20FR12B 1 a19-5480_120fr12b.htm 20FR12B

Table of Contents

 

As filed with the Securities and Exchange Commission on March 14, 2019

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 20-F

 

(Mark One)

 

o

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

OR

 

 

o

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

 

 

OR

 

 

o

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

 

For the transition period from                       to                        

 

 

OR

 

 

x

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: March 14, 2019

 

Commission file number          

 

Bioceres Crop Solutions Corp.

(Exact name of Registrant as specified in its charter)

 

Cayman Islands

(Jurisdiction of incorporation)

 

Ocampo 210 bis, Predio CCT, Rosario
Province of Santa Fe, Argentina

(Address of principal executive offices)

 

Gloria Montaron
General Counsel
Ocampo 210 bis, Predio CCT, Rosario
Province of Santa Fe, Argentina
Phone: 54-341-4861122
Email: gloria.montaron@biocerescrops.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

Copies to:

Conrado Tenaglia, Esq.

Matthew S. Poulter, Esq.

Linklaters LLP

1345 Avenue of the Americas

New York, NY 10105

Phone: (212) 903-9000

Fax: (212) 903-9100

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

None

 

Securities registered or to be registered pursuant to Section 12(g) of the Act:

 

None

 


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Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

 

Ordinary Shares

Warrants

 

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.

 

N/A

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes   x No

 

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.

x Yes   o No

 

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.

x Yes   o No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes   o No

 

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 o

 

Accelerated filer o

 

Non-accelerated filer o

 

Emerging growth company x

 

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. o

 


† 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 which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

US GAAP o

 

International Financial Reporting Standards as issued
by the International Accounting Standards Board
x

 

Other o

 

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.

o Item 17   o Item 18

 

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).

o Yes   o No

 


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Table of Contents

 

PART I

 

 

 

INTRODUCTORY NOTE AND PRESENTATION OF FINANCIAL AND OTHER INFORMATION

 

1

 

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

3

 

 

 

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

4

A.

Directors and Senior Management

 

4

B.

Advisers

 

4

C.

Auditors

 

5

 

 

 

 

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

 

6

A.

Offer Statistics

 

6

B.

Method and Expected Timetable

 

6

 

 

 

 

ITEM 3.

KEY INFORMATION

 

7

A.

Selected Financial Data

 

7

B.

Capitalization and Indebtedness

 

16

C.

Reasons for the Offer and Use of Proceeds

 

17

D.

Risk Factors

 

17

 

 

 

 

ITEM 4.

INFORMATION ON THE COMPANY

 

60

A.

History and Development of the Company

 

60

B.

Business Overview

 

62

C.

Organizational Structure

 

95

D.

Property, Plant and Equipment

 

96

 

 

 

 

ITEM 4A.

UNRESOLVED STAFF COMMENTS

 

97

 

 

 

 

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

98

A.

Operating Results

 

98

B.

Liquidity and Capital Resources

 

117

C.

Research and Development, Patents and Licenses, etc.

 

120

D.

Trend Information

 

121

E.

Off-Balance Sheet Arrangements

 

121

F.

Tabular Disclosure of Contractual Obligations

 

121

 

 

 

 

ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 

122

A.

Directors and Senior Management

 

122

B.

Compensation

 

124

C.

Board Practices

 

127

D.

Employees

 

129

E.

Share Ownership

 

129

 

 

 

 

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

131

 

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A.

Major Shareholders

 

131

B.

Related Party Transactions

 

131

C.

Interests of Experts and Counsel

 

136

 

 

 

 

ITEM 8.

FINANCIAL INFORMATION

 

137

A.

Consolidated Statements and Other Financial Information

 

137

B.

Significant Changes

 

137

 

 

 

 

ITEM 9.

THE OFFER AND LISTING

 

138

A.

Offer and Listing Details

 

138

B.

Plan of Distribution

 

138

C.

Markets

 

138

D.

Selling Shareholders

 

138

E.

Dilution

 

138

F.

Expenses of the Issue

 

138

 

 

 

 

ITEM 10.

ADDITIONAL INFORMATION

 

139

A.

Share Capital

 

139

B.

Memorandum and Articles of Association

 

139

C.

Material Contracts

 

141

D.

Exchange Controls

 

144

E.

Taxation

 

144

F.

Dividends and Paying Agents

 

149

G.

Statement by Experts

 

150

H.

Documents on Display

 

150

I.

Subsidiary Information

 

150

 

 

 

 

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT RISK

 

151

A.

Quantitative and Qualitative Disclosure about Market Risk

 

151

B.

Currency risk

 

151

C.

Interest rate risk

 

151

D.

Credit risk

 

152

 

 

 

 

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

 

154

A.

Debt Securities

 

154

B.

Warrants and Rights

 

154

C.

Other Securities

 

154

D.

American Depositary Shares

 

154

 

 

 

 

PART II

 

ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

 

155

A.

Defaults

 

155

B.

Arrears and Delinquencies

 

155

 

 

 

 

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

 

156

 

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PART I

 

INTRODUCTORY NOTE AND PRESENTATION OF FINANCIAL AND OTHER INFORMATION

 

Introductory Note

 

On March 14, 2019, Union Acquisition Corp. (“Union” or “UAC”), whose name changed to Bioceres Crop Solutions Corp., consummated the previously announced business combination pursuant to a share exchange agreement, dated as of November 8, 2018 (as amended, the “Exchange Agreement”), by and among UAC and Bioceres, Inc., a company incorporated under the laws of Delaware, which converted into Bioceres LLC pursuant to the Reorganization (as defined below) on February 28, 2019.

 

Prior to the consummation of the business combination on March 14, 2019, the following steps took place among Bioceres, Inc. and certain of its affiliates (collectively the “Reorganization”).

 

On February 13, 2019 Bioceres, Inc. formed a new subsidiary, BCS Holding Inc. (“BCS Holding”), and contributed its crop business net assets to BCS Holding in exchange for 100% equity interest in BCS Holding On February 28, 2019, Bioceres, Inc. converted into Bioceres LLC, and on March 1, 2019, Bioceres S.A., a company organized under the laws of Argentina and our ultimate parent company (“Parent”) contributed all of its equity interest in Bioceres Semillas S.A. (“Bioceres Semillas”) (its direct majority owned subsidiary) to Bioceres LLC in exchange for additional equity interests in Bioceres LLC.

 

In addition, concurrently with the consummation of the business combination on March 14, 2019, the Rizobacter Call Option (as defined below) was exercised, pursuant to which the total indirect ownership of BCS Holding in Rizobacter increased to 80.00% of all outstanding stock of Rizobacter. On October 22, 2018, Parent, RASA Holding LLC, a Delaware limited liability company and a wholly owned subsidiary of Bioceres, Inc., now a wholly-owned subsidiary of BCS Holding (“RASA Holding”), and Pedro Enrique Mac Mullen, María Marta Mac Mullen and International Property Services Corp., as sellers (collectively, the “Grantors”) entered into an amended and restated option agreement (as may be amended from time to time, the “Rizobacter Call Option Agreement”), pursuant to which the Parent, RASA Holding or any of their nominated affiliates (including BCS Holding and its subsidiaries, collectively the “Beneficiaries”) would have the option (the “Rizobacter Call Option”) to purchase from the Grantors all of their 11,916,000 shares of common stock (par value AR$1 each and 5 votes per share, the “Rizobacter Stock”) of Rizobacter Argentina S.A., an Argentine corporation and a subsidiary of RASA Holding (“Rizobacter”), representing 29.99% of all outstanding common stock of Rizobacter. Consideration for the Rizobacter Call Option was in the form of UAC shares (the “In-Kind Consideration”). As a result of the business combination and the other transactions contemplated by the Exchange Agreement, as well as the Reorganization and exercise of the Rizobacter Call Option, Union became the holding company of BCS Holding, its subsidiaries and Bioceres Semillas. Upon the consummation of the business combination, Union changed its name to Bioceres Crop Solutions Corp.

 

Unless the context otherwise requires, “we,” “us,” “our,” “the Company,” “BIOX,” “Bioceres” and “Bioceres Crop Solutions” will refer to Bioceres Crop Solutions Corp. and its subsidiaries.

 

Financial statement information

 

In December 2016, Bioceres S.A. approved a change in our fiscal year end from December 31 to June 30. Following the six-month period ended June 30, 2017 (the “Transition Period”), our fiscal year end is June 30 of each year. In connection with the business combination, the shareholders of Union passed resolutions to change its fiscal year to June 30, to be effective upon closing of the business combination, during an extraordinary general meeting held on February 27, 2019.

 

The combined statements of comprehensive income data for Bioceres for the three-month periods ended September 30, 2018 and 2017 and the combined statements of financial position data as of September 30, 2018 are derived from our unaudited interim condensed combined financial statements appearing elsewhere in this report. The combined statements of comprehensive income data for Bioceres for the year ended June 30, 2018,

 

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for the Transition Period and for the years ended December 31, 2016 and 2015 and the combined statements of financial position data as of June 30, 2018, 2017 and as of December 31, 2016 are derived from our audited combined financial statements appearing elsewhere in this report.

 

This report also includes (i) the unaudited pro forma condensed combined statement of income of Bioceres for the year ended June 30, 2018 and for the three months ended September 30, 2019, and (ii) the unaudited pro forma combined statement of financial position as of September 30, 2018, both of which give effect to the business combination, matters related thereto and exercise of the Rizobacter Call Option.

 

Our presentation currency is U.S. dollars. We account for our 50% equity interests in our joint ventures as equity method investments in our combined financial statements.

 

We have applied the following standards and amendments for the first time for our annual reporting period commencing July 1, 2018:

 

· IFRS 9 — Financial Instruments (version 2014).

 

· IFRS 15 — Revenue from Contracts with Customers.

 

· Amendments to IFRS 2 — Classification and measurement of share-based payment transactions.

 

· IFRIC 22 — Foreign currency transactions and advance consideration.

 

· Amendments to IAS 40 — Transfers of investment.

 

The adoption of these amendments did not have a material impact on the amounts recognized in prior periods.

 

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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:

 

·                       our ability to develop and commercialize biotechnology products;

 

·                       our ability to maintain our joint venture agreements with our current partners;

 

·                       the success of the HB4 technology that we license and that remains subject to receipt of regulatory approval;

 

·                       our or our collaborators’ ability to develop commercial products that incorporate our 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 by us, our joint ventures and third-party collaborators;

 

·                       our ability to adapt to continuous technological change in our industry;

 

·                       our expectations that products containing our seed traits will be commercialized and we will earn royalties from the sales of such products;

 

·                       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 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 protect our intellectual property through patents, PVP, trademarks, trade secret laws, confidentiality provisions, and licensing arrangements for the genes that we identify; 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.

 

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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.

 

ITEM 1.                                                IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

A.                 Directors and Senior Management

 

Directors

 

The following table sets forth the names and positions of the members of our Board of Directors and executive officers as of the date of this report. The business addresses of the members of our Board of our Directors are as follows:

 

·                  The business address of Messrs. Trucco and Lopez Lecube is Ocampo 210bis, Predio CCT, Rosario, Province of Santa Fe, Argentina;

 

·                  The business address of Mr. Camargo de Colón is Alameda Uruguay 60, Helvetia Country, Indaituba, San Pablo, 13337-570, Brazil;

 

·                  The business address of Mrs. Zang is Paseo de la Castellana 93, PISO 9, 28046, Madrid, Spain;

 

·                  The business address of Mr. Freisinger is 2001 McAllister St., Apt 104, San Francisco, California 94118, USA; and

 

·                  The business address of Mr. Bransfield is 444 Madison Avenue, Fl 34, New York, New York 10022.

 

Name

 

Position

Federico Trucco, Ph.D.

 

Chief Executive Officer and Executive Director

Enrique Lopez Lecube

 

Chief Financial Officer and Executive Director

Ricardo Yapur

 

Managing Director of Rizobacter Argentina S.A.

Gloria Montaron Estrada

 

General Counsel and Executive Director

Gerónimo Watson

 

Chief Technology Officer

Jorge Wagner

 

Chief Operating Officer

Carlos Camargo de Colón

 

Non-Executive Director

Natalia Zang

 

Non-Executive Director

Ari Freisinger

 

Non-Executive Director

Kyle P. Bransfield

 

Non-Executive Director

 

For more information about our Board of Directors and executive officers, see “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management.”

 

B.                 Advisers

 

Our external legal advisers are Linklaters LLP and Marval, O’Farrell & Mairal.

 

Linklaters LLP’s address is 1345 Avenue of the Americas, New York, NY 10105, U.S.A.

 

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Marval, O’Farrell & Mairal’s address is Av. Leandro N. Alem 882, C1001AAQ, Ciudad de Buenos Aires, Argentina.

 

C.                 Auditors

 

Our auditors are Price Waterhouse & Co. S.R.L. (“PwC”), with registered office at Bouchard 557 — Floor 8, C1106ABG. PwC is an independent registered public accounting firm, registered with the Public Company Accounting Oversight Board (United States).

 

Pursuant to the resolutions adopted by our Board of Directors on March 14, 2019 and in connection with the consummation of the business combination, Marcum LLP, Union’s auditors, was dismissed.

 

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ITEM 2.                                                OFFER STATISTICS AND EXPECTED TIMETABLE

 

A.                 Offer Statistics

 

Not applicable.

 

B.                 Method and Expected Timetable

 

Not applicable.

 

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ITEM 3.                                                KEY INFORMATION

 

A.                 Selected Financial Data

 

The following tables present our selected combined financial data for the periods indicated. In December 2016, Bioceres S.A. approved a change in our fiscal year end from December 31 to June 30. Following the six-month period ended June 30, 2017 (the “Transition Period”), our fiscal year end is June 30 of each year. The selected combined statement of comprehensive income data for the year ended June 30, 2018, for the Transition Period and for the years ended December 31, 2016 and 2015 and the selected combined statements of financial position data as of June 30, 2018, June 30, 2017 and December 31, 2016 are derived from the audited combined financial statements of Bioceres appearing elsewhere in this report. The selected combined statement of comprehensive income data for Bioceres for the three-month period ended September 30, 2018 and 2017 and the selected combined statements of financial position data as of September 30, 2018 are derived from the unaudited interim condensed combined financial statements appearing elsewhere in this report, which in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the unaudited interim periods. We have not included financial information as of and for the years ended December 31, 2014 and 2013, as such information is not available on a basis that is consistent with the combined financial information included in this report without unreasonable effort or expense. Bioceres’ combined financial statements have been prepared in accordance with International Financial Reporting Standards, which we refer to as IFRS, as issued by the International Accounting Standards Board.

 

The information in this section is not intended to replace the audited and unaudited financial statements appearing elsewhere in this report. Bioceres’ historical results are not necessarily indicative of the results that should be expected in the future, and the results for the three months ended September 30, 2018 are not necessarily indicative of the results that should be expected for the full year ending June 30, 2019, or any other interim periods or any future year or period. Actual future results are likely to be different from the amounts presented, and such differences may be significant.

 

You should read this selected financial data together with “Item 5. Operating and Financial Review and Prospects” and the financial statements and accompanying notes included in this report. The historical results are not necessarily indicative of Bioceres’ future results of operations or financial condition.

 

Selected Combined Statement of Comprehensive Income of Bioceres

 

 

 

Three-Month Period Ended
September 30,

 

Year Ended
June 30,

 

Six-Month
Transition
Period Ended
June 30,

 

Year Ended December 31,

 

 

 

2018

 

2017

 

2018

 

2017

 

2016(1)

 

2015(2)

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

(US$)

 

Total revenue

 

29,612,224

 

33,874,161

 

133,542,704

 

46,885,310

 

41,169,249

 

5,206,091

 

Cost of Sales

 

(14,499,010

)

(20,011,633

)

(77,094,551

)

(29,613,158

)

(30,598,956

)

(3,837,242

)

Research and development expenses

 

(1,048,492

)

(938,374

)

(3,950,100

)

(1,990,268

)

(853,854

)

(302,774

)

Selling, general and administrative expenses

 

(6,080,485

)

(8,395,208

)

(35,263,688

)

(15,689,598

)

(8,827,121

)

(1,401,037

)

Share of profit or loss of joint ventures and associates

 

80,156

 

55,117

 

(2,136,801

)

(649,075

)

(707,042

)

(858,158

)

Other income or loss

 

101,611

 

(56,878

)

613,389

 

54,252

 

24,765

 

12

 

Operating income/(loss)

 

8,166,004

 

4,527,185

 

15,710,953

 

(1,002,537

)

207,041

 

(1,193,108

)

Finance income

 

12,464,317

 

1,326,714

 

26,982,795

 

1,762,484

 

156,468

 

1,569,592

 

 

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Three-Month Period Ended
September 30,

 

Year Ended
June 30,

 

Six-Month
Transition
Period Ended
June 30,

 

Year Ended December 31,

 

 

 

2018

 

2017

 

2018

 

2017

 

2016(1)

 

2015(2)

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

(US$)

 

Finance costs

 

(26,199,971

)

(6,766,835

)

(67,933,511

)

(11,955,747

)

(8,406,045

)

(879,769

)

Loss before income tax

 

(5,569,650

)

(912,936

)

(25,239,763

)

(11,195,800

)

(8,042,536

)

(503,285

)

Income tax benefit/(expense)

 

1,970,393

 

289,837

 

10,928,517

 

2,817,251

 

1,860,647

 

(690,726

)

Loss for the period/year

 

(3,599,257

)

(623,099

)

(14,311,246

)

(8,378,549

)

(6,181,889

)

(1,194,011

)

Other comprehensive loss(3)

 

(16,395,253

)

(4,156,488

)

(31,833,554

)

(2,714,241

)

(4,579,700

)

 

Total comprehensive loss

 

(19,994,510

)

(4,779,587

)

(46,144,800

)

(11,092,790

)

(10,761,589

)

(1,194,011

)

Non-IFRS measures

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (unaudited)(4)

 

8,991,963

 

6,868,344

 

22,370,693

 

4,133,308

 

8,775,411

 

(1,116,215

)

 


Notes:—

(1)              Combined statements of profit or loss and other comprehensive income for the year ended December 31, 2016 include results of operations of Rizobacter from October 19, 2016 to December 31, 2016 (the period beginning on the date whereupon Bioceres acquired control of Rizobacter).

(2)              Combined statements of profit or loss and other comprehensive income for the year ended December 31, 2015 do not include the consolidated statements of profit or loss and other comprehensive income of Rizobacter, control of which Bioceres acquired on October 19, 2016.

(3)              Includes (i) exchange differences on translation of foreign operations from joint ventures, (ii) exchange differences on translation of foreign operations, (iii) revaluation of property, plant and equipment, net tax from joint ventures and (iv) revaluation of property, plant and equipment, net of tax.

