UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________
FORM 10-K/A
Amendment No. 1
(Mark One)
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal year ended December 31, 2018 |
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from ____ to ____ |
Commission File Number: 001-34885
____________________________________________________
AMYRIS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 55-0856151 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
5885 Hollis Street, Suite 100, Emeryville, California 94608
(Address of principal executive offices and Zip Code)
(510) 450-0761
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
| Common Stock, $0.0001 par value per share | AMRS | Nasdaq Global Select Market |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ 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. Yes ☐ No ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☒ Emerging growth company ☐
If an emerging growth company, 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 28, 2019, the last business day of the registrant's most recently completed second fiscal quarter, was $226.5 million based upon the closing price of the registrant’s common stock reported for such date on the Nasdaq Global Select Market.
Number of shares of the registrant’s common stock outstanding as of September 26, 2019: 103,400,207
DOCUMENTS INCORPORATED BY REFERENCE
None.
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A (this “Amendment”) amends the Annual Report on Form 10-K of Amyris, Inc. (the “Company”) for the fiscal year ended December 31, 2018 (the “Form 10-K”), as filed with the Securities and Exchange Commission (the “SEC”) on October 1, 2019 (the “Original Filing Date”).
This Amendment is being filed solely (i) for the purpose of furnishing Exhibit 101 (Interactive Data Files) to the Form 10-K, which was not included in the original filing of the Form 10-K with the SEC on the Original Filing Date, (ii) to correct administrative errors in the content of (A) the Report of Independent Registered Public Accounting Firm of BDO USA, LLP (the “BDO Report”), the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2017, contained in Part II, Item 8 of the Form 10-K and (B) the Reports of Independent Registered Public Accounting Firm of Macias Gini & O’Connell LLP (the “MGO Reports”), the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2018, contained in Part II, Item 8 and Part II, Item 9A of the Form 10-K, respectively and (iii) to correct certain other immaterial errors in Part II, Item 8 of the Form 10-K as set forth below.
The BDO Report and MGO Reports in the Form 10-K incorrectly contained certain references to September 30, 2019, when the correct date was October 1, 2019. Accordingly, such reports have been updated to refer to the correct date.
In addition, (i) certain references to “Contract assets” in the financial statement tables and related disclosure in Part II, Item 8 of the Form 10-K have been amended to refer to “Accounts receivable, unbilled – related party”, (ii) a line item for “Accounts receivable, unbilled, noncurrent - related party” has been added to the “Contract Balances” table in Note 10, “Revenue Recognition” in Part II, Item 8 of this Amendment, (iii) the amount of federal NOL and state NOL carryovers written off by the Company as a result of events occurring during the year ended December 31, 2017, disclosed in Note 14, “Income Taxes” in Part II, Item 8 of the Form 10-K, has been corrected, (iv) certain legend references and explanations in the tables in Note 2, “Restatement of 2017 Consolidated Financial Statements” and the “2017 and 2018 Quarterly Data – Restated Condensed Consolidated Financial Statements” section immediately after Note 16, “Subsequent Events” in Part II, Item 8 of the Form 10-K have been updated by deleting unused explanations, expanding or conforming certain explanations and adding certain explanations that were inadvertently excluded from such tables and (v) certain typographical errors in the financial statement tables and related disclosure in Part II, Item 8 of the Form 10-K have been corrected to conform to the correct disclosure provided elsewhere in Part II, Item 8 of the Form 10-K.
No other changes have been made to the Form 10-K. This Amendment speaks as of the Original Filing Date and does not reflect events that may have occurred subsequent to the Original Filing Date, and, except as expressly set forth herein, does not modify or update in any way the disclosures made in the Form 10-K.
Pursuant to Rule 12b-15 promulgated under the Securities Exchange Act of 1934, this Amendment sets forth the complete text of Part II, Item 8 and Part II, Item 9A of the Form 10-K as amended hereby. Part IV, Item 15 of this Amendment reflects (i) new consents of BDO USA, LLP and Macias Gini & O’Connell LLP, (ii) Exhibit 101 (Interactive Data Files) and (iii) new certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Section 906 of the Sarbanes-Oxley Act of 2002, each of which is filed or furnished herewith, as applicable.
AMYRIS, INC.
FORM 10-K/A
FOR THE YEAR ENDED DECEMBER 31, 2018
TABLE OF CONTENTS
| PART II | ||
| Item 8. | Financial Statements and Supplementary Data | 1 |
| Item 9A. | Controls and Procedures | 114 |
| Item 15. | Exhibits and Financial Statement Schedule | 119 |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AMYRIS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| 1 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Amyris, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Amyris, Inc. and subsidiaries (the Company) as of December 31, 2018, the related consolidated statements of operations, comprehensive loss, stockholders’ deficit and mezzanine equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated October 1, 2019 expressed an adverse opinion thereon.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has current debt service requirements that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Changes in Accounting Principles
As discussed in Notes 1 and 10 to the consolidated financial statements, the Company has changed its accounting method for recognizing revenue from contracts with customers in fiscal year 2018 due to the adoption of Topic 606, Revenue from Contracts with Customers, and all related amendments.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Macias Gini & O'Connell LLP
We have served as the Company's auditor since 2019.
San Francisco, California
October 1, 2019
| 2 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Amyris, Inc.
Emeryville, CA
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Amyris, Inc. as of December 31, 2017, the related consolidated statements of operations, comprehensive loss, stockholders’ deficit and mezzanine equity, and cash flows for the year then ended and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and the results of its operations and its cash flows for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Restatement to Correct 2017 Misstatements
As discussed in Note 2 to the consolidated financial statements, the 2017 financial statements have been restated to correct several misstatements.
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency and these factors, among others, raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ BDO USA, LLP
We have served as the Company's auditor since 2019.
San Jose, California
October 1, 2019
| 3 |
AMYRIS, INC.
| December 31, (In thousands, except shares and per share amounts) | 2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 45,353 | $ | 57,059 | ||||
| Restricted cash | 741 | 2,994 | ||||||
| Accounts receivable, net of allowance of $642 and $619, respectively | 16,003 | 18,953 | ||||||
| Accounts receivable related party, net of allowance of $0 and $23, respectively | 1,349 | 4,767 | ||||||
| Accounts receivable, unbilled – related party | 8,021 | 9,901 | ||||||
| Inventories | 9,693 | 5,408 | ||||||
| Deferred cost of products sold, current - related party | 489 | — | ||||||
| Prepaid expenses and other current assets | 10,566 | 4,919 | ||||||
| Total current assets | 92,215 | 104,001 | ||||||
| Property, plant and equipment, net | 19,756 | 13,892 | ||||||
| Accounts receivable, unbilled, noncurrent - related party | 1,203 | 7,940 | ||||||
| Deferred cost of products sold, noncurrent - related party | 2,828 | — | ||||||
| Restricted cash, noncurrent | 960 | 959 | ||||||
| Recoverable taxes from Brazilian government entities | 3,005 | 1,445 | ||||||
| Other assets | 7,958 | 12,559 | ||||||
| Total assets | $ | 127,925 | $ | 140,796 | ||||
| Liabilities, Mezzanine Equity and Stockholders' Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 26,844 | $ | 15,515 | ||||
| Accrued and other current liabilities | 28,979 | 29,202 | ||||||
| Contract liabilities(1) | 8,236 | 4,308 | ||||||
| Debt, current portion (includes instrument measured at fair value of $57,918 and $0, respectively) | 124,010 | 36,924 | ||||||
| Related party debt, current portion | 23,667 | 20,019 | ||||||
| Total current liabilities | 211,736 | 105,968 | ||||||
| Long-term debt, net of current portion | 43,331 | 60,220 | ||||||
| Related party debt, net of current portion | 18,689 | 46,541 | ||||||
| Derivative liabilities | 42,796 | 116,497 | ||||||
| Other noncurrent liabilities | 23,192 | 23,658 | ||||||
| Total liabilities | 339,744 | 352,884 | ||||||
| Commitments and contingencies (Note 9) | ||||||||
| Mezzanine equity: | ||||||||
| Contingently redeemable common stock (Note 6) | 5,000 | 5,000 | ||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock - $0.0001 par value, 5,000,000 shares authorized as of December 31, 2018 and 2017, and 14,656 and 22,171 shares issued and outstanding as of December 31, 2018 and 2017, respectively | — | — | ||||||
| Common stock - $0.0001 par value, 250,000,000 shares authorized as of December 31, 2018 and 2017, respectively; 76,564,829 and 45,637,433 shares issued and outstanding as of December 31, 2018 and 2017, respectively | 8 | 5 | ||||||
| Additional paid-in capital | 1,346,996 | 1,114,546 | ||||||
| Accumulated other comprehensive loss | (43,343 | ) | (42,156 | ) | ||||
| Accumulated deficit | (1,521,417 | ) | (1,290,420 | ) | ||||
| Total Amyris, Inc. stockholders’ deficit | (217,756 | ) | (218,025 | ) | ||||
| Noncontrolling interest | 937 | 937 | ||||||
| Total stockholders' deficit | (216,819 | ) | (217,088 | ) | ||||
| Total liabilities, mezzanine equity and stockholders' deficit | $ | 127,925 | $ | 140,796 | ||||
______________
| (1) | The balance in contract liabilities at December 31, 2017 represents deferred revenue, current prior to the Company's adoption of ASC 606, "Revenue". |
See accompanying notes to consolidated financial statements.
| 4 |
AMYRIS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| Years Ended December 31, (In thousands, except shares and per share amounts) | 2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Revenue | ||||||||
| Renewable products (includes related party revenue of $360 and $1,291, respectively) | $ | 33,598 | $ | 42,370 | ||||
| Licenses and royalties, net (includes related party revenue of $5,958 and $57,972, respectively) | 7,658 | 48,703 | ||||||
| Grants and collaborations (includes related party revenue of $4,735 and $1,679, respectively) | 22,348 | 36,598 | ||||||
| Total revenue (includes related party revenue of $11,053 and $60,942, respectively) | 63,604 | 127,671 | ||||||
| Cost and operating expenses | ||||||||
| Cost of products sold | 36,698 | 62,307 | ||||||
| Research and development | 68,722 | 57,562 | ||||||
| Sales, general and administrative | 90,902 | 63,853 | ||||||
| Impairment of other assets | 3,865 | – | ||||||
| Total cost and operating expenses | 200,187 | 183,722 | ||||||
| Loss from operations | (136,583 | ) | (56,051 | ) | ||||
| Other income (expense) | ||||||||
| (Loss) gain on divestiture | (1,778 | ) | 5,732 | |||||
| Interest expense | (42,703 | ) | (37,081 | ) | ||||
| Loss from change in fair value of derivative instruments | (30,880 | ) | (48,852 | ) | ||||
| Gain from change in fair value of debt | 2,082 | – | ||||||
| Loss upon extinguishment of debt | (17,424 | ) | (11,897 | ) | ||||
| Other income (expense), net | (2,949 | ) | (956 | ) | ||||
| Total other expense, net | (93,652 | ) | (93,054 | ) | ||||
| Loss before income taxes | (230,235 | ) | (149,105 | ) | ||||
| Provision for income taxes | – | (6,877 | ) | |||||
| Net loss attributable to Amyris, Inc. | (230,235 | ) | (155,982 | ) | ||||
| Less deemed dividend related to beneficial conversion feature on Series A preferred stock | – | (562 | ) | |||||
| Less deemed dividend related to beneficial conversion feature on Series B preferred stock | – | (634 | ) | |||||
| Less deemed dividend related to beneficial conversion feature on Series D preferred stock | – | (5,757 | ) | |||||
| Less deemed dividend upon settlement of make-whole provision on Series A preferred stock | – | (10,505 | ) | |||||
| Less deemed dividend upon settlement of make-whole provision on Series B preferred stock | – | (22,632 | ) | |||||
| Less deemed dividend related to the recognition of discounts on Series A preferred stock upon conversion | – | (21,578 | ) | |||||
| Less deemed dividend related to the recognition of discounts on Series B preferred stock upon conversion | – | (24,366 | ) | |||||
| Less deemed dividend related to proceeds discount upon conversion of Series D preferred stock | (6,852 | ) | – | |||||
| Add: losses allocated to participating securities | 13,991 | 40,159 | ||||||
| Net loss attributable to Amyris, Inc. common stockholders | $ | (223,096 | ) | $ | (201,857 | ) | ||
| Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, basic and diluted | 60,405,910 | 32,253,570 | ||||||
| Basic and diluted loss per share | $ | (3.69 | ) | $ | (6.26 | ) | ||
See accompanying notes to consolidated financial statements.
| 5 |
AMYRIS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
| Years Ended December 31, (In thousands) | 2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Comprehensive loss: | ||||||||
| Net loss | $ | (230,235 | ) | $ | (155,982 | ) | ||
| Foreign currency translation adjustment | (1,187 | ) | (1,252 | ) | ||||
| Comprehensive loss attributable to Amyris, Inc. | $ | (231,422 | ) | $ | (157,234 | ) | ||
See accompanying notes to consolidated financial statements.
| 6 |
AMYRIS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT AND MEZZANINE EQUITY
| Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||
| (In thousands, except number of shares) | Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Noncontrolling Interest | Total Stockholders' Deficit | Mezzanine Equity - Common Stock | ||||||||||||||||||||||||||||||
| December 31, 2016 | – | – | 18,273,921 | $ | 2 | $ | 990,895 | $ | (40,904 | ) | $ | (1,134,438 | ) | $ | 937 | $ | (183,508 | ) | $ | 5,000 | ||||||||||||||||||||
| Issuance of Series A preferred stock for cash | 22,140 | – | – | – | 562 | – | – | – | 562 | – | ||||||||||||||||||||||||||||||
| Issuance of Series B preferred stock upon conversion of debt, net of issuance costs of $0 | 40,204 | – | – | – | 11,530 | – | – | – | 11,530 | – | ||||||||||||||||||||||||||||||
| Issuance of Series B preferred stock for cash, net of issuance costs of $860 | 55,700 | – | – | – | 16,675 | – | – | – | 16,675 | – | ||||||||||||||||||||||||||||||
| Issuance of Series D preferred stock for cash, net of issuance costs of $176 | 12,958 | – | – | – | 6,197 | – | – | – | 6,197 | – | ||||||||||||||||||||||||||||||
| Issuance of common stock due to rounding from reverse stock split | – | – | 6,473 | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||
| Issuance of common stock for cash | – | – | 2,826,711 | – | 5,527 | – | – | – | 5,527 | – | ||||||||||||||||||||||||||||||
| Issuance of common stock upon conversion of preferred stock | (108,831 | ) | – | 17,274,017 | 3 | – | – | – | – | 3 | – | |||||||||||||||||||||||||||||
| Issuance of common stock upon conversion of debt | – | – | 2,257,786 | – | 12,687 | – | – | – | 12,687 | – | ||||||||||||||||||||||||||||||
| Issuance of common stock for settlement of debt principal payments | – | – | 1,246,165 | – | 10,707 | – | – | – | 10,707 | – | ||||||||||||||||||||||||||||||
| Issuance of common stock for settlement of debt interest payments | – | – | 400,967 | – | 3,436 | – | – | – | 3,436 | – | ||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants | – | – | 3,148,097 | – | 50,449 | – | – | – | 50,449 | – | ||||||||||||||||||||||||||||||
| Issuance of common stock upon restricted stock settlement | – | – | 156,104 | – | (385 | ) | – | – | – | (385 | ) | – | ||||||||||||||||||||||||||||
| Issuance of common stock upon ESPP purchase | – | – | 47,058 | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | – | – | 134 | – | 1 | – | – | – | 1 | – | ||||||||||||||||||||||||||||||
| Beneficial conversion feature of Series A preferred stock | – | – | – | – | 562 | – | – | – | 562 | – | ||||||||||||||||||||||||||||||
| Deemed dividend on beneficial conversion feature of Series A preferred stock | – | – | – | – | (562 | ) | – | – | – | (562 | ) | – | ||||||||||||||||||||||||||||
| Beneficial conversion feature to related party of Series B preferred stock | – | – | – | – | 634 | – | – | – | 634 | – | ||||||||||||||||||||||||||||||
| Deemed dividend to related party on beneficial conversion feature of Series B preferred stock | – | – | – | – | (634 | ) | – | – | – | (634 | ) | – | ||||||||||||||||||||||||||||
| Beneficial conversion feature of Series D preferred stock | – | – | – | – | 5,757 | – | – | – | 5,757 | – | ||||||||||||||||||||||||||||||
| Deemed dividend on beneficial conversion feature of Series D preferred stock | – | – | – | – | (5,757 | ) | – | – | – | (5,757 | ) | – | ||||||||||||||||||||||||||||
| Deemed dividend on preferred stock discounts upon conversion of Series A preferred stock | – | – | – | – | 21,578 | – | – | – | 21,578 | – | ||||||||||||||||||||||||||||||
| Deemed dividend on preferred stock discounts upon conversion of Series A preferred stock | – | – | – | – | (21,578 | ) | – | – | – | (21,578 | ) | – | ||||||||||||||||||||||||||||
| Deemed dividend on preferred stock discounts upon conversion of Series B preferred stock | – | – | – | – | 24,366 | – | – | – | 24,366 | – | ||||||||||||||||||||||||||||||
| Deemed dividend on preferred stock discounts upon conversion of Series B preferred stock | – | – | – | – | (24,366 | ) | – | – | – | (24,366 | ) | – | ||||||||||||||||||||||||||||
| Settlement of make-whole provision on Series A preferred stock | – | – | – | – | 10,505 | – | – | – | 10,505 | – | ||||||||||||||||||||||||||||||
| Deemed dividend upon settlement of make-whole provision on Series A preferred stock | – | – | – | – | (10,505 | ) | – | – | – | (10,505 | ) | – | ||||||||||||||||||||||||||||
| Settlement of make-whole provision on Series B preferred stock | – | – | – | – | 22,632 | – | – | – | 22,632 | – | ||||||||||||||||||||||||||||||
| Deemed dividend upon settlement of make-whole provision on Series B preferred stock | – | – | – | – | (22,632 | ) | – | – | – | (22,632 | ) | – | ||||||||||||||||||||||||||||
| Stock-based compensation | – | – | – | – | 6,265 | – | – | – | 6,265 | – | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | – | (1,252 | ) | – | – | (1,252 | ) | – | ||||||||||||||||||||||||||||
| Net loss (As Restated, Note 2) | – | – | – | – | – | – | (155,982 | ) | – | (155,982 | ) | – | ||||||||||||||||||||||||||||
| December 31, 2017 (As restated, Note 2) | 22,171 | – | 45,637,433 | $ | 5 | $ | 1,114,546 | $ | (42,156 | ) | $ | (1,290,420 | ) | $ | 937 | $ | (217,088 | ) | $ | 5,000 | ||||||||||||||||||||
| Cumulative effect of change in accounting principle for ASC 606 (see "Significant Accounting Policies" in Note 1) | – | – | – | – | – | – | (762 | ) | – | (762 | ) | – | ||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants | – | – | 20,891,038 | 2 | 62,152 | – | – | – | 62,154 | – | ||||||||||||||||||||||||||||||
| Settlement of derivatives liability upon exercise of warrants | – | – | – | – | 108,670 | – | – | – | 108,670 | |||||||||||||||||||||||||||||||
| Issuance of common stock in private placement, net of issuance costs of $0 | – | – | 205,168 | – | 1,415 | – | – | – | 1,415 | – | ||||||||||||||||||||||||||||||
| Issuance of common stock in private placement - related party, net of issuance costs of $0 | – | – | 1,643,991 | – | 6,050 | – | – | – | 6,050 | – | ||||||||||||||||||||||||||||||
| Issuance of common stock upon conversion of preferred stock | (7,515 | ) | – | 1,548,480 | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||
| Deemed dividend on preferred stock discounts upon conversion of Series D preferred stock | – | – | – | – | 6,852 | – | – | – | 6,852 | – | ||||||||||||||||||||||||||||||
| Deemed dividend on preferred stock discounts upon conversion of Series D preferred stock | – | – | – | – | (6,852 | ) | – | – | – | (6,852 | ) | – | ||||||||||||||||||||||||||||
| Issuance of common stock upon conversion of convertible notes | – | – | 5,674,926 | 1 | 42,368 | – | – | – | 42,369 | – | ||||||||||||||||||||||||||||||
| Issuance of common stock for settlement of debt interest payments | – | – | 238,898 | – | 1,800 | – | – | – | 1,800 | – | ||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | – | – | 70,807 | – | 288 | – | – | – | 288 | – | ||||||||||||||||||||||||||||||
| Issuance of common stock upon ESPP purchase | – | – | 246,230 | – | 777 | – | – | – | 777 | – | ||||||||||||||||||||||||||||||
| Issuance of common stock and payment of minimum employee taxes withheld upon net share settlement of restricted stock | – | – | 407,858 | – | (260 | ) | – | – | – | (260 | ) | – | ||||||||||||||||||||||||||||
| Stock-based compensation | – | – | – | – | 9,190 | – | – | – | 9,190 | – | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | – | (1,187 | ) | – | – | (1,187 | ) | – | ||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | (230,235 | ) | – | (230,235 | ) | – | ||||||||||||||||||||||||||||
| December 31, 2018 | 14,656 | – | 76,564,829 | $ | 8 | $ | 1,346,996 | $ | (43,343 | ) | $ | (1,521,417 | ) | $ | 937 | $ | (216,819 | ) | $ | 5,000 | ||||||||||||||||||||
See accompanying notes to consolidated financial statements.
