intellectual property rights:
| ● | our agreements may not adequately prevent disclosure of proprietary information; |
| ● | protection of our intellectual property rights throughout the world; |
| ● | changes in Argentine and U.S. patent law could diminish the value of patents and impair our ability to protect our product candidates; |
| ● | potential litigation relating to third party intellectual property rights infringement; |
| ● | technological developments or challenges by competitors; and |
| ● | requirement to pay royalties to employees who develop inventions commercialized by us. |
Risks Related to Operating in Latin America
We are subject to the following risks in respect of our operations in Latin America:
| ● | adverse economic or political conditions, including considerable economic uncertainty; |
| ● | significant government influence over the economies of the countries in which we operate; |
| ● | fluctuations in currency exchange rates; |
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| ● | currency of a hyperinflationary economy requires that we apply inflationary adjustments to our Argentine subsidiaries’ financial statements; |
| ● | inflation in Argentina and government intervention controls; |
| ● | limited access of the Argentine government and the private sector to the international capital markets; |
| ● | increase in export and import duties and controls; |
| ● | decline in the global prices of Latin America’s main commodity exports; |
| ● | Latin America continues to face considerable economic uncertainty; |
| ● | special protections for employees in the private sector; |
| ● | taxation relating to disposition or sale of our ordinary shares in Argentina; |
| ● | taxation relating to the payment of the In-Kind Consideration under the Rizobacter Call Option in Argentina; |
| ● | exchange controls and restrictions limit access to the FX Market (as defined below) to make payments and distributions from our Argentine subsidiaries; |
| ● | mandatory repatriation of export receivables; and |
| ● | changes in Argentine tax laws. |
Risks Relating to our Ordinary Shares Include:
Our shareholders are subject to the following risks:
| ● | reduction of liquidity due to our share repurchase program; |
| ● | compliance with listing standards of Nasdaq cannot be assured; |
| ● | the market price of our ordinary shares may be adversely affected if there are sales of a substantial number of our ordinary shares; |
| ● | dilution to shareholders will result from conversion of the Secured Convertible Guaranteed Notes due 2026; |
| ● | our status as a “controlled company” as defined by Nasdaq rules; |
| ● | fluctuation in the price of our securities; |
| ● | decrease in the price and trading volume of our ordinary shares due to publicity and market recommendations; |
| ● | difficulty faced by public shareholders in protecting their interests through the U.S. Federal courts; |
| ● | increased costs as we ceased to be an “emerging growth company”; |
| ● | less protection for our shareholders due to our status as a foreign private issuer; |
| ● | history of no cash dividends payments on our ordinary shares; and |
| ● | dilution to our shareholders due to issuance of additional securities. |
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Risks Related to our Business and Strategy
We may face difficulties implementing our inorganic growth strategy, including in respect of integrating the operations of the business we have acquired or expect to acquire in the future.
From time to time, we may acquire businesses, assets, or securities of companies that we believe will provide a strategic fit with our business, such as the merger (the “Pro Farm Merger”) with Pro Farm Group, Inc. (formerly Marronne Bio Innovations Inc.) (“Pro Farm”) and the acquisition of a majority interest in Rizobacter which is held by RASA Holding, on October 19, 2016 (the “Rizobacter Acquisition”). We integrate acquired businesses with our existing operations, our overall internal control over financial reporting processes, and our financial, operations, and information systems. If the financial performance of our business, as supplemented by the assets and businesses acquired, does not meet our expectations, our results of operations may fail to meet market expectations and we may face difficulties to service our debt obligations. We may not effectively assimilate the business or product offerings of acquired companies into our business or within the anticipated costs or timeframes, retain key customers and suppliers or key employees of acquired businesses, or successfully implement our business plan for the combined business. In addition, our final determinations and appraisals of the estimated fair value of assets acquired and liabilities assumed in our acquisitions may vary materially from earlier estimates and we may fail to realize fully anticipated cost savings, growth opportunities or other potential synergies. We cannot assure that the fair value of acquired businesses or investments will remain constant.
We may acquire businesses or products, or form strategic alliances, in the future, and we may not realize the benefits of such acquisitions.
We have acquired, and we may in the future acquire, other companies, employee teams, or technologies to further complement or expand our product portfolio, enhance our technical capabilities, obtain personnel, or otherwise offer growth opportunities. In addition, we plan to selectively partner, in-license or acquire key enabling technologies and businesses across our value chain that we believe will keep us on the cutting edge of our industry. We may not be able to identify appropriate targets or make acquisitions under satisfactory conditions, in particular, satisfactory price conditions. In addition, we may be unable to obtain financing for these acquisitions under other purposes in the context of existing operations. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing manufacturing and marketing any new products resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure that, following any such acquisition, we will achieve the expected synergies to justify the transaction, which could have a material adverse effect on our business, financial conditions, earnings and prospects.
Acquisitions, such as the Pro Farm Merger and Rizobacter Acquisition, may not be successful in achieving their intended benefits, cost savings and synergies and may disrupt current operations.
One component of our growth strategy historically has been acquisitions. These involve various inherent risks and the benefits, cost savings and synergies sought that may not be realized.