(4)              To provide investors with additional information regarding Bioceres’ financial results, Bioceres monitors and has presented within this report Adjusted EBITDA. Adjusted EBITDA is not a measurement of financial performance under IFRS and should not be considered an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to profit/(loss) as indicators of operating performance or any other measures of performance derived in accordance with IFRS. Bioceres defines Adjusted EBITDA as profit / (loss) exclusive of financial income / (costs), income tax benefit / (expense), depreciation, amortization, share-based compensation and inventory purchase price allocation. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Non-IFRS Financial Measures.”

 

The table below provides a reconciliation of our loss for the periods to Adjusted EBITDA:

 

 

 

Three-Month Period
Ended September 30,

 

Year Ended
June 30,

 

Six-Month
Transition
Period
Ended June
30, 2017

 

Year Ended December 31,

 

 

 

2018

 

2017

 

2018

 

2017

 

2016

 

2015

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

(US$)

 

Reconciliation of Net Loss to Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss for the period/year

 

(3,599,257

)

(623,099

)

(14,311,246

)

(8,378,549

)

(6,181,889

)

(1,194,011

)

Income tax (benefit)/expense

 

(1,970,393

)

(289,837

)

(10,928,517

)

(2,817,251

)

(1,860,647

)

690,726

 

Finance costs

 

26,199,971

 

6,766,835

 

67,933,511

 

11,955,747

 

8,406,045

 

879,769

 

Finance income

 

(12,464,317

)

(1,326,714

)

(26,982,795

)

(1,762,484

)

(156,468

)

(1,569,592

)

 

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Three-Month Period
Ended September 30,

 

Year Ended
June 30,

 

Six-Month
Transition
Period
Ended June
30, 2017

 

Year Ended December 31,

 

 

 

2018

 

2017

 

2018

 

2017

 

2016

 

2015

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

(US$)

 

Depreciation of property, plant and equipment

 

404,284

 

634,431

 

2,230,881

 

1,254,657

 

584,293

 

71,277

 

Amortization of intangible assets

 

417,871

 

577,033

 

2,141,476

 

1,418,529

 

424,179

 

2,331

 

Inventory purchase price allocation charge

 

 

1,119,155

 

2,257,378

 

2,436,949

 

7,516,071

 

 

Stock-based compensation charges

 

3,804

 

10,540

 

30,005

 

25,710

 

43,827

 

3,285

 

Adjusted EBITDA (unaudited)

 

8,991,963

 

6,868,344

 

22,370,693

 

4,133,308

 

8,775,411

 

(1,116,215

)

 

Selected Combined Statement of Financial Position of Bioceres

 

 

 

Bioceres

 

 

 

As of
September 30,
2018

 

As of June 30,
2018

 

As of June 30,
2017

 

As of
December 31,
2016

 

 

 

(unaudited)

 

 

 

 

 

 

 

(US$)

 

Cash and cash equivalents

 

3,255,981

 

2,215,103

 

1,679,478

 

982,897

 

Total assets

 

206,140,159

 

196,638,764

 

239,871,051

 

250,522,746

 

Borrowings

 

92,939,227

 

91,017,133

 

74,990,135

 

64,687,486

 

Total liabilities

 

173,553,055

 

163,505,108

 

162,631,985

 

166,852,003

 

Total equity

 

32,587,104

 

33,133,656

 

77,239,066

 

83,670,743

 

 

The unaudited pro forma combined financial information

 

On March 14, 2019, UAC consummated the previously announced business combination pursuant to the Exchange Agreement, by and among UAC and Bioceres, Inc., a company incorporated under the laws of Delaware, which converted into Bioceres LLC pursuant to the Reorganization on February 28, 2019.

 

The unaudited pro forma combined financial information has been derived by the application of pro forma adjustments to the historical combined financial statements of Bioceres, which have been presented to give effect to the business combination which is accounted for as a reverse recapitalization and the exercise of the Rizobacter Call Option (the “events”). UAC’s financial statements, which have been historically prepared under U.S. GAAP, have been adjusted to be presented under IFRS for the purposes of preparing the unaudited pro forma combined financial information.

 

Introduction

 

The unaudited pro forma combined statement of financial position as of September 30, 2018 is based on the historical statement of financial position of Bioceres (presented in accordance with IFRS) and the historical statement of financial position of UAC as of September 30, 2018 (adjusted to be presented in accordance with

 

9


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IFRS) to reflect the business combination, the accounting effects of the reverse recapitalization and the exercise of the Rizobacter Call Option, as if those events have occurred on September 30, 2018.

 

The unaudited pro forma condensed combined statement of income combines the historical audited results of operations of Bioceres for the year ended June 30, 2018 (presented in accordance with IFRS), with the historical unaudited results of operations of UAC for the period from November 14, 2017 (inception) to June 30, 2018 (adjusted to be presented in accordance with IFRS and to conform to Bioceres’ historical financial reporting periods) and gives pro forma effect to the events as if those had been consummated on July 1, 2017. The unaudited pro forma condensed combined statement of income for the three months ended September 30, 2018 combines the unaudited historical combined statement of income of Bioceres for the three-month period ended September 30, 2018 (presented in accordance with IFRS) with the unaudited historical condensed combined statement of income of UAC for the three-month period ended September 30, 2018 (adjusted to be presented in accordance with IFRS and to conform to Bioceres’ historical financial reporting periods), giving effect to the events as if those had occurred as of the beginning of the earliest period presented.

 

The unaudited pro forma adjustments are based on estimates, available information and certain assumptions that UAC and Bioceres believe are reasonable, factually supportable and directly attributable to the events. The unaudited pro forma adjustments and primary assumptions are described in the accompanying notes. The unaudited pro forma combined statement of income is being provided for illustrative purposes only and does not purport to represent what our results of operations or result for the period would have been if the events had occurred on the dates indicated, and are not intended to project our results of operations or results for any future period. Any of the factors underlying these estimates and assumptions may change or prove to be materially different and the estimates and assumptions may not be representative of facts that exist upon the consummation of the business combination.

 

Description of the business combination

 

On November 8, 2018, UAC entered into the Exchange Agreement, pursuant to which UAC will, among other things, purchase from Bioceres LLC (the “Seller”) the Bioceres stock and all of the Seller’s majority equity interest in Bioceres Semillas. As consideration for the transfer of all of the issued and outstanding shares of Bioceres stock and 87.2739% of the issued and outstanding equity interest in Bioceres Semillas to UAC, UAC will issue 27,116,174 ordinary shares (the “Exchange Shares”) and 7,500,000 warrants to the Seller.

 

In addition, on October 22, 2018, the Parent, RASA Holding and the Grantors entered into the Rizobacter Call Option Agreement, pursuant to which the Beneficiaries would have the option to purchase from the Grantors all of their Rizobacter Stock, representing 29.99% of all outstanding common stock of Rizobacter. Concurrently with the closing of business combination, the Rizobacter Call Option was exercised, pursuant to which the total indirect ownership of BCS Holding in Rizobacter increased to 80.00% of all outstanding stock of Rizobacter. The consideration for the Rizobacter Call Option was US$1,265,000 in cash and US$48,715,000 in UAC shares.

 

Accounting for the business combination

 

The business combination will be accounted for as a “reverse recapitalization”. Under this method of accounting, UAC will be treated as the “acquired” company for financial reporting purposes. This determination is primarily based on Bioceres’ equity holders expecting to have a majority of the voting rights of the combined company, Bioceres comprising the ongoing operations of the combined company, Bioceres comprising a majority of the governing body of the combined company, and Bioceres’ senior management comprising the majority members of the management of the combined company. Accordingly, for accounting purposes, the business combination will be treated as the equivalent of Bioceres issuing stock for the net assets of UAC, accompanied by a recapitalization. The net assets of UAC will be stated at historical cost, with no goodwill or other intangible assets recorded. It will be assumed that operations prior to the business combination will be those of Bioceres.

 

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Pro Forma Presentation

 

The unaudited pro forma combined financial information has been derived by the application of pro forma adjustments to the historical combined financial statements of Bioceres, which have been presented to give effect to the business combination which is accounted for as a reverse recapitalization and the exercise of the Rizobacter Call Option.

 

The unaudited pro forma combined statement of financial position as of September 30, 2018 is based on the historical statement of financial position of Bioceres presented in accordance with IFRS and the historical statement of financial position of UAC as of September 30, 2018, adjusted in accordance with IFRS to reflect the business combination, the accounting effects of the reverse recapitalization and the exercise of the Rizobacter Call Option, as if those events have occurred on September 30, 2018.

 

The unaudited pro forma condensed combined statement of income combines the historical audited results of operations of Bioceres for the year ended June 30, 2018, with the historical unaudited results of operations of UAC for the period from November 14, 2017 (inception) to June 30, 2018 and gives pro forma effect to the events as if those had been consummated on July 1, 2017. The unaudited pro forma condensed combined statement of income for the three months ended September 30, 2018 combines the unaudited historical combined statement of income of Bioceres for the three-month period ended September 30, 2018 with the unaudited historical condensed combined statement of income of UAC for the three-month period ended September 30, 2018, giving effect to the events as if those had occurred at the beginning of the earliest period presented.

 

You should read the information contained in this section in conjunction with “Item 5. Operating and Financial Review and Prospects,” the historical audited combined financial statements of Bioceres and the accompanying notes included elsewhere in this report. Certain line items of the unaudited pro forma condensed combined financial information of UAC included herein were aligned to Bioceres’ in order to conform to the presentation standards used in Bioceres’ combined financial statements. In addition, UAC’s historical financial reporting periods have been adjusted to conform to Bioceres’ historical financial reporting periods.

 

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Table of Contents

 

Unaudited pro forma combined statement of financial position as of September 30, 2018

 

 

 

I

 

II

 

 

III
Pro forma

 

 

IV
Rizobacter

 

 

V
Pro forma

 

 

 

Bioceres

 

UAC

 

 

adjustments

 

 

call option

 

 

combined

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

3,255,981

 

633,599

 

 

1,253,878

 

B

 

 

5,143,458

 

Other financial assets

 

4,562,725

 

117,076,074

 

 

(117,076,074

)

B C

 

 

4,562,725

 

Trade receivables

 

52,806,907

 

 

 

 

 

 

 

52,806,907

 

Other receivables

 

4,982,346

 

280,337

 

 

 

 

 

 

5,262,683

 

Income and minimum presumed income taxes recoverable

 

1,476,193

 

 

 

 

 

 

 

1,476,193

 

Inventories

 

25,089,935

 

 

 

 

 

 

 

25,089,935

 

Total current assets

 

92,174,087

 

117,990,010

 

 

(115,822,196

)

 

 

 

94,341,901

 

NON-CURRENT ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other financial assets

 

284,683

 

 

 

 

 

 

 

284,683

 

Other receivables

 

4,899,666

 

 

 

 

 

 

 

4,899,666

 

Income and minimum presumed income taxes recoverable

 

521,037

 

 

 

 

 

 

 

521,037

 

Deferred tax assets

 

597,522

 

 

 

 

 

 

 

597,522

 

Investments in joint ventures

 

22,509,645

 

 

 

 

 

 

 

22,509,645

 

Property, plant and equipment

 

37,441,647

 

 

 

 

 

 

 

37,441,647

 

Intangible assets

 

29,873,603

 

 

 

 

 

 

 

29,873,603

 

Goodwill

 

17,838,269

 

 

 

 

 

 

 

17,838,269

 

Total non-current assets

 

113,966,072

 

 

 

 

 

 

 

113,966,072

 

Total assets

 

206,140,159

 

117,990,010

 

 

(115,822,196

)

 

 

 

208,307,973

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and other payables

 

37,881,886

 

79,468

 

 

 

 

 

 

37,961,354

 

Borrowings

 

71,235,483

 

 

 

 

 

1,265,000

 

E

72,500,483

 

Employee benefits and social security

 

4,210,621

 

 

 

 

 

 

 

4,210,621

 

Deferred revenue and advances from customers

 

2,831,527

 

 

 

 

 

 

 

2,831,527

 

Income and minimum presumed income taxes payable

 

579

 

 

 

 

 

 

 

579

 

Government grants

 

6,257

 

 

 

 

 

 

 

6,257

 

Financed payment - Acquisition of business

 

20,616,463

 

 

 

95,798

 

D

(14,985,000

)

E

5,727,261

 

Ordinary shares subject to possible redemption

 

 

112,910,534

 

A

(112,910,534

)

C

 

 

 

Total current liabilities

 

136,782,816

 

112,990,002

 

 

(112,814,736

)

 

(13,720,000

)

 

123,238,082

 

NON-CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings

 

21,703,744

 

 

 

 

 

 

 

21,703,744

 

Government grants

 

10,871

 

 

 

 

 

 

 

10,871

 

Investments in joint ventures

 

2,086,376

 

 

 

 

 

 

 

2,086,376

 

Deferred tax liabilities

 

9,807,855

 

 

 

 

 

 

 

9,807,855

 

Provisions

 

458,874

 

 

 

 

 

 

 

458,874

 

Financed payment - Acquisition of business

 

2,702,519

 

 

 

 

 

 

 

2,702,519

 

Total non-current liabilities

 

36,770,239

 

 

 

 

 

 

 

36,770,239

 

Total liabilities

 

173,553,055

 

112,990,002

 

 

(112,814,736

)

 

(13,720,000

)

 

160,008,321

 

EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity attributable to owners of the parent

 

11,116,962

 

5,000,008

 

 

(3,007,459

)

C

24,636,806

 

F

37,746,317

 

Non-controlling interests

 

21,470,142

 

 

 

 

 

(10,916,806

)

F

10,553,336

 

Total equity

 

32,587,104

 

5,000,008

 

 

(3,007,459

)

 

13,720,000

 

 

48,299,653

 

Total equity and liabilities

 

206,140,159

 

117,990,010

 

 

(115,822,196

)

 

 

 

208,307,973

 

 

Notes to the pro forma combined statement of financial position as of September 30, 2018

 

I.                     This column is derived from the unaudited combined statement of financial position of Bioceres as of September 30, 2018.

 

II.                This column is derived from the unaudited balance sheet of UAC as of September 30, 2018 that has been adjusted to be presented under IFRS.

 

A.                 This has been classified as current liabilities due to the closing date of the business combination.

 

III.           This column shows the pro forma adjustments regarding:

 

B.                 The reclassification between “Other financial assets” and “Cash and cash equivalents” related to the release of funds held in the trust account;

 

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C.               The payment for the redeemed shares and equity adjustments; and

 

D.                 Financial results accrued on the amount owned for the original Rizobacter purchase option, in light of the exercise of the Rizobacter Call Option.

 

IV.            This column shows the pro forma adjustments in consideration of the exercise of the Rizobacter Call Option. The consideration for the Rizobacter Call Option was US$1,265,000 in cash and US$48,715,000 in UAC shares. The pro forma adjustments for the Rizobacter Call Option are:

 

E.                  Cancellation of financed payment — cancellation of the payment made in connection with the original Rizobacter purchase option, in light of the exercise of the Rizobacter Call Option; and

 

F.                   Equity adjustments for the acquisition of the 29.99% equity interest in Rizobacter in consideration of the Rizobacter Call Option and issuance of UAC shares mentioned above.

 

V.                 This column represents the unaudited pro forma combined statement of financial position as of September 30, 2018 for the business combination under IFRS and reflects all adjustments in columns I to IV above.

 

Unaudited pro forma combined statement of income for the three-month period ended September 30, 2018:

 

 

 

I

 

II

 

III

 

 

IV

 

 

 

Historical
Bioceres

 

Historical
UAC

 

Pro forma
adjustments

 

 

Pro forma
combined

 

Revenue

 

29,605,745

 

 

 

 

29,605,745

 

Government grants

 

6,479

 

 

 

 

6,479

 

Total revenue

 

29,612,224

 

 

 

 

29,612,224

 

Cost of sales

 

(14,499,010

)

 

 

 

(14,499,010

)

Research and development expenses

 

(1,048,492

)

 

 

 

(1,048,492

)

Selling, general and administrative expenses

 

(6,080,485

)

(159,688

)

 

 

(6,240,173

)

Share of loss of joint ventures

 

80,156

 

 

 

 

80,156

 

Other income or expenses, net

 

101,611

 

 

 

 

101,611

 

Operating profit or loss

 

8,166,004

 

(159,688

)

 

 

8,006,316

 

Finance income

 

12,464,317

 

507,664

 

(507,664

)

A

12,464,317

 

Finance costs

 

(26,199,971

)

 

(95,798

)

B

(26,295,769

)

Income or loss before income tax

 

(5,569,650

)

347,976

 

(603,462

)

 

(5,825,136

)

Income tax benefit

 

1,970,393

 

 

28,739

 

B

1,999,132

 

Income or loss for the period

 

(3,599,257

)

347,976

 

(574,723

)

 

(3,826,004

)

Attributable to:

 

 

 

 

 

 

 

 

 

 

Equity holders of the parent

 

(2,618,445

)

347,976

 

(1,065,129

)

C

(3,335,598

)

Non-controlling interest

 

(980,812

)

 

490,406

 

C

(490,406

)

 

 

(3,599,257

)

347,976

 

(574,723

)

 

(3,826,004

)

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding, basic and diluted

 

 

2,875,000

 

32,848,918

 

D

36,120,517

 

Basic and diluted net loss per ordinary share

 

 

(0.04

)

 

 

(0.09

)

 

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Notes to the pro forma combined statement of income for the three-month period ended September 30, 2018

 

I.                   This column is derived from the historical unaudited interim combined statement of income of Bioceres for three-month period ended September 30, 2018.

 

II.                This column is derived from the historical interim statement of income of UAC for three-month period ended September 30, 2018 that has been adjusted to be presented under IFRS.

 

III.           This column shows the pro forma adjustments for:

 

A.                 Reversing of financial income from the marketable securities held in the trust account.

 

B.                 Accrued finance costs on the 9.99% call option as if it had been exercised on July 1, 2017, net of income tax at the statutory rate of 30%.

 

C.                 Reclassification of income or loss attributable to equity holders of the Parent and non-controlling interest in consideration of the full exercise of the Rizobacter Call Option (and the acquisition of 29.99% equity interest in Rizobacter) as if it had been exercised on July 1, 2017.

 

D.                 This adjustment represents: (i) the capitalization of ordinary shares not redeemed, (ii) rights conversions into ordinary shares, (iii) shares that were registered pursuant to the Form S-4 filed with the SEC on February 11, 2019 constituting consideration in the business combination, (iv) shares issued to the Grantors and (v) shares issued in connection with Bioceres Semillas’ shareholders’ tag-along exercise.

