SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS

Basis of Presentation—The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include all adjustments necessary for the fair presentation of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Solazyme Brazil Renewable Oils and Bioproducts Limitada (“Solazyme Brazil”) and Solazyme Manufacturing 1, L.L.C., the latter of which owns the Company's facility located in Peoria, Illinois ("Peoria Facility"). All intercompany accounts and transactions have been eliminated in consolidation.

The Company entered into a joint venture agreement ("Joint Venture Agreement") with Bunge, which is a variable interest entity ("VIE") that is 50.1% owned by the Company and 49.9% owned by Bunge. The Company determined that it was not required to consolidate the 50.1% ownership in this joint venture and, therefore, accounts for this joint venture under the equity method of accounting (see Note 8).

Use of Estimates—Financial statements prepared in conformity with GAAP require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

Foreign Currency Translation—The assets and liabilities of the Company’s foreign subsidiary, Solazyme Brazil, and the Solazyme Bunge JV, where the local currency is the functional currency, are translated from their respective functional currency into U.S. dollars at the exchange rate in effect at the balance sheet date, with resulting foreign currency translation adjustments recorded in accumulated other comprehensive income (loss) in the consolidated statements of comprehensive loss. The Company also adjusts its investment in the Solazyme Bunge JV and cumulative translation adjustment in equity for its ownership portion of the cumulative translation gain or loss recognized on the Solazyme Bunge JV's financial statements. Revenues and expense amounts are translated at average rates during the period.

Cash Equivalents—All highly liquid investments with original or remaining maturities of three months or less at the time of purchase are classified as cash equivalents. Cash equivalents primarily consist of money market funds, commercial paper and U.S. treasury notes.

Marketable Securities—Investments with original maturities greater than three months at the time of purchase and maturing less than one year from the consolidated balance sheet date are classified as marketable securities. The Company classifies marketable securities as short-term based upon whether such assets are reasonably expected to be used in current operations. The Company invests its excess cash balances primarily in corporate bonds, United States Government and Agency securities, asset-backed securities, mortgage-backed securities, commercial paper, municipal bonds, certificates of deposit and floating rate notes. The Company classifies its marketable securities as available-for-sale, and records them at estimated fair value in the consolidated balance sheets, with unrealized gains and losses, if any, reported as a component of accumulated other comprehensive income (loss) in the consolidated statements of comprehensive loss. Marketable securities classified as available-for-sale are adjusted for amortization of premiums and accretion of discounts and such amortization and accretion are reported as components of interest and other income. Realized gains and losses and declines in value that are considered to be other-than-temporary are recognized in interest and other income. The cost of all securities sold is based on the specific identification method.

Restricted Certificates of Deposit—The Company maintained certificates of deposits classified in other long-term assets of $0.7 million and $1.0 million as of December 31, 2015 and 2014, respectively. These certificates of deposits were required to be pledged as collateral related to the Company’s facility lease in South San Francisco.

Deferred Financing Costs—Issuance fees or direct costs relating to its credit facilities are deferred and amortized to interest expense over the contractual or expected term of the related debt using the effective interest method. The Company classifies deferred financing costs in other long-term assets.

Debt Discounts—Debt discounts incurred with the issuance of the Company’s debt are recorded in the consolidated balance sheets as a reduction to associated debt balances. The Company amortizes debt discount to interest expense over the contractual or expected term of the debt using the effective interest method.

Accounts Receivable—Accounts receivable represents amounts owed to the Company for product revenues, collaborative research and development agreements and agreements with related parties. The Company had no amounts reserved for doubtful accounts as of December 31, 2015 and 2014, as the Company expected full collection of its accounts receivable balances. The Company reserves for estimated product returns as reductions of accounts receivable and product revenues. As of December 31, 2015 and 2014, the reserve for product returns was $1.8 million and $1.6 million, respectively. The Company monitors actual return history and reassesses its return reserve as return experience develops. Related party receivables were $12,000 and $0.4 million as of December 31, 2015 and 2014, respectively.

Unbilled Revenues—Unbilled revenues represent fees earned but not yet billed under certain research and development programs including agreements with related parties.

Fair Value of Financial Instruments—The Company measures certain financial assets and liabilities at fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Where available, fair value is based on, or derived from, observable market prices or other observable inputs. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The carrying amount of certain of the Company’s financial instruments, including cash and cash equivalents, restricted certificates of deposit, accounts receivable, unbilled revenues, prepaid expenses, accounts payable and accrued liabilities, approximates fair value due to their relatively short maturities. The fair value of the Company’s debt obligations, warrant liability and derivative financial instruments were determined using unobservable inputs (Level 3 inputs), as defined in FASB ASC 820, Fair Value Measurement (see Note 5).