The integration process of any newly acquired company may be complex, costly and time-consuming. The potential difficulties of integrating the operations of an acquired business and realizing our expectations for an acquisition, including the benefits that may be realized, include, among other things:
| ● | failure of the business to perform as planned following the acquisition or achieve anticipated revenue or profitability targets; |
| ● | delays, unexpected costs or difficulties in completing the integration of acquired companies or assets; |
| ● | higher than expected costs, lower than expected cost savings or synergies and/or a need to allocate resources to manage unexpected operating difficulties; |
| ● | difficulties assimilating the operations and personnel of acquired companies into our operations; |
| ● | diversion of the attention and resources of management or other disruptions to current operations; |
| ● | the impact on our or an acquired business’ internal controls and compliance with legal requirements; |
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| ● | ineffective or inadequate controls, procedures, or policies at the acquired company; |
| ● | multiple product lines or service offerings, as a result of our acquisitions, that are offered, priced, and supported differently; |
| ● | adverse effects on our existing business relationships with business partners and customers as a result of the acquisition; |
| ● | potential write-offs of acquired assets and potential financial and credit risks associated with acquired customers; |
| ● | inability to maintain relationships with key customers, suppliers, and partners of the acquired business; |
| ● | lack of experience in new markets, products, or technologies; |
| ● | diversion of management’s attention from other business concerns; |
| ● | use of resources that are needed in other parts of our business; |
| ● | retaining key customers, suppliers and key personnel; |
| ● | retaining and obtaining required regulatory approvals, licenses and permits; |
| ● | operating risks inherent in the acquired business and our business; |
| ● | lower than anticipated demand for product offerings by us or our licensees; and |
| ● | unanticipated issues, expenses and liabilities, including those arising from existing contractual obligations or litigation matters. |
Our failure to successfully complete the integration of any acquired business and any adverse consequences associated with future acquisition activities, could have an adverse effect on our business, financial condition and operating results.
Completed acquisitions may result in additional goodwill and/or an increase in other intangible assets on our balance sheet. We are required annually, or as facts and circumstances exist, to assess goodwill and other intangible assets to determine if impairment has occurred. If the testing performed indicates that impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill or other intangible assets and the implied fair value of the goodwill or the fair value of other intangible assets in the period the determination is made. We cannot accurately predict the amount and timing of any potential future impairment of assets. Should the value of goodwill or other intangible assets become impaired, there could be a material adverse effect on our financial condition and results of operations.
Certain of the Rizobacter shares are subject to a judicial injunction and, if decided unfavorably to us, we may be required to surrender part of our interest in Rizobacter thereby reducing our equity interest in Rizobacter.
Concurrently with the closing of business combination, the Rizobacter Call Option was exercised and we acquired 80.00% of Rizobacter’s capital stock, which we hold through our subsidiary RASA Holding. Of our total interest in Rizobacter, 29% of the shares we hold are subject to an injunction that affects 44% of the total share capital of Rizobacter. In addition, the injunction also requires that 30% of the dividends distributed on such shares be paid into a judicially created escrow account. The injunction relates to litigation among historical shareholders of Rizobacter arising from a disputed transfer of shares that occurred in 1995. Although the Argentine Supreme Court ruled against certain of the litigating historical shareholders, such shareholders subsequently pursued other legal recourse—including the injunction and non-innovative measure (medida de no innovar)—to further dispute the original transfer of shares. The non-innovative measure was overturned by an Argentine court of appeals on April 17, 2018.
We acquired our controlling stake in Rizobacter subject to the injunction and associated ongoing litigation. Should the court rule against the free transferability of the affected shares, we will be obligated to return certain shares, thereby reducing our equity interest in Rizobacter. Given the Argentine Supreme Court’s finding that the 1995 share transfer was valid, it is likely or probable that Bioceres PLC may be obligated to pay a contingent purchase price of US$17.3 million.
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We may not be successful in developing marketable or commercial technologies, as our product development cycle is lengthy and uncertain, and we may never generate revenues or earn royalties on the sale of our products currently in development.
Our success depends in part on our ability to identify and develop high-value crop productivity commercial products, which is an expensive, complex, prolonged, and uncertain process. Through our technology sourcing and product development collaborations, we commit substantial efforts and other resources to accomplish this. Our process of developing and commercializing technologies involves several phases and can take several years from discovery to commercialization of a product. On average, it takes between five and twelve years to develop a product for our crop productivity products. Some development initiatives may never result in a commercially viable product.
As of the date of this report, many of our products have been commercialized by Rizobacter, Bioceres Semillas and Pro Farm. There can be no assurance that our future crop productivity technologies will be viable for commercial use, or that we will be able to generate revenues from those technologies, in a significant manner or at all. If our products are unsuccessful in achieving their desired effect or otherwise fail to be commercialized, we will not receive revenues from our customers or royalty payments from the commercialization the technologies we develop or license, which could materially and adversely affect our business, financial condition, results of operations and growth strategy.
Our products may be unsuccessful or fail to achieve commercialization for any of the following reasons:
| ● | our products may not be effective in the target crops or may have adverse effects on consumers; |
| ● | our licensed products may not have the desired effect on the relevant crop sought by our end-market; |
| ● | we or our joint ventures or collaborators may be unable to obtain the requisite regulatory approvals for our products; |
| ● | our competitors may develop and launch competing or more effective products; |
| ● | our products may be viewed as too expensive by food companies or growers as compared to competitive products; |
| ● | our products may no longer be desirable as consumer preferences, which are unpredictable and can vary greatly, may change quickly; |
| ● | a market may not exist for seeds containing our licensed seed traits or biological treatments or such products may not be commercially successful; |
| ● | our products may be difficult to produce on a large scale or will not be economical to grow; |
| ● | we or the customers to whom we sell our products may be unable to fully develop or commercialize our products in a timely manner or at all; |
| ● | we may be unable to patent and/or obtain breeders’ rights or any other intellectual property rights on our technologies in the necessary jurisdictions; |
| ● | even if we obtain patent and/or breeders’ rights or any other intellectual property rights on our technologies, such rights may be later challenged by competitors or other parties; |
| ● | even if we obtain patent and/or breeders’ rights or any other intellectual property rights in respect of our technologies, competitors may design competing products that do not infringe these intellectual property rights; and |
| ● | third parties may develop superior or equivalent products. |
Further, we intend to continue to invest in R&D including additional and expanded field testing to validate potential products in real world conditions. Because of the long product development cycle and the complexities and uncertainties associated with biotech technologies, there can be no assurance that we will ever generate significant revenues from the technologies or products that we are currently developing without significant delay, without the incurrence of unanticipated costs or at all.