 

IV.            This column represents the unaudited pro forma combined statement of income for the business combination under IFRS and reflects all adjustments in columns I to III above.

 

Pro Forma Earnings Per Share (EPS)

 

The table below reflects the adjustments to basic and diluted net income per share for the effect of the business combination, assuming such transactions occurred on July 1, 2017, for the three-month period ended September 30, 2018.

 

 

 

EPS of Pro
Forma
Combined

 

Numerator:

 

 

 

Net Income (Loss) attributable to equity holders of the parent

 

(3,335,598

)

 

 

 

 

Denominator:

 

 

 

UAC weighted average shares outstanding, basic and diluted

 

2,875,000

 

Capitalization of ordinary shares not redeemed

 

123,164

 

Rights conversion into ordinary shares

 

1,150,000

 

Registered shares constituting consideration in the business combination

 

27,116,174

 

Shares issued to the Grantors

 

4,736,736

 

Bioceres Semillas’ shareholders’ tag-along exercise

 

119,443

 

Basic and diluted weighted average shares outstanding

 

36,120,517

 

 

 

 

 

Basic and diluted net loss per ordinary share

 

(0.09

)

 

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Unaudited pro forma combined statement of income for the year ended June 30, 2018:

 

 

 

I

 

II

 

III

 

 

IV

 

 

 

Historical
Bioceres

 

Historical
UAC

 

Pro forma
adjustments

 

 

Pro forma
combined

 

Revenue

 

133,491,118

 

 

 

 

133,491,118

 

Government grants

 

51,586

 

 

 

 

51,586

 

Total revenue

 

133,542,704

 

 

 

 

133,542,704

 

Cost of sales

 

(77,094,551

)

 

 

 

(77,094,551

)

Research and development expenses

 

(3,950,100

)

 

 

 

(3,950,100

)

Selling, general and administrative expenses

 

(35,263,688

)

(355,847

)

 

 

(35,619,535

)

Share of loss of joint ventures

 

(2,136,801

)

 

 

 

(2,136,801

)

Other income or expenses, net

 

613,389

 

 

 

 

613,389

 

Operating profit or loss

 

15,710,953

 

(355,847

)

 

 

15,355,106

 

Finance income

 

26,982,795

 

418,410

 

(418,410

)

A

26,982,795

 

Finance costs

 

(67,933,511

)

 

(379,531

)

B

(68,313,042

)

Income or loss before income tax

 

(25,239,763

)

62,563

 

(797,941

)

 

(25,975,141

)

Income tax benefit

 

10,928,517

 

 

113,859

 

B

11,042,376

 

Income or loss for the period

 

(14,311,246

)

62,563

 

(684,082

)

 

(14,932,765

)

Attributable to:

 

 

 

 

 

 

 

 

 

 

Equity holders of the parent

 

(11,039,533

)

62,563

 

(2,319,939

)

C

(13,296,909

)

Non-controlling interest

 

(3,271,713

)

 

1,635,857

 

C

(1,635,856

)

 

 

(14,311,246

)

62,563

 

(684,082

)

 

(14,932,765

)

Weighted average shares outstanding, basic and diluted

 

 

2,893,654

 

33,049,231

 

D

35,942,885

 

Basic and diluted net loss per ordinary share

 

 

(0.12

)

 

 

(0.37

)

 

Notes to the pro forma combined statement of income for the year ended June 30, 2018

 

I.                     This column is derived from the historical combined statement of income of Bioceres for the year ended June 30, 2018.

 

II.                This column is derived from the historical statement of income of UAC for period from November 14, 2017 (inception) through June 30, 2018.

 

III.           This column shows the pro forma adjustments for:

 

A.                 Reversing of financial income from the marketable securities held in the trust account.

 

B.                 Accrued finance costs on the 9.99% call option as if it had been exercised on July 1, 2017, net of income tax.

 

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C.                 Reclassification of income or loss attributable to equity holders of the Parent and non-controlling interest in consideration of the full exercise of the Rizobacter Call Option (and the acquisition of 29.99% equity interest in Rizobacter) as if it had been exercised on July 1, 2017.

 

D.                 This adjustment represents: (i) the capitalization of ordinary shares not redeemed, (ii) rights conversions into ordinary shares, (iii) shares that were registered  pursuant to the Form S-4 filed with the SEC on February 11, 2019 constituting consideration in the business combination, (iv) shares issued to the Grantors and (v) shares issued in connection with Bioceres Semillas’ shareholders’ tag-along exercise.

 

IV.                              This column represents the unaudited pro forma combined statement of income for the business combination under IFRS and reflects all adjustments in columns I to III above.

 

Pro Forma Earnings Per Share (EPS)

 

 

 

EPS of Pro
Forma
Combined

 

Numerator:

 

 

 

Net Income (Loss) attributable to equity holders of the parent

 

(13,296,909

)

 

 

 

 

Denominator:

 

 

 

UAC weighted average shares outstanding, basic and diluted

 

2,697,368

 

Capitalization of ordinary shares not redeemed

 

123,164

 

Rights conversion into ordinary shares

 

1,150,000

 

Registered shares constituting consideration in the business combination

 

27,116,174

 

Shares issued to the Grantors

 

4,736,736

 

Bioceres Semillas’ shareholders’ tag-along exercise

 

119,443

 

Basic and diluted weighted average shares outstanding

 

35,942,885

 

 

 

 

 

Basic and diluted net loss per ordinary share

 

(0.37

)

 

B.                 Capitalization and Indebtedness

 

The following table sets forth our total capitalization as of September 30, 2018:

 

·                  on an actual basis;

 

·                  on a pro forma basis to reflect (i) the capitalization of ordinary shares not redeemed for an amount of $2.0 million, and (ii) payment and shares issued to the Grantors for an amount of $13.7 million.

 

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As of
September 30,
2018

 

Pro forma as of
September 30,
2018

 

Short-term debt

 

91,851,946

 

78,227,744

 

Long-term debt (excluding current portions)

 

24,406,263

 

24,406,263

 

Total debt

 

116,258,209

 

102,634,007

 

Parent investment

 

60,113,094

 

60,113,094

 

Reverse recapitalization and exercise of Rizobacter call option

 

 

26,629,355

 

Accumulated deficit and other reserves

 

(48,996,132

)

(48,996,132

)

Equity attributable to equity holders of the parent

 

11,116,962

 

37,746,317

 

Equity attributable to non-controlling interests

 

21,470,142

 

10,553,336

 

Total capitalization

 

148,845,313

 

150,933,659

 

 

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 following the completion of the business combination. 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.

 

Risks Related to Our Business

 

We may not be successful in developing marketable or commercial technologies.

 

Our success depends in part on our ability to identify and develop high-value crop productivity technologies for use in commercial products. Through our technology sourcing and product development collaborations we commit substantial efforts and other resources to accomplish this. It may take several years, if at all, before many of our products complete the development process and become available for production and commercialization.

 

As of the date of this report, many of our products have been commercialized by Rizobacter, including Rizoderma, crop protection products in the Maxim line and a variety of adjuvants and packs. 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 seeds or other products that contain our seed traits or technology 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 of the seed traits and technologies we develop, which could materially and adversely affect our business, financial condition, results of operations and growth strategy.

 

Seeds containing the seed traits or biological treatments that we develop may be unsuccessful or fail to achieve commercialization for any of the following reasons:

 

·                       our seed traits or biological treatments may not be successfully validated in the target crops;

 

·                       our seed traits or biological treatments 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 the seeds containing our seed traits or for our biological treatments;

 

·                       our competitors may launch competing or more effective seed traits, biological treatments or germplasms;

 

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·                       a market may not exist for seeds containing our seed traits or biological treatments or such products may not be commercially successful;

 

·                       we may be unable to patent and/or obtain breeders’ rights or any other intellectual property rights on our traits and technologies in the necessary jurisdictions;

 

·                       even if we obtain patent and/or breeders’ rights or any other intellectual property rights on our seed traits, such rights may be later challenged by competitors or other parties; and

 

·                       even if we obtain patent and/or breeders’ rights or any other intellectual property rights on our seed traits, competitors may design competing products that do not infringe these intellectual property rights.

 

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.

 

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 seed traits and other technologies in the various relevant markets. As an operational matter, we generally lead these processes in Argentina through our affiliate, Instituto de Agrobiotecnologia Rosario S.A. (“INDEAR”), and our international subsidiaries or our collaborators lead these efforts in the United States, China, Brazil, Paraguay, Uruguay and other international markets. In the future, we expect to seek regulatory approvals in other markets. Regulatory and legislative requirements affect the development, production and sale of our products, including the testing, commercializing and planting of seeds containing our biotechnology 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.

 

In most of our key target markets, including the United States, regulatory approvals must be received prior to the importation and commercialization of transgenic products. Regulatory regimes in some of our key target markets may be more onerous. For example, in Argentina, the federal government’s regulation of agricultural biotechnology is handled primarily by two agencies, the Argentine National Advisory Commission on Agricultural Biotechnology (Comisión Nacional Asesora de Biotecnología Agropecuaria) (“CONABIA”), which regulates activity related to biosafety, and the National Food Safety and Quality Service (Servicio Nacional de Sanidad y Calidad Agroalimentaria), or SENASA, which regulates activity related to food and feed safety. Additionally, the National Market Regulator (Dirección Nacional de Mercados) must conduct an economic evaluation. When products containing our 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 as a result of negative market perception, heightened regulatory standards or unfamiliarity with the applicable regulatory regime, such products will not be commercialized, which would negatively impact our business and results of operations.

 

Our EcoSeed business is dependent in large part on the success of a technology that we license and that remains subject to receipt of regulatory approval.

 

The majority of our biotechnology seed products currently under development incorporates HB4 technology (a yield improvement technology). We expect that the sale of biotech seeds that contain HB4 technology, our EcoSeed business, will comprise an increasingly significant portion of our future revenues. As a result, our future growth and financial performance will largely depend on our ability to receive regulatory approval for and to commercialize our HB4 technology, and if this effort is unsuccessful we may not have the

 

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resources to pursue development of our other products and 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 the National Scientific and Technical Research Council of Argentina (Consejo Nacional de Investigaciones Científicas y Técnicas) (“CONICET”) and the National University of the Litoral. The Parent holds an exclusive license for HB4, which terminates on the expiration date of the last of the HB4 patents in 2033, 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 a costly or time-consuming legal dispute.

 

The Parent is party to funding agreements pursuant to which certain investors have a right to the majority of the payments we may receive in connection with the commercialization of our technologies in certain crops.

 

Between 2005 and 2007, the Parent entered into agreements with various investors to obtain funding in the aggregate amount of US$1.0 million for research and early stage development of technology relating to a specific sunflower gene, Hahb 4, that is intended to promote drought tolerance in crops. The funding agreements grant the investors, in the aggregate, the right to receive 52.8% of the rights and royalties payable to us from the successful commercialization of the resulting technology with respect to soybean, wheat and corn. As of the date hereof, the promoter element of the technology developed in connection with our research and development of Hahb 4 is being incorporated into a leading soybean product that Verdeca is developing, which also incorporates our HB4 technology. In addition, the licenses of our HB4 technology that we have granted to other developers and our joint ventures with respect to certain crops include the Hahb 4 promoter element. Accordingly, we may have to pay third parties royalties otherwise due to us in the absence of these agreements and we may not receive the full economic benefit of the commercialization of certain of our technologies. In addition, the investors party to these funding arrangements may claim to be entitled to payments in addition to the royalties, which we believe are within the scope of such agreements. The investors may also dispute the allocation of revenue as it relates to the relative importance of our various technologies incorporated into a given product. We cannot be certain how a court would interpret any ambiguities regarding the scope of these funding agreements or other claims that may be raised by one or more investors pursuant to these funding agreements. Any dispute regarding these agreements could be costly and divert management’s attention from our operations, and if the investors are deemed to have rights to payments in excess of those we believe are applicable, our business, results of operations, cash flows and prospects would be materially and adversely affected. See “Item 5. Operating and Financial Review and Prospects—F. Tabular Disclosure of Contractual Obligations” and “Item 4. Information on the Company—B. Business Overview—Early Stage Technology Development Agreements.”

 

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 joint venture arrangements with global agricultural firms to leverage their resources, know-how and channels of distribution 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. 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 suffer a reputational risk that could 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 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.

 

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The licenses that we grant to certain of the joint ventures in which we participate and to certain third parties are exclusive with respect to certain territories and/or crops, limiting our ability to use the licensed technology and future technologies either independently or with another partner.

 

The license we have agreed to grant to Verdeca would be exclusive with respect to HB4 soybean technology worldwide and, although we would be permitted to use this technology, we would be prohibited from licensing it to third parties. The license we granted to Trigall Genetics is exclusive with respect to HB4 wheat technology in Argentina, Brazil, Paraguay and Uruguay. Pursuant to the terms of the licenses in each of the above-mentioned joint ventures, we reserve the rights to use such technologies for research and non-commercial purposes. We are prohibited from independently using the technology we licensed to Trigall Genetics and Verdeca with respect to wheat and soybean, respectively, within their exclusive field and territories. As a result, we are, to a certain extent, dependent on the efforts of our joint ventures and licensees that hold or will hold exclusive licenses to commercialize our technologies in those fields and territories. These licenses are valid so long as the respective joint venture operates and can be recuperated by us upon joint venture dissolution. The restrictions imposed by these licenses limit our flexibility to commercialize our technology and expand our business, both of which could adversely affect our business, results of operations and prospects.

 

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.

 

R&D in the crop productivity industry is expensive, complex, prolonged and uncertain. We may spend many years and dedicate significant financial and other resources developing products that may never generate revenues or come to market. 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 13 years to develop a product for our crop productivity products. Some products will never reach the final stages of development.

 

Development of new or improved agricultural products involves risks of failure inherent in the development of products based on innovative and complex technologies. These risks include the possibility that:

 

·                       our products will fail to perform as expected in the field;

 

·                       our products will not receive necessary regulatory permits and governmental clearances in the markets in which we intend to sell them;

 

·                       our products may have adverse effects on consumers;

 

·                       consumer preferences, which are unpredictable and can vary greatly, may change quickly, making our products no longer desirable;

 

·                       our competitors develop new products that have other more appealing characteristics than our products;

 

·                       our products will be viewed as too expensive by food companies or growers as compared to competitive products;

 

·                       our products will be difficult to produce on a large scale or will not be economical to grow;

 

·                       intellectual property and other proprietary rights of third parties will prevent us, our R&D partners, or our licensees from marketing and selling our products;

 

·                       we may be unable to patent or otherwise obtain intellectual property protection for our discoveries in the necessary jurisdictions;

 

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·                       we or the customers that we sell our products to may be unable to fully develop or commercialize our products in a timely manner or at all; and

 

·                       third parties may develop superior or equivalent products.

 

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.

 

We or our collaborators may fail to perform our respective contractual obligations and we may have disputes with our collaborators.

 

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.

 

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 the division of labor will be successful in aiding the commercialization of our products. Furthermore, the agreements governing our partnership and collaborations are complex and cover a range of future activities. The occurrence of any negative event with respect to the above matters or a dispute between us and our partners or collaborators could delay our development and commercialization efforts, and lead to the dissolution of the partnership or collaboration. If disagreements with a collaborator arise, any such dispute could be costly, time-consuming to resolve and distracting to our management. 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.

 

Our joint venture agreements or any partnerships that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our product candidates.

 

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 should we so chose to enter into such arrangements and any future partnerships or joint ventures that we enter into 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.

 

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:

 

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·                       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 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;

 

·                       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.

 

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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 and Bioceres Semillas, our proprietary commercial channels for crop productivity technologies. 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.

 

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.

 

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, agronomics, mathematics programming and other subjects 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 Argentina and Latin America. 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 the majority 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.

 

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We do not enter into non-compete agreements with 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 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.

 

We may be adversely affected by global economic conditions.

 

Our ability to continue to develop and grow our business, build proprietary distribution channels and generate revenues from product sales and royalty payments may be adversely affected by global economic conditions in the future, including instability in credit markets, declining consumer and business confidence, fluctuating commodity prices and interest rates, volatile exchange rates and other challenges that could affect the global economy such as the changing financial regulatory environment. For example, our customers and licensees may experience deterioration of their businesses, cash flow shortages or difficulties obtaining financing, which could adversely affect the demand for our technologies, products and services. In addition, 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.

 

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 growing seasons, which vary from year to year, and are expected to result in both highly seasonal patterns and substantial fluctuations in quarterly sales and profitability. Weather conditions and natural disasters, such as heavy rains, hail, floods, freezing conditions, windstorms, drought or fire, also 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. Pergamino, Argentina where a large percentage of our operations are based, experienced intense flooding in late 2016. According to the Buenos Aires Grain Exchange, the average national yields of soybean and corn as of April 18, 2018 had registered decreases as a result of the drought. From December 2017 to March 2018, Argentina experienced a significant drought, which impacted crop yields. As we increase our sales in our current markets and expand into new markets in different geographies, it is possible that we may experience different seasonality patterns in our business. Disruptions may lead to delays in harvesting or planting by growers which can result in pushing orders to a future quarter, which could negatively affect results for the quarter in question and cause fluctuations in our operating results. Seasonal variations may be especially pronounced because our product lines are mainly sold in the Southern Hemisphere. Our seeds, biologicals and other crop input products sales tend to be comparatively low during the third and fourth quarters of our fiscal year, as soybean related sales peak in the second quarter. However, planting and growing seasons, climatic conditions and other variables on which sales of our products are dependent vary from year to year and quarter to quarter. As a result, we may experience substantial fluctuations in quarterly seed sales.

 

The overall level of seasonality in our business is difficult to evaluate as a result of our relatively early stage of development, our limited number of commercialized products, our expansion into new geographical territories, the introduction of new products and the timing of introductions of new products. It is possible that our business may be more seasonal or experience seasonality in different periods than anticipated. 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

 

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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.

 

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 variations, 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 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 resulted in 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 market opportunity for EcoSoy and EcoWheat 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 the market opportunity. No independent third party has compiled, examined, or performed any procedures with respect to our potential market opportunities related to EcoSoy and/or EcoWheat, 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 for EcoSoy and EcoWheat 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 EcoSoy and EcoWheat-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 EcoSoy and EcoWheat, 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 seed traits.

 

We are active in the field of biotech development of 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 due to food safety and environmental concerns. 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 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 select 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 genetically modified organisms (“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 GM seeds. In Argentina, a class action suit has been initiated against the national government and certain biotechnology companies, including the Parent, requesting, among other changes, the mandatory labelling of GM foods and environmental protection of land use. As of the date of this report, the plaintiffs’ request for an injunction against GMO approvals was rejected by the Federal Court of Appeals and an extraordinary appeal at the Supreme Court was filed, the practicable chances of success of which are low.