| 7 |
AMYRIS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Years Ended December 31, | 2018 | 2017 | ||||||
| (In thousands) | (As Restated, Note 2) | |||||||
| Operating activities | ||||||||
| Net loss | $ | (230,235 | ) | $ | (155,982 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Loss from change in fair value of derivative liabilities | 30,880 | 48,852 | ||||||
| Loss upon conversion or extinguishment of debt | 17,424 | 11,897 | ||||||
| Amortization of debt discount | 16,602 | 15,239 | ||||||
| Stock-based compensation | 9,190 | 6,265 | ||||||
| Modification of warrants recorded as legal expense | 6,764 | – | ||||||
| Depreciation and amortization | 4,921 | 11,358 | ||||||
| Issuance costs on warrant exercises for cash | 4,389 | – | ||||||
| Loss on impairment of other assets | 3,865 | – | ||||||
| Debt issuance costs expensed due to fair value option | 3,810 | – | ||||||
| Loss (gain) on divestiture | 1,778 | (5,732 | ) | |||||
| Loss on disposal of property, plant and equipment | 941 | 142 | ||||||
| Gain on foreign currency exchange rates | (2,223 | ) | (1,230 | ) | ||||
| Gain from change in fair value of debt | (2,082 | ) | – | |||||
| Noncash revenue reduction related to issuance of debt obligations under Ginkgo Partnership Agreement | – | 13,413 | ||||||
| Receipt of noncash consideration in connection with license revenue | – | (8,046 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | 7,448 | (19,647 | ) | |||||
| Accounts receivable, unbilled – related party | 8,056 | (7,940 | ) | |||||
| Inventories | (4,416 | ) | (3,126 | ) | ||||
| Deferred cost of products sold | (3,317 | ) | – | |||||
| Prepaid expenses and other assets | (6,383 | ) | (18,730 | ) | ||||
| Accounts payable | 11,603 | 5,452 | ||||||
| Accrued and other liabilities | 8,461 | 13,877 | ||||||
| Contract liabilities | 3,158 | (7,241 | ) | |||||
| Net cash used in operating activities | (109,366 | ) | (101,179 | ) | ||||
| Investing activities | ||||||||
| Purchases of property, plant and equipment | (12,472 | ) | (4,412 | ) | ||||
| Proceeds from divestiture, net of cash transferred | – | 54,827 | ||||||
| Maturities of short-term investments | – | 12,403 | ||||||
| Sale of short-term investments | – | 676 | ||||||
| Purchase of short-term investments | – | (11,786 | ) | |||||
| Net cash (used in) provided by investing activities | (12,472 | ) | 51,708 | |||||
| Financing activities | ||||||||
| Proceeds from issuance of debt, net of issuance costs | 94,371 | 18,925 | ||||||
| Proceeds from exercise of warrants, net of issuance costs | 57,767 | – | ||||||
| Proceeds from issuance of common stock in private placements, net of issuance costs | 1,415 | – | ||||||
| Proceeds from ESPP purchases | 777 | – | ||||||
| Proceeds from exercises of common stock options | 288 | – | ||||||
| Principal payments on debt | (41,668 | ) | (37,500 | ) | ||||
| Debt issuance costs incurred in connection with debt instrument accounted at fair value | (3,752 | ) | – | |||||
| Principal payments on capital leases | (981 | ) | – | |||||
| Payment of minimum employee taxes withheld upon net share settlement of restricted stock units | (260 | ) | (385 | ) | ||||
| Proceeds from issuance of convertible preferred stock | – | 98,246 | ||||||
| Proceeds from issuance of common stock in August 2017 offering | – | 5,759 | ||||||
| Issuance costs incurred | – | (2,159 | ) | |||||
| Payment of swap termination | – | (3,113 | ) | |||||
| Payment on early redemption of debt | – | (1,909 | ) | |||||
| Net cash provided by financing activities | 107,957 | 77,864 | ||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (77 | ) | 186 | |||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | (13,958 | ) | 28,579 | |||||
| Cash, cash equivalents and restricted cash at beginning of year | 61,012 | 32,433 | ||||||
| Cash, cash equivalents and restricted cash at end of year | $ | 47,054 | $ | 61,012 | ||||
| Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets | ||||||||
| Cash and cash equivalents | $ | 45,353 | $ | 57,059 | ||||
| Restricted cash, current | 741 | 2,994 | ||||||
| Restricted cash, noncurrent | 960 | 959 | ||||||
| Total cash, cash equivalents and restricted cash | $ | 47,054 | $ | 61,012 | ||||
| 8 |
Amyris, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
| Years
Ended December 31, (In thousands) | 2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | 18,524 | $ | 11,539 | ||||
| Supplemental disclosures of non-cash investing and financing activities: | ||||||||
| Derecognition of derivative liabilities upon exercise of warrants | $ | 108,670 | $ | – | ||||
| Issuance of common stock upon conversion of convertible notes | $ | 24,970 | $ | 28,702 | ||||
| Issuance of common stock - related party | $ | 6,050 | $ | – | ||||
| Accrued interest added to debt principal | $ | 3,664 | $ | 2,816 | ||||
| Issuance of common stock for settlement of debt principal and interest payments | $ | 1,800 | $ | 3,436 | ||||
| Cumulative effect adjustment of ASC 606 | $ | 762 | $ | – | ||||
| Financing of insurance premium under note payable | $ | 495 | $ | 467 | ||||
| Financing of equipment under financing leases | $ | 271 | $ | – | ||||
| Issuance of preferred stock attributed to derivative liabilities | $ | – | $ | 72,725 | ||||
| Issuance of convertible preferred stock upon conversion of debt | $ | – | $ | 40,204 | ||||
| Settlement of debt principal by a related party | $ | – | $ | 25,000 | ||||
| Issuance of note payable in exchange for debt extinguishment with third party | $ | – | $ | 16,954 | ||||
| Issuance of common stock for settlement of debt | $ | – | $ | 10,708 | ||||
See accompanying notes to consolidated financial statements.
| 9 |
Amyris, Inc.
Notes to Consolidated Financial Statements
1. Basis of Presentation and Summary of Significant Accounting Policies
Business Description
Amyris, Inc. (Amyris or the Company) is a leading industrial biotechnology company that applies its technology platform to engineer, manufacture and sell high performance, natural, sustainably-sourced products into the Health & Wellness, Clean Beauty, and Flavor & Fragrance markets. The Company's proven technology platform enables the Company to rapidly engineer microbes and use them as catalysts to metabolize renewable, plant-sourced sugars into large volume, high-value ingredients. The Company's biotechnology platform and industrial fermentation process replace existing complex and expensive manufacturing processes. The Company has successfully used its technology to develop and produce several distinct molecules at commercial volumes.
Going Concern
The Company has incurred significant operating losses since its inception and expects to continue to incur losses and negative cash flows from operations for at least the next 12 months following the issuance of the financial statements. As of December 31, 2018, the Company had negative working capital of $119.5 million and an accumulated deficit of $1.5 billion.
As of December 31, 2018, the Company's debt (including related party debt), net of deferred discount and issuance costs of $17.1 million and a change in fair value of $2.1 million, totaled $209.7 million, of which $147.7 million is classified as current. The Company's debt agreements contain various covenants, including certain restrictions on the Company's business that could cause the Company to be at risk of defaults, such as restrictions on additional indebtedness, material adverse effect and cross default clauses. A failure to comply with the covenants and other provisions of the Company’s debt instruments, including any failure to make a payment when required, would generally result in events of default under such instruments, which could permit acceleration a substantial portion of such indebtedness. If such indebtedness is accelerated, it would generally also constitute an event of default under the Company’s other outstanding indebtedness, permitting acceleration of a substantial portion of such other outstanding indebtedness. At December 31, 2018, the Company failed to meet certain covenants in connection with the GACP Term Loan Facility (see Note 5, “Debt”), including those associated with minimum revenue and minimum liquidity requirements. In April 2019, (i) GACP provided a waiver to the Company for breaches of all covenant violations under the GACP loan and security agreement (LSA) occurring prior to, as of and after December 31, 2018 through April 8, 2019, and (ii) GACP sold and assigned the loans under the LSA and all documents and assets related thereto to Foris Ventures, LLC (Foris). Subsequently, Foris provided a waiver to the Company for breaches of certain covenants under the LSA through June 30, 2020 and amended the financial covenants under the LSA to provide more favorable compliance terms and conditions. See Note 16, "Subsequent Events" for additional information.
Cash and cash equivalents of $45.4 million as of December 31, 2018 are not sufficient to fund expected future negative cash flows from operations and cash debt service obligations through September 30, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements are issued. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company's ability to continue as a going concern will depend, in large part, on its ability to achieve positive cash flows from operations during the 12 months from the date of this filing, and refinance or extend other existing debt maturities occurring later in 2019, all of which are uncertain and outside the control of the Company. Further, the Company's operating plan for 2019 contemplates a significant reduction in its net operating cash outflows as compared to the year ended December 31, 2018, resulting from (i) revenue growth from sales of existing and new products with positive gross margins, (ii) reduced production costs as a result of manufacturing and technical developments, and (iii) an increase in cash inflows from collaborations and grants. If the Company is unable to complete these actions, it expects to be unable to meet its operating cash flow needs and its obligations under its existing debt facilities. This could result in an acceleration of its obligation to repay all amounts outstanding under those facilities, and the Company may be forced to obtain additional equity or debt financing, which may not occur timely or on reasonable terms, if at all, and/or liquidate its assets. In such a scenario, the value received for assets in liquidation or dissolution could be significantly lower than the value reflected in these financial statements. The Company has in the past, including in July 2019, had certain of its debt instruments accelerated for failure to make a payment when due. While we have been able to cure these defaults to date to avoid additional cross-acceleration, we may not be able to cure such a default promptly in the future.
| 10 |
On September 16, 2019, the Company failed to pay an aggregate of $63.6 million of outstanding principal and accrued interest on the Second Exchange Note when due. The failure resulted in an event of default under the Second Exchange Note and also triggered cross-defaults under other debt instruments of the Company which permitted the holders of such indebtedness to accelerate the amounts owing under such instruments. The Company subsequently received waivers from substantially all holders of such other debt instruments to waive the right to accelerate. As a result, the indebtedness with respect to which the Company has obtained such waivers continues to be classified as long-term on the Company’s balance sheet. The indebtedness reflected by the Second Exchange Note continues to be classified as a current liability on the Company’s balance sheet. In addition, as a result of the payment default, the conversion price of the Second Exchange Note is subject to adjustment in accordance with the terms of the Second Exchange Note.
The Company does not currently have sufficient funds to repay the amounts outstanding under the Second Exchange Note. To date, negotiations with the holder of the Second Exchange Note have not been successful, and there can be no assurance that a favorable outcome for the Company will be reached. The Company has executed a term sheet with an existing investor for a term loan, the proceeds of which would be used to repay a portion of the Second Exchange Note. However, there can be no assurance that the Company will be able to obtain such financing on its expected timeline, or on acceptable terms, if at all. Even if the Company does obtain such financing, it will not have sufficient funds to repay the Second Exchange Note in full without obtaining additional financing, which the Company is attempting to source. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States (U.S. GAAP). The consolidated financial statements include the accounts of Amyris, Inc. and its wholly-owned and partially-owned subsidiaries in which the Company has a controlling interest after elimination of all significant intercompany accounts and transactions.
Investments and joint venture arrangements are assessed to determine whether the terms provide economic or other control over the entity requiring consolidation of the entity. Entities controlled by means other than a majority voting interest are referred to as variable-interest entities (VIEs) and are consolidated when Amyris has both the power to direct the activities of the VIE that most significantly impact its economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the entity. For any investment or joint venture in which (i) the Company does not have a majority ownership interest, (ii) the Company possesses the ability to exert significant influence and (iii) the entity is not a VIE for which the Company is considered the primary beneficiary, the Company accounts for the investment or joint venture using the equity method. Following the adoption of ASU 2016-01 on January 1, 2018 described in more detail below (which was applicable to the Company on a prospective basis), equity investments in which the Company does not exert significant influence and that do not have readily determinable fair values are measured at cost, adjusted for changes from observable market transactions, less impairment (“adjusted cost basis”). The Company evaluates its investments for impairment by considering a variety of factors, including the earnings capacity of the related investments. Fair value measurements for the Company’s equity investments are classified within Level 3 of the fair value hierarchy based on the nature of the fair value inputs. Realized and unrealized gains or losses are recognized in other income or expense.
Sale of Subsidiary and Entry into Commercial Agreements
On December 28, 2017, the Company completed the sale of all of the capital stock of its subsidiary Amyris Brasil, a wholly-owned subsidiary, to DSM Produtos Nutricionais Brasil S.A (DSM), a related party. Amyris Brasil owned and operated the Company’s production facility in Brotas, Brazil. The transaction resulted in a pretax gain of $5.7 million from continuing operations in 2017, which was further adjusted by a $1.8 million loss in 2018 related to the final working capital adjustments between the Company and DSM. The transaction did not result in presenting Amyris Brasil as a discontinued operation in the consolidated financial statements, as the sale did not represent a strategic shift that will have a major effect on the Company’s operations and financial results due to the Company’s continuing commercial presence and reinvestment in a new production facility under construction in Brazil and its continuing Brazilian operation through Amyris Biotecnologia do Brasil Ltda. (formerly SMA Indústria Química Ltda.). The Company and DSM also entered into a series of commercial agreements and a credit agreement concurrently with the sale of Amyris Brasil. See Note 10, “Revenue Recognition”, Note 11, “Related Party Transactions”, Note 13, “Divestiture” and Note 16, “Subsequent Events” for further information.
Use of Estimates and Judgements
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgements and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements.
| 11 |
Significant Accounting Policies
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained with various financial institutions.
Inventories
Inventories, which consist of farnesene-derived products, flavors and fragrances ingredients and clean beauty products, are stated at the lower of actual cost or net realizable value and are categorized as finished goods, work in process or raw material inventories. The Company evaluates the recoverability of its inventories based on assumptions about expected demand and net realizable value. If the Company determines that the cost of inventories exceeds their estimated net realizable value, the Company records a write-down equal to the difference between the cost of inventories and the estimated net realizable value. If actual net realizable values are less favorable than those projected by management, additional inventory write-downs may be required that could negatively impact the Company's operating results. If actual net realizable values are more favorable, the Company may have favorable operating results when products that have been previously written down are sold in the normal course of business. The Company also evaluates the terms of its agreements with its suppliers and establishes accruals for estimated losses on adverse purchase commitments as necessary, applying the same lower of cost or net realizable value approach that is used to value inventory. Cost is computed on a weighted-average basis.
Property, Plant and Equipment, Net
Property, plant and equipment are recorded at cost. Depreciation and amortization are computed straight-line based on the estimated useful lives of the related assets, ranging from 3 to 15 years for machinery, equipment and fixtures, and 15 years for buildings. Leasehold improvements are amortized over their estimated useful lives or the period of the related lease, whichever is shorter.
The Company expenses costs for maintenance and repairs and capitalizes major replacements, renewals and betterments. For assets retired or otherwise disposed, both cost and accumulated depreciation are eliminated from the asset and accumulated depreciation accounts, and gains or losses related to the disposal are recorded in the statement of operations for the period.
Impairment
Long-lived assets that are held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability of long-lived assets is based on an estimate of the undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the difference between the fair value of the asset and its carrying value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.
| 12 |
Recoverable Taxes from Brazilian Government Entities
Recoverable taxes from Brazilian government entities represent value-added taxes paid on purchases in Brazil, which are reclaimable from the Brazilian tax authorities, net of reserves for amounts estimated not to be recoverable.
Fair Value Measurements
The carrying amounts of certain financial instruments, such as cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities.
The Company measures the following financial assets and liabilities at fair value:
| • | Freestanding and bifurcated derivatives in connection with certain debt and equity financings; and |
| • | 6% Convertible Notes Due 2021 (see Note 4, "Fair Value Measurement", Note 5, "Debt" and Note 16, “Subsequent Events”), for which the Company has elected fair value accounting |
Fair value is 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 techniques are applied. These valuation techniques involve some level of management estimation and judgement, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity.
Changes to the inputs used in these valuation models have a significant impact on the estimated fair value of the 6% Convertible Notes Due 2021 and the Company's embedded and freestanding derivatives. For example, a decrease (increase) in the estimated credit spread for the Company results in an increase (decrease) in estimated fair value. Conversely, a decrease (increase) in the stock price results in a decrease (increase) in estimated fair value.
The changes during 2018 and 2017 in the fair values of the bifurcated compound embedded derivatives are primarily related to the change in price of the Company's common stock and are reflected in the consolidated statements of operations as “Gain (loss) from change in fair value of derivative instruments”.
For debt instruments for which the Company has not elected fair value accounting, fair value is based on the present value of expected future cash flows and assumptions about the then-current market interest rates as of the reporting period and the creditworthiness of the Company. Most of the Company's debt is carried on the consolidated balance sheet on a historical cost basis net of unamortized discounts and premiums, because the Company has not elected the fair value option of accounting. However, for the 6% Notes Due 2021, the Company elected fair value accounting, so that balances reported for that debt instrument represent fair value as of each balance sheet date; see Note 4, "Fair Value Measurement", for additional information. Changes in fair value of the 6% Convertible Notes Due 2021 are reflected in the consolidated statements of operations as “Gain (loss) from change in fair value of debt”.
For all debt instruments, including any for which the Company has elected fair value accounting, the Company classifies interest that has been accrued during each period as Interest expense on the consolidated statements of operations.
Derivatives
Embedded derivatives that are required to be bifurcated from the underlying debt instrument (i.e., host) are accounted for and valued as separate financial instruments. The Company has evaluated the terms and features of its convertible notes payable and convertible preferred stock and identified compound embedded derivatives requiring bifurcation and accounting at fair value, using the valuation techniques mentioned in the Fair Value Measurements section of this Note, because the economic and contractual characteristics of the embedded derivatives met the criteria for bifurcation and separate accounting due to the instruments containing conversion options, certain “make-whole interest” provisions, down-round conversion price adjustment provisions and/or conversion rate adjustments.
| 13 |
Cash warrants and anti-dilution warrants issued in conjunction with the convertible debt and equity financings are freestanding financial instruments which are also classified as derivative liabilities.
Noncontrolling Interest
Noncontrolling interests represent the portion of net income (loss), net assets and comprehensive income (loss) that is not allocable to the Company, in situations where the Company consolidates its equity investment in a joint venture for which there are other owners. The amount of noncontrolling interest is comprised of the amount of such interests at the date of the Company's original acquisition of an equity interest in a joint venture, plus the other shareholders' share of changes in equity since the date the Company made an investment in the joint venture.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable. The Company places its cash equivalents and investments (primarily certificates of deposits) with high credit quality financial institutions and, by policy, limits the amount of credit exposure with any one financial institution. 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 and short-term investments.
The Company performs ongoing credit evaluation of its customers, does not require collateral, and maintains allowances for potential credit losses on customer accounts when deemed necessary.