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Our business and the commercialization of our products currently in development are subject to various government regulations and we or our collaborators may be unable to obtain, or may face delays in obtaining, necessary regulatory approvals. In addition, if we are unable to comply with applicable regulatory regimes, we may not be able to sell our products in certain jurisdictions.
We are subject to approvals, registrations and regulations relating to different jurisdictions according to the countries in which we operate, which includes, among others, the (i) Argentine regulations relating to biotechnology, food safety and registration of seeds, (ii) the regulations imposed by the U.S. Environmental Protection Agency (“EPA”), among other governmental authorities, and (iii) European Union Registration, Evaluation, Authorization, and Restriction of Chemicals regulation.
Further, our business is generally subject to two types of regulations: (i) those that apply to our operations and (ii) those that apply to products containing or based on our technology. We are responsible for applying for and maintaining the regulatory approvals necessary for our operations, particularly those covering our field trials, bio-safety evaluations and feed and food tests. Under the terms of our joint venture agreements, we and our joint venture partners are jointly responsible for obtaining and maintaining the regulatory approvals necessary for the commercialization of products that contain our licensed seed traits and other technologies in the various relevant markets. Regulatory and legislative requirements affect the development, production and sale of our products, including the testing, commercialization and planting of seeds containing our biotechnology licensed seed traits. Failure to receive such approvals or non-compliance with the applicable regulatory regime could adversely impact our operations and business strategy. Additionally, we may face difficulties in obtaining regulatory approvals in jurisdictions in which we have not previously operated or in which we have limited experience.
Regulatory regimes in some of our key target markets may be more onerous and enforced by several entities. For example, in Argentina, the Argentine government’s regulation of agricultural biotechnology is enacted and enforced primarily by three agencies; (i) the Argentine National Advisory Commission on Agricultural Biotechnology (Comisión Nacional Asesora de Biotecnología Agropecuaria), which regulates activity related to biosafety; (ii) the National Food Safety and Quality Service (Servicio Nacional de Sanidad y Calidad Agroalimentaria) which regulates activity related to food and feed safety; and (iii) the National Seed Institute (Instituto Nacional de Semillas) which controls the registries for both entities and products that are under its jurisdiction, among other functions. Additionally, the National Market Regulator (Dirección Nacional de Mercados) must conduct an economic evaluation.
In the United States, the field testing, manufacture, sale and use of crop protection, plant health and plant nutrition products are extensively regulated by the EPA and other state, local and foreign governmental authorities. As we introduce new formulations of and applications for our products, we may need to seek EPA approval prior to commercial sale. For any such approval, the EPA may require us to fulfill certain conditions within a specified period of time following initial approval. Although the EPA has in place a registration procedure for biopesticides there can be no assurance that all of our products or product extensions will be eligible for this streamlined procedure or that additional requirements will not be mandated by the EPA that could make the procedure more time consuming and costly for our future products. Furthermore, in most of our key target markets, including the United States, regulatory approvals must be received prior to the importation and commercialization of genetically modified products.
When products containing our licensed seed traits or other technology reach large-scale field trials, bio-safety evaluations and commercial approval stages, if we, our joint ventures or other collaborators are unable to obtain the requisite regulatory approvals or if there is a delay in obtaining such approvals (for example, as a result of negative market perception, consumer groups’ legal actions against genetically modified organisms (“GMO”), heightened regulatory standards or unfamiliarity with the applicable regulatory regime), such products may not be commercialized, which would negatively impact our business and results of operations.
Our HB4 Seed business is dependent predominantly on the success of a technology that we license.
Many of our biotechnology licensed seed products currently under development incorporate HB4 technology, a yield improvement technology. We expect that the sale of biotech seeds that contain HB4 technology, our HB4 Seed business, will comprise an increasing portion of our future revenues. As a result, our future growth and financial performance will be influenced by our ability to commercialize our licensed HB4 technology, and if this effort is unsuccessful our business could be materially and adversely affected.
We also depend on our continued exclusive use of the HB4 technology pursuant to the terms of licensing agreements with Bioceres S.A., the National Scientific and Technical Research Council of Argentina (Consejo Nacional de Investigaciones Científicas y Técnicas) and the National University of the Litoral. Bioceres S.A. holds an exclusive license for HB4, which terminates on the expiration date of the last of the HB4 patents in 2040, unless terminated before such date in accordance with its terms. If this licensing agreement is declared unenforceable or invalid, we could lose access to one of our principal technologies and could become involved in costly or time-consuming legal disputes.
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There are a limited number of prospective collaborators in the markets in which we operate.