 

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 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 are intensely competitive and rapidly changing. Many companies engage in the development of crop productivity 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 allocated for crop productivity products that are more significant than our own R&D budget and

 

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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 this insight for their own development efforts.

 

In most segments of the crop productivity markets, the number of products available to end-customers 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 products containing our seed traits and technology. 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.

 

Our technology 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 seed traits and technology. At the same time, 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 control manufacturing and marketing costs; effectively price and market our products, successfully develop an effective marketing program and an efficient supply chain, develop new products with properties attractive to food manufacturers or growers and 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.

 

We register and market soybean varieties with glyphosate tolerance technology, meaning those that have been genetically modified to tolerate herbicides based on glyphosate.

 

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 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 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 government grants, licenses or other royalties; and

 

·                       discourage us and other collaborators from offering, and end-markets from purchasing, products that incorporate our seed traits and technology.

 

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Any of these events could have a material adverse effect on our business, results of operations and financial condition. We believe we currently are in compliance with regulations related to growing GM crops in Argentina and other countries; 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 seed traits or technology. In addition, we rely on various forms of intellectual property protection. Legislation and jurisprudence on intellectual property 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 protection for our products. Any changes to these existing laws and regulations may materially increase our costs, decrease our revenues and disrupt our business.

 

Our substantial indebtedness could adversely affect our financial condition.

 

We have a significant amount of indebtedness. As of September 30, 2018, our total indebtedness (as defined in the Exchange Agreement) was US$99.4 million. We may incur additional indebtedness in the future. We also have a programme under which we could issue corporate bonds in a principal amount of up to US$40 million. Our high level of indebtedness could have important adverse consequences, including:

 

·                       limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

 

·                       requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;

 

·                       increasing our vulnerability to general adverse economic and industry conditions;

 

·                       limiting our flexibility in planning for and reacting to changes in the industry in which we compete;

 

·                       placing us at a disadvantage compared to other, less leveraged competitors; and

 

·                       increasing the cost of borrowing.

 

The occurrence of any of the above may negatively impact our business and results of operations. As of June 30, 2018, due to the macroeconomic conditions in Argentina, Rizobacter failed to comply with certain financial ratio covenants under the Syndicated Loan Facility and obtained a waiver from the majority lenders. If any of our indebtedness gets accelerated as a result of our failure to meet certain covenants, the risks described above could intensify.

 

Price increases and shortages of raw materials could adversely affect our results of operations.

 

Our results of operations may be affected by the availability and pricing of raw materials, principally materials needed to design our technologies, such as raw glycerin. Factors such as changes in the global or regional levels of supply and demand, weather conditions, seasonal fluctuations, shortages or interruptions, changes in global climates and government regulations could substantially impact the price of raw materials. To the extent we are unable to pass on increases in raw materials and energy prices to our customers, a substantial increase in raw material prices or a continued interruption in supply could have a material adverse effect on our business, financial condition and results of operations.

 

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The overall agricultural industry is susceptible to commodity price changes and we, along with our food manufacturing customers and grower customers, are exposed to market risks from changes in commodity prices.

 

Changes in the prices of certain commodity products could result in higher overall cost along the agricultural supply chain, which may negatively affect our ability to commercialize our products. We will be susceptible to changes in costs in the agricultural industry as a result of factors beyond our control, such as general economic conditions, seasonal fluctuations, weather conditions, demand, food safety concerns, product recalls and government regulations. As a result, we may not be able to anticipate or react to changing costs by adjusting our practices, which could cause our operating results to deteriorate.

 

We may be required to pay substantial damages as a result of product liability claims for which we do not have insurance.

 

Product liability claims are a commercial risk for our business, particularly as we are involved in the sale of commercial technology and the supply of biotechnological products, some of which may be shown in the future to be harmful to humans and the environment. We may be held liable if any product we develop, unsuitable during marketing, sale or consumption. We do not currently have insurance coverage for such claims. Courts have levied substantial damages in the United States and elsewhere against a number of companies in the agriculture industry in past years based upon claims for injuries allegedly caused by the use of their products.

 

In addition, we may face product liability and similar claims involving cross-pollination of crops, which recently has affected other companies in our industry operating in the United States, and cross-contamination of GMO and non-GMO ingredients. In Argentina, there are no precedents for product liability cases in the agricultural industry related to transgenic or biotechnology products; however, there has been at least one product liability case related to the use of pesticides.

 

There is a possibility that a products liability case could be filed against us in Argentina, in which case damages may be substantial albeit potentially smaller than those typically awarded in the United States. Product liability claims against us, our joint ventures or third-party licensees selling products that contain our seed traits or technology or allegations of product liability relating to seeds or other products containing seed traits or technology developed by us could damage our reputation, harm our relationships with our collaborators and other business counterparties and materially and adversely affect our business, results of operations, financial condition and prospects.

 

Our operations are subject to various health and environmental risks associated with our use, handling and disposal of potentially toxic materials.

 

We are subject to numerous federal, state, local and foreign environmental, health and safety laws and regulations, including those governing laboratory procedures, the handling, use, storage, treatment, manufacture and disposal of hazardous materials and wastes, discharge of pollutants into the environment and human health and safety matters. As part of our technology sourcing and product development activities, we develop GMOs by inserting new genes into the genomes of certain plants and bacteria. Though we introduce these genes in order to improve plant traits, we cannot always predict the effect that these genes may have on the organism. In some cases, the genes may render the organism poisonous or toxic, or they may cause the organism to develop other dangerous characteristics that could harm the organism’s surrounding environment. Furthermore, there is a risk that, when testing GMOs, the seeds or strains of these organisms may escape the laboratory, greenhouse, industrial facility or field in which they are being tested and contaminate nearby areas. Poisonous or toxic organisms may therefore be inadvertently introduced into the environment or possibly enter the food production system, harming the people and animals who come in contact with them. Our crop protection products, which include Rizoderma, adjutants, therapies, herbicides, fungicides and insecticides, among others, bear similar risks in the development stage.

 

We cannot eliminate the risk of contamination or discharge and any resultant injury from these materials. If these risks were to materialize, we could be subject to fines, liability, reputational harm or otherwise adverse

 

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effects on our business. We may be sued for any injury or contamination that results from our use or the use by third parties of these materials, or may otherwise be required to remedy the contamination, and our liability may exceed any insurance coverage and our total assets. Furthermore, compliance with environmental, health and safety laws and regulations may be expensive and may impair our R&D efforts. If we fail to comply with these requirements, we could incur substantial costs and liabilities, including civil or criminal fines and penalties, clean-up costs or capital expenditures for control equipment or operational changes necessary to achieve and maintain compliance In addition, we cannot predict the impact on our business of new or amended environmental, health and safety laws or regulations or any changes in the way existing and future laws and regulations are interpreted and enforced. These current or future laws and regulations may impair our research, development or production efforts.

 

The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business.

 

Upon consummation of the business combination, we are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and regulatory requirements will be time consuming, resulting in increased costs to us or other adverse consequences.

 

As a public company, we will be subject to the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act. These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we will need to commit significant resources, hire additional staff and provide additional management oversight. We expect to implement additional procedures and processes for the purpose of addressing the applicable standards and requirements for public companies. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

 

As an “emerging growth company,” as defined in the JOBS Act, we may take advantage of certain temporary exemptions from various reporting requirements including, but not limited to, an exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and the rules and regulations of the SEC thereunder. These exemptions will cease to apply by no later than the last day of our fiscal year following the fifth anniversary of the completion of UAC’s initial public offering (the “IPO”)  (or under certain other circumstances) and we expect to incur additional expenses and devote increased management effort toward ensuring compliance with the additional reporting requirements that will apply when we cease to be an “emerging growth company.” We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.

 

We may require additional financing in the future and may not be able to obtain such financing on favorable terms, if at all, which could force us to delay, reduce or terminate some of our activities.

 

The process of developing and commercializing products is expensive, lengthy and risky and we expect to continue investing in our R&D services to identify new potential products for development. We may require additional capital to fund our technology sourcing and product development projects and to provide working capital to fund other aspects of our business. Although we currently believe that our cash and cash equivalents and marketable securities will provide adequate resources to fund our operations, including technology sourcing and product development expenses, planned capital expenditures and working capital requirements for the foreseeable future, we may nevertheless need additional financing in the future, due to changes in our business strategy or the occurrence of unanticipated events.

 

We may seek to issue additional equity securities, which could result in dilution to our existing shareholders, or raise additional debt financing, which could subject us to restrictive covenants that limit our operating flexibility and require us to comply with certain financial ratios. Alternatively, we may not be able to raise sufficient additional funds on terms that are favorable to us, if at all. If we fail to raise the funds we require,

 

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our ability to fund our operations, take advantage of strategic opportunities, develop and commercialize products or technologies, or otherwise respond to competitive pressures could be significantly limited. In such an event, we may be forced to delay or terminate our development initiatives or the commercialization of our technology and products, curtail operations or grant licenses to our technology on terms that are not favorable to us. If adequate funds are not available, we may not be able to successfully execute our business strategy or continue our business.

 

Development and commercialization of our products may incur scrutiny under the Convention on Biological Diversity Treaty.

 

The Convention is an international treaty that was adopted at the Earth Summit in Rio de Janeiro, Brazil in 1992. The treaty provides that if a company uses genetic resources, such as an indigenous plant, from a participating country to develop a product, then such company must obtain the prior informed consent of the participating country and owes fair and equitable compensation to the participating country. Although the United States is not a participating country, most countries where we currently obtain or may obtain genetic resources in the future, including Argentina, have ratified the treaty and are currently participants in the Convention. We may fall under scrutiny of the Convention with respect to the development or commercialization of any of our products derived from genetic resources originating from any of the countries that are participants in the Convention. There can be no assurance that the government of a participating country will not assert that it is entitled to fair and equitable compensation from us. Such compensation, if demanded, may make commercialization of our products impracticable.

 

Our business strategy may change and the successful implementation of our business plan is uncertain.

 

As an emerging biotechnology company, we continually analyze our business plan and operations in the light of market conditions and developments. We currently generate a significant portion of our revenue from the sale of crop protection products. We anticipate that following the successful regulatory approval and commercialization of our technologies, including HB4, an increasing portion of our revenues will be generated by sales of seed and integrated products through our proprietary commercial channels and third-party licensees, with incremental income projected to be generated by the joint ventures in which we participate. We face numerous challenges to completing the various steps necessary for the commercialization of our products and there can be no guarantee that we will be able to successfully commercialize our technologies. As a result of our continuous analyses of our crop productivity solutions, we may decide to make substantial changes in our business plan and operations. Such modifications may also result from management’s belief that it has identified more economical or efficient means of achieving our objectives. Furthermore, such changes could relate to minor aspects of the business plan, such as the methods in which we sell our crop productivity solutions, or to key aspects of the plan, such as the type of technologies that we seek to commercialize. Changes to our business plan could result in material delays to the commercialization of our products.

 

Our failure to accurately forecast and manage inventory could result in an unexpected shortfall or surplus of products which could harm our business.

 

We are required to produce inventories of certain of our products (mainly seeds and biologicals) and we monitor our inventory levels based on our own projections of future demand. Because of the significant time it takes to produce commercial quantities of seeds, production decisions must be made well in advance of sales. An inaccurate forecast of demand for any seed variety can result in the unavailability of seeds in high demand. Such unavailability may depress sales volumes and adversely affect customer relationships. Conversely, an inaccurate forecast could also result in an over-supply of seeds which may increase costs, negatively impact cash flow, reduce the quality of inventory and ultimately create write-offs of inventory. The acquisition of Rizobacter has increased the scale of our sales operations and as a result increased the magnitude of these risks, the realization of which could have a material adverse effect on our business, results of operations and financial condition.

 

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Disruption to our IT and operating system could adversely affect our reputation and have a material adverse effect on our business and results of operations.

 

Disruption or failure of our IT system due to technical reasons, natural disaster or other unanticipated catastrophic events, including power interruptions, storms, fires, floods, earthquakes, terrorist attacks and wars could significantly impair our ability to deliver data related to our projects to our collaborators on schedule and materially and adversely affect our relationships with our collaborators, our business and our results of operations. We expect to continue to develop our computational technologies and may need to update our IT system and storage capabilities. If our existing or future IT system does not function properly, or if the IT system proves incompatible with our new technologies, we could experience interruptions in data transmissions and slow response times, preventing us from completing routine research and business activities. Furthermore, we can provide no assurance that our current IT system is fully protected against third-party intrusions, viruses, hacker attacks, information or data theft or other similar threats.

 

Our business and operations would suffer in the event of computer system failures, cyber-attacks or a deficiency in our cyber-security.

 

Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, malware, natural disasters, terrorism war telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number intensity and sophistication of attempted attacks and intrusions from around the world have increased. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product development programs. For example, the loss of field trial data from completed or ongoing or planned field trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur material legal claims and liability, damage to our reputation, and the further development of our product candidates could be delayed.

 

Labor unions can request, and have requested, the unionization of some of our employees.

 

In December 2016 and March 2017, the Argentine Trade Union of Truck Drivers (Sindicato de Choferes de Camiones) (“SCC”) and the Argentine Union of Rural Workers and Stevedores (Unión Argentina de Trabajadores Rurales y Estibadores) (“UATRE”), respectively requested the unionization of some employees of Rizobacter. With respect to the former, the SCC requested to unionize employees involved in logistics and operation of forklifts. UATRE requested to unionize workers engaged in the handling and storage of grain related to our seed treatment process undertaken seasonally. After negotiations, both SCC and UATRE came to an agreement with Rizobacter wherein Rizobacter agreed to hire companies to carry out the operations covered by each union. Each company agreed to indemnify Rizobacter in relation to any subsequent claims by the workers registered with the SCC or the UATRE, as the case may be, without direct cause to Rizobacter.

 

If new union disputes arise, they may be time consuming and distracting to management. The occurrence of a union dispute could have a material and adverse effect on our costs and business, results of operations and financial condition.

 

We rely on third parties to grow our seeds. If these parties do not grow our seeds at a satisfactory quality, in a timely manner, in sufficient quantities or at an acceptable cost, our commercialization efforts could be delayed or otherwise negatively impacted.

 

We rely on affiliated and unaffiliated growers to grow the majority of our proprietary seed and to sell it to us at negotiated prices each year. Our current dependence upon others for the production of our seeds may adversely affect our ability to commercialize any products on a timely and competitive basis. If our growers

 

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decline to a significant degree to plant the acreage on which we rely, and if we cannot find other growers to plant the lost acreage, our inventory of seed could be insufficient to satisfy the needs of our customers. Furthermore, growers may refuse to grow our seeds for any reason, including deterioration in our business relationship or the existence of more favorable terms with other companies. For example, if a particular crop is paying a materially higher price than has been paid in the past, growers may decide to not grow our seeds in favor of receiving a higher return from an alternative crop planted on the same acreage. If third-party growers decline to grow our seeds or if they are unable to grow our seeds at acceptable quality levels, our business, results of operations and financial condition could materially decline.

 

We are subject to anti-corruption and anti-money laundering laws with respect to both our domestic and international operations, and non-compliance with such laws can subject us to criminal and civil liability and harm our business.

 

We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C.§201, the U.S. Travel Act, the USA PATRIOT Act, Argentine Law No. 27,401, as amended, and possibly other anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit us and our collaborators from authorizing, offering, or directly or indirectly providing improper payments or benefits to recipients in the public or private sector. We or our collaborators may have direct and indirect interactions with government agencies and state-affiliated entities and universities in the course of our business. We may also have certain matters come before public international organizations such as the United Nations. We use third-party collaborators, joint venture and strategic partners, law firms, and other representatives for regulatory compliance, patent registration, lobbying, deregulation advocacy, field testing, and other purposes in a variety of countries, including those that are known to present a high corruption risk such as India, China, and Latin American countries. We can be held liable for the corrupt or other illegal activities of these third-party collaborators, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. In addition, although we have implemented policies and procedures to ensure compliance with anti-corruption and related laws, there can be no assurance that all of our employees, representatives, contractors, partners, or agents will comply with these laws at all times. Noncompliance with these laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other or injunctions, suspension and debarment from contracting with certain governments or other persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations, and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, results of operations, and financial condition.

 

A portion of our revenue is generated from government grants from Argentine government entities and our operations rely on grants to fund our technology sourcing and product development activities. We cannot guarantee that we will continue to obtain government grants in the future, and our failure to do so for any reason could require us to change our operating model.

 

The receipt of government grants is central to our strategy of minimizing our capital expenditures in connection with technology sourcing and product development and represents an important means of development of early-stage technology. Pursuant to such grants, the government directly pays for, or we are reimbursed for certain expenses incurred in connection with, our technology development activities. Additionally, a portion of our revenue is generated from payments to us or payments made directly to our suppliers in the form of government grants.

 

Our ability to obtain grants and fund our technology sourcing and product development activities with funds received from government entities in the future depends upon the availability of funds under applicable government programs and approval of our applications to participate in such programs. The application process for these grants and other incentives is highly competitive. We may not be successful in obtaining any additional grants, loans or other incentives. The receipt of grant funds also subjects us to compliance with the specific grant

 

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requirements, including rigorous documentation requirements. Failure to comply with these requirements could lead to termination of these grant or difficulties in obtaining new grants, as well as an inability to receive reimbursement for our costs or a requirement to refund costs previously reimbursed.

 

Additionally, we are subject to audits in connection with our grant funds, which may subject us to penalties if we are not compliant with applicable requirements. An audit could result in a material adjustment to our results of operations and financial condition. In addition, serious reputational harm or significant adverse financial effects could occur if allegations of impropriety are made against us, even if we are ultimately found to have done no wrong.

 

Finally, there can be no assurance that the Argentine government, or the international bodies such as the Inter-American Development Bank and the World Bank that historically have provided the funding that the Argentine government has used to make research grants, will continue to provide grants or funding at current levels or at all. To the extent that our existing grants are terminated or modified or we are unsuccessful in securing government grants in the future, we may have to modify our business strategy and would lose a potential source of revenue and means of sourcing and developing new technology, which could adversely affect our results of operations and increase our costs.

 

Risks Related to Our Intellectual Property

 

Agreements with our collaborators and third parties may not adequately prevent disclosure of trade secrets, know-how and other proprietary information, which could materially adversely affect our technology and harm our business.