Customers representing 10% or greater of accounts receivable were as follows:
| As of December 31, | 2018 | 2017 | ||||||
| Customer B | 24 | % | 10 | % | ||||
| Customer C | 19 | % | 15 | % | ||||
| Customer G | 11 | % | ** | |||||
| Customer A (related party) | ** | 38 | % | |||||
______________
** Less than 10%
Customers representing 10% or greater of revenue were as follows:
| Years Ended December 31, | 2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Customer A (related party) | 17 | % | 46 | % | ||||
| Customer B | 18 | % | 13 | % | ||||
| Customer C | 13 | % | ** | |||||
| Customer D | 13 | % | ** | |||||
| Customer E | ** | 11 | % | |||||
| Customer F | ** | ** | ||||||
______________
** Less than 10%
Revenue Recognition
Year ended December 31, 2017
For the year ended December 31, 2017, the Company recognized revenue from the sale of renewable products, licenses of and royalties from intellectual property, and grants and collaborative research and development services. Revenue was recognized when all of the following criteria were met: persuasive evidence of an arrangement existed, delivery has occurred or services have been rendered, the fee was fixed or determinable, and collectability was reasonably assured. If sales arrangements contained multiple elements, the Company evaluated whether the components of each arrangement represent separate units of accounting.
| 14 |
Renewable Product Sales
The Company’s renewable product sales do not include rights of return, except for sales of Biossance products. Returns are only accepted if the product does not meet product specifications and such nonconformity is communicated to the Company within a set number of days of delivery. The Company offers a two-year standard warranty provision for squalane products, if the products do not meet Company-established criteria as set forth in the Company’s trade terms. The Company bases its return reserve on a historical rate of return for the Company’s squalane products. Revenues are recognized, net of discounts and allowances, once passage of title and risk of loss has occurred and contractually specified acceptance criteria have been met, provided all other revenue recognition criteria have also been met.
Licenses and Royalties
License fees for intellectual property transferred to other parties, representing non-refundable payments received at the time of signature of license agreements, are recognized as revenue upon signature of the license agreements when the Company has no significant future performance obligations and collectability of the fees is assured. Upfront payments received at the beginning of licensing agreements with future service obligations are deferred and recognized as revenue on a systematic basis over the period during which the related services are rendered and all obligations are performed.
Royalties from intellectual property licenses that allow Amyris's customers to use the Company’s intellectual property to produce and sell their products in which the Company shares in the profits are recognized in the period the royalty report is received.
Grants and Collaborative Research and Development Services
Revenues from collaborative research and development services are recognized as the services are performed consistent with the performance requirements of the contract. In cases where the planned levels of research and development services fluctuate over the research term, the Company recognizes revenues using the proportional performance method based upon actual efforts to date relative to the amount of expected effort to be incurred by us. When up-front payments are received and the planned levels of research and development services do not fluctuate over the research term, revenues are recorded on a ratable basis over the arrangement term, up to the amount of cash received. When up-front payments are received and the planned levels of research and development services fluctuate over the research term, revenues are recorded using the proportional performance method, up to the amount of cash received. 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 is limited to those amounts whereby collectability is reasonably assured.
Grants are agreements that generally provide cost reimbursement for certain types of expenditures in return for research and development activities over a contractually defined period. Revenues from grants are recognized in the period during which the related costs are incurred, provided that the conditions under which the grants were provided have been met and only perfunctory obligations are outstanding.
Year ended December 31, 2018
In accordance with a new revenue recognition standard that the Company adopted January 1, 2018, the Company recognizes revenue from the sale of renewable products, licenses of and royalties from intellectual property, and grants and collaborative research and development services. Revenue is measured based on the consideration specified in a contract with a customer, and transaction price is allocated utilizing stand-alone selling price. Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring control over a product or service to a customer. The Company generally does not incur costs to obtain new contracts. The costs to fulfill a contract are expensed as incurred.
The Company accounts for a contract when it has approval and commitment to perform from both parties, the rights of the parties are identified, payment terms are established, the contract has commercial substance and collectability of the consideration is probable. Changes to contracts are assessed for whether they represent a modification or should be accounted for as a new contract. The Company considers the following indicators, among others, when determining if it is acting as a principal in the transaction and recording revenue on a gross basis: (i) the Company is primarily responsible for fulfilling the promise to provide the specified goods or service, (ii) the Company has inventory risk before the specified good or service has been transferred to a customer or after transfer of control to the customer and (iii) the Company has discretion in establishing the price for the specified good or service. If a transaction does not meet the Company's indicators of being a principal in the transaction, then the Company is acting as an agent in the transaction and the associated revenues are recognized on a net basis.
| 15 |
The Company’s significant contracts and contractual terms with its customers are presented in Note 10, "Revenue Recognition".
The Company recognizes revenue when control has passed to the customer. The following indicators are evaluated in determining when control has passed to the customer: (i) the Company has a right to receive payment for the product or service, (ii) the customer has legal title to the product, (iii) the Company has transferred physical possession of the product to the customer, (iv) the customer has the significant risk and rewards of ownership of the product and (v) the customer has accepted the product. For most of the Company's renewable products customers, supply agreements between the Company and each customer indicate when transfer of title occurs.
In some cases, the Company may make a payment to a customer. When that occurs, the Company evaluates whether the payment is for a distinct good or service receivable from the customer. If the fair value of the goods or services receivable is greater than or equal to the amount paid to the customer, then the entire payment is treated as a purchase. If, on the other hand, the fair value of goods or services is less than the amount paid, then the difference is treated as a reduction in transaction price of the Company's sales to the customer.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company's contracts may contain multiple performance obligations if a promise to transfer the individual goods or services is separately identifiable from other promises in the contracts and, therefore, is considered distinct. For contracts with multiple performance obligations, the Company determines the standalone selling price of each performance obligation and allocates the total transaction price using the relative selling price basis.
The following is a description of the principal goods and services from which the Company generates revenue.
Renewable Product Sales
Revenues from renewable product sales are recognized as a distinct performance obligation on a gross basis as the Company is acting as a principal in these transactions, with the selling price to the customer recorded net of discounts and allowances. Revenues are recognized at a point in time when control has passed to the customer, which typically is upon the renewable products leaving the Company’s facilities with the first transportation carrier. The Company, on occasion, may recognize revenue under a bill and hold arrangement, whereby the customer requests and agrees to purchase product but requests delivery at a later date. Under these arrangements, control transfers to the customer when the product is ready for delivery, which occurs when the product is identified separately as belonging to the customer, the product is ready for shipment to the customer in its current form, and the Company does not have the ability to direct the product to a different customer. It is at this point that the Company has the right to receive payment, the customer obtains legal title, and the customer has the significant risks and rewards of ownership. The Company’s renewable product sales do not include rights of return, except for Biossance products, for which the Company estimates sales returns subsequent to sale and reduces revenue accordingly. For renewable products other than Biossance, returns are accepted only if the product does not meet product specifications and such nonconformity is communicated to the Company within a set number of days of delivery. The Company offers a two-year assurance-type warranty to replace squalane products that do not meet Company-established criteria as set forth in the Company’s trade terms. An estimate of the cost to replace the squalane products sold is made based on a historical rate of experience and recognized as a liability and related expense when the renewable product sale is consummated.
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Licenses and Royalties
Licensing of Intellectual Property: When the Company’s intellectual property licenses are determined to be distinct from the other performance obligations identified in the arrangement, revenue is recognized from non-refundable, up-front fees allocated to the license at a point in time when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For intellectual property licenses that are combined with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front-fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognized.
Royalties from Licensing of Intellectual Property: The Company earns royalties from the licensing of its intellectual property whereby the licensee uses the intellectual property to produce and sell its products to its customers and the Company shares in the profits.
When the Company’s intellectual property license is the only performance obligation, or it is the predominant performance obligation in arrangements with multiple performance obligations, the Company applies the sales-based royalty exception which requires the Company to estimate the revenue that is recognized at a point in time when the licensee’s product sales occur. Estimates of sales-based royalty revenues are made using the most likely outcome method, which is the single amount in a range of possible amounts, using the best evidence available at the time, derived from the licensee’s historical sales volumes and sales prices of its products and recent commodity market pricing data and trends. Estimates are adjusted to actual or as new information becomes available.
When the Company’s intellectual property license is not the predominant performance obligation in arrangements with multiple performance obligations, the royalty represents variable consideration and is allocated to the transaction price of the predominant performance obligation which generally is the supply of renewable products to the Company's customers. Revenue is estimated and recognized at a point in time when the renewable products are delivered to the customer. Estimates of the amount of variable consideration to include in the transaction price are made using the expected value method, which is the sum of probability-weighted amounts in a range of possible amounts determined based on the cost to produce the renewable product plus a reasonable margin for the profit share. The Company only includes an amount of variable consideration in the transaction price to the extent it is probable that a significant reversal in the cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Also, the transaction price is reduced for estimates of customer incentive payments payable by the Company for certain customer contracts.
Grants and Collaborative Research and Development Services
Collaborative Research and Development Services: The Company earns revenues from collaboration agreements with customers to perform research and development services to develop new molecules using the Company’s technology and to scale production of the molecules for commercialization and use in the collaborator’s products. The collaboration agreements generally include providing the Company's collaboration partners with research and development services and with licenses to the Company’s intellectual property to use the technology underlying the development of the molecules and to sell its products that incorporate the technology. The terms of the Company's collaboration agreements typically include one or more of the following: advance payments for the research and development services that will be performed, nonrefundable upfront license payments, milestone payments to be received upon the achievement of the milestone events defined in the agreements, and royalty payments upon the commercialization of the molecules in which the Company shares in the customer’s profits.
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Collaboration agreements are evaluated at inception to determine whether the intellectual property licenses represent distinct performance obligations separate from the research and development services. If the licenses are determined to be distinct, the non-refundable upfront license fee is recognized as revenue at a point in time when the license is transferred to the licensee and the licensee is able to use and benefit from the license while the research and development service fees are recognized over time as the performance obligations are satisfied. The research and development service fees represent variable consideration. Estimates of the amount of variable consideration to include in the transaction price are made using the expected value method, which is the sum of probability-weighted amounts in a range of possible amounts. The Company only includes an amount of variable consideration in the transaction price to the extent it is probable that a significant reversal in the cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Revenue is recognized over time using either an input-based measure of labor hours expended or a time-based measure of progress towards the satisfaction of the performance obligations. The measure of progress is evaluated each reporting period and, if necessary, adjustments are made to the measure of progress and the related revenue recognized.
Collaboration agreements that include milestone payments are evaluated at inception to determine whether the milestone events are considered probable of achievement, and estimates are made of the amount of the milestone payments to include in the transaction price using the most likely amount method which is the single amount in a range of possible amounts. If it is probable that a significant revenue reversal will not occur, the estimated milestone payment amount is included in the transaction price. Each reporting period, the Company re-evaluates the probability of achievement of the milestone events and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative basis, which would affect collaboration revenues in the period of adjustment. Generally, revenue is recognized using an input-based measure of progress towards the satisfaction of the performance obligations which can be labor hours expended or time-based in proportion to the estimated total project effort or total projected time to complete. The measure of progress is evaluated each reporting period and, if necessary, adjustments are made to the measure of progress and the related revenue recognized. Certain performance obligations are associated with milestones agreed between the Company and its customer. Revenue generated from the performance of services in accordance with these milestones is recognized upon confirmation from the customer that the milestone has been achieved. In these cases, amounts recognized are constrained to the amount of consideration received upon achievement of the milestone.
The Company generally invoices its collaboration partners on a monthly or quarterly basis, or upon the completion of the effort or achievement of a milestone, based on the terms of each agreement. Deferred revenue arises from amounts received in advance of performing the research and development activities and is recognized as revenue in future periods as the performance obligations are satisfied.
Grants: The Company earns revenues from grants with government agencies to, among other things, provide research and development services to develop molecules using the Company’s technology, and create research and development tools to improve the timeline and predictability for scaling molecules from proof of concept to market by reducing time and costs. Grants typically consist of research and development milestone payments to be received upon the achievement of the milestone events defined in the agreements.
The milestone payments are evaluated at inception to determine whether the milestone events are considered probable of achievement and estimates are made of the amount of the milestone payments to include in the transaction price using the most likely amount method which is the single amount in a range of possible amounts. If it is probable that a significant revenue reversal will not occur, the estimated milestone payment amount is included in the transaction price. Each reporting period, the Company re-evaluates the probability of achievement of the milestone events and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative basis, which would affect grant revenues in the period of adjustment. Revenue is recognized over time using a time-based measure of progress towards the satisfaction of the performance obligations. The measure of progress is evaluated each reporting period and, if necessary, adjustments are made to the measure of progress and the related revenue recognized.
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Cost of Products Sold
Cost of products sold includes the production costs of renewable products, which include the cost of raw materials, in-house manufacturing labor and overhead, amounts paid to contract manufacturers, including amortization of tolling fees, and period costs including inventory write-downs resulting from applying lower of cost or net realizable value inventory adjustments. Cost of products sold also includes certain costs related to the scale-up of production. Shipping and handling costs charged to customers are recorded as revenues. Outbound shipping costs incurred are included in cost of products sold. Such charges were not material for any of the periods presented.
The Company recognizes deferred cost of products sold as an asset on the balance sheet when a cost is incurred in connection with a revenue performance obligation that will not be fulfilled until a future period.
Research and Development
Research and development costs are expensed as incurred and include costs associated with research performed pursuant to collaborative agreements and government grants, including internal research. Research and development costs consist of direct and indirect internal costs related to specific projects, as well as fees paid to others that conduct certain research activities on the Company’s behalf.
Debt Extinguishment
The Company accounts for the income or loss from extinguishment of debt in accordance with ASC 470, Debt, which indicates that for all extinguishment of debt, the difference between the reacquisition consideration and the net carrying amount of the debt being extinguished should be recognized as gain or loss when the debt is extinguished. Losses from debt extinguishment are shown in the consolidated statements of operations under "Other income (expense)" as "Loss upon extinguishment of debt".
Stock-based Compensation
The Company accounts for stock-based employee compensation plans under the fair value recognition and measurement provisions of U.S. GAAP. Those provisions require all stock-based payments to employees, including grants of stock options and restricted stock units (RSUs), to be measured using the grant-date fair value of each award. The Company recognizes stock-based compensation expense net of expected forfeitures over each award's requisite service period, which is generally the vesting term. Expected forfeiture rates are estimated based on the Company's historical experience. Stock-based compensation plans are described more fully in Note 12, "Stock-based Compensation".
Income Taxes
The Company is subject to income taxes in the United States and foreign jurisdictions and uses estimates to determine its provisions for income taxes. The Company uses the asset and liability method of accounting for income taxes, whereby deferred tax asset or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income.
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Recognition of deferred tax assets is appropriate when realization of such assets is more likely than not. The Company recognizes a valuation allowance against its net deferred tax assets unless it is more likely than not that such deferred tax assets will be realized. This assessment requires judgement as to the likelihood and amounts of future taxable income by tax jurisdiction.
The Company applies the provisions of Financial Accounting Standards Board (FASB) guidance on accounting for uncertainty in income taxes. The Company assesses all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability, and the tax benefit to be recognized is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and the Company will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgement, and such judgements may change as new information becomes available.
Foreign Currency Translation
The assets and liabilities of foreign subsidiaries, where the local currency is the functional currency, are translated from their respective functional currencies into U.S. dollars at the rates in effect at each balance sheet date, and revenue and expense amounts are translated at average rates during each period, with resulting foreign currency translation adjustments recorded in other comprehensive loss, net of tax, in the consolidated statements of stockholders’ deficit. As of December 31, 2018 and 2017, cumulative translation adjustment, net of tax, were $43.3 million and $42.2 million, respectively.
Where the U.S. dollar is the functional currency, remeasurement adjustments are recorded in other income (expense), net in the accompanying consolidated statements of operations. Net losses resulting from foreign exchange transactions were $1.6 million and $0.4 million for the years ended December 31, 2018 and 2017, respectively and are recorded in other income (expense), net in the consolidated statements of operations.
New Accounting Standards or Updates Recently Adopted
During the year ended December 31, 2018 the Company adopted the following Accounting Standards Updates (ASUs):
Revenue Recognition The Company adopted ASC 606, Revenue from Contracts with Customers, with a date of initial application of January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition as detailed above in “Significant Accounting Policies”. The Company applied ASC 606 using the modified retrospective approach by recognizing the cumulative effect of initially applying ASC 606 to all contracts not completed as of the date of adoption as an adjustment to the opening balance of accumulated deficit at January 1, 2018. Therefore, the comparative information has not been adjusted and continues to be reported under the legacy revenue recognition guidance of ASC 605, "Revenue Recognition".
The Company applied ASC 606 using a practical expedient for contracts that were modified before the application date, which allowed the Company to determine an aggregate effect of all modifications that occurred before January 1, 2018, when determining the satisfied and unsatisfied performance obligations, the transaction price, and allocating that transaction price to the performance obligations instead of retrospectively restating the contracts for such contract modifications.
The cumulative effect of initially applying ASC 606 resulted in an increase to accumulated deficit at January 1, 2018 of approximately $0.8 million. The most significant change in accounting policy is the Company is now required to estimate royalty revenues from licenses of the Company’s intellectual property and recognize estimated royalty revenues at a point in time when the Company sells its renewable products to its customers (if the sales-based royalty exception does not apply) or when the licensee sells its products to its customer (if the sales-based royalty exception does apply).
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The following table presents the amounts by which revenue is affected in the current reporting period by the application of ASC 606 as compared with the legacy guidance that was in effect before the accounting change.
| Year Ended December 31, 2018 | ||||||||||||
| (In thousands) | As Reported | Adjustments | Amounts Without the Adoption of ASC 606 | |||||||||
| Renewable products | $ | 33,598 | $ | — | $ | 33,598 | ||||||
| Licenses and royalties | 7,658 | 5,094 | 12,752 | |||||||||
| Grants and collaborations | 22,348 | (5,786 | ) | 16,562 | ||||||||
| Total revenue from all customers | $ | 63,604 | $ | (692 | ) | $ | 62,912 | |||||
Financial Instruments In January 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which changes the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The Company adopted ASU 2016-01 on January 1, 2018. Adoption of this ASU did not impact the Company's consolidated financial position, results of operations or cash flows.
Classification of Cash Flow Elements In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which affects the classification of certain cash receipts and cash payments on the statement of cash flows. ASU 2016-15 results in a change in cash flow classification of debt prepayment or extinguishment costs. ASU 2016-15 became effective January 1, 2018 on a retrospective basis. Adoption of this ASU did not impact the Company's consolidated financial position, results of operations or cash flows.
Income Taxes Related to Intra-entity Asset Transfers In October 2016, FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory on simplifying the accounting for income taxes related to intra-entity asset transfers. The new guidance allows an entity to recognize the tax expense from the sale of an asset in the seller’s tax jurisdiction when the transfers occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. ASU 2016-16 became effective January 1, 2018, which the Company adopted on a modified retrospective basis.
Restricted Cash in Statement of Cash Flows In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The accounting standard update became effective January 1, 2018 using a retrospective transition method for each period presented. Upon adoption, ASU 2016-18 resulted in a change in the presentation of restricted cash in the statement of cash flows for current and prior periods presented.
Derecognition of Nonfinancial Assets In February 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which requires entities to apply certain recognition and measurement principles in ASC 606 when they derecognize nonfinancial assets, and in substance, nonfinancial assets, and the counterparty is not a customer. The guidance applies to: (1) contracts to transfer to a noncustomer a nonfinancial asset or group of nonfinancial assets, or an ownership interest in a consolidated subsidiary that does not meet the definition of a business and is not a not-for-profit activity; and (2) contributions of nonfinancial assets that are not a business to a joint venture or other noncontrolled investee. The accounting standard update became effective January 1, 2018 on a modified retrospective basis. Adoption of this ASU did not impact the Company's consolidated financial position, results of operations or cash flows.
