INVESTMENTS IN JOINT VENTURES AND RELATED PARTY TRANSACTIONS

Solazyme Bunge Joint Venture

In April 2012, the Company and Bunge formed the Solazyme Bunge JV to build, own and operate the Solazyme Bunge JV Plant, a commercial-scale renewable algal oils production facility adjacent to Bunge’s Moema sugarcane mill in Brazil. Construction of the Solazyme Bunge JV Plant commenced in the second quarter of 2012. In May 2014, the Solazyme Bunge JV Plant produced its first products on full-scale production lines, including 625,000 liter fermentation tanks, and manufacturing operations at the facility are in the process of being optimized and ramped up. Both oil and Encapso^™ products have been manufactured; production is continuing and is expected to ramp toward targeted nameplate capacity as the Company works to increase efficiency in unit operations, and balances production volumes with operating costs as it focuses on higher value products. Additional capital expenditures may be required to reach nameplate capacity depending on the product mix produced at the plant. In October 2015, the Company and Bunge entered into an amended and restated joint venture agreement to expand the Solazyme Bunge JV to include certain oils for food and other nutrition products. In this expansion of the Solazyme Bunge JV, Bunge will provide sales, marketing and application development for certain food oils, and will also provide oil processing, global distribution and logistics, and the Company will provide access to its proprietary technology for the production of certain oils and structuring fats for the food and animal nutrition markets. The Company will also provide the Solazyme Bunge JV with sales, marketing and application development for certain oils and technical expertise in regard to the implementation of its technology. The Solazyme Bunge JV is 50.1% owned by the Company and 49.9% by Bunge and is governed by a six member board of directors, three from each investor. The capital contributions for this venture are being provided jointly by Solazyme and Bunge, and the joint venture agreements include a royalty to the Company for certain products that provides additional compensation to the Company for its technology contributions. The Company and Bunge each contributed capital in the amount of $95.1 million through September 30, 2015, comprised of $24.9 million, $47.9 million, $12.3 million and $10.0 million during the nine months ended September 30, 2015 and during the years ended December 31, 2014, 2013 and 2012, respectively, to the Solazyme Bunge JV. During the nine months ended September 30, 2015, the Company contributed $5.5 million to the Solazyme Bunge JV through a reduction in the Company’s receivables due from the Solazyme Bunge JV of $5.5 million. The Company’s capital contributions paid in cash were recorded as an increase to investment in unconsolidated joint venture and a corresponding decrease to cash and cash equivalents.

The Company has determined that the Solazyme Bunge JV is a VIE based on the insufficiency of each party’s equity investment at risk to absorb losses and the Company’s share of the respective expected losses of the Solazyme Bunge JV. Currently, the optimization and ramping up of the Solazyme Bunge JV Plant is the activity of the Solazyme Bunge JV that most significantly impacts its economic performance. Although the Company has the obligation to absorb losses and the right to receive benefits of the Solazyme Bunge JV that could potentially be significant to the Solazyme Bunge JV, each of the Company and Bunge has equally shared decision-making powers over certain significant activities of the Solazyme Bunge JV, including those related to the construction, optimization and ramping up of the Solazyme Bunge JV Plant. Therefore, the Company does not consider itself to be the Solazyme Bunge JV’s primary beneficiary at this time, and as such has not consolidated the financial results of the Solazyme Bunge JV since the inception of this joint venture. The Company accounts for its interest in the Solazyme Bunge JV under the equity method of accounting. This consolidation status could change in the future due to changes in events and circumstances impacting the power to direct the activities that most significantly affect the Solazyme Bunge JV’s economic performance. The Company will continue to reassess its potential designation as the primary beneficiary of the Solazyme Bunge JV. During the three and nine months ended September 30, 2015, the Company recognized $5.9 million and $18.3 million of losses related to its equity method investment in the Solazyme Bunge JV, respectively. During the three and nine months ended September 30, 2014, the Company recognized $7.2 million and $15.7 million of losses related to its equity method investment in the Solazyme Bunge JV, respectively.

In anticipation of the Solazyme Bunge JV’s formation, in May 2011, the Company granted Bunge a warrant (the "Bunge Warrant”) to purchase 1,000,000 shares of its common stock at an exercise price of $13.50 per share. The Company accounted for the Bunge Warrant pursuant to FASB ASC 505-50, Equity-Based Payments to Non-Employees, which establishes that share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued (whichever is more reliably measurable), and the measurement date of such instruments shall be the earlier of the date at which a commitment for performance by the counterparty is reached or the date at which the counterparty’s performance is complete. As of September 30, 2015 and December 31, 2014, the Company had no warrant liability associated with the Bunge Warrant shares as the third tranche of 250,000 shares could no longer vest. The Company recorded no gain or loss related to the change in the fair value of the warrant liability during the three months ended September 30, 2015 and 2014, respectively, and a net unrealized gain of $0 and $0.7 million during the nine months ended September 30, 2015 and 2014, respectively. As of September 30, 2015, 750,000 of the Bunge Warrant shares had vested.