 

We rely on a combination of intellectual property laws and other agreements with our collaborators and third parties to protect and otherwise seek to control access to, and distribution of, our proprietary information. These measures may not prevent disclosure, infringement or misappropriation of our confidential information. Our confidentiality and nondisclosure agreements or covenants may not be enforceable under applicable law and, even if they are enforceable, may be breached, and we may not have adequate remedies for such a breach that would effectively prevent the further dissemination of our confidential information or direct competition with us by a joint venture partner. We also have limited control over the protection of trade secrets used by our collaborators and could lose future trade secret protection if any unauthorized disclosure of such information occurs. Enforcement of any claim that a party illegally disclosed confidential information or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, others may independently discover our trade secrets and proprietary information, and in such cases, we could not assert any trade secret rights against such parties. Laws regarding trade secret rights in certain markets where we operate may afford little or no protection of our trade secrets. If any of our trade secrets were to be disclosed to or independently developed by a competitor, or if we otherwise were to lose protection for our trade secrets or proprietary know-how, the value of this information may be greatly reduced and our business and competitive position could be harmed. Moreover, our collaborators may allege that we have disclosed their trade secrets or confidential information.

 

We may not be able to adequately protect our intellectual property rights throughout the world.

 

Our commercial success depends in part on our ability to obtain and maintain patent or other intellectual property protection and/or trade secrets protection for the technologies we develop and use. We are responsible for determining the jurisdictions in which patent protection will be pursued for our intellectual property. Filing, prosecuting, maintaining and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States are less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States and other countries in which we file for patent protection, such as Argentina, China, India, Brazil, Mexico and Australia. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products, and we may be unable to prevent such competitors from importing those infringing products into territories where we have patent protection but enforcement is not as strong due to the exhaustion of rights. These

 

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products may compete with our product candidates and our licensed patents and other intellectual property rights may not be effective or sufficient to prevent them from competing in those jurisdictions. In addition, competitors could use our licensed patent disclosures and/or reverse engineer our trade-secret-protected products in order to produce competing products. Moreover, growers or others in the chain of commerce may raise legal challenges against our intellectual property rights or may infringe upon our intellectual property rights, including through means that may be difficult to prevent or detect. For example, in Argentina, growers may legally avoid paying royalties to the owners of intellectual property if they keep the seeds from their own harvests and plant them for personal use. Argentine legislation in respect of breeders’ rights includes a concept of a “farmer’s privilege,” which allows growers to use seeds obtained from their own harvests to be replanted on their own farm. According to the National Seed Institute of Argentina (Instituto Nacional de Semillas), the reserves of seeds kept for personal use has grown significantly in recent years, which may increase the likelihood that growers illegally claiming the privilege may use and/or sell GM seeds into the market without paying royalties owed to us.

 

The legal systems of certain countries, including China, where we have licensed patent applications, have not historically favored the enforcement of patents or other intellectual property rights, which could hinder us from preventing the infringement of our licensed patents or other intellectual property rights and result in substantial risks to us. Proceedings to enforce our licensed patent rights in the United States or foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our licensed patents at risk of being invalidated or interpreted narrowly and our licensed patent applications at risk of not issuing and could provoke third parties to assert patent infringement or other claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license from third parties.

 

Changes in Argentine and U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

 

As is the case with other biotech companies, our success is heavily dependent on intellectual property, including patents. Obtaining and enforcing biotech patents involves technological and legal complexity, and is costly, time consuming, and inherently uncertain. In this regard, the Argentine Patent Office (Instituto Nacional de Propiedad Intelectual) issued Regulation 283/15 with new guidelines for examining biotech inventions. These guidelines seriously restrict the patentability of several categories of inventions in the agricultural field. This restriction is already being followed in the practice of the Argentine Patent Office.

 

In September 2016, the Argentine Patent Office issued Argentine Regulation 56/16, under which the Argentine Patent Office will deem that any patent application whose examination had not begun by October 15, 2016 satisfies the substantive requirements of patentability (novelty, non-obviousness and industrial application); provided that a patent has been granted abroad for the same invention by a foreign patent office carrying out substantive examination in a country whose patent law has the same substantive requirements as Argentine law. This can result in prosecution times that are substantially shorter, and similar to those of the fastest jurisdictions. In particular, the patent office has applied this regulation to biotech cases as long as they are directed to matter that is not affected by the guidelines.

 

In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. In a recent ruling (in re “Monsanto Technology LLC c/ Instituto Nacional de la Propiedad Industrial s/ Denegatoria de Patente”, case number CCF 8044/2007), Tribunal III of the Civil and Commercial Federal Court of Appeals of the City of Buenos Aires confirmed, by revoking a decision of a lower court, the rejection of a biotechnological patent application by the Argentine Patent Office, with the understanding that the invention should be protected as a plant variety protection (“PVP”) and not under a patent (the patent application was for a recombinant DNA molecule and a cell transformed by such molecule). Lack of inventive activity and non-patentable matters are also mentioned as grounds in this precedent. Although the Court of Appeals’ decision is now being reviewed by

 

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Argentine Supreme Court of Justice, this precedent may adversely affect patentability of the technologies we develop. Depending on decisions by the Argentine and U.S. Congresses, the federal courts in each country, the U.S. Patent and Trademark Office and the Argentine Patent Office, as well as the relevant authorities in other countries in which we hold patents, the laws and regulations governing patents could change in unpredictable ways that may weaken or undermine our ability to obtain new patents or to enforce our existing licensed patents and patents we might obtain in the future. During recent years, certain sectors of the Argentine agricultural industry have been requesting that the Argentine PVP Law is amended.

 

If we or one of our collaborators or licensees are sued for infringing the intellectual property rights of a third party, such litigation could be costly and time consuming and could prevent us or our collaborators or licensees from developing or commercializing products that incorporate our technology.

 

Our ability to generate significant revenues from our products depends on our and our joint ventures’ and licensees’ ability to develop, market and sell products and utilize our proprietary technologies without infringing the intellectual property and other rights of any third parties.

 

As the agricultural biotech industry continues to develop, we, our collaborators or licensees may become party to, or threatened with, litigation or other adverse proceedings regarding intellectual property or proprietary rights in our technology, processes, developed seed traits or seed treatments. Third parties may assert claims based on existing or future intellectual property rights and the outcome of any proceedings is subject to uncertainties that cannot be adequately quantified in advance. Any litigation proceedings could be costly and time consuming. A negative outcome from an intellectual property infringement suit could result in liability for monetary damages, require us to indemnify our licensees for damages arising from warranties we have made about the intellectual property we have licensed, which claims might not be subject to a cap, or treble damages and attorneys’ fees if we are found to have willfully infringed a patent. There is also no guarantee that we, our collaborators or licensees would be able to obtain a license under such infringed intellectual property on commercially reasonable terms or at all. A finding of infringement could prevent us, our collaborators or our licensees from developing, marketing or selling a product or force us to cease some or all of our business operations. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel may be diverted as a result of these proceedings, which could have a material adverse effect on our operations. In some cases, our agreements with our collaborators or licensees might oblige us to pay for the enforcement of our licensed intellectual property rights, even though our collaborators or licensees may be responsible for commercializing the potentially infringing products. Claims that we have misappropriated the confidential information or trade secrets of third parties could similarly have a negative impact on our business.

 

The value of our intellectual property could diminish due to technological developments or challenges by competitors, making our products less competitive.

 

Our intellectual property rights are important to the operation of our business and the commercialization of our crop productivity products. We rely on a combination of patents, PVP, trademarks, trade secret laws, confidentiality provisions and licensing arrangements to establish and protect our intellectual property. However, the importance of technology development and intellectual property protection in the crop productivity industry increases the risk that technological advances by others could render our products less competitive. Our business could be negatively affected by any of the following:

 

·                       our issued licensed patents, PVP certificates and trademark registrations may be successfully challenged by our competitors;

 

·                       we may be unable to obtain intellectual property licenses that are necessary or useful to our business on favorable terms, or at all;

 

·                       new technology that is independently developed by others may supersede our technology and make our products less desirable or costlier in the marketplace;

 

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·                       competitors may design around our licensed patent and/or PVP protections; and

 

·                       competitors may reverse engineer our trade secret technologies.

 

We may be required to pay royalties to employees who develop inventions that have been or will be commercialized by us, even if the rights to such inventions have been assigned to it, exclusive licenses have been granted to it and the employees have waived their rights to royalties or other additional compensation.

 

Under Argentine Patent and Utility Models Law No. 24,481 and Argentine Labor Law No. 20,744, which provide the legal framework related to ownership of inventions developed during an employer-employee relationship, the employer is awarded ownership of inventions when the employee was hired for the purpose of engaging in inventive discovery or when such invention otherwise derives from the knowledge acquired by virtue of the employee’s working for the employer. Depending on the nature and the scope of an employee’s contribution to an invention and the nature of his or her hiring, he or she may be entitled to additional compensation by the employer; however, the employer will still retain ownership rights on the conditions mentioned above. If an employee was hired for a purpose other than to engage in inventive discovery and he or she creates an invention that is not related to the employer’s processes, methods or business, the employee shall be the owner of the invention.

 

A significant portion of our employees are dedicated to activities that may be considered inventive. As a result, a significant portion of our employees execute confidentiality and ownership rights agreements upon commencement of employment whereby they agree to classify all work undertaken by them as engagement in inventive discovery, which grants us all ownership rights in inventions created while such employees are employed by us. If these assignments or exclusive licenses were deemed invalid or unenforceable, we could be required to pay royalties to our employees who have invented intellectual property that we have commercialized, which in turn may have a material adverse effect on our results of operations. In addition, if these assignments or exclusive licenses were deemed invalid or unenforceable, it is possible that our employees could assign or license to third parties their rights in any inventions created while employed by us. This could have a material adverse effect on our results of operations.

 

Risks Related to Bioceres’ Acquisitions

 

Certain of the Rizobacter shares are subject to a judicial injunction.

 

Concurrently with the closing of business combination, the Rizobacter Call Option was exercised and we currently own 80.00% of Rizobacter’s capital stock through our subsidiary RASA Holding, 29% of which are subject to a precautionary measure issued pursuant to an injunction that affects 44% of the total share capital of Rizobacter. In addition, the precautionary measure also covers 30% of the dividends distributed on such shares, directing such percentage of dividends into a judicially created escrow account. Simultaneously with the exercise of the Rizobacter Call Option, 665,078 of the UAC shares representing 10% of Rizobacter shares subject to the precautionary measures were pledged to Bioceres S.A. The precautionary measure relates to litigation among historical shareholders of Rizobacter arising from a disputed transfer of shares that occurred in 1995. Although the Supreme Court of Argentina ruled against certain of the litigating historical shareholders, such shareholders subsequently pursued other legal recourse—including the precautionary measure and non-innovative (medida de no innovar)—to further dispute the original transfer of shares. The non-innovative measure (medida de no innovar) was overturned by an Argentine court of appeals on April 17, 2018.

 

We purchased our controlling stake in Rizobacter subject to the precautionary measure and associated ongoing litigation. Should such contingencies be lifted, the Parent may be obligated to pay a contingent purchase price of US$17.3 million to certain selling shareholders of Rizobacter. Conversely, should the court rule against the free transferability of the affected shares, we would be obligated to return certain shares, thereby reducing our equity participation in Rizobacter, and the Parent would not be obligated to pay the abovementioned contingent purchase price. Given the Supreme Court of Argentina’s finding that the 1995 share transfer was valid, it is not likely or probable that our equity participation in Rizobacter will be affected and that the Parent may be obligated to pay the contingent purchase price of US$17.3 million. The same Rizobacter shareholders

 

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who challenged the 1995 transfer requested an additional precautionary measure against the sellers and Rizobacter relating to the same disputed share transfer, in response to which Rizobacter filed a motion for reversal with an appeal, which was granted by an Argentine court of appeals on April 17, 2018, overturning the non-innovative measure.

 

We may not be able to manage our growth successfully.

 

We expect that the acquisition of Rizobacter will expand our operations and that such expansion will continue. As we continue to grow, we must improve our operational, technical and managerial knowledge and compliance systems in order to effectively manage our operations across the expanded group. Failure to integrate, monitor and manage expanded operations could have a material adverse effect on our business, results of operations and financial condition.

 

Integration of Rizobacter involves certain risks that may have a material adverse effect on us.

 

We have engaged in acquisitions in the past, including the acquisition of Rizobacter in October 2016, and may complete further mergers and acquisitions in the future as part of our growth strategy. We believe that these transactions will contribute to our continued growth and competitiveness.

 

Like any acquisition of companies and assets and the integration of such companies and assets, the acquisition of Rizobacter involves certain risks, including the risk that:

 

·                       integrating new networks, information systems, personnel, financial and accounting systems, risk and other management systems, financial planning and reporting, products and customer bases into our existing business may run into difficulties, cause us to incur unexpected costs and operating expenses and place additional demands on management time;

 

·                       we may incur unexpected liabilities or contingencies relating to acquired businesses;

 

·                       the expected operation and financial synergies and other benefits from such acquisitions may not be fully achieved;

 

·                       the use of more cash or other financial resources on integration and implementation activities than expected; and

 

·                       the use of more cash or other financial resources on integration and implementation activities than expected.

 

If we fail to achieve the business growth opportunities, cost savings and other benefits it anticipates from mergers and acquisition transactions, or incur greater integration costs than it has estimated, our business, results of operations and financial condition may be materially and adversely affected.

 

We may acquire businesses or products, or form strategic alliances, in the future, and we may not realize the benefits of such acquisitions.

 

We plan to selectively partner, in-license or acquired 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 the 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 you that, following any such

 

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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.

 

Risks Related to Operating in Latin America and Argentina

 

Latin America

 

Latin America has experienced, and may continue to experience, adverse economic or political conditions that may impact our business, financial condition and results of operations.

 

Our business is dependent to a certain extent upon the economic conditions prevalent in Argentina, as well as the other Latin American countries in which it currently operates, such as Uruguay, and in which it may seek to expand operations in the future, such as Brazil. Latin American countries have historically experienced uneven periods of economic growth, recessions, periods of high inflation and economic instability. Recently, the economic growth rates of the economies of many Latin American countries have slowed and some have entered mild recessions. Additionally, economic and political developments in Latin America, including future economic changes or crises (such as inflation, currency devaluation or recession), government deadlock, political instability, terrorism, civil strife, changes in laws and regulations, restrictions on the repatriation of dividends or profits, expropriation or nationalization of property, restrictions on currency convertibility, volatility of the foreign exchange market and exchange controls could impact our operations and/or the market value of the ordinary shares and the ADSs and have a material adverse effect on our business, financial condition and results of operations.

 

Latin American governments have exercised, and continue to exercise, significant influence over the economies of the countries in which we operate, which could adversely affect our business, financial condition, results of operations and prospects.

 

Historically, governments in Latin America have frequently intervened in the economies of their respective countries and have occasionally made significant changes in policy and regulations. Governmental actions to control inflation and other policies and regulations have often involved, among others, price controls, currency devaluations, capital controls and tariffs. Our business, financial condition, results of operations and prospects may be adversely affected by the changes in government policies or regulations of Latin American governments, including:

 

·                       exchange rates and exchange control policies;

 

·                       tariff and inflation control policies;

 

·                       price control policies;

 

·                       liquidity of domestic capital and lending markets;

 

·                       tax policies, royalty and tax increases and retroactive tax claims; and

 

·                       other political, diplomatic, social and economic developments in or affecting the countries in which we operate.

 

In July 2018, Andrés Manuel López Obrador was elected president of Mexico and assumed office on December 1, 2018, and in October 2018, Jair Bolsonaro was elected president of Brazil assumed office on January 1, 2019. We cannot predict the changes these new administrations may bring, the impact of such changes on the Argentine economy or the business and results of the operations of our Argentine subsidiaries.

 

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Argentina

 

Our business, results of operations and financial condition may be adversely affected by fluctuations in currency exchange rates, including between the U.S. dollar and the Argentine peso.

 

In recent years, and especially during the last months, the Argentine peso has suffered significant devaluations against the U.S. dollar. In 2015, the peso depreciated 51.73% against the U.S. dollar primarily after the lifting of certain foreign exchange restrictions in the month of December, mainly as a consequence of the substantial reduction of the spread between the exchange rate on the Argentine Exchange Currency Market (Mercado Único y Libre de Cambio) (“MULC”) and the unofficial market. Since the devaluation in December 2015, the Central Bank of Argentina (Banco Central de la República Argentina) (“Central Bank”) has allowed the peso to float and significantly limited interventions to those needed to ensure the orderly functioning of the MULC. In 2016, the peso depreciated 22.15% against the U.S. dollar and in 2017, the peso depreciated 18.45% against the U.S. dollar.

 

Due to several factors, including but not limited to the raising of the interest rate by the US Federal Reserve, the inability of the Argentine government to perform structural changes and reduce the fiscal deficit, the Argentine government’s increasing need for international financing, the increase of the Argentine government’s inflation goals for 2018, a historical drought that affected the crops production (main export of Argentina) and the Turkish crisis, during the first half of 2018 the Argentine peso suffered a new sharp depreciation, which as of December 31, 2018 accumulated 103.83%. As a consequence of the recent inflation trends, the peso qualifies as a currency in a hyperinflationary economy as of July 1, 2018.

 

As part of the plan to control the foreign exchange rate and inflation, on June 7, 2018, the Argentine government and the International Monetary Fund (“IMF”) announced a technical agreement through which the IMF would grant to Argentina a stand-by loan for an amount of up to $50 billion for a term of up to three years to strengthen the federal reserves and Argentina’s financial and fiscal position. On June 21, 2018, the IMF made a first disbursement of $15 billion under the agreement. By the end of September 2018, the amount of the stand-by loan was increased an additional $7.1 billion. By the end of October 2018, the IMF made the second disbursement of $5.7 billion and by the end of December made a third disbursement of $7.6 billion. It is expected that the IMF will make additional disbursements in 2019 for $22.8 billion.

 

On September 28, 2018, the U.S. dollar exchange rate reached a peak of AR$40.8967 per U.S. dollar. Effective October 1, 2018, the Central Bank defined foreign exchange intervention and non-intervention zones for the U.S. dollar exchange rate until the end of 2018, at AR$34 per U.S. dollar in the lower bound and AR$44 per U.S. dollar in the upper bound. Such rates are adjusted daily, provided that if the exchange rate is beyond the upper bound, the Central Bank may sell foreign currency for a daily amount of up to US$50 million, and beyond the lower bound, the Central Bank may increase the monetary base backed with the increase of the Argentine federal reserves. As of the date of this report, the exchange rate was equal to AR$41.509 per U.S. dollar, while the non-intervention zones were fixed at AR$38.642 per U.S. dollar in the lower bound and AR$50.007 per U.S. dollar in the upper bound. The sharp depreciation of the Argentine peso in 2018 has fostered again inflation and created a strong volatility in the U.S. dollar exchange rate that gave raise to doubts on further depreciations of the Argentine peso and the control of the inflation levels, which could lead to a new financial crisis. We are unable to predict the future value of the peso against the U.S. dollar. If the peso continues to devalue, all or some of the negative effects on the Argentine economy related to such devaluation could reappear.