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Income Taxes In March 2018, FASB issued ASU 2018-05, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. As of December 31, 2018, the Company's analysis for the Transition Tax has been filed with its December 31, 2017 tax return and the Company considered its accounting for this area of the Tax Act to be complete as of such date and did not make any measurement-period adjustments related to it. In addition, the Company considered its accounting for changes in the U.S. federal rate and deferred tax impact for the rate change to be complete. The Company also accounted for the tax impact related to other areas of the Tax Act and believe its analysis to be completed consistent with the guidance in ASU 2018-05. The Company recognizes that the IRS is continuing to publish and finalize ongoing guidance with respect to the Act which may modify accounting interpretation for the Tax Act, the Company would look to account for these impacts in the period of such change is enacted.
Non-employee Stock-based Compensation In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which more closely aligns the accounting for employee and nonemployee stock-based compensation. Under the new standard, companies are no longer required to value non-employee awards differently from employee awards. The Company adopted this accounting standard update on January 1, 2018 using a modified retrospective approach. Adoption of this ASU did not impact the Company's consolidated financial position, results of operations or cash flows.
Recent Accounting Standards or Updates Not Yet Effective
Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), as subsequently updated, with fundamental changes as to how entities account for leases. Lessees will need to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. Additional disclosures for leases will also be required.
The Company is adopting the new standard effective January 1, 2019 using a modified retrospective method, and will not restate comparative periods. The modified retrospective transition approach requires lessees and lessors to recognize and measure existing leases at the date of initial application. The new standard provides a number of optional practical expedients in transition. The Company expects to elect the “package of practical expedients”, which permits it not to reassess under the new standard prior conclusions about lease identification, lease classification and initial direct costs.
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The adoption of this standard on January 1, 2019 is expected to have the effect of increasing assets and liabilities on the consolidated balance sheet by $25.7 million, but is not expected to have a material impact on the consolidated statements of operations or cash flows. The most significant impact relates to (i) the recognition of new Right of Use (ROU) assets and lease liabilities on the balance sheet for operating leases; and (ii) providing significant new disclosures about leasing activities. Upon adoption, the Company will recognize operating lease liabilities of $33.6 million, based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases. The Company will also recognize ROU assets of $29.7 million, which represents the operating lease liability adjusted for accrued rent.
Financial Instruments with "Down Round" Features In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): Accounting for Certain Financial Instruments with Down Round Features. The amendments of this ASU update the classification analysis of certain equity-linked financial instruments, or embedded features, with down round features, as well as clarify existing disclosure requirements for equity-classified instruments. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The accounting standard update will be effective beginning in the first quarter of fiscal year 2019 using a modified retrospective approach. The Company completed its assessment of the new standard and determined the impact to the consolidated balance sheet would be material. The Company anticipates recording a $41.0 million reduction to derivative liabilities and a corresponding $41.0 million increase to equity on January 1, 2019.
Fair Value Measurement In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which amends ASC 820, Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. The accounting standard update will be effective beginning in the first quarter of fiscal year 2020, with removed and modified disclosures to be adopted on a retrospective basis, and new disclosures to be adopted on a prospective basis. The Company is in the initial stages of evaluating the impact of the new standard on its consolidated financial statements.
Collaborative Revenue Arrangements In November 2018, the FASB issued ASU 2018-18, Clarifying the Interaction between Topic 808 and Topic 606, that clarifies the interaction between the guidance for certain collaborative arrangements and Topic 606, the new revenue recognition standard. A collaborative arrangement is a contractual arrangement under which two or more parties actively participate in a joint operating activity and are exposed to significant risks and rewards that depend on the activity’s commercial success. The ASU provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard. The accounting standard update will be effective beginning in the first quarter of fiscal year 2020 retroactively. The Company does not believe that the impact of the new standard on its consolidated financial statements will be material.
Credit Losses In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. ASU 2016-13 also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity's portfolio. ASU 2016-13 will become effective for the Company beginning in the first quarter of fiscal year 2020. The Company does not believe that the impact of the new standard on its consolidated financial statements will be material.
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2. Restatement of Consolidated Financial Statements
Restatement Background
Subsequent to the issuance of the Company's unaudited condensed consolidated financial statements as of September 30, 2018 and as previously announced on April 5, 2019 and May 14, 2019, the Audit Committee (the Audit Committee) of the Board of Directors of the Company (the Board) and the Board, respectively, concluded that the Company will restate its interim condensed consolidated financial statements for the quarterly and year-to-date periods ended March 31, 2018, June 30, 2018 and September 30, 2018 (collectively, the Restated 2018 Non-Reliance Periods) and its audited consolidated financial statements for the year ended December 31, 2017 (the Restated 2017 Non-Reliance Consolidated Financial Statements).
Restated 2017 Non-Reliance Consolidated Financial Statements
During the course of the re-audit of the Restated 2017 Financial Statements, in addition to incorrectly accounting for certain payment obligations under the Ginkgo Partnership Agreement as previously disclosed, the Company identified other accounting and financial reporting errors related to (i) the recognition of certain deemed dividends to preferred stock holders, (ii) incorrect accounting treatment for the derecognition of certain debt and derivative liability instruments, (iii) errors in computing tax expense, (iv) incorrect revenue recognition for certain non-cash consideration received under a collaboration agreement, (v) the timing of certain revenue recognition between quarters within 2017, (vi) computation of earnings (loss) per share, (vii) correction of errors in cash flow statements for non-cash adjustments, and (viii) computation of loss on extinguishment of certain debt instruments.
The error corrections for the year to date audited 2017 consolidated financial statements have been reflected throughout these consolidated financial statements and accompanying notes. Also, the tables below show the impact of each adjustment by the individual financial statement line item caption and provide a brief description of the adjustment.
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Consolidated Balance Sheet
The following table presents the Company's consolidated balance sheet at December 31, 2017 as previously reported, restatement adjustments and as restated (in thousands):
| December 31, 2017 | ||||||||||||||
| (In thousands) | As Previously Reported | Corrections | Ref. | As Restated | ||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 57,059 | $ | — | $ | 57,059 | ||||||||
| Restricted cash | 2,994 | — | 2,994 | |||||||||||
| Accounts receivable, net | 24,281 | (5,328 | ) | a | 18,953 | |||||||||
| Accounts receivable - related party, net | 9,340 | (4,573 | ) | a | 4,767 | |||||||||
| Accounts receivable, unbilled - related party | — | 9,901 | 9,901 | |||||||||||
| Inventories | 5,408 | — | 5,408 | |||||||||||
| Prepaid expenses and other current assets | 5,525 | (606 | ) | b | 4,919 | |||||||||
| Total current assets | 104,607 | (606 | ) | 104,001 | ||||||||||
| Property, plant and equipment, net | 13,892 | — | 13,892 | |||||||||||
| Accounts receivable, unbilled, noncurrent – related party | 7,940 | — | 7,940 | |||||||||||
| Restricted cash, noncurrent | 959 | — | 959 | |||||||||||
| Recoverable taxes from Brazilian government entities | 1,445 | — | 1,445 | |||||||||||
| Other assets | 22,640 | (10,081 | ) | c | 12,559 | |||||||||
| Total assets | $ | 151,483 | $ | (10,687 | ) | $ | 140,796 | |||||||
| Liabilities, Mezzanine Equity and Stockholders' Deficit | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 15,921 | $ | (406 | ) | d | $ | 15,515 | ||||||
| Accrued and other current liabilities | 29,402 | (200 | ) | e | 29,202 | |||||||||
| Contract liabilities | 4,880 | (572 | ) | f | 4,308 | |||||||||
| Debt, current portion | 36,924 | — | 36,924 | |||||||||||
| Related party debt, current portion | 20,019 | — | 20,019 | |||||||||||
| Total current liabilities | 107,146 | (1,178 | ) | 105,968 | ||||||||||
| Long-term debt, net of current portion | 61,893 | (1,673 | ) | g | 60,220 | |||||||||
| Related party debt, net of current portion | 46,541 | — | 46,541 | |||||||||||
| Derivative liabilities | 119,978 | (3,481 | ) | h | 116,497 | |||||||||
| Other noncurrent liabilities | 10,632 | 13,026 | i | 23,658 | ||||||||||
| Total liabilities | 346,190 | 6,694 | 352,884 | |||||||||||
| Commitments and contingencies | ||||||||||||||
| Mezzanine equity: | ||||||||||||||
| Contingently redeemable common stock | 5,000 | — | 5,000 | |||||||||||
| Stockholders’ deficit: | ||||||||||||||
| Preferred stock | — | — | — | |||||||||||
| Common stock - $0.0001 par value | 5 | — | 5 | |||||||||||
| Additional paid-in capital | 1,048,274 | 66,272 | j | 1,114,546 | ||||||||||
| Accumulated other comprehensive loss | (42,156 | ) | — | (42,156 | ) | |||||||||
| Accumulated deficit | (1,206,767 | ) | (83,653 | ) | k | (1,290,420 | ) | |||||||
| Total Amyris, Inc. stockholders’ deficit | (200,644 | ) | (17,381 | ) | (218,025 | ) | ||||||||
| Noncontrolling interest | 937 | — | 937 | |||||||||||
| Total stockholders' deficit | (199,707 | ) | (17,381 | ) | (217,088 | ) | ||||||||
| Total liabilities, mezzanine equity and stockholders' deficit | $ | 151,483 | $ | (10,687 | ) | $ | 140,796 | |||||||
Restatement adjustments:
a. Reclassification of related party accounts receivable to a separate line on the balance sheet.
b. Write-off of unrecoverable receivable in connection with facilities subleased to a related party.
c. Correction of error in recording amounts payable under Ginkgo Partnership Agreement as prepaid royalties instead of reduction in revenue.
d. Adjustment to uninvoiced receipts liability.
e. Adjustment to accrued liability.
f. Revision to accounting for equity received in satisfaction of a customer receivable.
g. Adjustment to issuance-date fair value of a debt instrument.
h. Make-whole derivative liabilities adjustment.
i. Accrual of the Ginkgo Partnership Payments obligation, net of reduction to deferred revenue liability.
j. Correction to the accounting for a make-whole equity instrument in connection with May 2017 equity offering.
k. Sum of adjustments to net loss for the year ended December 31, 2017 as result of corrections.
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Consolidated Statement of Operations
The following table presents the Company's consolidated statements of operations for the year ended December 31, 2017 as previously reported, restatement adjustments and as restated (in thousands, except per share amounts):
| Year Ended December 31, 2017 | ||||||||||||||||||
| (In thousands, except shares and per share amounts) | As Previously Reported | Reclassifications(1) | Corrections | Ref | As Restated | |||||||||||||
| Renewable products | $ | 45,781 | $ | (3,411 | ) | $ | – | $ | 42,370 | |||||||||
| Licenses and royalties | 57,703 | 6,774 | (15,774 | ) | ab | 48,703 | ||||||||||||
| Grants and collaborations | 39,960 | (3,363 | ) | 1 | 36,598 | |||||||||||||
| Total revenue | 143,444 | – | (15,773 | ) | 127,671 | |||||||||||||
| Cost and operating expenses | – | |||||||||||||||||
| Cost of products sold | 62,713 | – | (406 | ) | ad | 62,307 | ||||||||||||
| Research and development | 57,027 | (72 | ) | 607 | ae | 57,562 | ||||||||||||
| Sales, general and administrative | 63,219 | 72 | 562 | af | 63,853 | |||||||||||||
| Total cost and operating expenses | 182,959 | – | 763 | 183,722 | ||||||||||||||
| Loss from operations | (39,515 | ) | – | (16,536 | ) | (56,051 | ) | |||||||||||
| Other income (expense) | ||||||||||||||||||
| (Loss) gain on divestiture | 5,732 | – | – | 5,732 | ||||||||||||||
| Interest expense | (34,033 | ) | – | (3,048 | ) | ah | (37,081 | ) | ||||||||||
| (Loss) gain from change in fair value of derivative instruments | (1,742 | ) | – | (47,110 | ) | ai | (48,852 | ) | ||||||||||
| Loss upon extinguishment of debt | (1,521 | ) | – | (10,376 | ) | ak | (11,897 | ) | ||||||||||
| Other income (expense), net | (955 | ) | – | (1 | ) | (956 | ) | |||||||||||
| Total other expense, net | (32,519 | ) | – | (60,535 | ) | (93,054 | ) | |||||||||||
| Loss before income taxes | (72,034 | ) | – | (77,071 | ) | (149,105 | ) | |||||||||||
| Provision for income taxes | (295 | ) | – | (6,582 | ) | am | (6,877 | ) | ||||||||||
| Net loss attributable to Amyris, Inc. | (72,329 | ) | – | (83,653 | ) | (155,982 | ) | |||||||||||
| Less deemed dividend on capital distribution to related parties | (8,648 | ) | – | 8,648 | an | – | ||||||||||||
| Less deemed dividend related to beneficial conversion feature on Series A preferred stock | (562 | ) | – | – | (562 | ) | ||||||||||||
| Less deemed dividend related to beneficial conversion feature on Series B preferred stock | (634 | ) | – | – | (634 | ) | ||||||||||||
| Less deemed dividend related to beneficial conversion feature on Series D preferred stock | (5,757 | ) | – | – | (5,757 | ) | ||||||||||||
| Less deemed dividend upon settlement of make-whole provision on Series A preferred stock | – | – | (10,505 | ) | ap | (10,505 | ) | |||||||||||
| Less deemed dividend upon settlement of make-whole provision on Series B preferred stock | – | – | (22,632 | ) | aq | (22,632 | ) | |||||||||||
| Less deemed dividend related to proceeds discount and issuance costs upon conversion of Series A preferred stock | – | – | (21,578 | ) | ar | (21,578 | ) | |||||||||||
| Less deemed dividend related to proceeds discount and issuance costs upon conversion of Series B preferred stock | – | – | (24,366 | ) | as | (24,366 | ) | |||||||||||
| Less cumulative dividends on Series A and Series B preferred stock | (5,439 | ) | – | 5,439 | aw | – | ||||||||||||
| Add: losses allocated to participating securities | – | – | 40,159 | au | 40,159 | |||||||||||||
| Net loss attributable to Amyris, Inc. common stockholders | $ | (93,369 | ) | – | $ | (108,488 | ) | $ | (201,857 | ) | ||||||||
| Net loss per share attributable to common stockholders | ||||||||||||||||||
| Basic and diluted | $ | (2.89 | ) | $ | (6.26 | ) | ||||||||||||
| Weighted-average shares of common stock outstanding used in computing loss per share of common stock: | ||||||||||||||||||
| Basic and diluted | 32,253,570 | 32,253,570 | ||||||||||||||||
(1) Reclassification of revenue and operating expense by type to conform to the Company's current presentation.
Restatement adjustments:
ab. Ginkgo partnership obligation and promissory note issuance recorded as reduction to revenue and correction of errors in recording revenue from non-cash consideration.
ad. Correction in connection with a sales return, and adjustment to uninvoiced receipts liability.
ae. Write-off of unrecoverable receivable in connection with facilities subleased to a related party, and reclassification of operating expense by classification to conform to the Company's current presentation.
af. Expense incurred in connection with May 2017 equity offering.
ah. Correction to amortization of debt discounts, and interest expense in connection with partnership payments obligation.
ai. Correction to accounting for make-whole liability in connection with May 2017 Offering.
ak. Loss on extinguishment of related and unrelated party debt.
am. Tax provision to accrue liability for unrecognized tax benefit.
an. Loss on extinguishment of related and unrelated party debt.
ap. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings.
aq. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings.
ar. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings.
as. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings.
au. Correction in the computation of loss per share to reflect participating securities.
aw. Correction in the computation of net loss per share related to make-whole deemed dividends.
| 26 |
Consolidated Statement of Cash Flows
The following table presents the Company's consolidated statements of cash flows for the year ended December 31, 2017 as previously reported, restatement adjustments and as restated (in thousands). In this table, As Restated amounts reflect the impact of corrections to the consolidated balance sheet as of December 31, 2017 and the statement of operations for the year ended December 31, 2017, as well as the Company's adoption of ASU 2016-18, which changes how restricted cash is reported in statements of cash flows.
| Year Ended December 31, 2017 | ||||||||||||
| (In thousands) | As Previously Reported | Corrections(1) | As Restated | |||||||||
| Operating activities | ||||||||||||
| Net loss | $ | (72,329 | ) | (83,653 | ) | $ | (155,982 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation and amortization | 11,358 | – | 11,358 | |||||||||
| (Gain) loss on disposal of property, plant and equipment | 142 | – | 142 | |||||||||
| Stock-based compensation | 6,265 | – | 6,265 | |||||||||
| Amortization of debt discount | 12,490 | 2,749 | 15,239 | |||||||||
| (Gain) loss upon extinguishment of debt | 1,521 | 10,376 | 11,897 | |||||||||
| Receipt of equity in connection with collaboration arrangements revenue | (2,661 | ) | 2,661 | – | ||||||||
| (Gain) loss from change in fair value of derivative liabilities | 1,742 | 47,110 | 48,852 | |||||||||
| (Gain) loss on foreign currency exchange rates | (1,230 | ) | – | (1,230 | ) | |||||||
| Noncash revenue reduction related to issuance of debt obligations | – | 13,413 | 13,413 | |||||||||
| Non-cash gain on divestiture | (5,732 | ) | – | (5,732 | ) | |||||||
| Receipt of noncash consideration in connection with license revenue | (8,046 | ) | – | (8,046 | ) | |||||||
| Changes in assets and liabilities: | ||||||||||||
| Accounts receivable | (19,647 | ) | – | (19,647 | ) | |||||||
Accounts receivable, unbilled – related party |
(7,940 | ) | – | (7,940 | ) | |||||||
| Inventories | (3,126 | ) | – | (3,126 | ) | |||||||
| Prepaid expenses and other assets | (19,336 | ) | 606 | (18,730 | ) | |||||||
| Accounts payable | 5,858 | (406 | ) | 5,452 | ||||||||
| Accrued and other liabilities | 7,295 | 6,582 | 13,877 | |||||||||
| Contract liabilities | (7,241 | ) | – | (7,241 | ) | |||||||
| Net cash used in operating activities | (100,617 | ) | (562 | ) | (101,179 | ) | ||||||
| Investing activities | ||||||||||||
| Proceeds from divestiture | 54,827 | – | 54,827 | |||||||||
| Change in short-term investments | 712 | 581 | 1,293 | |||||||||
| Change in restricted cash | 865 | (865 | ) | – | ||||||||
| Purchases of property, plant and equipment | (4,412 | ) | – | (4,412 | ) | |||||||
| Net cash (used in) provided by investing activities | 51,992 | (284 | ) | 51,708 | ||||||||
| Financing activities | ||||||||||||
| Proceeds from issuance of convertible preferred stock | 101,124 | (2,878 | ) | 98,246 | ||||||||
| Proceeds from exercises of common stock options | 160 | (160 | ) | – | ||||||||
| Payment of minimum employee taxes withheld upon net share settlement of restricted stock units | (385 | ) | – | (385 | ) | |||||||
| Proceeds from issuance of common stock in August 2017 offering | – | 5,759 | 5,759 | |||||||||
| Issuance costs incurred | – | (2,159 | ) | (2,159 | ) | |||||||
| Change in restricted cash related to contingently redeemable common stock | 1,046 | (1,046 | ) | – | ||||||||
| Proceeds from issuance of debt, net of issuance costs | 18,925 | – | 18,925 | |||||||||
| Principal payments on debt | (37,500 | ) | – | (37,500 | ) | |||||||
| Payment of swap termination | (3,113 | ) | – | (3,113 | ) | |||||||
| Payment on early redemption of debt | (1,909 | ) | – | (1,909 | ) | |||||||
| Net cash provided by financing activities | 78,348 | (484 | ) | 77,864 | ||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 186 | – | 186 | |||||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | 29,909 | (1,330 | ) | 28,579 | ||||||||
| Cash, cash equivalents and restricted cash at beginning of year | 27,150 | 5,283 | 32,433 | |||||||||
| Cash, cash equivalents and restricted cash at end of year | $ | 57,059 | 3,953 | 61,012 | ||||||||
| Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets | ||||||||||||
| Cash and cash equivalents | $ | 57,059 | ||||||||||
| Restricted cash, current | 2,994 | |||||||||||
| Restricted cash, noncurrent | 959 | |||||||||||
| Total cash, cash equivalents and restricted cash | $ | 61,012 | ||||||||||
| Supplemental disclosures of cash flow information: | ||||||||||||
| Cash paid for interest | $ | 11,539 | $ | – | $ | 11,539 | ||||||
| Supplemental disclosures of non-cash investing and financing activities: | ||||||||||||
| Issuance of common stock upon conversion of debt | $ | 28,702 | $ | – | $ | 28,702 | ||||||
| Accrued interest added to debt principal | $ | 2,816 | $ | – | $ | 2,816 | ||||||
| Issuance of common stock for settlement of debt principal and interest payments | $ | 3,436 | $ | – | $ | 3,436 | ||||||
| Financing of insurance premium under note payable | $ | 467 | $ | – | $ | 467 | ||||||
| Issuance of convertible preferred stock upon conversion of debt | $ | 40,204 | $ | – | $ | 40,204 | ||||||
| Settlement of debt principal by a related party | $ | 25,000 | $ | – | $ | 25,000 | ||||||
| Issuance of note payable in exchange for debt extinguishment with third party | $ | 16,954 | $ | – | $ | 16,954 | ||||||
| Issuance of common stock for settlement of debt | $ | 10,708 | $ | – | $ | 10,708 | ||||||
| Issuance of preferred stock attributed to derivative liabilities | $ | – | $ | 72,725 | $ | 72,725 | ||||||
(1) To reflect the impact of restatement corrections on the statement of cash flows.