Our Research and Development (“R&D”) and commercialization activities are costly, time-intensive and require significant infrastructure and resources. Therefore, our business strategy involves entering into collaboration and joint venture arrangements with global agricultural firms to leverage their resources, know-how and distribution channels and into collaborations with research institutions and governmental agencies to facilitate our low-cost approach to R&D. The crop productivity market is highly consolidated and dominated by a relatively small number of large companies. Additionally, there are a limited number of researchers and research institutions focused on the technologies that we seek to develop and competition for entry into collaboration arrangements with them can be challenging. Due to the small number of companies in our markets and the small number of potential collaborators, there are limited opportunities for us to pursue additional joint ventures and collaborations with new partners and collaborators. If we may cease to be attractive to prospective collaborators if our technology platform or track record is not perceived to be sufficiently developed or successful or if, in the case of prospective joint venture partners, such prospective partners view us as a competitor and choose not to collaborate with us. In addition, if we fail to develop or maintain our relationships with any of our existing collaborators, we could lose our opportunity to work with that collaborator and could be subject to reputational damage that could negatively impact our relationships with other collaborators in what is a relatively small industry community. If we are unable to enter into new joint venture agreements or collaborations, we may face higher development costs than initially anticipated, greater difficulties in achieving commercialization, challenges in expanding our portfolio of technologies and distribution networks and commercial products, or other adverse impacts, which could have a material adverse effect on our business prospects.
The licenses that Bioceres PLC grants to us related to HB4 wheat are currently exclusive with respect to certain territories and/or crops. We are seeking to expand these licenses and we may be limited in our ability to use the licensed technology in other territories in the future, either independently or with another partner, if we fail to extend the licenses to additional crops and territories. However, all current and short-term commercial activities are covered by our licenses. In addition, such licensed technology may be rendered obsolete.
The licenses Bioceres PLC granted to us are exclusive with respect to HB4 wheat technology in Argentina, Brazil, Paraguay and Uruguay. Pursuant to the terms of the license we may be limited to use the licensed technology in other countries either independently or with another partner or third party, while we seek to expand these licenses, as needed. The restrictions imposed by the terms of these licenses may limit our flexibility to commercialize HB4 wheat technology and expand our business in such territories and could adversely affect our business, results of operations and prospects.
In addition, the technology that Bioceres PLC licenses to us may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of our competitors, which will prevent or limit our ability to generate revenues from the commercialization of our licensed seed traits and technology.
Our joint venture agreements or any partnerships that we may enter into in the future may not be successful, or we may fail to perform our respective contractual obligations, which could adversely affect our ability to develop and commercialize our product candidates, as well as result in disputes with our collaborators.
We may seek partnerships or joint venture arrangements with third parties for the development or commercialization of our product candidates depending on the merits of retaining commercialization rights for ourselves as compared to entering into partnerships or joint venture arrangements. We will face, to the extent that we decide to enter into partnerships or joint venture agreements, significant competition in seeking appropriate partners. Moreover, partnerships or joint venture arrangements are complex and time-consuming to negotiate document implement and maintain. We may not be successful in our efforts to establish and implement partnerships, joint ventures, or other alternative arrangements and such partnerships, joint ventures, or arrangements may not be successful. Furthermore, the terms of any partnerships, joint ventures, or other arrangements that we may establish may not be favorable to us.
Pursuant to our joint venture agreements, other agreements with our joint venture partners and collaboration arrangements, we are required to provide R&D services over a particular period of time and meet other contractual obligations. If we fail to perform our obligations under these agreements, our collaborators’ obligations to us may be reduced and, in other cases, our collaborators may seek to dissolve the corresponding joint venture or terminate their agreements with us and, as a result, our anticipated revenues may decrease. In addition, the failure of any of our collaborators to perform their contractual obligations, due to financial hardship, disagreement under the relevant agreement or for any other reason, may hinder our research collaboration, development and commercialization activities, increase our costs and materially and adversely affect our results of operations. Because some of our intellectual property has been licensed to various joint ventures for use in several different fields, the interests of each of our partners in these joint ventures may not always be aligned. As a result, it is possible that potential disputes may arise between us and our partners.
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Additionally, a licensee, collaborator or third party may use our intellectual property without our permission, dispute our ownership of certain intellectual property rights or argue that our intellectual property does not cover the joint venture’s marketed product. We seek to address these concerns in our contractual agreements; however, we may not have contractual arrangements with the party in question and/or such provisions may not be effective. If these provisions prove to be ineffective, we may not be able to achieve our objectives of generating significant revenues from crop productivity products sales and royalties from our seed technologies. Furthermore, regardless of any resort to legal action, a dispute with an end-customer, a licensee or collaborator over intellectual property rights may damage our relationship with that licensee or collaborator and may also harm our reputation in the industry.
Further, our ability to generate value from our joint ventures and research collaborations will depend on, among other things, our ability to work cooperatively with our collaborators for the discovery, development and commercialization of our technology and products and we may be unable to do so. We cannot be sure that this structure will be successful in commercializing our products. Furthermore, the agreements governing our partnership and collaborations are complex and cover a range of future activities. Such a dispute may also negatively affect our relationship with one or more of our other collaborators and may hinder our ability to enter into future collaboration agreements. Any of these occurrences could negatively impact our business and results of operations.