 

Our combined financial information included herein is presented in U.S. dollars. Therefore, the resulting exchange differences arising from the translation of balances and transactions in Argentine pesos to U.S. dollars are recognized in the financial gain or expense item. Fluctuations in exchange rates relative to the U.S. dollar could impair the comparability of our results from period to period and could have a material adverse effect on our results of operations and financial condition. In addition, our results of operations and financial condition are affected by changes in the Argentine peso to U.S. dollar exchange rate because the majority of our operations are conducted in Argentina and, accordingly, a significant portion of our costs are incurred in Argentine pesos, while our revenues are primarily denominated in or influenced by U.S. dollars. Consequently, appreciation of the U.S. dollar relative to the Argentine peso, to the extent not offset by inflation in Argentina, could result in

 

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favorable variations in our operating margins and, conversely, depreciation of the Argentine peso against the U.S. dollar may raise our costs in U.S. dollars, which would increase the prices of our commercial technology, products and services to our customers, which, in turn, could adversely affect our business and results of operations and cause significant variability in our results of operations from period to period. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting Our Results of Operations—Macroeconomic conditions” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Factors affecting comparability of prior periods.”

 

The devaluation of the Argentine peso has had a negative impact on the ability of certain Argentine businesses to honor their foreign currency-denominated debt and has also led to very high inflation and significantly reduced real wages. We have a significant amount of indebtedness denominated in U.S. dollars. If the Argentine peso is further significantly devalued, the Argentine economy and our business could be adversely affected. Significant variations in the comparative value of the Argentine peso to the U.S. dollar could adversely affect our business and results of operations.

 

As of July 1, 2018, the peso qualifies as a currency of a hyperinflationary economy, and we are required to apply inflationary adjustments to our financial statements, which could adversely affect our Argentine subsidiaries’ financial statements, results of operations and financial condition.

 

Pursuant to the International Accounting Standards (“IAS”) 29 (Financial Reporting in Hyperinflationary Economies), the financial statements of entities whose functional currency is that of a hyperinflationary economy must be adjusted for the effects of changes in a suitable general price index. IAS 29 does not prescribe when hyperinflation arises, but includes several characteristics of hyperinflation. The International Accounting Standards Board (“IASB”) does not identify specific hyperinflationary jurisdictions. However, in June 2018, the International Practices Task Force of the Centre for Quality (“IPTF”), which monitors “highly inflationary countries” categorized Argentina as a country with projected three-year cumulative inflation rate greater than 100%. Additionally, some of the other qualitative factors of IAS 29 were present, providing prima facie evidence that the Argentine economy is hyperinflationary for purposes of IAS 29. Therefore, Argentine companies using International Financial Reporting Standard as adopted by the IASB (“IFRS”) are required to apply IAS 29 to their financial statements for periods ending on and after July 1, 2018.

 

Similarly, Argentine Generally Accepted Accounting Principles (“Argentine GAAP”) (Technical Resolutions No. 17, 39 and 41 (“TR 17”)) also requires the adjustment of financial statements to reflect the changes in general price index in the context of hyperinflation. The Argentine Federation of Economic Sciences Professionals Bodies (Federación Argentina de Consejos Profesionales de Ciencias Económicas) (“FACPCE”), after finding the presence of the qualitative requirements of Argentine GAAP for the adjustment, stated that the adjustment should be applied to all Argentine companies’ financial statements for periods ending on or after July 1, 2018; provided that, for all financial statements ending between July 1, 2018 and September 30, 2018, the adjustment is optional.

 

Adjustments to reflect inflation, such as those required by IAS 29 and TR 17, were prohibited by law No. 23,928 (the “Law 23,928”). Additionally, Decree No. 664/03, issued by the Argentine government (the “Decree”), instructed regulatory authorities, such as Public Registries of Commerce, the Superintendence of Corporations of the City of Buenos Aires and the Argentine Securities Commission (Comisión Nacional de Valores) (“CNV”), to accept only financial statements that comply with the prohibition set forth by the Law 23,928. However, on December 4, 2018, Law 27,468 abrogated Decree No. 664/03 and amended Law 23,928 indicating that the prohibition of indexation no longer applies to the financial statements. According to the foregoing, on December 26, 2018, the CNV amended its rules to adopt the adjustments to reflect inflation under IAS 29 for the periods ending on and after December 31, 2018, and on February 4, 2019, extended the term for the filing of the interim unaudited financial statements ended on December 31, 2018 until March 14, 2019. For purposes of the determination of the indexation for tax purposes, Law 27,468 substituted the WPI (as defined below) for the CPI, and modified the standards for triggering the tax indexation procedure. During the first three years as from January 1, 2018, the tax indexation will be applicable if the variation of the Consumer Price Index (“CPI”) exceeds 55% in 2018, 30% in 2019 and 15% in 2020. From January 1, 2021, the tax indexation procedure will be triggered under similar standards as those set forth by IAS 29 and TR 17. To the extent that the CPI

 

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increased by 47.6% in 2018 (below the statutory threshold for this year), the tax indexation procedure was not triggered for 2018. As a result, beginning with the period ending on December 31, 2018, Bioceres’ Argentine subsidiaries will prepare financial statements in compliance with IFRS, adopting IAS 29 and TR 17 for regulatory purposes in Argentina. However, Bioceres’ Argentina subsidiaries’ interim financial statements as of September 30, 2018 were prepared, for regulatory purposes, to comply with IFRS or Argentina GAAP without adopting IAS 29 or TR 17, and will differ from such subsidiaries’ financial statements prepared in connection with international reporting requirements adopting IAS 29 and TR 17.

 

We cannot predict the full future impact that the application of IAS 29 and TR 17 and the eventual application of the tax indexation procedure and related adjustments will have on Bioceres’ Argentine subsidiaries’ financial statements or the effects on our business, results of operations and financial condition.

 

Government intervention in the Argentine economy could adversely affect the economy and our financial condition and results of operations.

 

During recent years, the Argentine government increased its direct intervention in the economy, including through the implementation of regulation of market conditions, expropriations or nationalizations and price controls.

 

For example, in 2012, the Kirchner administration removed the directors and senior officers of YPF S.A., Argentina’s largest oil and gas company, which was controlled by the Spanish group Repsol, and the Argentine Congress approved a bill to expropriate the shares held by Repsol representing 51% of the shares of YPF S.A. In February 2014, the Argentine government and Repsol reached an agreement on the terms of the compensation payable to Repsol for the expropriation of the YPF S.A. shares, which totaled US$5.0 billion (Ps.79.3 billion) payable by delivery of Argentine sovereign bonds with various maturities. The agreement settled the claim filed by Repsol with the International Centre for Settlement of Investment Disputes (“ICSID”).

 

In December 2012 and July 2013, the Argentine Congress established new regulations relating to domestic capital markets. The new regulations generally provided for increased intervention in the capital markets by the government, authorizing, for example, the CNV to appoint observers with the ability to veto the decisions of the board of directors of companies admitted to the public offering regime under certain circumstances and suspend the board of directors for a period of up to 180 days. This power was later abrogated by the Law No. 27,440.

 

In September 2014, the Kirchner administration enacted a law that enables the Argentine government to intervene in certain markets when it considers that any party to such market is trying to impose prices or supply restrictions in such market. This law applies to all economic processes linked to goods, facilities and services which, either directly or indirectly, satisfy basic needs of the population (so-called “basic needs goods”), and grants broad powers to the relevant enforcing agency to become involved in such processes. It also empowers the enforcing agency to order the sale, production, distribution and/or delivery of basic needs goods throughout the country in case of a shortage of supply.

 

In May 2016, the Argentine congress barred companies from laying off workers for a 180-day period in a law later vetoed by President Macri.

 

More recently, and due to the foreign exchange crisis, rapidly increasing inflation and decline in economic activity during the first half of 2018, on November 8, 2018 the Central Bank issued Communication “A” 6595 imposing on financial entities a minimum cash requirement equal to 23% up to 29 days; 17% between 30 and 59 days; 11% between 60 and 89 days; 5% between 90 and 179 days; 2% between 180 and 365 days; and 0% for more than 365 days on obligations with international financial facilities; which, however, was repealed on January 1, 2019. On November 12, 2018, the Argentine government issued a decree imposing the payment of an extraordinary non-remuneratory bonus of AR$5,000 to all workers in the private sector, to be paid in two installments in December 2018 and February 2019, and imposing a notice requirement until March 31, 2019, under which all private sector employers must give notice of any proposed layoffs without cause to the Argentine Ministry of Production and Work, at least ten days prior to the proposed layoffs. In addition, effective October 1, 2018, the Central Bank defined foreign exchange intervention and non-intervention zones for the U.S. dollar

 

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exchange rate until the end of 2018, at AR$34 per U.S. dollar in the lower bound and AR$44 per U.S. dollar in the upper bound. Such rates are adjusted daily; provided that beyond the upper bound, the Central Bank may sell foreign currency for a daily amount of up to US$50 million, and beyond the lower bound, the Central Bank may increase the monetary base backed with the increase of the federal reserves. As of the date of this report, the non-intervention zones were fixed at AR$38.642 per U.S. dollar in the lower bound and AR$50.007 per U.S. dollar in the upper bound.

 

Substantially all of our assets are located in Argentina. Therefore, we are subject to political uncertainties, including expropriation or nationalization of our business or assets, or subject to renegotiation or annulment of existing contracts and other similar risk, although the current administration has not taken an interventionist approach. In the future, intervention in the economy by the Argentine government may continue or increase, the occurrence of which may adversely affect Argentina’s economy and, in turn, our business, results of operations and financial condition. We cannot assure investors that these or other measures that may be adopted by the Argentine government in the future in response to social unrest, such as nationalizations, intervention by the CNV, forced renegotiations or modifications of existing contracts, new tax policies, price fixing, regulations and reforms affecting foreign trade and investments, will not have a material adverse effect on the Argentine economy and, consequently, will not adversely affect our business, results of operations and financial condition.

 

Political developments in Argentina could adversely affect the Argentine economy.

 

Presidential and congressional elections in Argentina took place and a runoff election (ballotage) between the two leading presidential candidates was held on November 22, 2015, which resulted in Mr. Mauricio Macri being elected President of Argentina. The Macri administration assumed office on December 10, 2015.

 

Since assuming office, the Macri administration has announced and implemented several significant economic and policy reforms, including:

 

·                       Argentine National Institute of Statistics and Census (Instituto Nacional de Estadística y Censos) (“INDEC”) reforms. In January 2016, based on its determination that INDEC had failed to produce reliable statistical information, the Macri administration declared the national statistical system and the INDEC in a state of administrative emergency. INDEC implemented certain methodological reforms and adjusted certain macroeconomic statistics on the basis of these reforms which enabled a readjustment of Argentine duties towards the IMF. Since June 2015, INDEC began publishing revised data, including foreign trade and balance of payment statistics, the CPI and revised Gross Domestic Product (“GDP”) data for the years 2004 through 2015. In March 2018, the Macri administration announced the preparation of a draft bill to provide INDEC with total autonomy and to transform it into an entity that will guarantee greater statistical independence of the main macroeconomic indicators.

 

·                       Agreement with holdout creditors. The Macri administration has settled the substantial majority of outstanding claims brought by holdout creditors and has issued sovereign bonds in the international financial markets passed by Congress through Law No. 27,249. Although the size of the claims involved has decreased significantly, litigation initiated by bondholders that have not accepted Argentina’s settlement offer continues in several jurisdictions.

 

·                       Foreign exchange reforms. The Macri administration eliminated all foreign exchange restrictions, including certain currency controls, which were imposed by the previous administration. However, due to the foreign exchange crisis, soaring inflation and plummeting economic activity during the first half of 2018, on November 8, 2018 the Central Bank issued Communication “A” 6595 imposing on financial entities a minimum cash requirement equal to 23% up to 29 days; 17% between 30 and 59 days; 11% between 60 and 89 days; 5% between 90 and 179 days; 2% between 180 and 365 days; and 0% for more than 365 days on obligations with international financial facilities; which, however, was repealed on January 1, 2019. In addition, effective October 1, 2018, the Central Bank defined foreign exchange intervention and non-intervention zones for the U.S. dollar exchange rate until the end of 2018, at AR$34 per U.S. dollar in the lower bound and AR$44 per U.S. dollar in the upper bound.

 

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Such rates are adjusted daily; provided that beyond the upper bound, the Central Bank may sell foreign currency for a daily amount of up to US$50 million, and beyond the lower bound, the Central Bank may increase the monetary base backed with the increase of the federal reserves. As of the date of this report, the non-intervention zones were fixed at AR$38.642 per U.S. dollar in the lower bound and AR$50.007 per U.S. dollar in the upper bound.

 

·                       Foreign trade reforms. The Macri administration has eliminated export duties on wheat, corn, beef and other regional products, and reduced duties on soybeans by 5% from 35% to 30%. With respect to payments for imports of goods and services, the Macri administration announced the elimination of amount limitations for access to the Foreign Exchange Market for any new transactions as of December 17, 2015, and for existing debts for imports of goods and services as of April 22, 2016. On January 2, 2017, the Argentine government enacted a further reduction of the export duties rate set for soybean and soybean products, setting a monthly 0.5% cut on the export duties rate beginning on January 2018. However, due to the foreign exchange crisis in the second half of 2018, in September general export duties were re-imposed and the progressive reduction of export duties on soybean products stopped. For example, a general additional export duty has been imposed on all exports of goods, levied on the lower of 12% of the good’s FOB value or AR$3 or AR$4 per U.S. dollar, depending on the kind of the good. Also, in addition to the general additional export duty referred above, exports of soybean and soybean products have been subject to an export duty equal to 18%. And on December 28, 2018, a new export duty has been imposed on exports of services until December 31, 2020, levied on the lower of 12% or AR$4 per U.S. dollar.

 

·                       Fiscal policy. The Macri administration took steps to anchor fiscal accounts, reduce the primary fiscal deficit, eliminate subsidies, reorganize certain expenditures and generate increased revenue through a tax amnesty program. The primary fiscal deficit for 2016 was 4.6% of GDP, 0.2% lower than the Federal government target; for 2017 the primary fiscal deficit was 3.9% of GDP, 0.3% lower than the Federal government target, and for 2018, the primary fiscal deficit is 2.4%, 0.3% lower than the Federal government target. Due to the foreign exchange crisis in the second half of 2018, the Argentine government implemented a series of measures aiming at reducing the fiscal deficit drastically for the incoming years, including the suspension of public infrastructure works, the depreciation of the Argentine peso, the re-imposition of export duties, the request of a stand-by loan agreement with the IMF and the elimination of the Supportive Federal Fund (by which the Federal Government distributed 30% of the proceeds of the export duties on soybean and soybean products to the provinces and municipalities), among other things. For the incoming years, the Argentine government targets a primary fiscal deficit of 0% of the GDP for 2019 and a primary fiscal surplus of 1% of the GDP for 2020.

 

·                       Correction of monetary imbalances. The Macri administration has adopted an inflation targeting regime in parallel with the floating exchange rate regime and set inflation targets for the next four years. The Central Bank has increased stabilization efforts to reduce excess monetary imbalances and raised peso interest rates to offset inflationary pressure. The Central Bank announced inflation target ranges for 2017 (12% to 17%); 2018 (8% to 12%); and 2019 (3.5% to 6.5%). However, inflation for 2017 arose to 24.8%, and for 2018, fostered by a depreciation of 103.83% of the Argentine peso to the U.S. dollar, soared to 47.6%. The official estimation of inflation for 2019 is 29%, while private sources predict an inflation of 35% for the same period. Since October 1, 2018, in addition to the creation of the foreign exchange intervention and non-intervention zones, the Central Bank adopted a policy of zero currency issuance. Therefore, the Central Bank re-calculated the inflation target for 2019 and 2020 to 27.8% and 19.6%, respectively. See “—Risks Related to Operating in Latin America and Argentina—Argentina—Political developments in Argentina could adversely affect the Argentine economy—Foreign Exchange Reforms” and “—Risks Related to Operating in Latin America and Argentina—Argentina—Continuing high inflation may have a negative effect on the Argentine economy and on our financial performance.”

 

·                       Tax Amnesty Law. On June 29, 2016, the Argentine Congress passed Law No. 27,260, which became effective on July 22, 2016 and provides for a tax amnesty regime and tax reform. This regime allowed

 

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individuals and entities to disclose undeclared assets both abroad and in Argentina, under the conditions set forth in the law and within a period extending from its effectiveness until March 31, 2017, without the need to repatriate such assets to Argentina and without penalty (other than charges described below) or the need to explain the source of the funds, among other benefits. The law also provides that there will be no charge on assets worth up to US$25,000, and a discounted applicable tax of 5% on property and assets worth up to US$80,000. Above that threshold, the applicable tax was 10% until the end of 2016 and 15% until the end of March 2017, when the amnesty window closed.

 

·                       National Electricity State of Emergency and Reforms. Following years of very limited investment in the domestic energy sector, as well as a continued freeze on electrical power and natural gas tariffs since the 2001-2002 economic crisis, Argentina began to experience energy shortages in 2011. In response to the growing energy deficit left by the prior government, the Macri administration, upon assuming office, declared a state of emergency with respect to the national electrical power system, which will remain in effect until December 31, 2017. The state of emergency allowed the federal government to take actions designed to ensure the supply of electrical power to the country, such as instructing the Ministry of Energy and Mining to design and implement, with the cooperation of all federal public entities, a coordinated program to guarantee the quality and security of the electrical power system. In addition, the Macri administration announced the elimination of certain energy subsidies and a substantial increase in electrical power rates.

 

·                       Corporate Criminal Liability Law (Ley de Responsabilidad Penal Empresaria). On November 8, 2017, the Argentine Congress passed Law No. 27,401 which provides for the criminal liability of corporate entities when the following crimes are committed, directly or indirectly, with their intervention or on their behalf, interest or benefit: (a) local or international bribery and influence peddling, (b) negotiations that are incompatible with public office, (c) illegal payments made to public officials under the appearance of taxes or fees owed to the relevant government agency (conclusión), (d) illegal enrichment of public officers and employees, and (e) producing knowingly false balance sheets and reports to cover up local or international bribery or influence peddling. Companies found liable for committing such crimes may be subject to various sanctions, including, among others, fines ranging from two to five times the “undue” benefit that was obtained or that could have been obtained through the actions incurred in breach of this regulation. Additionally, Companies found liable may forfeit assets obtained through the illegal actions. The law became effective on March 1, 2018.