| 27 |
3. Balance Sheet Details
Allowance for Doubtful Accounts
Allowance for doubtful accounts activity and balances were as follows:
| (In thousands) | Balance at Beginning of Year |
Provisions | Recoveries (Write-offs), Net |
Balance at End of Year | ||||||||||||
| Allowance for doubtful accounts: | ||||||||||||||||
| Year Ended December 31, 2018 | $ | 642 | $ | – | $ | – | $ | 642 | ||||||||
| Year Ended December 31, 2017 (as restated, Note 2) | $ | 501 | $ | 141 | $ | – | $ | 642 | ||||||||
Inventories
| December 31, (In thousands) |
2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Raw materials | $ | 3,901 | $ | 819 | ||||
| Work in process | 539 | 364 | ||||||
| Finished goods | 5,253 | 4,225 | ||||||
| Total inventories | $ | 9,693 | $ | 5,408 | ||||
| 28 |
Prepaid expenses and other current assets
| December 31, (In thousands) |
2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Prepayments, advances and deposits | $ | 5,644 | $ | 3,599 | ||||
| Recoverable taxes from Brazilian government entities | 631 | 87 | ||||||
| Other | 4,291 | 1,233 | ||||||
| Total prepaid expenses and other current assets | $ | 10,566 | $ | 4,919 | ||||
Property, plant and equipment, net
| December 31, (In thousands) |
2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Machinery and equipment | $ | 43,713 | $ | 46,317 | ||||
| Leasehold improvements | 39,922 | 40,036 | ||||||
| Computers and software | 9,987 | 9,555 | ||||||
| Furniture and office equipment, vehicles and land | 3,016 | 3,415 | ||||||
| Construction in progress | 1,749 | 2,838 | ||||||
| Total property, plant and equipment, gross | 98,387 | 102,161 | ||||||
| Less: accumulated depreciation and amortization | (78,631 | ) | (88,269 | ) | ||||
| Total property, plant and equipment, net | $ | 19,756 | $ | 13,892 | ||||
Property, plant and equipment, net includes $5.0 million and $4.2 million of machinery and equipment under capital leases as of December 31, 2018 and 2017, respectively. Accumulated amortization of assets under capital lease totaled $2.3 million and $1.6 million as of December 31, 2018 and 2017, respectively.
Depreciation and amortization expense, including amortization of assets under capital leases, was $4.9 million and $11.4 million for the years ended December 31, 2018 and 2017, respectively.
Losses on disposal of property, plant and equipment were $0.9 million and $0.1 million for the years ended December 31, 2018 and 2017, respectively. Such losses or gains were included in "Research and development" expense in the consolidated statements of operations.
In December 2017, the Company's sold its Brotas production plant in Brazil to a unit of DSM Nutritional Products Ltd (together with its affiliates, DSM); see Note 13, "Divestiture" and Note 11, "Related Party Transactions" for details.
Other assets
| December 31, (In thousands) |
2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Contingent consideration | $ | 4,286 | $ | 8,150 | ||||
| Deposits | 2,465 | 2,462 | ||||||
| Other | 1,207 | 1,947 | ||||||
| Total other assets | $ | 7,958 | $ | 12,559 | ||||
| 29 |
Accrued and other current liabilities
| December 31, (In thousands) |
2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Payroll and related expenses | $ | 9,220 | $ | 7,238 | ||||
| Contract termination fees | 4,092 | — | ||||||
| Accrued interest | 3,853 | 8,213 | ||||||
| Asset retirement obligation(1) | 3,063 | 3,587 | ||||||
| Ginkgo partnership payments obligation | 2,155 | — | ||||||
| Tax-related liabilities | 2,139 | 5,837 | ||||||
| Professional services | 1,173 | 1,694 | ||||||
| Other | 3,284 | 2,633 | ||||||
| Total accrued and other current liabilities | $ | 28,979 | $ | 29,202 | ||||
______________
| (1) | The asset retirement obligation represents liabilities incurred but not yet discharged in connection with our 2013 abandonment of a partially constructed facility in Pradópolis, Brazil. |
Other noncurrent liabilities
| December 31, (In thousands) |
2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Liability for unrecognized tax benefit | $ | 6,582 | $ | 6,582 | ||||
| Deferred rent, net of current portion | 6,440 | 7,818 | ||||||
| Ginkgo partnership payments obligation, net of current portion | 6,185 | 6,444 | ||||||
| Contract liabilities, net of current portion | 1,587 | 383 | ||||||
| Contract termination fees, net of current portion(1) | 1,530 | — | ||||||
| Capital leases, net of current portion | 195 | 217 | ||||||
| Other | 673 | 2,214 | ||||||
| Total other noncurrent liabilities | $ | 23,192 | $ | 23,658 | ||||
______________
| (1) | Contract liabilities, net of current portion at December 31, 2018 and 2017 includes $1,204 and $383 in connection with DSM, which is a related party. |
In November 2017, the Company entered into a partnership agreement with one of its former collaboration partners, Ginkgo Bioworks, Inc. and has an obligation to make quarterly payments of $0.8 million from December 31, 2018 through September 2022. At December 31, 2018, total future minimum payments under the agreement totaled $12.7 million. The Company recorded this liability at its discounted present value of $6.1 million and is accreting the $6.6 million discount to interest expense over the five-year repayment period. Also, in conjunction with the partnership agreement, the Company issued a $12.0 million promissory note, which is included in long-term debt at a $8.0 million carrying value, net of unamortized discount. See Note 10, “Revenue Recognition” for information regarding the Ginkgo Partnership Agreement and the related accounting treatment for the partnership payments.
In September 2019, the Company was notified by DSM that certain contingent consideration payable to the Company upon the realization of certain NOL tax benefits transferred to DSM with the sale of the Brotas facility in December 2017 would not be realized due to changes in DSM’s Brazilian legal entity structure. The Company considered this information in conjunction with the probability and timing of DSM’s realization of the underlying NOL tax benefits and determined that $3.9 million of the contingent consideration receivable was not recoverable as of December 31, 2018.
4. Fair Value Measurement
Assets and liabilities are measured and reported at fair value per related accounting standards that define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. An asset's or liability's level is based on the lowest level of input that is significant to the fair value measurement. Assets and liabilities carried at fair value are valued and disclosed in one of the following three levels of the valuation hierarchy:
• Level 1: Quoted market prices in active markets for identical assets or liabilities.
• Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
• Level 3: Unobservable inputs that are not corroborated by market data.
| 30 |
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
As of December 31, 2018 and 2017, the Company’s financial assets and financial liabilities measured at fair value on a recurring basis were classified within the fair value hierarchy as follows:
| December 31, (In thousands) | 2018 | 2017 (As Restated, Note 2) | ||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Money market funds | $ | — | — | $ | — | $ | — | $ | 53,199 | $ | — | $ | — | $ | 53,199 | |||||||||||||||||
| Certificates of deposit | — | — | — | — | — | 4,153 | — | 4,153 | ||||||||||||||||||||||||
| Total assets measured and recorded at fair value | $ | — | — | $ | — | $ | — | $ | 53,199 | $ | 4,153 | $ | — | $ | 57,352 | |||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||
| 6% Convertible Notes Due 2021 | $ | — | — | $ | 57,918 | $ | 57,918 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
| Embedded derivatives in connection with the issuance of debt and equity instruments | — | — | — | — | — | — | 723 | 723 | ||||||||||||||||||||||||
| Freestanding derivative instruments in connection with the issuance of equity instruments | — | — | 42,796 | 42,796 | — | — | 115,774 | 115,774 | ||||||||||||||||||||||||
| Total liabilities measured and recorded at fair value | $ | — | $ | — | $ | 100,714 | $ | 100,714 | $ | — | $ | — | $ | 116,497 | $ | 116,497 | ||||||||||||||||
There were no transfers between the levels during 2018 or 2017.
The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgements and consider factors specific to the asset or liability. The fair values of money market funds and certificates of deposit are based on fair values of identical assets. The method of determining the fair value of compound embedded derivative liabilities is described subsequently in this note. Market risk associated with compound embedded derivative liabilities relates to the potential reduction in fair value and negative impact to future earnings from a decrease in interest rates.
At December 31, 2018 and December 31, 2017, the carrying value of certain financial instruments, such as cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and other current accrued liabilities, approximate fair value due to their relatively short maturities and low market interest rates, if applicable.
Changes in fair value of derivative liabilities are presented as gains or losses in the consolidated statements of operations in the line captioned "Gain (loss) from change in fair value of derivative instruments".
Changes in the fair value of debt that is accounted for at fair value are presented as gains or losses in the consolidated statements of operations in the line captioned "Gain (loss) from change in fair value of debt".
| 31 |
6% Convertible Notes Due 2021
The Company issued $60.0 million of 6% Convertible Notes Due 2021 on December 10, 2018 (see Note 5, "Debt" and “Subsequent Events” for details) and elected the fair value option of accounting for this instrument. At December 31, 2018, outstanding principal was $60.0 million, and the fair value was $57.9 million, which was measured using a binomial lattice model and assuming a 25.2% discount yield, 45% equity volatility, 50% / 50% probability of principal repayment in cash / stock, and 5% probability of change in control. The Company assumed that if a change of control event were to occur, it would occur at the end of the calendar year. See Note 5, “Debt” and Part II, Item 8, “Subsequent Events” for further information related to this debt instrument. For the year ended December 31, 2018, the Company recorded a $2.1 million gain from change in fair value of debt in connection with the 6% Convertible Notes Due 2021, as follows:
| In thousands | ||||
| Fair value at issuance on December 10, 2018 | $ | 60,000 | ||
| Change in fair value | (2,082 | ) | ||
| Fair value at December 31, 2018 | $ | 57,918 | ||
Derivative Instruments
Derivative instruments measured at fair value on a recurring basis as of December 31, 2018 and 2017 are as follows:
| December 31, (In thousands) |
2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Equity-related derivative liabilities | $ | 41,272 | $ | 108,887 | ||||
| Debt-related derivative liabilities | 1,524 | 7,610 | ||||||
| Total derivative liabilities | $ | 42,796 | $ | 116,497 | ||||
The following table provides a reconciliation of the beginning and ending liability balances associated with derivative liabilities – either freestanding or compound embedded – measured at fair value using significant unobservable inputs (Level 3):
| (in thousands) | 2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Balance at January 1 | $ | 116,497 | $ | 4,135 | ||||
| Additions | 4,089 | 133,517 | ||||||
| Loss from change in fair value of derivative liabilities | 30,880 | 48,852 | ||||||
| Derecognition to additional paid-in capital upon conversion or extinguishment | (108,670 | ) | (70,007 | ) | ||||
| Balance at December 31 | $ | 42,796 | $ | 116,497 | ||||
The liabilities associated with freestanding and compound embedded derivatives represent the fair value of the equity conversion options, make-whole provisions, down round conversion price or conversion rate adjustment provisions and antidilution provisions in some of the Company's debt, preferred stock, cash warrants and antidilution warrants; see Note 5, "Debt", and Note 7, "Stockholders' Deficit". There is no current observable market for these types of derivatives and, as such, the Company determined the fair value of the freestanding or embedded derivatives using the Monte Carlo or binomial lattice models.
A binomial lattice model was used to determine if a convertible note or share of convertible preferred stock would be converted, called or held at each decision point. Within the lattice model, the following assumptions are made: (i) the convertible note or share of convertible preferred stock will be converted early if the conversion value is greater than the holding value and (ii) the convertible note or share of convertible preferred stock will be called if the holding value is greater than both (a) redemption price and (b) the conversion value at the time. If the convertible note or share of convertible preferred stock is called, the holder will maximize their value by finding the optimal decision between (1) redeeming at the redemption price and (2) converting the convertible note or share of convertible preferred stock. Using this lattice method, the Company valued the embedded and freestanding derivatives using the "with-and-without method", where the fair value of each related convertible note or share of convertible preferred stock including the embedded derivative is defined as the "with", and the fair value of the convertible note excluding the embedded derivatives is defined as the "without". This method estimates the fair value of the embedded and freestanding derivatives by looking at the difference in the values between each convertible note or share of convertible preferred stock with the embedded and freestanding derivatives and the fair value of such convertible note or share of convertible preferred stock without the embedded and freestanding derivatives. The lattice model uses the stock price, conversion price, maturity date, risk-free interest rate, estimated stock volatility and estimated credit spread. The Company marks the compound embedded derivatives to market due to the conversion price not being indexed to the Company's own stock.
| 32 |
The Company used a Monte Carlo simulation valuation model to determine the fair value of the May 2017 and August 2017 Cash and Dilution Warrants. Monte Carlo simulation combines a random number generator based on a probability distribution and additional inputs of volatility, time to expiration to generate a stock price and other uncertainties. The generated stock price at the time of expiration is then used to calculate the value of the option. The model then calculates results tens of thousands of times, each time using a different set of random values from the probability functions. The resulting Monte Carlo simulation valuation is based on the average of all the calculated results.
The market-based assumptions and estimates used in valuing the compound embedded and freestanding derivative liabilities include amounts in the following ranges/amounts:
| December 31, | 2018 | 2017 | ||||||
| Risk-free interest rate | 2.5% | - | 3.0% | 1.7% | - | 2.4% | ||
| Risk-adjusted discount yield | 17.2% | - | 27.3% | 18.4% | - | 28.5% | ||
| Stock price volatility | 45.0% | - | 85.0% | 45.0% | - | 80.0% | ||
| Probability of change in control | 0.0% | 5.0% | ||||||
| Stock price | $3.34 | $3.75 | ||||||
| Credit spread | 14.6% | - | 24.9% | 16.6% | - | 26.7% | ||
| Estimated conversion dates | 2019 | - | 2025 | 2018 | - | 2025 | ||
Changes in valuation assumptions can have a significant impact on the valuation of the embedded and freestanding derivative liabilities and debt that the Company elects to account for at fair value. For example, all other things being equal, a decrease/increase in the Company’s stock price, probability of change of control, credit spread, term to maturity/conversion or stock price volatility decreases/increases the valuation of the liabilities, whereas a decrease/increase in risk adjusted yields or risk-free interest rates increases/decreases the valuation of the liabilities. Certain of the convertible notes, shares of convertible preferred stock and warrants also include conversion or exercise price adjustment features and, for example, certain issuances of common stock by the Company at prices lower than the current conversion or exercise price result in a reduction of the conversion price of such notes or convertible preferred stock, or a reduction in the exercise price of, or an increase in the number of shares subject to, such warrants, which increases the value of the embedded and freestanding derivative liabilities and debt measured at fair value; see Note 5, "Debt" for details.
The Series A Preferred Stock issued in May 2017 and Series B Preferred Stock issued in May 2017 (see Note 7, “Stockholder’s Deficit”) included make-whole provisions, which are accounted for as embedded derivatives through the July 2017 Shareholder Approval date at which time the make-whole provision became settleable for a fixed number of common stock shares and ceased to be accounted for as a derivative liability. Cash and antidilution warrants, classified as freestanding financial instruments, were also issued in conjunction with the May 2017 Offering, August 2017 DSM Offering and August 2017 Vivo Offering and are classified as derivative liabilities. The total derivative liability recorded for the securities issued in connection with the May 2017 Offering, August 2017 DSM Offering and August 2017 Vivo Offering was $113.1 million.
In June 2012, the Company entered into a cross-currency interest rate swap arrangement with Banco Pine with respect to the repayment of R$22.0 million (approximately U.S. $6.6 million based on the exchange rate as of December 31, 2017) of the Banco Pine Note. The swap arrangement exchanged the principal and interest payments under the Banco Pine Note (see Note 4, "Debt") for alternative principal and interest payments that are subject to adjustment based on fluctuations in the foreign currency exchange rate between the U.S. dollar and Brazilian real. The swap had a fixed interest rate of 3.94%. Changes in the fair value of the swap were recognized in the consolidated statements of operations, in “Gain (loss) from change in fair value of derivative instruments". As of December 31, 2017, the balances of the loan and the associated cross-currency interest rate swap were zero.
Assets and Liabilities Recorded at Carrying Value
Financial Assets and Liabilities
The carrying amounts of certain financial instruments, such as cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities and low market interest rates, if applicable. Loans payable, credit facilities and convertible notes are recorded at carrying value (except for the 6% Convertible Notes Due 2021, which are recorded at fair value), which is representative of fair value at the date of acquisition. For loans payable and credit facilities recorded at carrying value, the Company estimates fair value using observable market-based inputs (Level 2); for convertible notes, the Company estimates fair value based on rates currently offered for instruments with similar maturities and terms (Level 3). The carrying amount (the total amount of net debt presented on the balance sheet) of the Company's debt at December 31, 2018, excluding the 6% Convertible Notes that the Company records at fair value, and at December 31, 2017, was $151.7 million and $165.4 million, respectively. The fair value of such debt at December 31, 2018 and at December 31, 2017 was $149.3 million and $156.9 million, respectively, and was determined by (i) discounting expected cash flows using current market discount rates estimated for certain of the debt instruments and (ii) using third-party fair value estimates for the remaining debt instruments.
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Assets and Liabilities Measured and Recorded at Fair Value on a Non-Recurring Basis
On November 19, 2018, the Company amended its supply agreement with DSM, as discussed in Note 10, “Revenue Recognition” to secure production capacity at the Brotas facility in exchange for future cash payments totaling $22.7 million, the issuance of 1,643,991 million shares common stock valued at $6.1 million on the date of issuance and a further cash payment for the difference between the fair value of the common stock and $7.3 million on March 29, 2019. In addition, the Company modified certain warrants held by DSM which resulted in the transfer of $2.9 million of value to DSM and paid $1.8 million to settle certain obligations to DSM related to the 2017 sale of the Brotas facility. The Company also entered into other transactions contemporaneously with the amended supply agreement as discussed in Note 11, “Related Party Transactions” and Note 16, “Subsequent Events”. This series of transactions with DSM in November 2018 was accounted for as a combined transaction in which the Company determined and allocated the fair value of the consideration to each element. The fair value of the consideration transferred to DSM under the combined arrangement totaled $33.3 million and was allocated as follows (in thousands):
| Element | Fair Value Allocation | |||
| Manufacturing capacity reservation fee | $ | 24,395 | ||
| Legal settlement and consent waiver | 6,764 | |||
| Working capital adjustment | 2,145 | |||
| Total fair value of consideration transferred | $ | 33,304 | ||
The fair value of these elements is based on Level 3 inputs, which considered the lowest level of input that is significant to the fair value measurement of these elements. To determine the fair value of the manufacturing capacity reservation fee, the Company used a discounted cash flow model under a cost savings valuation approach based on a competing manufacturing quote for similar capacity, location and timing. The Company used a discount rate of 22.5% and a tax rate of 0% to discount the gross cash flows. The fair value of the legal settlement for failure to obtain consent from DSM prior to executing the August 2018 Vivo Warrant transaction and was determined by calculating the difference between the fair values of the warrants held by Vivo prior to and after the August 2018 Vivo Warrant transaction using a combination of a Monte Carlo simulation and the Black-Scholes-Merton option pricing model. The fair value of the working capital adjustment was determined to equal the difference between the preliminary estimate for working capital upon closing the Brotas facility sale and the final working capital amounts transferred.