Derivative Financial Instruments—FASB ASC 815, Derivatives and Hedging ("ASC 815"), establishes accounting and reporting standards for derivative instruments. The accounting standards require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The fair value of the derivative is remeasured to fair value at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value of the derivative being charged to earnings (loss). The Company has determined that it must bifurcate and account for the early conversion payment features in its 6.00% convertible senior subordinated notes due 2018 (“2018 Notes”) and its 5.00% convertible senior subordinated notes due 2019 ("2019 Notes" and, collectively with the 2018 Notes, the "Notes") as embedded derivatives in accordance with ASC 815 (see Note 5 and Note 11). The Company recorded these embedded derivative liabilities as non-current liabilities on its consolidated balance sheets with a corresponding debt discount at the date of issuance that is netted against the principal amount of the Notes. The Company estimates the fair value of these liabilities using a Monte Carlo simulation model.

Concentration of Credit Risk—Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents, marketable securities, accounts receivables and restricted certificates of deposit. The Company places its cash equivalents and investments with high credit quality financial institutions and, by policy, limits the amounts invested with any one financial institution or issuer. Deposits held with banks may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses on its deposits of cash and cash equivalents.

The Company had 17 customers accounting for 92% of the receivable balance as of December 31, 2015. The Company had 12 customers accounting for 95% of the receivable balance as of December 31, 2014. The Company does not believe the accounts receivable from these customers represent a significant credit risk based on past collection experiences and the general creditworthiness of these customers. In 2015, three customers accounted for 20%, 14% and 13% of total net revenues. In 2014, three customers accounted for 27%, 16%, and 13% of total net revenues. In 2013, four customers accounted for 22%, 21%, 20% and 15% of total net revenues.

Inventories—Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out basis. Inventory cost consists of raw materials, third-party contractor costs associated with packaging, distribution and production of products, supplies, shipping costs and other overhead costs associated with manufacturing. If inventory costs exceed expected market value due to obsolescence or lack of demand, inventory write-downs may be recorded as deemed necessary by management for the difference between the cost and the market value in the period that impairment is first recognized. Beginning in 2014, inventories also include manufacturing and third-party contract costs associated with the production of the Company's ingredient products that met applicable regulatory requirements. Prior to products' meeting any applicable regulatory requirements, and during scale-up of the manufacturing process to nameplate capacity, a portion of the manufacturing and associated production costs are charged to research and development expenses.

Property, Plant and Equipment—Property, plant and equipment are recorded at cost, less accumulated depreciation. Depreciation is calculated on a straight-line basis over the following estimated ranges of useful lives:



Asset classification		Estimated useful life
Plant equipment		5 – 20 years
Lab equipment		3 – 7 years
Leasehold improvements		Shorter of useful life or life of lease
Building and improvements		7 – 20 years
Computer equipment and software		3 – 7 years
Furniture and fixtures and automobiles		5 – 7 years

Long-Lived Assets—The Company periodically reviews long-lived assets, including property, plant and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset is impaired or the estimated useful lives are no longer appropriate. If indicators of impairment exist and the undiscounted projected cash flows associated with such assets are less than the carrying amount of the asset, an impairment loss is recorded to write the asset down to its estimated fair value. Fair value is estimated based on discounted future cash flows. See Note 3 for information on impairment charges recognized in years ended December 31, 2015 and 2014. There were no asset impairment charges incurred for the year ended December 31, 2013.

Segment Reporting—The chief operating decision maker is the Chief Executive Officer of the Company.

The Company derives revenue from two principal activities: commercial product sales and collaborative research and development programs with strategic and government entities. The Company’s commercial product sales are focused on Algenist^®products and high-value oils, encapsulated oils and whole algae powdered products to companies that use them as ingredients.

The Company has two operating segments for financial statement reporting purposes: Algenist^® and Ingredients & Other (previously called Intermediates/Ingredients & Other). The Company’s chief operating decision maker reviews and monitors gross margin by segment, however, the Company does not allocate its operating expenses between its different segments and its collaborative research and development programs, and therefore the chief operating decision maker does not evaluate financial performance beyond product gross margin.