 

·                       Amendment to Labor Risks Law. On February 15, 2017, the Argentine congress passed Law 27,348, which amends and complements Labor Risks Law No. 24,557, or the Labor Risks Law, and aims to reduce litigation arising from accidents at work. Under the new regime, prior to filing a lawsuit resulting from work-related accidents, affected workers must go through jurisdictional medical commissions, in order to assess the impact of any accident and to assign benefits provided for under the Labor Risks Law.

 

·                       Productive Financing Law. On May 9, 2018, the Argentine congress passed Law No. 27,440, which amends and updates the Argentine Capital Markets Law, the Mutual Funds Law and the Argentine Negotiable Obligations Law, among others. Furthermore, the law amends certain tax provisions, including certain regulations relating to derivatives and promotes a financial inclusion program.

 

·                       Social Security Reform Law. On December 28, 2017 Argentine Law No. 27,426 was promulgated. The law provides for modifications to the method of calculation of increases of social security benefits. In most cases, minimum benefits will equal 82% of the minimum wage. The law also grants employees the option to maintain their employment status until the age of 70, though employees may choose to retire earlier. Male employees may retire at 65 and female employees may retire at 60.

 

·                       Labor Reform Draft Bill. The Macri administration announced a draft bill to reform labor and social security which was sent to the Argentine congress for debate on November 21, 2017. On November 29, 2017, the draft bill was passed by the Argentine senate, and sent to the Argentine congress the

 

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same day. The draft bill aims to improve competitiveness and efficiency of various sectors, increase employment, attract investment and reduce labor costs.

 

·                       Tax Rules.

 

·                       Pursuant to the amendment to the Personal Assets Tax Law approved by Law No. 27,480, enacted on December 5, 2018, for fiscal year 2019 the minimum taxable amount is AR$2 million. For taxpayers domiciled in Argentina, the tax rate would still be 0.25% if the aggregate amount of declared assets is between AR$2 million and AR$5 million, but it would increase to 0.5% on the excess of AR$5 million if the declared assets are of between AR$5 and AR$20 million and to 0.75% on the excess of AR$20 million if the value of informed assets is higher than AR$20 million. For individuals and entities not domiciled in Argentina, the tax rate would be maintained at 0.25%, irrespective of the value of the taxable assets.

 

·                       Law No. 27,430, enacted on December 27, 2017, which included a series of tax and social security reforms (the “Tax Reform”) did not substantially modify the tax treatment set forth in Law No. 26,893 to gains recognized by nonresidents on the sale of shares, quotas or other equity participations in Argentine companies as well as “other securities” of Argentine residents. However, the reform shifted the tax liability from nonresident purchasers to nonresident sellers. Beginning January 1, 2018, when a nonresident seller sells shares or quotas in an Argentine company to a nonresident buyer, the seller must pay Argentine Income Tax on the Capital Gains (as defined below) through its legal representative in Argentina. General Resolution No. 4,227 establishes a payment mechanism for the Argentine Income Tax on Capital Gains pertaining to completed transactions.

 

·                       Limitation of Bureaucracy and Simplification. On January 11, 2018, Decree No. 27/2018, or Decree 27/2018, was published in the Argentine Official Gazette, with the objective to reduce government bureaucracy and approve new practices which reduce costs and boost competitiveness. The Decree 27/2018 modifies and simplifies regulatory frameworks related to Argentina’s National Food Safety and Quality Service (Servicio Nacional de Sanidad y Calidad Agroalimentaria) (“SENASA”), companies, transportation, trademark and patent procedures, transportation, digital signature, access to credit and work promotion.

 

·                       Regulation of the Modern Biotechnology Promotion and Development Law. On January 17, 2018, Decree 50/2018 regulating the Modern Biotechnology Promotion and Development Law No. 26,270 was published in the Argentine Official Gazette. With the aim of promoting the development and production of modern biotechnology in Argentina through tax benefits and other incentives, Decree 50/2018 establishes benefits that apply to qualifying beneficiaries.

 

·                       Negotiation with the IMF. On June 7, 2018, the Argentine government and the IMF announced the arrival of a technical agreement for the granting of a stand-by loan to Argentina for an amount of up to US$50 billion for a term of up to three years for strengthening the federal reserves and the financial and fiscal position of Argentina. The agreement was approved for the board of directors of the IMF on June 20, 2018, together with the fiscal and economic plan for Argentina and on June 21, 2018, the IMF made the first disbursement of US$15 billion. By the end of September 2018, a new agreement was announced under which the amount of the stand-by loan is increased in US$7.1 billion. Pursuant to the agreement, by the end of October 2018, the IMF made the second disbursement of $5.7 billion and by the end of December made a third disbursement of $7.6 billion. It is expected that the IMF would make additional disbursements in 2019 for US$22.8 billion.

 

Some of the measures proposed by the Macri administration may generate political and social opposition, which may in turn prevent the new government from adopting such measures as proposed. Political parties opposed to the Macri administration retained a majority of the seats in both chambers of the Argentine Congress in the last elections, which will require the Macri administration to seek political support from the opposition for its economic proposals. In October 2017, mid-term congressional elections were held in Argentina. Although

 

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President Macri’s governing coalition obtained the largest share of the votes at the national level, it continues without a majority in either chamber of congress. Such circumstances create further uncertainty in the ability of the Macri administration to pass legislation required to implement its proposals. In addition, there are presidential elections in Argentina in October 2019, and there are uncertainties on whether Macri will run for re-election or will be re-elected, or other candidate from his coalition will be elected, and the coalition majorities at both chambers of congress. Therefore, there remains uncertainty on the continuation of the measures and policies adopted by the Macri administration, or the changes to be adopted by a new administration and their impact on the economy and our business.

 

The fiscal, monetary and currency adjustments undertaken by the Macri administration subdued growth in the short-term. Immediately after most of the foreign exchange controls were lifted on December 10, 2015, the dismantling of the multiple exchange regime resulted in the official peso exchange rate (available only for certain types of transactions) falling in value by 40.1%, as the peso-U.S. dollar exchange rate reached Ps.13.76 to US$1.00 on December 17, 2015. As of December 2016, the Argentine peso depreciated 22.15% and as of December 2017, the Argentine peso depreciated 18.45%. During 2018, the Argentine peso has depreciated 103.83% (with a peak of AR$40.8967 to US$1 in September 30, 2018) accumulating a total depreciation of 284.84% since December 16, 2015 (immediately after most of the foreign exchange controls were lifted and dismantling of the multiple exchange regimes). For containing the escalade of the peso-U.S. dollar exchange rate, during 2018 the Central Bank sold more than US$14 billion, reducing the Central Bank reserves; and increased the peso interest rates to more than 60%, affecting the access to domestic financing. Due to the foreign exchange crisis, in 2018 the inflation soared to 47.6% with an official estimation of 29% for 2019, while private sources predict an inflation of 35% for the same period; and the economic activity contracted 3.3% in 2018 and is expected to contract 1.6% in 2019.

 

As of the date of this report, the impact that these measures and any future measures taken by the Macri administration will have on the Argentine economy cannot be predicted. The proposed deregulation could be disruptive to the economy and fail to benefit, or harm, our business. The failure of these measures to achieve their intended goals could adversely affect the Argentine economy and our business, financial condition and results of operations.

 

The credibility of several Argentine economic indexes has been called into question, which may lead to a lack of confidence in the Argentine economy and in turn limit our ability to access the credit and capital markets.

 

Between 2007 and 2014, INDEC, which is the only institution in Argentina with the statutory authority to produce official national statistics, underwent a process of institutional and methodological reforms that gave rise to a controversy with respect to the reliability of the information it produces, including inflation, GDP and unemployment data.

 

Reports published by the IMF and data produced by private sources has shown that between 2007 and 2014, inflation rates were considerably higher than those published by INDEC. The IMF has censured Argentina for failing to adopt remedial measures addressing the quality of official data, including inflation and GDP data, as required under the Articles of Agreement of the IMF adopted at the United Nations Monetary and Financial Conference, Bretton Woods, on July 22, 1944 (the “Articles of Agreement of the IMF”).

 

Between February 2014 and November 2015, INDEC established a new inflation index, known as National Urban Consumer Price Index (Índice de Precios al Consumidor Nacional Urbano) (“NUCPI”), which measured prices on goods across the country and replaced the previous index that only measured inflation in the urban sprawl of the City of Buenos Aires. Even though the new methodology brought inflation statistics closer to those estimated by private sources, material differences between the official inflation data and private estimates remained during 2015.

 

However, during December 2015 and January 2016, the Macri administration declared the national statistical system and INDEC to be in a state of administrative emergency through December 31, 2016 and announced that INDEC would implement certain methodological reforms and adjust certain macroeconomic statistics on the basis of these reforms. Accordingly, the publication of official data on prices, poverty,

 

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unemployment and GDP was temporarily suspended and in the interim the Macri administration released an alternative temporary CPI index based on data from the City of Buenos Aires and the province of San Luis. After implementing the methodological reforms, in June 2016, INDEC resumed its CPI publications and revised GDP data for the years 2004 through 2015. Among other adjustments, in calculating GDP for 2004, INDEC made changes to the composition of GDP that resulted in a downward adjustment of approximately 12% for that year. In calculating real GDP for subsequent years based on the revised 2004 GDP, INDEC used deflators that are consistent with its revised methodology to calculate inflation. By understating inflation in the past, INDEC had overstated growth in real terms. The adjustments made by INDEC resulted in a determination of real GDP growth for the period between 2004 and 2015 of 48.6%, as opposed to a 65% growth in real terms for the same period resulting from the information used prior to June 2016. As a consequence of these reforms, on November 9, 2016, the IMF lifted its censure on Argentina, noting that Argentina had resumed the publication of data in a manner consistent with its obligations under the Articles of Agreement of the IMF. Recently, in March 2018, the Macri administration announced a draft bill to provide INDEC with total autonomy and to transform it into an entity that will guarantee greater statistical independence of the main macroeconomic indicators.

 

However, uncertainty remains as to whether official data and measurement procedures sufficiently reflect inflation in Argentina, and what effect these reforms will have on the Argentine economy. As of the date of this report, the impact that these measures and other future measures taken by the Macri administration with respect to INDEC could have on the Argentine economy and investors’ perception of the country cannot be predicted.

 

Continuing high inflation may have a negative effect on the Argentine economy and on our financial performance.

 

In the past, inflation has materially undermined the Argentine economy and the government’s ability to foster conditions that would permit stable growth. In recent years, Argentina has confronted inflationary pressures (including the depreciation of the Argentine Peso), evidenced by significantly higher fuel, energy and food prices, among other factors.

 

The reliability of INDEC’s statistical data between 2007 and 2015 has been called into question. However, since assuming office in December 2015, Macri’s administration temporarily suspended INDEC’s publication of price indexes and implemented a series of methodological reforms and adjustments to improve the reliability of the statistical information reported by INDEC. In the interim, INDEC released alternative temporary CPI index based on data from the City of Buenos Aires and the Province of San Luis and resumed CPI publications in June 2016. For further information, see “—Risks Related to Operating in Latin America and Argentina—Argentina—The credibility of several Argentine economic indexes has been called into question, which may lead to a lack of confidence in the Argentine economy and in turn limit our ability to access the credit and capital markets.”

 

According to data published by INDEC, the NUCPI increased 23.9% between January and December 2014 and 11.9% between January and October 2015. In 2014, based on data from the City of Buenos Aires, the CPI increased by 34.3%. In 2015, based on data from the Province of San Luis, the CPI grew 31.6% and based on data from the City of Buenos Aires, the CPI increased by 26.9%. For the period between January and April 2016, based on data from the Province of San Luis, the CPI grew 14.08% and based on data from the City of Buenos Aires, the CPI increased by 19.10%. After implementation of the methodological reforms, INDEC reported an increase in the CPI of 16.8% between June and December 2016, and of 24.8% in 2017. However, fostered by a depreciation of the Argentine Peso against the U.S. dollar of 103.83% during 2018, the CPI increased by 47.6%. The official estimation of CPI increase for 2019 is 29%, while private sources predict a CPI increase of 35% for the same period.

 

INDEC also published inflation figures for the Wholesale Price Index (“WPI”). According to data published by INDEC, the WPI increased 10.6% between January and October 2015, increased 34.5% in 2016 and 18.8% in 2017. Further, INDEC reported an increase of 73.5% during 2018.

 

If the fiscal deficit is not reduced and the exchange rate of the Argentine Peso to the U.S. dollar not stabilized, inflation rates could continue escalating and end in hyperinflation and a new economic crisis. There

 

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is uncertainty regarding the effects that the measures adopted, or that may be adopted in the future, by the Central Bank and/or the Argentine government may have in controlling inflation. If inflation remains high or continues to rise, Argentina’s economy may be negatively impacted, and our results of operations could be materially affected.

 

Limited access of the Federal Government and the private sector to the international capital markets could adversely affect our financial condition.

 

After Argentina’s 2001 sovereign default, resulting from defaulted bonds exchanges in 2005 and 2010, Argentina restructured approximately 91% of its defaulted debt that was eligible for restructuring. Holdout bondholders that declined to participate in the restructurings, however, filed lawsuits against Argentina in several countries, including the United States.

 

In November 2012, the United States District Court for the Southern District of New York ratified the injunction order issued on February 23, 2012, which held that Argentina had violated the pari passu clause with respect to the bondholders that had not participated in the sovereign debt swaps in 2005 and 2010, and as a consequence was required pursuant to the District Court’s ruling to pay 100% of the amounts due to the plaintiffs together with the payment of the amounts due on the next maturity date to bondholders who had participated in the debt swaps. In June 2014, the U.S. Supreme Court denied Argentina’s appeal for certiorari of the Second Circuit Court of Appeals’ ruling affirming the District Court judgment. That same month, the District Court ruled that funds should not be delivered to the holders of restructured debt in the absence of a prior agreement with the holdout bondholders. In June 2015, the U.S. Second Circuit Court of Appeals granted partial summary judgment to a group of “me-too” plaintiffs in 36 separate lawsuits, finding that Argentina violated a pari passu clause in bonds issued to the “me-too” bondholders.

 

In February 2016, the Macri administration reached agreements in principle with certain holdout bondholders to settle these claims, which were subject to the approval of the Argentine Congress and the lifting of the pari passu injunctions. In March 2016, after the District Court agreed to vacate the pari passu injunctions subject to certain conditions, the Argentine Congress ratified these settlement agreements through Law No. 27,249 and repealed the so-called Lock Law No. 26,017 and the Sovereign Payment Law No. 26,984, which prohibited Argentina to offer to holdout bondholders more favorable terms than those offered in the 2005 and 2010 debt swaps. In the months following the decisions, the Argentine government has reached settlement agreements with holders of a significant portion of the defaulted bonds and has repaid the majority of the holdouts creditors with the proceeds from a US$16.5 billion international offering of 3-year, 5-year, 10-year and 30-year bonds on April 22, 2016. Although the size of the claims involved decreased significantly, litigation initiated by bondholders that have not accepted Argentina’s settlement offer continues in several jurisdictions. Through this offering, Argentina temporarily regained access to the international capital markets.

 

Additionally, foreign shareholders of several Argentine companies have filed claims with ICSID, alleging that the emergency measures adopted by the Argentine government since the crisis in 2001 and 2002 differ from the just and equal treatment standards set forth in several bilateral investment treaties to which Argentina is a party. Many of these claims have been ruled against Argentina.

 

In January 2018, a new claim against the Argentine government was submitted by the fund “Draw Capital Partners” in New York in relation to certain interests due between 2014 and 2016. This claim has reopened discussions around Argentina’s foreign debt, despite the agreement reached by Macri’s administration to overcome the default.

 

Pursuant to a report issued by the Secretary Office of Finance in October 2018, as of June 30, 2018, Argentina’s foreign debt amounted to US$327.2 billion, which represents 77.4% of Argentina’s GDP. If the GDP Coupon is also considered, then Argentina’s foreign debt amounts to US$340.6 billion.

 

Holdout creditors litigation, as well as ICSID and other claims against the Argentine government, have resulted and may result in new material judgments against the government, lead to attachments of or injunctions relating to Argentina’s assets, or could bring Argentina in default of its other obligations, and such event may

 

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prevent Argentina from obtaining favorable terms or interest rates when accessing international capital markets or from accessing international financing at all. The termination of the injunctions issued by the U.S. courts preventing bondholders from receiving their interest payments on the bonds issued pursuant to the 2005 and 2010 exchange offers and the related subsequent events have paved the way for the Argentine government to regain access to the international capital markets.

 

However, the publication of a description of the bribes paid by Argentine businessmen to the Kirchner administration (known as the notebooks or graft scandal (escándalo de los cuadernos)), along with the strong depreciation of the Argentine peso in 2018 and the increase of the fiscal deficit and inflation, have once again limited both the Argentine government and private entities’ access to the international capital markets.

 

The Argentine government’s ability to obtain additional international or multilateral private financing or direct foreign investment may be limited, which may in turn impair its ability to implement reforms and public policies to foster economic growth. In addition, the access of Argentine companies, such as us, to the international capital markets may continue to be limited or subject to terms less favorable than those provided to companies in other countries in the region, potentially impacting our financial condition.

 

An increase in export and import duties and controls may have an adverse impact on our business.

 

Since 2002, the Argentine government has imposed duties on the exports of various primary and manufactured products. Even though the majority of such imposed duties were suspended after the Macri administration took office, similar export duties were reimposed on September 4, 2018, until December 2020, in an effort to balance the Argentine government’s budget until the economy is stabilized. See “—Risks Related to Operating in Latin America and Argentina— Argentina—Political developments in Argentina could adversely affect the Argentine economy—Foreign Trade Reforms.”

 

The government imposed the Import Monitoring System (the “SIMI”) in December 2015. Under this new system, importers are required to submit certain information electronically through the SIMI application which, once approved, will be valid for 180 calendar days.

 

The Argentine government has also enacted an import licensing regime that includes automatic and non-automatic licensing for imports according to the tariff codes of the goods to be imported. Automatic import licensing implies that the importer must only get through the SIMI and any other certification related to the imported goods. Non-automatic licensing implies that the authorities also have a ten-day term to either approve or reasonably reject the import license requested due to its effect on local businesses, aside from the other import requirements that the goods may have (including SIMI and certifications).

 

Notwithstanding the above, we cannot make assurances or predictions that there will not be further increases in the export duties or that other new export duties, taxes or quotas will not be imposed. The imposition of new export duties, taxes or quotas or a significant increase in existing export duties or the application of export quotas or the imposition of regimes that aim to restrict or control imports and exports could adversely affect our financial condition or results of operations.

 

The implementation of future exchange controls and restrictions on capital inflows and outflows could limit the availability of international credit, adversely affecting the Argentine economy, and, as a result, our financial condition and results of operations.