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5. Debt
| December 31, (In thousands) |
2018 | 2017 | ||||||||||||||||||||||||||
| Principal | Unamortized Debt (Discount) Premium |
Change in Fair Value |
Net | Principal | Unamortized Debt (Discount) Premium |
Net | ||||||||||||||||||||||
| Convertible notes payable | (As Restated, Note 2) | |||||||||||||||||||||||||||
| 6% convertible notes due 2021 | $ | 60,000 | $ | – | $ | (2,082 | ) | $ | 57,918 | $ | – | $ | – | $ | – | |||||||||||||
| 2015 Rule 144A convertible notes | 37,887 | (2,413 | ) | – | 35,474 | 37,887 | (9,458 | ) | 28,429 | |||||||||||||||||||
| 2014 Rule 144A convertible notes | 24,004 | (867 | ) | – | 23,137 | 24,004 | (3,170 | ) | 20,834 | |||||||||||||||||||
| August 2013 financing convertible notes | 4,415 | (70 | ) | – | 4,345 | 4,009 | (2,126 | ) | 1,883 | |||||||||||||||||||
| December 2017 convertible notes | – | – | – | – | 5,000 | (25 | ) | 4,975 | ||||||||||||||||||||
| 126,306 | (3,350 | ) | (2,082 | ) | 120,874 | 70,900 | (14,779 | ) | 56,121 | |||||||||||||||||||
| Related party convertible notes payable | ||||||||||||||||||||||||||||
| 2014 Rule 144A convertible notes | 24,705 | (1,038 | ) | – | 23,667 | 24,705 | (3,784 | ) | 20,921 | |||||||||||||||||||
| August 2013 financing convertible notes | – | – | – | – | 21,711 | 897 | 22,608 | |||||||||||||||||||||
| R&D note | – | – | – | – | 3,700 | (18 | ) | 3,682 | ||||||||||||||||||||
| 24,705 | (1,038 | ) | – | 23,667 | 50,116 | (2,905 | ) | 47,211 | ||||||||||||||||||||
| Loans payable and credit facilities | ||||||||||||||||||||||||||||
| GACP term loan facility | 36,000 | (1,349 | ) | – | 34,651 | – | – | – | ||||||||||||||||||||
| Ginkgo note | 12,000 | (4,047 | ) | – | 7,953 | 12,000 | (4,862 | ) | 7,138 | |||||||||||||||||||
| Other loans payable | 4,910 | (1,047 | ) | – | 3,863 | 6,463 | (1,277 | ) | 5,186 | |||||||||||||||||||
| Senior secured loan facility | – | – | – | – | 28,566 | (253 | ) | 28,313 | ||||||||||||||||||||
| Other credit facilities | – | – | – | – | 381 | – | 381 | |||||||||||||||||||||
| 52,910 | (6,443 | ) | – | 46,467 | 47,410 | (6,392 | ) | 41,018 | ||||||||||||||||||||
| Related party loans payable | ||||||||||||||||||||||||||||
| DSM note | 25,000 | (6,311 | ) | – | 18,689 | 25,000 | (8,039 | ) | 16,961 | |||||||||||||||||||
| February 2016 private placement | – | – | – | – | 2,000 | – | 2,000 | |||||||||||||||||||||
| Other DSM loan | – | – | – | – | 393 | – | 393 | |||||||||||||||||||||
| 25,000 | (6,311 | ) | – | 18,689 | 27,393 | (8,039 | ) | 19,354 | ||||||||||||||||||||
| Total debt | $ | 228,921 | $ | (17,142 | ) | $ | (2,082 | ) | 209,697 | $ | 195,819 | $ | (32,115 | ) | 163,704 | |||||||||||||
| Less: current portion | (147,677 | ) | (56,943 | ) | ||||||||||||||||||||||||
| Long-term debt, net of current portion | $ | 62,020 | $ | 106,761 | ||||||||||||||||||||||||
Future minimum payments under the debt agreements as of December 31, 2018 are as follows:
| Years ending December 31 (In thousands) |
Convertible Notes | Loans Payable and Credit Facilities |
Related Party Convertible Notes | Related Party Loans Payable and Credit Facilities | Total | |||||||||||||||
| 2019 | $ | 134,368 | $ | 10,219 | $ | 25,508 | $ | 2,500 | $ | 172,595 | ||||||||||
| 2020 | — | 9,981 | — | 2,500 | 12,481 | |||||||||||||||
| 2021 | — | 34,740 | — | 27,521 | 62,261 | |||||||||||||||
| 2022 | — | 13,417 | — | — | 13,417 | |||||||||||||||
| 2023 | — | 367 | — | — | 367 | |||||||||||||||
| Thereafter | — | 2,200 | — | — | 2,200 | |||||||||||||||
| Total future minimum payments | 134,368 | 70,924 | 25,508 | 32,521 | 263,321 | |||||||||||||||
| Less: amount representing interest(1) | (7,368 | ) | (18,014 | ) | (803 | ) | (7,521 | ) | (33,706 | ) | ||||||||||
| Less: future conversion of accrued interest to principal | (694 | ) | — | — | — | (694 | ) | |||||||||||||
| Present value of minimum debt payments | 126,306 | 52,910 | 24,705 | 25,000 | 228,921 | |||||||||||||||
| Less: current portion of debt principal | (126,306 | ) | (3,829 | ) | (24,705 | ) | — | (154,840 | ) | |||||||||||
| Noncurrent portion of debt principal | $ | — | $ | 49,081 | $ | — | $ | 25,000 | $ | 74,081 | ||||||||||
______________
| (1) | Excluding net debt discount of $17.1 million that will be amortized to interest expense over the term of the debt. |
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Convertible Notes Payable
6% Convertible Notes Due 2021
On December 6, 2018, the Company entered into a securities purchase agreement to issue and sell $60.0 million in aggregate principal amount of senior convertible notes (the 6% Convertible Notes Due 2021) that are convertible into shares of the Company’s common stock. The securities purchase agreement prohibits the Company, subject to certain exceptions, from (i) disposing of any common stock or securities convertible into or exchangeable for shares of common stock during the period commencing on December 6, 2018 and continuing through the later of (A) the date 90 days after December 10, 2018 and (B) the date 30 days after the Registration Statement (as defined below) is declared effective and (ii) effecting or entering into an agreement to effect any issuance involving a variable rate transaction for so long as the 6% Convertible Notes Due 2021 remain outstanding.
The closing of the issuance and sale of the 6% Convertible Notes Due 2021 occurred on December 10, 2018, for net proceeds, after deducting offering expenses payable by the Company and placement agent and advisory fees, of $56.2 million.
The 6% Convertible Notes Due 2021 are general unsecured obligations of the Company. Unless earlier converted or redeemed, the 6% Convertible Notes Due 2021 will mature on the third anniversary of issuance, subject to the rights of the holders to extend the maturity date in certain circumstances. The 6% Convertible Notes Due 2021 are convertible from time to time, at the election of the holders, into shares of common stock at an initial conversion price of $6.32 per share. The conversion price is subject to adjustment in the event of any stock split, reverse stock split, recapitalization, reorganization or similar transaction. The Company has the option, upon prior notice to the holders, to settle any conversion of the 6% Convertible Notes Due 2021 in cash.
The 6% Convertible Notes Due 2021 are payable in equal monthly installments beginning April 1, 2019 (each, an Installment Date), in either cash at 108% of such installment amount or, at the Company’s option, subject to the satisfaction of certain equity conditions (the Equity Conditions), in shares of common stock at a discount to the then-current market price, subject to a price floor (the Installment Conversion Price). The holders have the right, upon notice to the Company, to defer all or any portion of any installment amount to a future Installment Date. In addition, if the Company elects to pay any installments in shares of common stock, the holders of the 6% Convertible Notes Due 2021 have the right to accelerate amounts outstanding under their 6% Convertible Notes Due 2021 during such month up to an aggregate of three times the relevant installment amount.
The 6% Convertible Notes Due 2021 bear interest at a rate of 6% per annum, payable quarterly until the first Installment Date, and then at each Installment Date thereafter. Interest on the 6% Convertible Notes Due 2021 may be paid in either cash or, at the Company’s option, subject to the satisfaction of the Equity Conditions, shares of common stock at the Installment Conversion Price. The Company elected to make the interest payment due January 1, 2019 in cash.
The 6% Convertible Notes Due 2021 contain customary terms and covenants, including (i) a restriction on the Company’s ability to incur additional indebtedness, (ii) certain events of default, after which the holders may require the Company to redeem all or any portion of their 6% Convertible Notes Due 2021 in cash at a price equal to the greater of (A) 125% of the amount being redeemed and (B) the intrinsic value of the shares of common stock underlying the amount being redeemed, and (iii) certain other events, after which the holders may convert all or any portion of the 6% Convertible Notes Due 2021 at a discount to the Installment Conversion Price.
In the event of a Fundamental Transaction (as defined in the 6% Convertible Notes Due 2021), holders of the 6% Convertible Notes Due 2021 may require the Company to redeem all or any portion of their 6% Convertible Notes Due 2021 at a price equal to the greater of (i) 125% of the amount being redeemed and (ii) a premium to the intrinsic value of the shares of Common Stock underlying the amount being redeemed.
Notwithstanding the foregoing, the holders will not have the right to convert any portion of a 6% Convertible Note Due 2021, and the Company will not have the option to pay any amount in shares of common stock, if (a) the holder, together with its affiliates, would beneficially own in excess of 4.99% (or such other percentage as determined by the holder and notified to the Company in writing, not to exceed 9.99%, provided that any increase of such percentage will not be effective until 61 days after notice thereof) of the number of shares of common stock outstanding immediately after giving effect to such conversion or payment, as applicable (the Ownership Limitation), or (b) the aggregate number of shares issued with respect to the 6% Convertible Notes Due 2021 (and any other transaction aggregated for such purpose) after giving effect to such conversion or payment, as applicable, would exceed 15,271,047 shares of common stock (the Exchange Cap), unless the Company has obtained prior stockholder approval to issue shares in excess of the Exchange Cap. In the event that (i) the Company is prohibited from issuing any shares of common stock under the 6% Convertible Notes Due 2021 as a result of the Ownership Limitation (other than in connection with a conversion of 6% Convertible Notes Due 2021), such shares shall be held in abeyance (and the related principal amount of the 6% Convertible Notes Due 2021 reinstated) until the holder shall notify the Company and elect to receive such shares without exceeding the Ownership Limitation, and (ii) the Company is prohibited from issuing any shares of common stock under the 6% Convertible Notes Due 2021 as a result of the Exchange Cap, the Company will pay cash in lieu of any shares that would otherwise be deliverable in excess of the Exchange Cap.
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In connection with the offering of the 6% Convertible Notes Due 2021, the Company entered into a registration rights agreement, dated December 10, 2018, with the purchasers of the 6% Convertible Notes Due 2021, pursuant to which the Company agreed to file a registration statement (the Registration Statement) with the Securities and Exchange Commission (the SEC) registering the resale of all of the shares of common stock issuable pursuant to the terms of the 6% Convertible Notes Due 2021 (the Registrable Securities) under the Securities Act of 1933, as amended (the Securities Act), within 30 days following December 10, 2018, and to have the Registration Statement declared effective by the SEC by the date that is 60 days after December 10, 2018. In the event that the Registration Statement is not filed or declared effective within the foregoing time frames, or if thereafter, subject to certain exceptions, the Registration Statement is not effective for any reason or the prospectus contained therein is not available for use by the holders, Company shall pay to each holder an amount in cash equal to 2% of such holder’s original principal amount of Notes on the date of such failure and thereafter on every 30 day anniversary thereof until such failure is cured or no longer prevents the holders from freely disposing of their Registrable Securities. The Company filed the Registration Statement on January 8, 2019, and it went effective on February 7, 2019.
The Company has elected to account for the 6% Convertible Notes Due 2021 at fair value pursuant to U.S. GAAP, as of the issuance date. Management believes that the fair value option better reflects the underlying economics of the 6% Convertible Notes Due 2021, which contain multiple embedded derivatives. Under the fair value election, changes in fair value will be reported in the consolidated statements of operations as "Gain (loss) from change in fair value of debt" in each reporting period subsequent to the issuance of the 6% Convertible Notes Due 2021. For the year ended December 31, 2018, the Company recorded a gain of $2.1 million, which is shown as Change in Fair Value in the table at the beginning of this Note 4. See Note 4, "Fair Value Measurement" for information about the assumptions that the Company used to measure the fair value of the 6% Convertible Notes Due 2021.
In May, June and July 2019, the Company exchanged the 6% Convertible Notes Due 2021 for new senior convertible notes and warrants to purchase common stock. See Note 16, “Subsequent Events” for additional information.
2015 Rule 144A Convertible Notes
In October 2015, the Company sold $57.6 million aggregate principal amount of 9.50% convertible senior notes due 2019 (the 2015 Rule 144A Convertible Notes) to certain qualified institutional buyers in a private placement. Net proceeds from the offering were $54.4 million after payment of offering expenses and placement agent fees, which together are treated as a debt discount and are being amortized over the remaining loan term using the effective interest method. The Company used $18.3 million of the net proceeds to repurchase $22.9 million aggregate principal amount of outstanding 2014 Rule 144A Convertible Notes as discussed below. The 2015 Rule 144A Convertible Notes bear interest at a rate of 9.50% per year, payable semiannually in arrears on April 15 and October 15 of each year. Interest on the 2015 Rule 144A Convertible Notes is payable, at the Company's option, entirely in cash or entirely in common stock valued at 92.5% of a market-based price. The Company elected to make the April 15, 2016 and 2017 and October 15, 2018 interest payments in shares of common stock and the October 15, 2016 and 2017 and April 15, 2018 interest payments in cash. The 2015 Rule 144A Convertible Notes matured on April 15, 2019. See Note 16, "Subsequent Events".
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The 2015 Rule 144A Convertible Notes are convertible into shares of the Company's common stock at a conversion rate of 61.7246 shares per $1,000 principal amount of 2015 Rule 144A Convertible Notes (which conversion rate is subject to adjustment in certain circumstances), representing an effective conversion price of approximately $16.20 per share as of December 31, 2018. If converted prior to maturity, noteholders are entitled to receive a payment (the Early Conversion Payment) equal to the present value of the remaining scheduled payments of interest on the 2015 Rule 144A Convertible Notes being converted through April 15, 2019, computed using a discount rate of 0.75%. The Company may make the Early Conversion Payment, at its election, either in cash or, subject to certain conditions, in common stock valued at 92.5% of a market-based price. Through December 31, 2018, the Company has elected to make each Early Conversion Payment in shares of common stock.
In January 2017, the Company issued an additional $19.1 million in aggregate principal amount of 2015 Rule 144A Convertible Notes (the Additional 2015 Rule 144A Convertible Notes) in exchange for the cancellation of $15.3 million in aggregate principal amount of other outstanding convertible promissory notes of the Company, with the same terms as the 2015 Rule 144A Convertible Notes; provided, that the aggregate number of shares issued with respect to the Additional 2015 Rule 144A Convertible Notes (and any other transaction aggregated for such purpose) cannot exceed 3,652,935 shares of common stock without prior stockholder approval. The exchange was accounted for as an extinguishment of debt, resulting in a $0.1 million gain in the year ended December 31, 2017.
In May 2017, the Company exchanged $3.7 million in aggregate principal amount of 2015 Rule 144A Convertible Notes for shares of its Series B 17.38% Convertible Preferred Stock and warrants to purchase common stock, as described in more detail in Note 7, “Stockholders’ Deficit”. The exchange was accounted for as an extinguishment of debt, resulting in a $2.0 million loss in the year ended December 31, 2017.
On April 16, 2019, the Company repaid the 2015 Rule 144A Convertible Notes in full in cash. See Note 16, “Subsequent Events”.
2014 Rule 144A Convertible Notes
In May 2014, the Company sold $75.0 million in aggregate principal amount of 6.50% Convertible Senior Notes due 2019 (the 2014 Rule 144A Convertible Notes) to qualified institutional buyers in a private placement. The net proceeds from the offering were $72.0 million after payment of initial purchaser discounts and offering expenses, which together are treated as a debt discount and are being amortized over the remaining loan term. The Company used $9.7 million of the net proceeds to repay convertible notes previously issued to an affiliate of Total S.A. (together with its affiliates, Total), representing the amount of 2014 Rule 144A Convertible Notes purchased by Total. Certain of the Company's affiliated entities (including Total) purchased $24.7 million in aggregate principal amount of 2014 Rule 144A Convertible Notes. The 2014 Rule 144A Convertible Notes bear interest at an annual rate of 6.5%, payable semiannually in arrears on May 15 and November 15 of each year in cash. The 2014 Rule 144A Convertible Notes mature on May 15, 2019, unless earlier converted or repurchased.
The 2014 Rule 144A Convertible Notes are convertible into shares of the Company's common stock at a conversion rate of 17.8073 shares per $1,000 principal amount of 2014 Rule 144A Convertible Notes (which conversion rate is subject to adjustment in certain circumstances), representing an effective conversion price of approximately $56.16 per share as of December 31, 2018.
In May 2017, the Company exchanged $3.4 million in aggregate principal amount of 2014 Rule 144A Convertible Notes for shares of its Series B 17.38% Convertible Preferred Stock and warrants to purchase common stock, as described in more detail in Note 7, “Stockholders’ Deficit". The exchange was accounted for as an extinguishment, resulting in a $1.8 million loss for the year ended December 31, 2017.
In May 2019, the Company exchanged a portion of the 2014 Rule 144A Convertible Notes, representing $38.2 million aggregate principal amount of 2014 Rule 144A Convertible Notes, for shares of common stock, warrants to purchase common stock and a new senior convertible note (see Note 16, “Subsequent Events” for additional information) and repaid the remaining portion of the 2014 Rule 144A Convertible Notes in cash at maturity.
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August 2013 Financing Convertible Notes
In August 2013, the Company entered into a Securities Purchase Agreement (the August 2013 SPA) with Total and Temasek to sell up to $73.0 million in convertible notes in private placements (the August 2013 Financing or the Tranche Notes). The August 2013 SPA provided for the August 2013 Financing to be divided into two tranches, each with differing closing conditions. The Tranche I Notes were due sixty months from the date of issuance (October 16, 2018). Interest accrued on the Tranche I Notes at 5% per six months, compounded semiannually, and was payable in kind by adding to the principal or in cash. Through maturity, the Company elected to pay interest on the Tranche I Notes in kind. The Tranche I Notes totaling $15.2 million of principal and accrued interest matured and were repaid in full by conversion into shares of common stock on October 16, 2018 pursuant to the Maturity Treatment Agreement terms (see “Related Party Convertible Notes Payable - August 2013 Financing Convertible Notes” below). Upon conversion of the Tranche I Notes, the Company recognized a $10.9 million loss upon extinguishment of debt in 2018. See the "Maturity Treatment Agreement" section below for details of the impact of that agreement on the Tranche Notes.
The Tranche II Notes are due sixty months from the date of issuance (January 15, 2019). Interest accrues on the Tranche II Notes at 10% per annum, compounded annually, and is payable in kind by adding to the principal or in cash. Through December 31, 2018, the Company has elected to repay interest on the Tranche II Notes in kind. On November 8, 2018, the Company repaid in full the Tranche II Notes held by Total totaling $9.8 million of principal and accrued interest by conversion into shares of common stock pursuant to the Maturity Treatment Agreement terms (see “Related Party Convertible Notes Payable - August 2013 Financing Convertible Notes” below). Upon conversion of the Tranche II Notes held by Total, the Company recognized a $6.5 million loss upon extinguishment of debt.