The following table reflects revenues and gross margins for the Company's operating segments for the years ended December 31, 2015, 2014 and 2013, reconciled to the Company’s total product revenue and cost of product revenue as shown in its consolidated statements of operations (in thousands):



Year ended December 31, 2015	Algenist^®		Ingredients & Other			Total
Product revenue	$	23,278	$	10,022		$	33,300
Cost of product revenue	7,616		10,563			18,179
Segment gross margin	$	15,662	$	(541	)	$	15,121
Year ended December 31, 2014
Product revenue	$	24,429	$	12,917		$	37,346
Cost of product revenue	7,746		12,866			20,612
Segment gross margin	$	16,683	$	51		$	16,734
Year ended December 31, 2013
Product revenue	$	19,856	$	106		$	19,962
Cost of product revenue	6,338		47			6,385
Segment gross margin	$	13,518	$	59		$	13,577

A reconciliation of total gross margin to operating loss is as follows (in thousands):



	Year ended December 31,
	2015			2014			2013
Gross margin	$	15,121		$	16,734		$	13,577
Research and development programs revenue	12,831			23,045			19,788
Research and development expense	48,094			81,680			66,572
Sales, general and administrative expense	80,733			90,266			62,933
Restructuring charges	4,953			3,514			—
Loss from operations	$	(105,828	)	$	(135,681	)	$	(96,140	)

The Company does not allocate any assets to its operating segments.

Geographic Data

Geographic revenues are identified by the location in which the research and development program revenue and product sales were originated. Total revenues of $45.7 million, $56.3 million, and $38.1 million for the years ended December 31, 2015, 2014 and 2013, respectively, originated in the United States. Total revenues of $0.4 million, $4.1 million and $1.7 million for the years ended December 31, 2015, 2014 and 2013, respectively, originated in Brazil. Long-lived assets, net of accumulated depreciation, located in the United States were $26.3 million and $35.3 million as of December 31, 2015 and 2014, respectively. Long-lived assets, net of accumulated depreciation, located in Brazil were $23,000 and $0.8 million as of December 31, 2015 and 2014, respectively.

Revenue Recognition—Revenues are recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2)transfer of title has been completed or services have been rendered; (3)the fee is fixed or determinable; and (4) collectability is reasonably assured. The Company’s primary sources of revenues are revenues from research and development programs and product sales. If sales arrangements contain multiple elements, the Company evaluates whether the components of each arrangement represent separate units of accounting. To date, the Company has determined that all revenue arrangements should be accounted for as a single unit of accounting.

Product Revenue—Product revenue is recognized from the sale of the Company's personal care products, which includes its Algenist^® skin care line and ingredient products including its Tailored^™ oil products and blended fuel sales, the latter of which is part of the Company's fuels marketing and development programs.

Research and development program revenues

•

Collaborative Research and Development—Collaborative research and development programs with commercial and strategic partners typically provide the Company with multiple revenue streams, which may include up-front non-refundable fees for licensing and reimbursement for research and development activities; cost reimbursement fees may include reimbursement for full-time employee equivalents (“FTE”), contingent milestone payments upon achievement of contractual criteria, licensing fees and commercialization royalty fees. Such revenues are recognized as the services are performed over a performance period, as specified in the respective agreements. When up-front payments are combined with funded research services in a single unit of accounting, the Company recognizes the payments using the proportional performance method of revenue recognition based upon the actual amount of research and development labor hours and research expenses incurred relative to the amount of the total expected labor hours and research expenses estimated to be incurred, but not greater than the amount of the research and development program fee as specified under such agreements. The Company is required to make estimates of total labor hours and research and development expenses required to perform the Company’s obligations under each research and development program; the Company evaluates the appropriate period based on research progress attained and reevaluates the period when significant changes occur. Where arrangements include milestones that are determined to be substantive and at risk at the inception of the arrangement, revenues are recognized upon achievement of the milestone and are limited to those amounts for which collectability is reasonably assured. If these conditions are not met, the milestone payments are deferred and recognized as revenue over the estimated period of performance under the contract as completion of performance obligations occur.

•

Government Programs—Revenues from research and development programs with governmental entities generally provide cost reimbursement for certain types of expenditures in return for research and development activities over a contractually defined period. Revenues from government programs are recognized in the period during which the related costs are incurred, provided that the conditions under which the government program activities were provided have been met and only perfunctory obligations are outstanding.