The success of our R&D partnerships or joint venture arrangements will depend heavily on the efforts and activities of our partners. Our joint venture arrangements may present financial, managerial, and operational challenges, including potential disputes, liabilities, or contingencies and may involve risks not otherwise present when operating independently including:
| ● | partners may have business interests, goals or cultures that are or become inconsistent with our business interests, goals or culture; |
| ● | partners may have significant discretion in determining the efforts and resources that they will apply to partnerships or joint ventures; |
| ● | partners may not pursue development and commercialization of our potential products or may elect not to continue or renew development or commercialization programs based on trial results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as business combination that diverts resources or creates competing priorities; |
| ● | partners may delay trials, provide insufficient funding for a trial program, stop a trial, abandon a product candidate, repeat or conduct new trials or require a new formulation of a product candidate for testing; |
| ● | partners could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates; |
| ● | a partner with marketing manufacturing and distribution rights to one or more products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities; |
| ● | we could grant exclusive rights to our partners that would prevent us from collaborating with others; |
| ● | partners may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property rights or proprietary information or expose us to potential liability; |
| ● | we may incur liabilities or losses as a result of an action taken by the joint venture or our joint venture partners; |
| ● | disputes may arise between us and a partner that causes the delay or termination of the research development or commercialization of our current or future products or that results in costly litigation or arbitration that diverts management attention and resources; |
| ● | our joint venture partners may act contrary to our instructions, requests, policies or objectives, which could reduce our return on investment, harm our reputation or restrict our ability to run our business; |
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| ● | partnerships may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable current or future products; |
| ● | partners may own or co-own intellectual property covering our products that results from our partnering with them and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; and |
| ● | a partner’s sales and marketing activities or other operations may not comply with applicable laws resulting in civil or criminal proceedings. |
The risks described above or the failure to continue any joint venture or joint development arrangement or to resolve disagreements with our current or future joint venture partners could materially and adversely affect our ability to transact the business that is the subject of such joint venture, which would in turn negatively affect our financial condition and results of operations.
We may experience difficulties in collecting payments or royalties to which we believe we are entitled.
We sell certain of our products to distributors through Rizobacter, Bioceres Semillas and Pro Farm. We also often license the use of certain technology to collaborators and licensees who use or will use the intellectual property to develop and commercialize seeds with improved seed traits. Additionally, we may be entitled under applicable intellectual property laws in the countries in which we operate to the payment of royalties from end users who subsequently multiply and use our seed technology. In each case, we may not actually receive the payments or royalties to which we are entitled, due to failure or refusal of the responsible parties to pay the amounts due. Failure to receive amounts owed to us could have an adverse impact on our business.
In the case of royalty payments from licensees, we rely on the good faith of the licensees to report to us the sales they earn from these products and to accurately calculate the royalties, to which we are entitled, processes that may involve complicated and difficult calculations. Under existing agreements, we have the right to inspect the inventory and accounts of multipliers of our seeds and licensees of our technologies; however, we must also rely on the good faith of end users to accurately report to us the multiplication of our seeds and remit royalty payments due in respect of the same, which may be respected to varying degrees in different jurisdictions given the absence of contractual privity and prevailing market practice.
We may face difficulty servicing our indebtedness, including the Notes due 2026.
Our ability to make scheduled payments of the principal of, to pay interest on, or to refinance our indebtedness depends on our future performance, which is subject to many factors, including economic, financial, competitive and other, beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.
We may elect to make interest payments under the Secured Convertible Guaranteed Notes due 2026 in kind, which will be capitalized, but if the Secured Convertible Guaranteed Notes due 2026 are not converted into ordinary shares, we will be required to pay the principal thereof in cash. Our ability to refinance the Secured Convertible Guaranteed Notes due 2026, will depend on the financial markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations and limit our flexibility in planning for and reacting to changes in our business. Holders of the Secured Convertible Guaranteed Notes due 2026 have the right to require us to repurchase their Secured Convertible Guaranteed Notes due 2026 for cash upon the occurrence of a change of control. We cannot assure you that we will have sufficient financial resources, or will be able to arrange financing, to pay the price in cash with respect to any Secured Convertible Guaranteed Notes due 2026 surrendered by holders for repurchase upon a change of control. In addition, restrictions under our then existing credit facilities or other indebtedness, if any, may not allow us to repurchase the Secured Convertible Guaranteed Notes due 2026 upon a change of control. Our failure to repurchase the Secured Convertible Guaranteed Notes due 2026 upon a change of control when required would result in an event of default with respect to the Secured Convertible Guaranteed Notes due 2026 which could, in turn, constitute a default under the terms of our other indebtedness, if any. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repurchase the Secured Convertible Guaranteed Notes due 2026 and the Noteholders may therefore enforce their security interest over the collateral pledged to them.
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We depend on our key personnel and research collaborators, and we may be adversely affected if we are unable to attract and retain qualified scientific and business personnel.
Our business is dependent on our ability to recruit and maintain highly skilled and educated individuals through direct employment or collaboration arrangements, with expertise in a range of disciplines, including biology, chemistry, plant genetics, agronomy, mathematics programming and other specializations which are relevant to our business. Our ability to recruit such a work force depends in part on our ability to maintain our market leadership in agricultural biotech industry in countries in which we operate. Maintaining our ability to attract highly skilled workers and leading scientific institutions depends in part on our ability to maintain a strong technology platform and state-of-the-art facilities, as well as our ability to consistently and successfully commercialize our technology. There can be no assurance that we will be able to maintain leading scientific capabilities or continue to successfully maintain advanced technology in the market.
Our success is also dependent to a significant degree upon the technical skills and continued service of certain members of our management team, in particular those of our CEO, Dr. Federico Trucco. Dr. Trucco has occupied several positions at Bioceres since 2005 and has vast experience and knowledge of our business, strategy and technologies. Furthermore, he has developed and maintained strong relationships with our original shareholders. The cessation of Dr. Trucco’s employment for any reason could have a material and negative impact on us. In addition, the number of qualified and highly educated personnel in Argentina, where most of our operations are located, is limited and competition for the services of such persons may be intense.