In August 2018, in connection with certain amendments to the August 2017 Vivo Cash Warrants (see Note 7, “Stockholders' Deficit”), the conversion price of the Tranche Notes I and II was reduced from $5.2977 per share to $4.40 per share. As of December 31, 2018, the conversion price of the remaining Tranche II Notes held by Wolverine Flagship Fund Trading Limited (Wolverine) is $4.40 per share (which conversion price is subject to adjustment in certain circumstances, including certain price-based anti-dilution adjustments). The August 2013 SPA and the Tranche Notes contain customary terms, covenants and restrictions, including a limit on the Company’s debt, subject to certain exceptions and waivers, of the greater of $200 million or 50% of its consolidated total assets and the Company’s secured debt of the greater of $125 million or 30% of its consolidated total assets. The August 2013 SPA also requires the Company to obtain the consent of the holders of a majority of these notes before completing any change of control transaction or purchasing assets in one transaction or in a series of related transactions in an amount greater than $20.0 million, in each case while any Tranche Notes are outstanding. In addition, the Tranche Notes contain certain events of default after which the Tranche Notes may become due and payable immediately.
On January 14, 2019, Wolverine agreed to waive payment of the Tranche II Note held by Wolverine at maturity until July 15, 2019 in exchange for a cash waiver fee, payable on or prior to July 15, 2019, of $0.6 million. On July 2, 2019, the Company and Wolverine entered into an exchange agreement whereby the parties agreed to extinguish the Tranche II Note held by Wolverine in exchange for 1,767,632 shares of common stock and a warrant to purchase 1,080,000 shares of common stock. See Note 16, “Subsequent Events” for additional information.
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Maturity Treatment Agreement
In July 2015, the Company entered into an Exchange Agreement (the 2015 Exchange Agreement) with Total and Temasek pursuant to which Temasek exchanged $71.0 million in principal amount of outstanding Tranche Notes and Total exchanged $70.0 million in principal amount of outstanding convertible notes for shares of the Company's common stock at a price of $34.50 per share (2015 Exchange). At the closing of the 2015 Exchange, the Company, Total and Temasek also entered into a Maturity Treatment Agreement dated July 29, 2015, pursuant to which Total and Temasek agreed to convert any Tranche Notes or 2014 144A Notes held by them that were not canceled in the 2015 Exchange (Remaining Notes) into shares of the Company's common stock in accordance with the terms of such Remaining Notes at or prior to maturity, provided that certain events of default had not occurred with respect to the applicable Remaining Notes. In May 2017, the Company entered into separate letter agreements with each of Total and Temasek, pursuant to which the Company agreed that the Remaining Notes consisting of 2014 144A Notes held by Total ($9.7 million in principal amount as of December 31, 2017) and Temasek ($10.0 million in principal amount as of December 31, 2017) would no longer be subject to mandatory conversion at or prior to the maturity of such Remaining Notes. Accordingly, the Company will be required to pay any portion of such Remaining Notes that remain outstanding at maturity in cash in accordance with the terms of such Remaining Notes. As of December 31, 2017, after giving effect to such letter agreements, Temasek did not hold any Remaining Notes and Total held $21.8 million in principal amount of Remaining Notes (consisting of Tranche Notes), which Remaining Notes were converted to common stock in October and November 2018 pursuant to the terms of the Maturity Treatment Agreement (see below under "Related Party Convertible Notes Payable - August 2013 Financing Convertible Notes" for more information). The 2015 Exchange Agreement contains customary terms, covenants and restrictions, including a limit on the Company’s debt of the greater of $200 million or 50% of its consolidated total assets and the Company’s secured debt of the greater of $125 million or 30% of its consolidated total assets, subject to certain exceptions.
December 2017 Convertible Note
In December 2017, the Company issued and sold a convertible note under an April 2017 securities purchase agreement in the principal amount of $5.0 million with a maturity date of June 1, 2018, for proceeds to the Company of $5.0 million. The Company identified certain embedded feature that required bifurcation, but the fair value of these derivative features was $0, due primarily to the short-term maturity of the note and a significant out of the money conversion price at issuance and through the maturity date. The Company elected to pay each installment in cash, and the note was repaid in full in May 2018.
Related Party Convertible Notes Payable
August 2013 Financing Convertible Notes
Certain of the August 2013 Financing Convertible Notes were held by related parties; see Note 11, "Related Party Transactions" for details.
On October 16, 2018, the Tranche I Notes held by Total totaling $15.2 million of principal and accrued interest reached maturity and were converted into 3,448,821 shares of common stock. Upon conversion of the Tranche I Notes, the Company recognized a $10.9 million loss upon extinguishment of debt.
On November 8, 2018, Total converted its Tranche II Notes totaling $9.8 million of principal and accrued interest, which were scheduled to mature on January 15, 2019, into shares of common stock. In connection with such conversion, the Company agreed to pay Total future interest on the Tranche II Notes being converted up to, but excluding, the maturity date for such notes, which interest was converted by Total into common stock at the conversion price for the Tranche II Notes. As a result of such conversion, the Tranche II Notes held by Total converted into 2,226,105 shares of common stock. Upon conversion of the Tranche II Notes held by Total, the Company recognized a $6.5 million loss upon extinguishment of debt.
2014 Rule 144A Convertible Notes
Certain of the 2014 Rule 144A Convertible Notes are held by related parties. See Note 11, "Related Party Transactions" for details.
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R&D Note
In March 2016, as a result of the restructuring of the Company’s fuels joint venture with Total, Total Amyris BioSolutions B.V., the Company issued to Total an unsecured convertible note (the R&D Note) in the principal amount of $3.7 million, representing the remaining portion of the $105.0 million convertible note facility between the Company and Total initially established in 2012. In March and May 2018, the Company and Total amended the R&D Note to extend the maturity to May 31, 2018 and July 2, 2018, respectively, with accrued and unpaid interest payable on March 31, 2018, May 31, 2018 and July 2, 2018. On July 2, 2018, the Company repaid the R&D Note in full.
Loans Payable and Credit Facilities
GACP Term Loan Facility
On June 29, 2018, the Company, certain of the Company’s subsidiaries and GACP Finance Co., LLC (GACP) entered into a Loan and Security Agreement (the LSA) to borrow a $36.0 million secured term loan (the GACP Term Loan Facility). The LSA also provides for an incremental secured term loan facility in an aggregate principal amount of up to $35.0 million (the Incremental GACP Term Loan Facility and, together with the GACP Term Loan Facility, the GACP Term Loan Facilities), subject to certain conditions and approvals, to fund the construction of a custom-built manufacturing facility in Brazil. The majority of the net proceeds from the GACP Term Loan Facility were used to repay all amounts outstanding under the Senior Secured Loan Facility between the Company and Stegodon described below. The remaining net proceeds were used on July 2, 2018 to repay amounts outstanding under the R&D Note at maturity, as described above.
Loans under the GACP Term Loan Facilities have a maturity date of July 1, 2021; provided, that if the Company has not (i) met certain financial conditions on or prior to January 7, 2019 or (ii) refinanced the 2015 Rule 144A Convertible Notes and 2014 Rule 144A Convertible Notes with indebtedness that has a maturity date which is later than July 1, 2021 or converted such notes into equity prior to January 12, 2019, then the maturity date will be January 12, 2019. See Note 16, “Subsequent Events” for additional information about the waiver of this provision. The GACP Term Loan Facilities will amortize beginning on July 1, 2019 in quarterly installments equal to 2.5% of the original loan amounts, with the remaining principal balance payable on the maturity date. Loans under the GACP Term Loan Facilities initially accrued interest at a rate per annum equal to the sum of (i) the greater of (A) the U.S. prime rate as reported in the Wall Street Journal and (B) 4.0%, plus (ii) 6.25%, payable monthly. The GACP Term Loan Facilities are guaranteed by the subsidiaries of the Company party to the LSA and collateralized by first-priority liens on substantially all the Company’s and such subsidiaries’ assets, including intellectual property, subject to certain exceptions. The LSA includes customary terms, covenants and restrictions, including mandatory prepayments upon the occurrence of certain events, including asset sales, casualty events, incurrence of additional indebtedness and borrowing base deficiencies, subject to certain exceptions and reinvestment rights. The LSA contains certain financial covenants that include quarterly minimum revenues, minimum liquidity amounts and a minimum asset coverage ratio.
The Company paid origination fees at closing equal to 4%, or $1.4 million, of the funded amount of the GACP Term Loan Facility and other closing costs totaling $0.2 million, plus an agency fee of $25,000 per quarter during the term of the GACP Term Loan Facilities. The $1.6 million of issuance costs will be amortized using the effective interest method over the expected 3-year loan term.
In November 2018, the Company and GACP amended the LSA to reduce the minimum revenue requirement for the two fiscal quarters ending December 31, 2018 in exchange for an increase in optional prepayment fees, an increase in the minimum liquidity amount and an increase in the base interest rate per annum, from the sum of (i) the greater of (A) the prime rate as reported in the Wall Street Journal or (B) 4.0% plus (ii) 6.25% to the sum of (i) the greater of (A) the prime rate as reported in the Wall Street Journal or (B) 4.0% plus (ii) 8.25%. In December 2018, the Company and GACP further amended the LSA to exclude certain intellectual property licensed to DSM from the loan collateral (see Note 10, “Revenue Recognition” for more information) in exchange for a further increase in the base interest rate per annum, from the sum of (i) the greater of (A) the prime rate as reported in the Wall Street Journal or (B) 4.0% plus (ii) 8.25% to the sum of (i) the greater of (A) the prime rate as reported in the Wall Street Journal or (B) 4.75% plus (ii) 9.00%.
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In April 2019, (i) GACP provided a waiver to the Company for breaches of all covenant violations under the GACP loan and security agreement (LSA) occurring prior to, as of and after December 31, 2018 through April 8, 2019, and (ii) GACP sold and assigned the loans under the LSA and all documents and assets related thereto to Foris Ventures, LLC (Foris). Subsequently, Foris provided a waiver to the Company for breaches of certain covenants under the LSA through June 30, 2020 and amended the financial covenants under the LSA to provide more favorable compliance terms and conditions. See Note 16, "Subsequent Events" for additional information.
Senior Secured Loan Facility
In March 2014, the Company entered into a Loan and Security Agreement (the LSA) with Hercules Technology Growth Capital, Inc. to make available to the Company a secured loan facility (the Senior Secured Loan Facility) in an initial aggregate principal amount of up to $25.0 million. The LSA was subsequently amended in June 2014, March 2015 and November 2015 to (i) extend additional credit facilities to the Company in an aggregate amount of up to $31.0 million, of which $16.0 million was drawn by the Company, (ii) extend the maturity date of the loans, and (iii) remove, add and/or modify certain covenants and agreements under the LSA.
In June 2016, Hercules transferred and assigned its rights and obligations under the Senior Secured Loan Facility to Stegodon Corporation (Stegodon), an affiliate of Ginkgo Bioworks, Inc. (Ginkgo).
In March and May 2018, the Company and Stegodon amended the LSA to extend the date for a $5.5 million principal payment to May 31, 2018 and July 2, 2018, respectively. Under the amendments, the interest rate from April 1, 2018 through the date of such $5.5 million principal payment would be the previously agreed interest rate plus 5.0%.
On June 29, 2018, the Company repaid the Senior Secured Loan Facility in full.
Ginkgo Note
In November 2017, the Company issued an unsecured promissory note in the principal amount of $12.0 million to Ginkgo (the November 2017 Ginkgo Note) in connection with the termination of the Ginkgo Collaboration Agreement and the execution of a new partnership agreement (the Ginkgo Partnership Agreement), which is described in Note 10, "Revenue Recognition". The November 2017 Ginkgo Note bears interest at 10.5% per annum, payable monthly, and has a maturity date of October 19, 2022. The November 2017 Ginkgo Note may be prepaid in full without penalty or premium at any time, provided that certain payments have been made under the Company’s partnership agreement with Ginkgo. The November 2017 Ginkgo Note also contains customary terms, covenants and restrictions, including certain events of default after which the note may become due and payable immediately. The Company recorded the $7.0 million present value of the November 2017 Ginkgo Note as a note payable liability, and the remaining $5.0 million was recorded as a debt discount which is being accreted to interest expense over the loan term using the effective interest method. Also, the Company concluded that while no cash was received from Ginkgo under the November 2017 Ginkgo Note, the transaction represents consideration payable to a former customer and the present value of the note payable obligation should be recorded as a reduction of cumulative revenue recognized to date from Ginkgo in the period the November 2017 Ginkgo Note was executed. As a result, the Company recorded a $7.0 million reduction of license revenues as of December 31, 2017. See Note 10, "Revenue Recognition" for additional information.
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Other Loans Payable
Nikko Note: In December 2016, in connection with the Company's formation of its cosmetics joint venture (the Aprinnova JV) with Nikko Chemicals Co., Ltd. (Nikko) made a loan to the Company in the principal amount of $3.9 million and the Company issued a promissory note (the Nikko Note) to Nikko in an equal principal amount. The proceeds of the Nikko Note were used to satisfy the Company's remaining liabilities related to the Company's purchase of a manufacturing facility in Leland, North Carolina and related assets in December 2016, including liabilities under a promissory note in the principal amount of $3.5 million issued in connection therewith. The Nikko Note (i) bears interest at 5% per year, (ii) has a term of 13 years, (iii) is payable in equal monthly installments of principal and interest beginning on January 1, 2017 and (iv) is secured by a first-priority lien on 10% of the Aprinnova JV interests owned by the Company. In addition, (i) the Company repaid $400,000 of the Nikko Note in equal monthly installments of $100,000 as required on January 1, 2017, February 1, 2017, March 1, 2017 and April 1, 2017 and (ii) the Company is required to repay the Nikko Note with any profits distributed to the Company by the Aprinnova JV, beginning with the distributions for the fourth fiscal year of the Aprinnova JV, until the Nikko Note is fully repaid. The Nikko Note may be prepaid in full or in part at any time without penalty or premium. The Nikko Note contains customary terms and provisions, including certain events of default after which the Nikko Note may become due and payable immediately.
Aprinnova Working Capital Loans: In February 2017, in connection with the formation of the Aprinnova JV in December 2016, Nikko made a working capital loan to the Aprinnova JV in the principal amount of $1.5 million and received a promissory note from the Aprinnova JV in an equal amount (the First Aprinnova Note). The First Aprinnova Note was repayable in $375,000 installments plus accrued interest on May 1, 2017, August 1, 2017, November 1, 2017 and February 1, 2018. The First Aprinnova Note was fully repaid in January 2018. In August 2017, Nikko made a second working capital loan to the Aprinnova JV in the principal amount of $1.5 million and received a promissory note from the Aprinnova JV in an equal amount (the Second Aprinnova Note). The Second Aprinnova Note is payable in full on August 1, 2019, with interest payable quarterly. Both notes bear interest at 2.75% per annum. Effective July 31, 2019, the Company and Nikko agreed to extend the term of the Second Aprinnova Note to August 1, 2020. See Note 16, "Subsequent Events".
Related Party Loans Payable
DSM Note
In December 2017, the Company and DSM entered into a credit agreement (the DSM Credit Agreement) to make available to the Company an unsecured credit facility of $25.0 million. On December 28, 2017, the Company borrowed $25.0 million under the DSM Credit Agreement, representing the entire amount available thereunder, and issued a promissory note to DSM in an equal principal amount (the DSM Note). The Company used the proceeds of the amounts borrowed under the DSM Credit Agreement to repay all outstanding principal under a promissory note in the principal amount of $25 million issued to Guanfu Holding Co., Ltd. in December 2016 (the Guanfu Note). Given multiple elements in the arrangements with DSM, the Company fair valued the DSM Note to determine the arrangement consideration that should be allocated to the DSM Note. The fair value of the DSM Note was discounted using a Company specific weighted average cost of capital rate that resulted in a debt discount of $8.0 million. The debt discount is being amortized over the loan term using the effective interest method.
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The DSM Note (i) is an unsecured obligation of the Company, (ii) matures on December 31, 2021 and (iii) accrues interest from and including December 28, 2017 at 10% per annum, payable quarterly. The DSM Note may be prepaid in full or in part at any time without penalty or premium. In addition, the Company is required to use certain payments received by the Company from DSM under the Value Sharing Agreement (see Note 10, “Revenue Recognition”) to repay amounts outstanding under the DSM Credit Agreement. The DSM Credit Agreement and the DSM Note contain customary terms, covenants and restrictions, including certain events of default after which the DSM Note may become due and payable immediately.
February 2016 Private Placement
In February 2016, the Company issued and sold $20.0 million in aggregate principal amount of promissory notes (the February 2016 Notes), as well as warrants to purchase an aggregate of 190,477 shares of the Company's common stock, exercisable at a price of $0.15 per share as of December 31, 2018 (the February 2016 Warrants), resulting in aggregate proceeds to the Company of $20.0 million, in a private placement to certain existing stockholders of the Company that are affiliated with members of the Company's Board of Directors (the Board): Foris Ventures, LLC (Foris, an entity affiliated with director John Doerr of Kleiner Perkins Caufield & Byers, a current stockholder, and an owner of greater than five percent of the Company’s outstanding common stock), which purchased $16.0 million aggregate principal amount of the February 2016 Notes and warrants to purchase 152,381 shares of the Company's common stock; Naxyris S.A. (Naxyris, an investment vehicle owned by Naxos Capital Partners SCA Sicar; director Carole Piwnica is Director of NAXOS UK, which is affiliated with Naxos Capital Partners SCA Sicar, and was designated as a director of the Company by Naxyris), which purchased $2.0 million aggregate principal amount of the February 2016 Notes and warrants to purchase 19,048 shares of the Company's common stock; and Biolding Investment SA (Biolding, a fund affiliated with director HH Sheikh Abdullah bin Khalifa Al Thani, who was designated as a director of the Company by Biolding), which purchased $2.0 million aggregate principal amount of the February 2016 Notes and warrants to purchase 19,048 shares of the Company's common stock.
The February 2016 Notes bore interest at 13.50% per annum and had an initial maturity date of May 15, 2017. In May 2017, the February 2016 Notes purchased by Foris and Naxyris were exchanged for shares of the Company’s Series B 17.38% Convertible Preferred Stock and warrants to purchase common stock; see Note 7, “Stockholders’ Deficit”.
In May 2017, the Company and Biolding amended the February 2016 Note issued to Biolding (the Biolding Note) to extend the maturity of the Biolding Note to November 15, 2017, and on November 13, 2017, the Company and Biolding further amended the Biolding Note to extend the maturity to December 31, 2017. The Company paid the Biolding Note in full on January 2, 2018.
The February 2016 Warrants each have five-year terms. The February 2016 Warrants purchased by Naxyris were fully exercised in the year ended December 31, 2017, and a gain of $0.1 million was recorded in earnings. As of December 31, 2018, none of the 171,429 February 2016 Warrants purchased by Foris or Biolding have been exercised.
For information regarding related party loans payable subsequent to December 31, 2018, see Note 16, “Subsequent Events”.
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Letters of Credit
In June 2012, the Company entered into a letter of credit agreement for $1.0 million under which it provided a letter of credit to the landlord for its headquarters in Emeryville, California in order to cover the security deposit on the lease. This letter of credit is secured by a certificate of deposit. Accordingly, the Company has $1.0 million of restricted cash, noncurrent in connection with this arrangement as of December 31, 2018 and 2017.
6. Mezzanine Equity
Mezzanine equity at December 31, 2018 and 2017 is comprised of proceeds from common shares sold on May 10, 2016 to the Bill & Melinda Gates Foundation (the Gates Foundation). On April 8, 2016, the Company entered into a Securities Purchase Agreement with the Gates Foundation, pursuant to which the Company agreed to sell and issue 292,398 shares of its common stock to the Gates Foundation in a private placement at a purchase price per share of $17.10, the average of the daily closing price per share of the Company’s common stock on the Nasdaq Stock Market for the twenty consecutive trading days ending on April 7, 2016, for aggregate proceeds to the Company of approximately $5.0 million (the Gates Foundation Investment). The Securities Purchase Agreement includes customary representations, warranties and covenants of the parties.