Research and Development—Research and development costs associated with research performed pursuant to research and development programs with government entities and commercial and strategic partners (“partners”) and the Company’s internal projects are expensed as incurred, and include, but are not limited to, personnel and related expenses, facility costs and overhead, depreciation and amortization of plant, property and equipment used in development, laboratory supplies, and scale-up research manufacturing and consulting costs.

Restructuring Charges—The Company accounts for restructuring activities in accordance with FASB ASC 420, Exit or Disposal Cost Obligations. Under the guidance, for the cost of restructuring activities that do not constitute a discontinued operation, the liability for the current fair value of expected future costs associated with such restructuring activity are recognized in the period in which the liability is incurred.

Advertising Costs—Advertising costs are expensed as incurred. Advertising expense was $1.7 million, $2.4 million, and $3.1 million for 2015, 2014 and 2013, respectively.

Patent Costs—All costs related to filing and pursuing patent applications are expensed as incurred as recoverability of such expenditures is uncertain and the underlying technologies are under development. Patent-related legal costs incurred are recorded in selling, general and administrative expenses.

Income Taxes—The Company accounts for income taxes under the asset and liability method, which requires, among other things, that deferred income taxes be provided for temporary differences between the tax basis of the Company’s assets and liabilities and the financial statement reported amounts. A valuation allowance is provided against deferred tax assets when it is more likely than not that they will not be realized.

The Company provides for reserves necessary for uncertain tax positions taken or expected to be taken on tax filings. First, the Company determines if the weight of available evidence indicates that a tax position is more likely than not to be sustained upon audit. Second, based on the largest amount of benefit that is more likely than not to be realized on ultimate settlement, the Company recognizes any such differences as a liability. Because the Company’s unrecognized tax benefits offset deferred tax assets for which the Company has not realized benefit in the financial statements, none of the unrecognized tax benefits through December 31, 2015, if recognized, would affect the Company’s effective tax rate.

Stock-Based Compensation—The Company recognizes stock-based compensation for awards to employees based on the estimated fair value of the awards granted. The Company uses the Black-Scholes option-pricing model to estimate the fair value of awards granted to employees, and the requisite fair value is recognized as expense on a straight-line basis over the service period of the award.

The Black-Scholes option pricing model requires the following inputs: expected life, expected volatility, risk-free interest rate, expected dividend yield rate, exercise price and closing price of the Company’s common stock on the date of grant. Due to the Company’s limited history of grant activity, the Company calculates its expected term utilizing the “simplified method” permitted by the Securities and Exchange Commission (“SEC”), which is the average of the total contractual term of the option and its vesting period. The Company believes historical volatility data of the Company's share price provides the best estimate for the expected volatility of the underlying share price that marketplace participants would most likely use in determining an exchange price for an option. As such, beginning in the second quarter of 2014 the Company began weighting the historical volatility data of its share price in proportion to the number of years of information it has available to the total expected term of stock options. The remaining volatility weight is allocated evenly among selected comparable public companies within its industry. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities similar to the option’s expected term. The expected dividend yield was assumed to be zero, as the Company has not paid, nor does it anticipate paying, cash dividends on shares of its common stock. The Company estimates its forfeiture rate based on an analysis of its actual forfeitures and will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors.

The Company accounts for restricted stock units and restricted stock awards issued to employees based on the quoted market price of the Company’s common stock on the date of grant that are expensed on a straight-line basis over the service period.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of awards granted to nonemployees. The Company accounts for restricted stock units and restricted stock awards issued to nonemployees based on the estimated fair value of the Company’s common stock on the date of grant. The measurement of stock-based compensation for nonemployees is subject to periodic adjustments as the underlying equity instruments vest, and the resulting change in value, if any, is recognized in the Company’s consolidated statements of operations during the period the related services are rendered.

Accumulated Other Comprehensive Loss—The components of accumulated other comprehensive income loss consisted of the following (in thousands):



	Foreign Currency Translation Adjustments			Change in unrealized gain/loss on available-for-sale securities			Total Accumulated Other Comprehensive Loss
Balance at December 31, 2012	$	(725	)	$	326		$	(399	)
Current period other comprehensive loss	(3,155		)	(240		)	(3,395		)
Balance at December 31, 2013	(3,880		)	86			(3,794		)
Current period other comprehensive loss	(6,908		)	(312		)	(7,220		)
Balance at December 31, 2014	(10,788		)	(226		)	(11,014		)
Current period other comprehensive loss	(11,545		)	228			(11,317		)
Balance at December 31, 2015	$	(22,333	)	$	2		$	(22,331	)

Net Loss per Share—Basic net loss per share is computed by dividing the Company’s net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by giving effect to all potentially dilutive securities, including stock options, common stock issuable pursuant to the 2011 Employee Stock Purchase Plan, restricted stock, restricted stock units and common stock warrants. Basic and diluted net loss per share was the same for all periods presented as the inclusion of all potentially dilutive securities outstanding was anti-dilutive.