In addition to forming the Solazyme Bunge JV in April 2012, the Company entered into a Development Agreement with the Solazyme Bunge JV to continue to conduct research and development activities that are intended to benefit the Solazyme Bunge JV, including activities in the areas of strain development, molecular biology and process development. The Development Agreement provides that the Solazyme Bunge JV will pay the Company a technology maintenance fee in recognition of the Company’s ongoing research investment in technology that would benefit the Solazyme Bunge JV. The Company also entered into a Technology Service Agreement with the Solazyme Bunge JV under which the Solazyme Bunge JV pays the Company for technical services related to the operations of the production facility. In the third quarter of 2013, the Solazyme Bunge JV also agreed to pay the Company to support the Solazyme Bunge JV’s commercial activities, including, but not limited to, facilitating supply agreements on behalf of the Solazyme Bunge JV and providing regulatory support. In October 2015, the Company and the Solazyme Bunge JV entered into an Amended and Restated Development Agreement through which the Company will provide additional research and development targeted at completing the development of additional products for the Solazyme Bunge JV. The project plans under the Amended and Restated Development Agreement provide that the Solazyme Bunge JV will provide research funding to the Company covering periods through December 2018, payable quarterly in advance throughout the research term.

In February 2013, the Solazyme Bunge JV entered into a loan agreement with the Brazilian Development Bank (“BNDES” or “BNDES Loan”) under which it may borrow up to R$245.7 million (approximately USD $59.9 million based on the exchange rate as of September 30, 2015). As a condition of the Solazyme Bunge JV drawing funds under the loan, the Company may be required to provide a bank guarantee equal to 14.39% of the total amount available under the BNDES Loan and a corporate guarantee equal to 35.71% of the total amount available under the BNDES Loan (not to exceed the Company’s ownership percentage in the Solazyme Bunge JV). The BNDES funding has supported the construction of the Solazyme Bunge JV’s first commercial-scale production facility in Brazil, reducing the capital requirements funded directly by the Company and Bunge. The term of the BNDES Loan is eight years and the loan has an average interest rate of approximately 4.0% per annum. As of September 30, 2015, the Company’s bank guarantee was in place and the corporate guarantee was not in place. The fees incurred on the cancelable bank guarantee were not material during the three and nine months ended September 30, 2015 and 2014.

The following table summarizes the carrying amounts of the assets and the fair value of the liabilities included in the Company’s condensed consolidated balance sheet and the maximum loss exposure related to the Company’s interest in its unconsolidated VIE (the Solazyme Bunge JV) as of September 30, 2015 (in thousands):



	Assets						Liabilities
VIE	Accounts Receivable		Unbilled Revenues		Investment in Unconsolidated Joint Venture		Loan Guarantee		Maximum Exposure to Loss (1)
Solazyme Bunge JV	$	12	$	—	$	36,185	$	—	$	45,239


(1)	Includes maximum exposure to loss attributable to the Company’s bank guarantee required to be provided for the Solazyme Bunge JV of R$35.4 million (approximately $8.6 million based on the exchange rate at September 30, 2015) and non-cancelable purchase obligations of R$1.7 million (approximately $0.4 million based on the exchange rate at September 30, 2015).

The Company may be required to contribute additional capital to the VIE (for which the Company does not consider itself to be the primary beneficiary) in the future, which would increase the Company’s maximum exposure to loss. These future contribution amounts cannot be quantified at this time.

Summarized information on the Solazyme Bunge JV’s balance sheets and income statements as of September 30, 2015 and December 31, 2014 and for the three and nine months ended September 30, 2015 and 2014, respectively, was as follows (in thousands):



	September 30, 2015		December 31, 2014
Current assets	$	9,599	$	4,339
Noncurrent assets	107,714		161,751
Total assets	$	117,313	$	166,090
Current liabilities	24,396		24,881
Noncurrent liabilities	41,245		78,666
JV's partners' capital, net	51,672		62,543
Total liabilities and partners' capital, net	$	117,313	$	166,090



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net sales	$	953		$	540		$	1,611		$	540
Net loss	$	(11,435	)	$	(10,992	)	$	(34,610	)	$	(23,822	)

Related Party Transactions

The Company recognized revenues related to its research and development arrangements with the Solazyme Bunge JV of $0.9 million and $2.9 million in the three and nine months ended September 30, 2015, respectively, and $3.3 million and $10.2 million in the three and nine months ended September 30, 2014, respectively. The Company also recognized product revenues from sales to the Solazyme Bunge JV of $0 and $1.2 million during the three and nine months ended September 30, 2015 and $1.3 million and $2.7 million during the three and nine months ended September 30, 2014, respectively. As of September 30, 2015 and December 31, 2014, the Company had receivables of $12,000 and $0.4 million, respectively, due from the Solazyme Bunge JV. As of September 30, 2015 and December 31, 2014, the Company had unbilled revenues of $0 and $2.4 million, respectively, related to the Solazyme Bunge JV.