Our inability to secure, retain or find replacements for key management and technical personnel could adversely affect our business and could have a material adverse effect on our business, operating results, financial condition and growth prospects.
We do not enter into non-compete agreements with all of our employees, and therefore we may be unable to prevent our competitors from benefiting from the expertise of our former employees.
We do not enter into non-compete agreements with all of our employees, which prevents us from limiting our key employees from joining our competitors or competing directly against us. As a result, we may be unable to prevent our competitors from benefiting from the expertise of such employees. Direct competition by a former employee could materially adversely affect our business, results of operations and ability to capitalize on our proprietary information.
Adverse changes in global economic conditions, including as a result of the armed conflict in Israel and Palestine and the war in Ukraine, may negatively affect our industry, business, and results of operations.
Our industry is affected by changes in economic conditions outside our control, which can result in a general decrease in product demand from our customers. Such economic developments, like inflationary pressures in the U.S. and elsewhere, the China trade wars, the armed conflict in Israel and Palestine and the war in Ukraine may affect our business in a number of ways. Reduced demand may drive us and our competitors to offer products at promotional prices, which would have a negative impact on our profitability. In addition, the tightening of credit in financial markets may adversely affect the ability of our customers and suppliers to obtain financing for significant purchases and operations and could result in a decrease in, or cancellation of, orders for our products. If demand for our products slows down or decreases, we will not be able to maintain our revenue and we may run the risk of failing to satisfy the financial and other restrictive covenants to which we are subject under our existing indebtedness. Reduced revenue as a result of decreased demand may also reduce our planned growth and otherwise hinder our ability to improve our performance in connection with our long-term strategy.
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In addition, through Pro Farm, we maintain an indirectly wholly owned subsidiary in Russia, Pro Farm Russia, LLC, and own a 12% minority interest in a third-party manufacturing plant in Vyborg, Russia. While our revenues derived from sales to customers in Ukraine and Russia are currently immaterial, products for Pro Farm, our wholly owned subsidiary, are partially sourced by suppliers from the manufacturing plant in Russia. We may face risks associated with maintaining our subsidiary in Russia and minority ownership of the manufacturing plant, or with any international operations in Russia, including risks associated with our compliance with evolving international sanctions and potential reputational harm as a result of our operations in Russia. Further, Russia’s president Vladimir Putin has approved decrees which allow the government to seize assets owned by foreign businesses and has taken steps to invalidate intellectual property protections for U.S.-based companies operating in Russia. In addition, should the conflict escalate or be prolonged, supply chain, trade routes and agricultural markets could be adversely affected, which, in turn, could materially, adversely affect our business operations and financial performance. While we have policies and procedures in place designed to ensure compliance with applicable sanctions and trade restrictions, our employees, contractors, and agents may take actions in violation of such policies and applicable law, and we could be held ultimately responsible. If we are held responsible for a violation of U.S. sanctions laws, we may be subject to various penalties, any of which could have a material adverse effect on our business, financial condition or results of operations.
Further, our earnings may be adversely affected by fluctuations in the price of certain commodities, such as grains, milk, meat, biofuels and biomaterials. If commodity prices are negatively impacted, the value of our products could be directly and negatively impacted. Additionally, growers’ incomes have historically been negatively affected by commodity prices. As a result, fluctuations in commodity prices could have an impact on growers’ purchasing decisions and negatively affect their ability and decisions to purchase our seeds or products that incorporate our proprietary technology. We cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.
The spread of global pandemics, such as the COVID-19 pandemic, and government efforts to control the effect and spread of such pandemics have had and will have a disruptive effect on different aspects of our business.
The spread of global pandemics, such as the COVID-19 pandemic, impacted the world economy and the jurisdictions in which we conduct our business. Jurisdictions in which we conduct our business have imposed mandates and/or regulations or implemented measures to counter the spread of the COVID-19 virus to control the impact of the pandemic on public health and their respective economies.
These control measures collectively have changed over the course of the pandemic and may be reinstated if another pandemic breaks out. Moreover, the emergence of variants of the COVID virus, caused by mutations, led to a resurgence in infections and prompted renewed uncertainty. We have been affected in a number of ways, such as the way in which we operate our headquarters operations, interact with our scientists and their activities, and plan for and carry out clinical trials, all of which have experienced some short-term disruption and may suffer long-term changes in the way we will do business. Actions such as government lock downs slowed or, in some cases, temporarily stopped research and development activities and clinical trials. Various safety protocols for personal interactions may hamper research and development activities. Since we are mostly focused on the activities related to research and development, we have not experienced the larger adverse economics of a slowed economy. The financial effect will be that our development expenses may increase and we may have to obtain additional capital funding. Any required additional equity funding will be dilutive to the equity of our investors and debt financing may have restrictive covenants that could adversely affect our business plans and operational objectives. Any further funding that we may need may not be available or even if available it may not be on terms that are acceptable to us.
While it is not possible to predict the future impact of global pandemics and the effect of the measures adopted by governments, global pandemics have in the past and in the future may significantly affect global economic conditions. Furthermore, global pandemics and governments’ future responses to global pandemics may affect our financial position and results of operations. We monitor the impact of pandemics, such as the COVID-19 pandemic, on us. However, the impact of such pandemics on our business, results of operations, and financial position remains highly uncertain.