 

Starting in 2001, and increasingly from 2011 until President Macri assumed office in December 2015, the Argentine government increased foreign exchange controls. Together with regulations established in 2012 that subjected certain foreign exchange transactions to prior approval by the Argentine tax authorities or the Central Bank, the measures taken by the previous administration significantly curtailed access to the foreign exchange market by Argentine and non-Argentine individuals and private sector entities. In response, an unofficial U.S. dollar trading market developed in which the peso-U.S. dollar exchange rate differed substantially from the official peso-U.S. dollar exchange rate.

 

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In the past, the Argentine government also imposed informal restrictions, such as limitations on the ability of certain local companies and individuals to purchase foreign currency. These restrictions on foreign currency purchases started in October 2011 and tightened during 2012 through 2014 until the end of 2015. Informal restrictions may consist of de facto measures restricting local residents and companies from purchasing foreign currency through the foreign exchange market to make payments abroad, such as dividends, capital reductions, and payment for importation of goods and services.

 

Exchange controls which were in place in the previous administration affected the level of international reserves deposited with the Central Bank, which significantly decreased from US$47.4 billion as of November 1, 2011 to US$25.6 billion (Ps.332.9 billion) as of December 31, 2015, resulting in a reduced capacity of the Argentine government to intervene in the foreign exchange market and to provide access to such markets to private sector entities like our Argentine subsidiaries. As of December 31, 2017, the level of international reserves deposited with the Central Bank was US$55.1 billion and as of December 31, 2018, US$65.7 billion. Notwithstanding the measures adopted by the new administration, in the future the Argentine government could otherwise reduce the level of international reserves deposited with the Central Bank, which could lead to political and social tensions and undermine the Argentine government’s public finances, as has occurred in the past, which could adversely affect Argentina’s economy and prospects for economic growth.

 

Effective October 1, 2018, the Central Bank defined foreign exchange intervention and non-intervention zones for the U.S. dollar exchange rate until the end of 2018, which were set at AR$34 per U.S. dollar in the lower bound and AR$44 per U.S. dollar in the upper bound, and are adjusted daily at a monthly rate of 3%, provided that beyond the upper bound, the Central Bank may sell foreign currency for a daily amount of up to US$50 million, and beyond the lower bound, the Central Bank may increase the monetary base backed with the increase of the federal reserves. As of the date of this report, the non-intervention zones were fixed at AR$38.642 per U.S. dollar in the lower bound and AR$50.007 per U.S. dollar in the upper bound.

 

In addition, due to the foreign exchange crisis, soaring inflation and plummeting economic activity during the first half of 2018, on November 8, 2018 the Central Bank issued Communication “A” 6595 imposing on financial entities a minimum cash requirement equal to 23% up to 29 days; 17% between 30 and 59 days; 11% between 60 and 89 days; 5% between 90 and 179 days; 2% between 180 and 365 days; and 0% for more than 365 days on obligations with international financial facilities; which, however, was repealed on January 1, 2019.

 

In the future, the Argentine government could reinstate other exchange controls, transfer restrictions, repatriation obligations, mandatory deposits and take other measures in response to capital flight or a significant depreciation of the Argentine peso, all of which could limit our ability to access the international capital markets. Such measures could lead to political and social tensions and undermine the Argentine government’s public finances, as has occurred in the past, which could adversely affect Argentina’s economy and prospects for economic growth, which, in turn, could impair the ability of our Argentine subsidiaries to make dividend payments and adversely affect our business and results of operations.

 

The Argentine government may order salary increases for employees in the private sector, which could increase our operating costs and adversely affect our results of operations.

 

In the past, the Argentine government has passed laws, regulations and decrees requiring companies in the private sector to increase wages and provide specified benefits to employees and may do so again in the future. In September 2014, the minimum salary was Ps.4,400 and the Argentine government increased it to Ps.4,716 in January 2015, to Ps.5,588 in August 2015, to Ps.6,060 in January 2016, to Ps.6,810 in June 2016, to Ps.7,560 in September 2016, to Ps.8,860 in September 2017 and to Ps.10,700 in September 2018. Recently, the Argentine government has also approved additional increases of the minimum salary to Ps.11,300 as of December 2018, to Ps.11,900 as of March 2019 and to Ps.12,500 as of June 2019. Argentine employers, both in the public and private sectors, have experienced significant pressure from their employees and labor organizations to increase wages and to provide additional employee benefits. Due to the high levels of inflation, employees and labor organizations are demanding significant wage increases. Recently, the INDEC published data regarding the evolution of salaries in the private and public sectors, which reflects a salary increase in the private and public sectors, respectively, of 32.91% and 32.58% between November 2015 and December 2016, 26.7% and 25.26%

 

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between January 2017 and December 2017 and 28.3% and 27.2% between January 2018 and November 2018. However, due to high levels of inflation, employers in both the public and private sectors have historically experienced, and currently are experiencing, significant pressure from unions and their employees to further increase salaries. Recently, commercial pilots’ of Aerolíneas Argentinas S.A. (the state-owned airline) obtained a salary increase of 40.5%, and workers in the oil industry obtained a salary increase of 25.0% and have demanded additional increases. In addition, on November 12, 2018, the Argentine government issued a decree imposing the payment of an extraordinary non-remuneratory bonus of AR$5,000 to all workers in the private sector, to be paid in two installments in December 2018 and February 2019. This bonus and similar salary increases and additional payments could also have an effect on inflation, and, if, as a result of such measures and demands, future salary increases in the Argentine peso exceed the pace of the devaluation of the Argentine peso, this could have a material and adverse effect on our costs and business, results of operations and financial condition.

 

The disposition or sale of BIOX shares and/or BIOX warrants may be subject to taxation in Argentina.

 

According to amendments to Argentine Income Tax Law No. 20,628 (the “Argentine Income Tax Law”) through the Tax Reform on December 27, 2017, gains realized from the indirect sale or disposal of assets located in Argentina, including shares or other equity participations in Argentine companies by an entity or individual not resident in Argentina (“Non-Argentine Resident”) are taxable under certain conditions, as if a direct sale took place (the “Tax on Indirect Sales”).

 

The Tax Reform created a presumption of income from Argentine source on the sale or disposition by Non-Argentine Residents of shares and participations (or rights to receive such shares or participations) in foreign entities whose underlying assets are fully or partially located in Argentina, as long as the following conditions are met:

 

(1)              At least thirty percent of the value of the shares, participations or rights of the foreign entity, at the time of sale or in any of the 12 previous months, derives from assets that the entity owns directly or indirectly in Argentina. For this purpose, such Argentine assets or rights will be valued at their fair market value and will include, among others, shares or other forms of ownership, control or participation in the profits of a company incorporated in Argentina; and

 

(2)              The securities or rights of the foreign entity being sold or disposed represent, at least, ten percent of the equity of that entity, at the time of their disposal or in any of the 12 previous months. For purposes of this calculation, ownership of related entities, spouses and other relatives must be considered jointly.

 

(3)              The relevant shares and participations in the foreign entity have been acquired on or after January 1, 2018.

 

In case the Tax on Indirect Sales applies, the Argentine source gain (the acquisition cost may be adjusted by inflation) on which the Tax on Indirect Sales will be calculated is a proportion to the value of the Argentine assets held by the foreign entity with respect to the total value of the securities or rights being transferred.

 

The Tax on Indirect Sales is levied at a 15% rate on the net capital gain (the acquisition cost may be adjusted by inflation), or at a 13.5% effective rate on the gross price and should be paid to the Argentine tax authorities if (i) the buyer or acquirer is an Argentine corporate entity (in general, entities organized or incorporated under Argentine law, certain traders and intermediaries, local branches of foreign entities, sole proprietorships and individuals carrying on certain commercial activities in Argentina) (“Argentine Entity”) or an Argentine resident individual (“Argentine Resident”), by the Argentine Entity or Argentine Resident, who will act as withholding agent, or (ii) none of the parties are Argentine Entities or Residents, by the seller or transferor or its legal representative in Argentina, if any. However, such rates may be reduced if a Treaty to Avoid Double Taxation were applicable to Bioceres LLC. If the Tax on Indirect Sales becomes applicable and the tax is applied on a net basis, pursuant to current income tax rules, the acquisition cost may be adjusted by the CPI to calculate the net capital gain.

 

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Argentine Income Tax Law sets forth that the tax on Indirect Sales does not apply to transfers made within the same economic group. Pursuant to regulations issued by the Argentine Ministry of Economy, transfers within the same economic group would take place when the seller or sellers participate or participates, directly or indirectly, in at least 80% of the transferee’s capital, or vice versa, or when one or more entities participate, directly or indirectly, in at least 80% of the transferor’s and transferee’s capital, and such participations have been held for at least two years prior to the transfer.

 

The payment of the In-Kind Consideration under the Rizobacter Call Option may be subject to taxation in Argentina.

 

In the event the Rizobacter Call Option is exercised, and if the UAC shares to be delivered by UAC in connection with the payment of the In-Kind Consideration represent more than ten percent of all UAC’s issued and outstanding shares, such delivery of the UAC shares would be subject to the Tax on Indirect Sales at the level of UAC levied on the gain resulting from the difference between the UAC shares’ tax basis (acquisition cost) and the UAC shares fair market value as of the transfer date. However, the rate of the Tax on Indirect Sales might be reduced if at the time of the delivery by UAC of the UAC shares, UAC is a UK tax resident and the Treaty to Avoid Double Taxation between Argentina and United Kingdom applies. Any resulting Tax on Indirect Sales would be calculated on the proportion of the value that the Argentine assets represent with respect to the total value of the UAC shares delivered and should be paid to the Argentine tax authorities by UAC or its legal representative in Argentina, if any. However, to the extent that the delivery of the UAC shares and satisfaction of the In-Kind Consideration occurs simultaneously, there would be no tax basis for the Tax on Indirect Sales if UAC’s acquisition cost for the UAC shares equals such shares’ fair market value on the same day.

 

In addition, satisfaction of the In-Kind Consideration under the Rizobacter Call Option would be deemed a sale of the UAC shares by RASA Holding to the Grantors subject to the Tax on Indirect Sales at the level of RASA Holding. However, to the extent that the delivery of the UAC shares and satisfaction of the In-Kind Consideration occurs simultaneously, there would be no tax basis for the Tax on Indirect Sales as RASA Holding’s acquisition cost for the UAC shares equals such shares’ fair market value on the same day.

 

The holding of Argentine companies’ equity by Non-Argentine Residents and dividend distributions from Argentine Entities to Non-Argentine Residents may be subject to taxation in Argentina.

 

Non-Argentine residents are subject to Argentine personal assets tax for holding shares and other equity participations in Argentine companies as of December 31st of each year at a rate of 0.25%, which is levied on the proportional net worth value (valor patrimonial proporcional) of the shares arising from the last balance sheet. Argentine companies are obliged to pay the tax on behalf of their Non-Argentine Resident shareholders, partners or owners and are entitled to seek reimbursement from them.

 

As a result of the Tax Reform, dividends from profits obtained by Argentine Entities during fiscal years beginning on or after January 1, 2018 and up to December 31, 2019, paid to Non-Argentine Residents are subject to income tax withholding at a rate of 7% on the amount of dividends paid levied, which rate is increased to 13% for profits obtained during fiscal years beginning on or after January 1, 2020. The 13% domestic rate may be reduced by application of tax treaties signed by Argentina.

 

We cannot predict the full impact that the application of these taxes would have on Bioceres Crop Solutions, which is not an Argentine company, BCS Holding and their other Non-Argentine Resident subsidiaries in connection with their holding of shares and equity in Argentine companies.

 

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Risks Related to Our Securities

 

There can be no assurance that we will be able to comply with the continued listing standards of the NYSE American.

 

Our ordinary shares and public warrants are currently listed on the NYSE American (the “NYSE”). Our continued eligibility for listing may depend on, among other things, the amount of “public float” (equity held by non-affiliates). If the NYSE delists BIOX shares from trading on its exchange for failure to meet the listing standards, BIOX shareholders could face significant material adverse consequences including:

 

·                       a limited availability of market quotations for BIOX’s securities;

 

·                       reduced liquidity for BIOX’s securities;

 

·                       a determination that BIOX shares is a “penny stock” which will require brokers trading in BIOX share to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for BIOX’s securities;

 

·                       a limited amount of news and analyst coverage; and

 

·                       a decreased ability to issue additional securities or obtain additional financing in the future.

 

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our ordinary shares and public warrants are listed on the NYSE or another national securities exchange, they are covered securities. If our securities were no longer listed on NYSE, they would not be covered securities and we would be subject to regulation in each state in which we offer securities.

 

A significant portion of our ordinary shares following the business combination are restricted from immediate resale, but may be sold into the market in the future. This could cause the market price of our ordinary shares to drop significantly, even if our business is doing well.

 

Sales of a substantial number of shares in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our ordinary shares.

 

The initial shareholders of UAC have agreed not to transfer, assign or sell any of their shares until the earlier to occur of: (A) one year after the completion of the business combination or (B) the date on which the closing price of our ordinary shares equals or exceeds US$12.00 per share (as adjusted for share splits, share dividends, reorganizations and recapitalization) for any 20 trading days within any 30-trading day period commencing 150 days after a business combination, or earlier if, subsequent to a business combination, we complete a liquidation, merger, share exchange or other similar transaction that results in all of our public shareholders having the right to exchange their ordinary shares for cash, securities or other property.

 

In addition, in connection with the execution Exchange Agreement, UAC and Bioceres, Inc. entered into the Lock-up Agreement, pursuant to which Bioceres, Inc. may not transfer the UAC shares received as consideration in the business combination under terms that are consistent with the lock-up arrangements described above. As restrictions on resale end, the market price of our ordinary shares could decline if the holders of currently restricted shares sell them or are perceived by the market as intending to sell them.

 

The exercise of outstanding warrants would increase the number of shares eligible for future resale in the public market and result in dilution to shareholders.

 

UAC issued public warrants to purchase 11,500,000 ordinary shares as part of its IPO and private warrants to purchase 5,200,000 ordinary shares. Each public and private warrant became exercisable upon the completion of the business combination and will expire on the fifth anniversary of the completion of the business combination. Pursuant to the terms of the warrant agreement, we have agreed that as soon as practicable after the consummation of the business combination, we will use our best efforts to file with the SEC a registration statement for the registration, under the Securities Act of 1933, as amended (the “Securities Act”), of the ordinary shares issuable upon exercise of the warrants. We will use our best efforts to cause the same to become effective and to maintain the effectiveness of

 

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such registration statement and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. In addition, 7,500,000 warrants have been issued in connection with the business combination. The potential for the issuance of a substantial number of additional shares upon exercise of these warrants will result in dilution to the then existing holders of our ordinary shares and increase the number of ordinary shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our ordinary shares.

 

There is no guarantee that the public warrants will ever be in the money, and they may expire worthless.

 

The exercise price for BIOX warrants is US$11.50 per whole ordinary share. There is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.

 

Following the closing of the business combination, we are a “controlled company” within the meaning of NYSE rules and, as a result, qualify for exemptions from certain corporate governance requirements.

 

Following completion of the business combination, Bioceres S.A. controls, directly or indirectly, a majority of the voting power of Bioceres Crop Solutions’ outstanding shares. Under NYSE rules, a listed company of which more than 50.0% of the voting power for the election of directors is held by any person or group of persons acting together is a “controlled company” and may elect not to comply with certain NYSE corporate governance requirements, including the requirement (i) that a majority of the board of directors consist of independent directors, as defined under the NYSE rules and (ii) to have a compensation committee and a nominating and governance committee. We have decided to be treated as a “controlled company” and, even though the majority of our Board of Directors (along with our compensation committee and our nominating and governance committee that we chose to establish) consists of independent directors, you may not have the same protections afforded to shareholders of companies that are subject to all of the NYSE corporate governance requirements.

 

Bioceres S.A. controls us, and its interests may conflict with yours in the future.

 

Bioceres S.A. currently indirectly owns 74.7% of Bioceres Crop Solutions. As a result of this voting control, Bioceres S.A. will effectively be able to determine the outcome of all matters requiring shareholder approval, including, but not limited to, the election and removal of directors (subject to any contractual designation rights), as well as other matters of corporate or management policy (such as potential mergers or acquisitions, payment of dividends, asset sales, and amendments to organizational documents). This concentration of ownership may delay or deter possible changes in control and limit the liquidity of the trading market for BIOX shares, which may reduce the value of an investment such shares. This voting control could also deprive shareholders of an opportunity to receive a premium for their shares as part of a potential sale of Bioceres Crop Solutions. So long as Bioceres S.A. and its affiliates continue to own a significant amount of Bioceres Crop Solutions’ voting power, they may continue to be able to strongly influence or effectively control its decisions. The interests of Bioceres S.A. and its affiliates may not coincide with the interests of other holders of BIOX shares.

 

We believe we were treated as a passive foreign investment company for the taxable year ending January 31, 2019, which could result in adverse U.S. federal income tax consequences to certain U.S. investors, unless certain elections are made.

 

We will be treated as a “passive foreign investment company” (“PFIC”) for any taxable year in which either (1) at least 75% of our gross income (looking through certain 25% or more-owned corporate subsidiaries) is passive income or (2) at least 50% of the average value of our assets (looking through certain 25% or more-owned corporate subsidiaries) is attributable to assets that produce, or are held for the production of, passive income. Passive income generally includes, without limitation, dividends, interest, rents, royalties, and gains from the disposition of passive assets. We believe that we were treated as a PFIC for the taxable year ending January 31, 2019. As we were treated as a PFIC for the taxable year ending January 31, 2019, a U.S. Holder (as defined in “Taxation”) who held our shares or warrants in the taxable year ending January 31, 2019 may continue to be subject to increased U.S. federal income tax liability and may be subject to additional

 

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reporting requirements under the PFIC regime, unless certain elections are made. See the section of this report entitled “Item 10. Additional Information—E. Taxation—Material U.S. Federal Income Tax Considerations—U.S. Holders—Passive Foreign Investment Company Considerations”). We urge prospective U.S. Holders to consult their own tax advisors regarding the possible application of the PFIC rules to their individual circumstances.

 

We may not qualify as a U.K. tax resident, which would increase withholding taxes on dividends received from our subsidiaries.

 

We plan to move our place of central management and control to the United Kingdom and become a tax resident of the United Kingdom. In the event that we do not, or if the United Kingdom taxing authority does not accept that we are a United Kingdom tax resident, or any other relevant tax authority does not accept that we are a UK tax resident, then, among other things, any dividend distributions from our U.S. subsidiary would be subject to a 30% U.S. withholding tax.

 

A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.

 

Following the business combination, the price of our securities may