The following table summarizes the Company’s calculation of basic and diluted net loss per share (in thousands, except share and per share amounts):



	Year ended December 31,
	2015			2014			2013
Numerator
Net loss	$	(141,447	)	$	(162,141	)	$	(116,389	)
Denominator
Weighted-average number of common shares used in net loss per share calculation	80,165,402			75,879,721			64,228,387
Less: Weighted-average shares subject to repurchase	—			(513		)	(16,429		)
Denominator: basic and diluted	80,165,402			75,879,208			64,211,958
Net loss per share, basic and diluted	$	(1.76	)	$	(2.14	)	$	(1.81	)

The following outstanding shares of potentially dilutive securities were excluded from the calculation of diluted net loss per share for the periods presented as the effect was anti-dilutive:



	Year ended December 31,
	2015	2014	2013
Options to purchase common stock	11,900,671	13,740,204	9,957,367
Common stock subject to repurchase	—	—	2,942
Restricted stock units	1,883,552	1,812,332	1,871,907
Warrants to purchase common stock	750,000	1,250,000	1,385,000
Shares of common stock to be issued upon conversion of the Notes	18,790,996	18,790,996	9,905,521
Total	33,325,219	35,593,532	23,122,737

The table above does not reflect early conversion payment features of the Notes (see Notes 5 and 11) that may be settled, at the Company’s election, in cash or, subject to satisfaction of certain conditions, in shares of the Company’s common stock.

Recent Accounting Pronouncements—In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in FASB ASC 605, Revenue Recognition. ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This new guidance is effective for interim and annual reporting periods beginning after December 15, 2017, and early adoption is permitted, but not before December 15, 2016. The Company is currently assessing the potential impact of this new guidance on its consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40); Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which requires management of a company to evaluate whether there is substantial doubt about the Company’s ability to continue as a going concern. This standard will be effective for the Company beginning in the first quarter of 2017. The Company is currently assessing the potential impact of this new guidance on its consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30), which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This standard requires retrospective adoption and will be effective for the Company beginning in its first quarter of 2016. In August 2015, the FASB issued ASU 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcement at 18 June 2015 EITF Meeting. ASU 2015-15 incorporates the SEC staff's announcement that clarifies the exclusion of line-of-credit arrangements from the scope of ASU 2015-03. In the first quarter of 2016, the Company will reclassify debt issuance costs from other long-term assets to convertible debt as required under this standard.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. Topic 330, Inventory, currently requires an entity to measure inventory at the lower of cost or market, with market value represented by replacement cost, net realizable value or net realizable value less a normal profit margin. The amendments in ASU 2015-11 require an entity to measure inventory at the lower of cost or net realizable value. This standard requires retrospective adoption and will be effective for the Company beginning in its first quarter of 2017. The Company is currently assessing the potential impact of this new guidance on its consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which requires companies to classify all deferred tax assets and liabilities as noncurrent. In addition, companies will no longer allocate valuation allowances between current and noncurrent deferred tax assets because those allowances also will be classified as noncurrent. This standard applies to the Company beginning in its first quarter of 2017 and the Company has early adopted this standard on a prospective basis effective December 31, 2015. Prior periods were not retrospectively adjusted. The adoption of this standard did not have a significant impact on the Company's consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The new standard principally affects accounting standards for equity investments, financial liabilities where the fair value option has been elected, and the presentation and disclosure requirements for financial instruments. Upon the effective date of the new standards, all equity investments in unconsolidated entities, other than those accounted for using the equity method of accounting, will generally be measured at fair value through earnings. There will no longer be an available-for-sale classification and therefore, no changes in fair value will be reported in other comprehensive income for equity securities with readily determinable fair values. The new guidance on the classification and measurement will be effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and early adoption is permitted. The Company is in the process of evaluating the impact of the adoption of this new guidance on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. The ASU is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of evaluating the impact of the adoption of this new guidance on its consolidated financial statements.