Our crop productivity business is highly seasonal and affected by factors beyond our control, which may cause our sales and operating results to fluctuate significantly.
The sale of our products is dependent upon planting and harvest seasons and are expected to result in highly seasonal patterns and substantial fluctuations in quarterly sales and profitability. As we increase the variety of products sold within our current markets, and expand into new markets in different geographies, the seasonality of our business may change. Therefore, our business may be more seasonal or experience seasonality in different periods than anticipated.
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Weather conditions and natural disasters, such as heavy rains, hail, floods, freezing conditions, windstorms, drought or fire, affect decisions by our distributors, direct customers and end users about the types and amounts of products to use and the timing of harvesting and planting. As a result, our operating results may vary substantially from year to year and quarter to quarter beyond the regular seasonal patterns’ predictions.
Other factors may also contribute to the unpredictability of our operating results, including the size and timing of significant distributor transactions, the delay or deferral of use of our commercial technology or products and the fiscal or quarterly budget cycles of our direct customers, distributors, licensees and end users. Customers may purchase large quantities of our products in a particular quarter to store and use over long periods of time or time their purchases to manage their inventories, which may cause significant fluctuations in our operating results for a particular quarter or year.
Our results of operations from our crop productivity products may vary significantly from period to period due to circumstances beyond our control, including as a result of climate change.
The crop productivity market is affected by various factors that make their operations relatively unpredictable from period to period. The development of our products may be adversely affected by circumstances beyond our control. For our crop productivity products, factors beyond our control include weather and climatic change, such as droughts or heat stress, or other factors we are unable to identify. For example, if there were a prolonged or permanent disruption to the electricity, climate control or water supply operating systems in our greenhouses or laboratories, the plants on which we are testing our licensed seed traits and the samples we store in freezers, both of which are essential to our development activities, would be severely damaged or destroyed, adversely affecting our development activities and thereby our business and results of operations. We have experienced crop failures in the past for various reasons, which have required us to re-start field trials and delays in achieving expected results.
The crop productivity market is also vulnerable to crop disease and to pests, which may vary in severity and effect, depending on the stage of production at the time of infection or infestation, the type of treatment applied, climatic conditions and the risks associated with ongoing global climate change. The costs to control disease and other infestations vary depending on the severity of the damage and the extent of the plantings affected. Moreover, there can be no assurance that available technologies to control such infestations will continue to be effective. These infestations can also increase costs, decrease revenues and lead to additional charges to earnings, which may have a material adverse effect on our business, financial position and results of operations.
Any development or product failure we may experience or any inability to economically source necessary materials could result in increased cost of development of our crop productivity products, which may negatively impact our business and results of operations.
Certain estimates of market opportunity included in this report are based on assumptions that are inherently uncertain and subject to risks and uncertainties that could have a material adverse effect on our business, operating results, and financial condition.
The information regarding our market opportunities, including for HB4 soy and HB4 wheat, has been prepared by management and our assumptions underlying our statements about these market opportunities are inherently uncertain and are subject to significant business, economic, regulatory and competitive risks and other uncertainties that could cause actual results to differ materially from those set forth in management’s estimates. No independent third party has compiled, examined, or performed any procedures with respect to our potential market opportunities, nor has any third party expressed any opinion or any other form of assurance on the information or its achievability by us, and no independent third party has assumed responsibility for, or claimed any association with, the information we have included herein regarding such potential market opportunities. The information regarding market opportunities is not fact and should not be relied upon as being indicative of future results. For example, we extrapolated from publicly available data for the past ten years to estimate soy and wheat production area in order to in turn estimate the size of HB4 soy and HB4 wheat-related market opportunities. Changes in economic, climate, regulatory and other factors could significantly reduce the target area and our market opportunity. We also made assumptions regarding the number of bags of soybeans and wheat seeds needed to plant one hectare as well as other information, which in each case may prove to be materially incorrect. Furthermore, we may not be able to take advantage of these market opportunities even if they are available. Our failure to take advantage of market opportunities or to correctly size our market opportunity could have a material adverse effect on our ability to take advantage of our investments in licensed technologies, including for HB4 soy and HB4 wheat, and therefore on our business, operating results and financial condition.
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Consumer and government resistance to GM crops may negatively affect our public image and reduce sales of seeds or other products containing our licensed seed traits. In addition, Bioceres S.A., from whom we license HB4 technology, is party to a legal proceeding in Argentina, which if decided unfavorably would adversely affect our ability to sell HB4 products in Argentina.
We develop biotech seeds, including GM seeds and the successful commercialization of our products depends, in part, on public acceptance of genetically engineered agricultural products. Some consumers may reject foods made from GM seeds and production of certain GM crops is prohibited in certain countries. Any increase in negative perceptions of GM crops, or more restrictive government regulations in response thereto, could have a negative effect on our business and may delay or impair the development and commercialization of some of our products.
The commercial success of our products may be adversely affected by claims that biotechnology plant products are unsafe for consumption or use, pose risks of damage to the environment, or create legal, social and ethical dilemmas.
The high public profile of biotechnology in food production and food products and public attitudes about the safety and environmental hazards of, and ethical concerns over, genetic research and biotechnology plant products could negatively affect our public image and results of operations.
The prohibition of the production of certain GM crops in certain countries and the current resistance from consumer groups to GM crops not only limits our access to such markets but also has the potential of spreading to and influencing the acceptance of products developed through biotechnology in other regions of the world and may also influence regulators in other countries to limit or ban production of GM crops, which could limit the commercial opportunities to exploit biotechnology. For example, in the United States, no product may be labelled as “organic” if it contains any GMO. Additionally, some states in the United States are considering, and one state has passed a law relating to, mandatory labelling of GMO foods, which may carry a negative connotation for consumers and which could make it difficult and expensive for companies to use ingredients from GM crops and distribute products in compliance with the labelling requirements, each of which could in turn have an adverse impact on the sale of our licensed GM seeds. In Argentina, a class action suit has been filed against Bioceres S.A. (from whom we license HB4 technology), certain biotechnology companies and the national government. The class action plaintiffs request that GMO foods be mandatorily labelled as such and that measures be taken to protect land use, among others. As we license HB4 technology from Bioceres S.A, if such action were to be decided unfavorably, we would no longer be able to sell products that contain HB4 technology in Argentina, which would have a significant negative impact on our revenue. As of the date of this report, the plaintiffs’ request for injunctions against GMO approvals were rejected by the Federal Court of Appeals and an injunction appealed before the Argentine Supreme Court was also rejected.
GM crops are grown principally in the United States, Brazil and Argentina, where there are fewer restrictions on the production of GM crops. If these or other countries where GM crops are grown or where we engage in business activities enact laws or regulations that ban the production of such crops or make regulations more stringent, we could experience a longer product development cycle for our products and may be forced to abandon projects related to certain crops or geographies, both of which would negatively affect our business and results of operations. Public attitudes towards ownership of genetic material and potential changes to laws regulating such ownership could weaken our intellectual property rights with respect to our genetic material and discourage R&D partners from supporting, developing or commercializing our products and technologies. Furthermore, any future labeling requirements could heighten these concerns and make consumers less likely to purchase food products containing gene-edited ingredients.
Competition in crop productivity products, including biologicals, is intense and requires continuous technological development.
We currently face significant direct and indirect competition in the markets in which we operate. The markets for crop productivity products, including biologicals, are intensely competitive and rapidly changing. Many companies engage in the development these products, and speed in commercializing a new product can be a significant competitive advantage.
As an example, some of our competitors engage in research associated with discovery and therefore have R&D budgets that are more significant than our own R&D budget and that cover more activities than those in which we engage. In addition, former collaborators, by virtue of having had access to our proprietary technology, may utilize know-how acquired while employed by us for their own development efforts.
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In most segments, the number of products available to end-consumers is steadily increasing as new products are introduced. We may be unable to compete successfully against our current and future competitors, which may result in price reductions, reduced margins and the inability to achieve market acceptance for our products and technologies. In addition, many of our competitors have substantially greater financial, marketing, sales, distribution and technical resources than us and some of our competitors have more experience in R&D, regulatory matters, manufacturing and marketing. We anticipate increased competition in the future as new companies enter the market and new technologies become available. Programs to improve genetics and crop protection chemicals are generally concentrated within a relatively small number of large companies, while non-genetic approaches are underway with broader set of companies. Mergers and acquisitions in the plant science, specialty food ingredient and agricultural biotechnology seed and chemical industries may result in even more resources being concentrated among a smaller number of our competitors.
The expiration of patents covering existing products reduces the barriers to entry for competitors. Our ability to compete effectively and to achieve commercial success depends, in part, on our ability to (i) control manufacturing and marketing costs, (ii) effectively price and market our products, (iii) successfully develop an effective marketing program and an efficient supply chain, (iv) develop new products with properties attractive to food manufacturers or growers, and (v) commercialize our products quickly without incurring major regulatory costs. We may not be successful in achieving these factors and any such failure may adversely affect our business, results of operations and financial condition.
Changes in laws and regulations to which we are subject, or to which we may become subject in the future, may materially increase our costs of operation, decrease our operating revenues and disrupt our business.
Laws and regulatory standards and procedures that impact our business are continuously changing. Responding to these changes and meeting existing and new requirements may be costly and burdensome. Changes in laws and regulations may occur that could:
| ● | impair or eliminate our ability to source technology and develop our products, including validating our products through field trials and passing biosafety evaluations; |
| ● | increase our compliance and other costs of doing business through increases in the cost to protect our owned and licensed intellectual property, including know-how, trade secrets and regulatory data, or increases in the cost to obtain the necessary regulatory approvals to commercialize and market the products we develop directly or jointly; |
| ● | require significant product redesign or redevelopment; |
| ● | render our licensed seed traits and technology and products that incorporate them less profitable or less attractive compared to competing products; |
| ● | reduce the amount of revenues generated from licenses or other royalties; |
| ● | restrict or increase the costs of making payments and distributions; |
| ● | increase our export and import duties and costs or intensify controls and restrictions on our imports; and |
| ● | discourage us and other collaborators from offering, and end-markets from purchasing, products that incorporate our licensed seed traits and technology. |
Any of these events could have a material adverse effect on our business, results of operations and financial condition. As of the date hereof, we believe that we substantially comply with regulations in Argentina and other countries in which we operate relating to GM crops. However, if these regulations change, our validation trials and compliance efforts may become costly and burdensome.
Any changes in regulation in countries where GM crops are grown or exported into could result in our collaborators, other third parties or us being unable or unwilling to develop, commercialize or sell products that incorporate our licensed seed traits or technology. In addition, we rely on various forms of intellectual property rights protection. Legislation and precedents relating to intellectual property rights in the key markets where we seek protection, such as the United States, Brazil and Argentina, is evolving and changes in laws could affect our ability to obtain or maintain intellectual property rights protection for our products. Any changes to these existing laws and regulations may materially increase our costs, decrease our revenues and disrupt our business.
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