In connection with the entry into the Securities Purchase Agreement, on April 8, 2016, the Company and the Gates Foundation entered into a Charitable Purposes Letter Agreement, pursuant to which the Company agreed to expend an aggregate amount not less than the amount of the Gates Foundation Investment to develop a yeast strain that produces artemisinic acid and/or amorphadiene at a low cost and to supply such artemisinic acid and amorphadiene to companies qualified to convert artemisinic acid and amorphadiene to artemisinin for inclusion in artemisinin combination therapies used to treat malaria commencing in 2017. The Company is currently conducting the project. If the Company defaults in its obligation to use the proceeds from the Gates Foundation Investment as set forth above or defaults under certain other commitments in the Charitable Purposes Letter Agreement, the Gates Foundation will have the right to request that the Company redeem, or facilitate the purchase by a third party of, the Gates Foundation Investment shares then held by the Gates Foundation at a price per share equal to the greater of (i) the closing price of the Company’s common stock on the trading day prior to the redemption or purchase, as applicable, or (ii) an amount equal to $17.10 plus a compounded annual return of 10%. As of December 31, 2018, the Company's remaining research and development obligation under this arrangement was $0.7 million.
7. Stockholders’ Deficit
Warrants
The Company issues warrants in certain debt and equity transactions in order to facilitate raising equity capital or reduce borrowing costs. In connection with various debt and equity transactions (see Note 5, "Debt" and below), the Company has issued warrants exercisable for shares of common stock. The May 2017 and August 2017 cash and dilution warrants, and the July 2015 related party debt exchange warrants are accounted for as derivative liabilities. See the Temasek Funding Warrant and Series A and B sections below for more information. The following table summarizes warrant activity for the year ended December 31, 2018:
| Transaction | Number Outstanding as of December 31, 2017 |
Additional Warrants Issued |
Exercises | Number Outstanding as of December 31, 2018 | ||||||||||||
| August 2018 warrant exercise agreements | – | 12,097,164 | – | 12,097,164 | ||||||||||||
| May 2017 cash and dilution warrants | 18,042,568 | – | (11,749,770 | ) | 6,292,798 | |||||||||||
| August 2017 cash and dilution warrants | 9,543,234 | 1,713,565 | (7,288,683 | ) | 3,968,116 | |||||||||||
| April 2018 warrant exercise agreements | – | 3,616,174 | – | 3,616,174 | ||||||||||||
| July 2015 related party debt exchange | 2,082,010 | 471,204 | (1,889,986 | ) | 663,228 | |||||||||||
| February 2016 related party private placement | 171,429 | – | – | 171,429 | ||||||||||||
| July 2015 private placement | 81,197 | – | – | 81,197 | ||||||||||||
| Other | 1,406 | – | – | 1,406 | ||||||||||||
| 29,921,844 | 17,898,107 | (20,928,439 | ) | 26,891,512 | ||||||||||||
For information regarding warrants issued subsequent to December 31, 2018, see Note 16, “Subsequent Events”.
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Shares Issuable under Convertible Notes
In connection with various debt transactions (see Note 5, "Debt"), the Company issued certain convertible notes that are convertible into shares of common stock as follows as of December 31, 2018, at any time at the election of each debtholder:
| Debt Instrument | Number of Shares into Which Debt Instrument Is Convertible as of December 31, 2018 | |||
| 6% convertible notes due 2021 | 9,493,672 | |||
| 2015 Rule 144A convertible notes | 2,338,560 | |||
| August 2013 financing convertible notes | 1,003,554 | |||
| 2014 Rule 144A convertible notes | 867,376 | |||
| 13,703,162 | ||||
2018 Warrant Exercises and New Warrant Issuances
April 2018 Warrant Transactions
On April 12, 2018, in accordance with the terms of the Warrant Exercise Agreement, certain holders of the May 2017 Warrants (see below under “May 2017 Offerings”) exercised their May 2017 Cash Warrants in full to purchase an aggregate of 3,616,174 shares of common stock for net proceeds to the Company of $14.5 million and surrendered their May 2017 Dilution Warrants for cancellation. Upon exercise of the May 2017 Cash Warrants and surrender of such May 2017 Dilution Warrants, certain derivative liabilities representing certain anti-dilution rights contained in the May 2017 Warrants were effectively settled. Under the terms of the Warrant Exercise Agreements, the exercise of such May 2017 Cash Warrants and surrender of such May 2017 Dilution Warrants was required on the date of the Warrant Exercise Agreement in order for the Company to issue new warrants to these same holders to purchase an aggregate of 3,616,174 shares of common stock, exercisable at a price of $7.00 per share. The new warrants were fully exercisable upon issuance, with an expiration date of July 12, 2019. The new warrants do not provide the holders with anti-dilution protection and only permit “cashless” exercise after the six-month anniversary of issuance, and only to the extent that there is not an effective registration statement covering the resale of the shares of common stock underlying the new warrants; on September 26, 2018, the Company filed such a registration statement, which was declared effective on October 11, 2018. The new warrants were evaluated for liability classification, and while meeting the definition of a derivative, the freestanding instruments met the indexation and equity classification criteria to be accounted for as equity.
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August 2018 Warrant Transactions
In August 2018 in accordance with the terms of the Warrant Exercise Agreements, Foris Ventures, LLC (Foris) and entities affiliated with Vivo Capital LLC (Vivo), related parties and holders of the May 2017 Warrants and August 2017 Warrants (see below under “August 2017 Vivo Offering”), respectively, exercised their Cash Warrants and, in the case of Foris, Dilution Warrants in full and in accordance with the terms of the Warrant Exercise Agreements, to purchase an aggregate of approximately 12.6 million shares of common stock for $43.0 million in proceeds to the Company, and Vivo subsequently surrendered their Dilution Warrants for cancellation. In connection with the entry by the Company and Vivo into Warrant Exercise Agreement, the Company and Vivo amended the August 2017 Vivo Cash Warrants to (i) reduce the exercise price of such warrants from $6.39 per share to $4.40 per share and (ii) remove the August 2017 Vivo Offering Beneficial Ownership Limitation from such warrants. Upon exercise and surrender of such Cash Warrants and Dilution Warrants, certain derivative liabilities representing certain anti-dilution rights contained in the May 2017 Warrants and August 2017 Warrants were effectively settled. Under the terms of the Warrants Exercise Agreement, the exercise of the Cash Warrants and Dilution Warrants and subsequent surrender of the Vivo Dilution Warrants was required on the date of the Warrants Exercise Agreement in order for the Company to issue a series of new warrants to these same holders to purchase an aggregate of 12.1 million shares of common stock, exercisable at $7.52 per share. The new warrants are exercisable any time after the six-month anniversary of issuance and for 15 months thereafter, with an expiration date in May 2020. The new warrants do not provide the holders with anti-dilution protection and only permit “cashless” exercise after the twelve-month anniversary of issuance, and only to the extent that there is not an effective registration statement covering the resale of the shares of common stock underlying the new warrants. The new warrants were evaluated for liability classification, and while meeting the definition of a derivative, the freestanding instruments met the indexation and equity classification criteria to be accounted for as equity.
Temasek Funding Warrant – Related Party
Following amendments to certain common stock purchase warrants in August 2018 (see below under “May 2017 Offerings” and “August 2017 Vivo Offering”), and a corresponding adjustment to the conversion price of the August 2013 financing convertible notes from $5.2977 per share to $4.40 per share (see Note 5, “Debt”), the Temasek Funding Warrant became exercisable for an additional 471,204 shares of common stock in accordance with its terms. On October 19, 2018, Temasek exercised the Temasek Funding Warrant with respect to 1,889,986 shares of common stock underlying the Temasek Funding Warrant by means of a cashless exercise, resulting in the issuance of 1,852,585 shares of common stock to Temasek. As of December 31, 2018, there were 471,204 shares underlying the Temasek Funding Warrant. As a result of this exercise, the derivative liability related to the Temasek Funding Warrant decreased by $14.0 million.
November 2018 DSM Securities Purchase Agreement – Related Party
On November 20, 2018, the Company issued 1,643,991 shares of common stock (the DSM Shares) at $3.68 per share to DSM in a private placement pursuant to a securities purchase agreement, dated November 19, 2018, between the Company and DSM (the DSM SPA), in consideration of certain agreements of DSM set forth in the Supply Agreement Amendment described in Note 10, "Revenue Recognition". The Company also agreed to pay DSM the difference between the DSM SPA purchase price of $4.41 and the closing share price of the Company's common stock on March 28, 2019, multiplied by 1,643,991. At inception, the Company recorded a $1.2 million derivative liability for the difference between $4.41 and the Company’s closing stock price on November 20, 2018. At December 31, 2018 fair value based on the Company’s closing stock price was $1.8 million, resulting in a $0.6 million loss on change in fair value for the year ended December 31, 2018. At March 28, 2019, the Company's stock price was $2.10, and the Company owed DSM $3.8 million in connection with this agreement. Pursuant to the DSM SPA, the Company agreed to file a registration statement providing for the resale by DSM of the DSM Shares and to use commercially reasonable efforts to (i) cause such registration statement to become effective within 181 days following the date of the DSM SPA and (ii) keep such registration statement effective until DSM does not own any DSM Shares or the DSM Shares are eligible for resale under Rule 144 without regard to volume limitations. See Note 11, "Related Party Transactions" for additional information about the accounting for this transaction and other November 2018 transactions with DSM. In April 2019, in connection with the assignment by the Company of its rights under the Value Sharing Agreement (see Note 10, "Revenue Recognition"), the Company satisfied its obligation under the Supply Agreement Amendment relating to the difference between $4.41 and the price of the Company’s common stock on March 28, 2019. See Note 16, “Subsequent Events” for additional information.
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At Market Issuance Sales Agreement
On March 8, 2016, the Company entered into an At Market Issuance Sales Agreement (ATM Sales Agreement) with FBR Capital Markets & Co. and MLV & Co. LLC (Agents) under which the Company would be able to issue and sell shares of its common stock having an aggregate offering price of up to $50.0 million (ATM Shares) from time to time through the Agents, acting as its sales agents, under the Company's Registration Statement on Form S-3 (File No. 333-203216), effective April 15, 2015. Sales of the ATM Shares through the Agents would be made by any method that is deemed an "at the market offering" as defined in Rule 415 under the Securities Act of 1933, as amended, including by means of ordinary brokers' transactions at market prices, in block transactions, or as otherwise agreed by the Company and the Agents. The Company agreed to pay the applicable Agent a commission rate of up to 3.0% of the gross proceeds from the sale of any ATM Shares sold through such Agent under the ATM Sales Agreement. The ATM Sales Agreement included no commitment by other parties to purchase ATM Shares the Company offers for sale.
During the year ended December 31, 2018, the Company issued and sold 205,168 shares of common stock under the ATM Sales Agreement, at an average price of $6.90 per share, resulting in total net proceeds to the Company of $1.4 million. During the year ended December 31, 2017, the Company did not sell any shares of common stock under the ATM Sales Agreement. The ATM Sales Agreement expired on April 15, 2018, and as a result, zero remained available for issuance under the ATM Sales Agreement as of December 31, 2018.
May 2017 Offerings
In May 2017, the Company issued and sold an aggregate of 22,140 shares of Series A 17.38% Convertible Preferred Stock (Series A Preferred Stock), 70,904 shares of Series B 17.38% Convertible Preferred Stock (Series B Preferred Stock), and warrants to purchase an aggregate of 7,384,190 shares of common stock at an initial exercise price of $7.80 per share, warrants to purchase an aggregate of 7,384,190 shares of common stock at an initial exercise price of $9.30 per share, and warrants to purchase a number of shares of common stock sufficient to provide full-ratchet anti-dilution protection with respect to the effective price paid for the common stock underlying the Series A Preferred Stock and Series B Preferred Stock (collectively, the May 2017 Warrants) in separate offerings, certain of which were registered under the Securities Act or others of which were private placements (collectively, the May 2017 Offerings).
The net proceeds to the Company from the May 2017 Offerings were $50.7 million after payment of offering expenses and placement agent fees. The Series A Preferred Stock and May 2017 Warrants relating thereto were sold to the purchasers thereof in exchange for aggregate cash consideration of $22.1 million, and the Series B Preferred Stock and May 2017 Warrants relating thereto were sold to the purchasers thereof in exchange for (i) aggregate cash consideration of $30.7 million and (ii) the cancellation of $40.2 million of outstanding indebtedness (including accrued interest thereon) owed by the Company to certain purchasers, of which $33.1 million was from related parties, as further described below.
Series A and B Preferred Stock
Series A Preferred Stock
Each share of Series A Preferred Stock has a stated value of $1,000 and is convertible at any time, at the option of the holder, into common stock at a conversion price of $17.25 per share (Preferred Stock Conversion Rate). The Preferred Stock Conversion Rate is subject to adjustment in the event of any dividends or distributions of common stock, or any stock split, reverse stock split, recapitalization, reorganization or similar transaction. If not previously converted at the option of the holder, each share of Series A Preferred Stock automatically converted on October 9, 2017, the 90th day following the date that the July 2017 Stockholder Approval (as defined below) was obtained and effected, subject to the May 2017 Offerings Beneficial Ownership Limitation (as defined below).
Dividends, at a rate per year equal to 17.38% of the stated value of the Series A Preferred Stock, will be payable semiannually from the issuance of the Series A Preferred Stock until the tenth anniversary of the date of issuance, on each October 15 and April 15, beginning October 15, 2017, on a cumulative basis, at the Company's option, in cash, out of any funds legally available for the payment of dividends, or, subject to the satisfaction of certain conditions, in Common Stock at the Preferred Stock Conversion Rate, or a combination thereof. Upon the conversion of the Series A Preferred Stock prior to the tenth anniversary of the date of issuance, the holders of the Series Preferred A Stock shall be entitled to a payment equal to $1,738 per $1,000 of stated value of the Series A Preferred Stock, less the amount of all prior semiannual dividends paid on such converted Series A Preferred Stock prior to the relevant conversion date (Make-Whole Payment), at the Company's option, in cash, out of any funds legally available for the payment of dividends, or, subject to the satisfaction of certain conditions, in common stock at the Preferred Stock Conversion Rate, or a combination thereof. If the Company elects to pay any dividend in the form of cash, it shall provide each holder with notice of such election not later than the first day of the month of prior to the applicable dividend payment date.
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Unless and until converted into common stock in accordance with its terms, the Series A Preferred Stock has no voting rights, other than as required by law or with respect to matters specifically affecting the Series A Preferred Stock.
Upon any liquidation, dissolution or winding-up of the Company, the holders of the Series A Preferred Stock shall be entitled to receive out of the assets of the Company the same amount that a holder of Common Stock would receive if the Series A Preferred Stock were fully converted to common stock immediately prior to such liquidation, dissolution or winding-up (without regard to whether such Series A Preferred Stock is convertible at such time), which amount shall be paid pari passu with all holders of Common Stock.
The conversion of the Series A Preferred Stock is subject to a beneficial ownership limitation of 4.99% (or such other percentage not to exceed 9.99%, provided that any increase will not be effective until 61 days after notice thereof by the holder) of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon conversion of such Series A Preferred Stock (May 2017 Offerings Beneficial Ownership Limitation). In addition, prior to obtaining the July 2017 Stockholder Approval (as defined below), the aggregate number of shares issued with respect to the Series A Preferred Stock (and any other transaction aggregated for such purpose) could not exceed 3,792,778 shares of common stock (May 2017 Exchange Cap).
The Series A Preferred Stock is classified as permanent equity, as the Company controls all actions or events required to settle the optional and mandatory conversion feature in shares. The Make-Whole Payment was determined to be an embedded derivative requiring bifurcation and separate recognition as a derivative liability recognized at its fair value as of the issuance date with subsequent changes in fair value recorded in earnings until the earlier of (i) July 7, 2017 when the Make-Whole shares became fixed and certain, (ii) the Series A Preferred Stock is converted into common stock, (iii) the Make-Whole Payment is voluntarily converted, or (iv) the Make-Whole Payment is paid through declared dividends or cash. A derivative liability was recognized at fair value on the date of issuance for the Make-Whole Payment in the amount of $11.0 million. The value of the remaining Make-Whole derivative liability at July 7, 2017 was extinguished to equity. All Make-Whole Payment conversions into common stock before and after July 7, 2017, were accounted for as a deemed dividend in the period converted. A derivative liability was also recognized at fair value on the date of issuance for the May 2017 Warrants issued to the Series A holders (discussed more fully below) in the amount of $10.6 million. The Series A Preferred Stock also contained a beneficial conversion feature which was recognized up to the amount of $0.6 million of proceeds allocated to the preferred stock. Net proceeds allocated to the Series A Preferred Stock were $0.6 million.
As of December 31, 2017, all 22,140 shares of Series A Preferred Stock had been converted into common stock (with the Make-Whole Payment in each case being made in the form of common stock) and zero shares of Series A Preferred Stock were outstanding. Upon conversion of the Series A Preferred Shares, the Company recognized a deemed dividend for the unamortized discount related to the allocation of proceeds to the May 2017 Warrants derivatives totaling $21.6 million, and deemed dividends upon settlement of the Series A Make-Whole Payment totaling $10.5 million, all as a reduction to Additional Paid-in Capital and an increase to net loss attributable to Amyris, Inc. common stockholders.
Series B Preferred Stock
The Series B Preferred Stock has substantially identical terms to the Series A Preferred Stock, except that (i) the conversion of the Series B Preferred Stock was subject to the July 2017 Stockholder Approval and (ii) the May 2017 Offerings Beneficial Ownership Limitation does not apply to DSM. The Series B Preferred Stock was classified as permanent equity at issuance due to the lack of a cash redemption feature and because the holder’s only recourse to affect conversion was to require the Company to continually seek shareholder approval, thus effectively giving the Company control over the actions or events necessary to settle an optional or mandatory conversion feature in shares. As described in more detail below under “July 2017 Stockholder Approval,” in July 2017 the Company’s stockholders approved removing a restriction preventing the Series B Preferred Stock issued in the May 2017 Offerings from being convertible into common stock.
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The investors that purchased shares of the Series B Preferred Stock included related parties affiliated with members of the Board: Foris exchanged an aggregate principal amount of $27.0 million of indebtedness, plus accrued interest thereon, for 30,729 shares of Series B Preferred Stock and May 2017 Warrants to purchase 4,877,386 shares of Common Stock and Naxyris exchanged an aggregate principal amount of $2.0 million of indebtedness, plus accrued interest thereon, for 2,333 shares of Series B Preferred Stock and May 2017 Warrants to purchase 370,404 shares of common stock. The fair value of the Series B Preferred Stock, the embedded Make-Whole payment and the related warrants exceeded the carrying value of the related party debt and accrued interest exchanged by $8.6 million which was recorded as a loss upon extinguishment of debt as the Company determined that the related parties were acting in their interests as debt holders.
The investors that purchased shares of the Series B Preferred Stock also included non-related party holders of the Company's 2014 Rule 144A Convertible Notes and 2015 Rule 144A Convertible Notes. These investors exchanged all or a portion of their holding of such indebtedness, including accrued interest thereon, representing an aggregate of $3.4 million of 2014 Rule 144A Convertible Notes and $3.7 million of 2015 Rule 144A Convertible Notes, for Series B Preferred Stock and May 2017 Warrants in the May 2017 Offerings. The fair value of the Series B Preferred Stock, the embedded Make-Whole payment and the related warrants exceeded the carrying value of the debt and accrued interest exchanged by $1.9 million, which was recognized as a loss on extinguishment of debt in other income (expense).
Issuance costs of $1.2 million were netted against the proceeds. Additional issuance costs of $0.2 million were expensed as debt extinguishment costs for debt that was exchanged in the May 2017 Offerings.
Upon the closing of the May 2017 Offerings, all such exchanged indebtedness was canceled and the agreements relating thereto, including any note purchase agreements or unsecured or secured promissory notes (including any security interest relating thereto), were terminated, except to the extent such investors or other investors retain a portion of such indebtedness.
A derivative liability was recognized at fair value on the date of issuance for the May 2017 DSM Series B Make-Whole Payment in the amount of $12.4 million. A derivative liability was also recognized at fair value on the date of issuance for the May 2017 Warrants issued to DSM (discussed more fully below) in the amount of $11.9 million. Upon conversion of the DSM Series B Preferred Shares, the Company recognized a deemed dividend for the unamortized discounts related to the allocation of proceeds to the May 2017 DSM Make-Whole Payment and May 2017 Warrants derivatives totaling $24.4 million, and a deemed dividend upon settlement of all May 2017 Series B Make-Whole Payments totaling $22.6 million, all as a reduction to Additional Paid in Capital and an increase to net loss attributable to Amyris, Inc. common stockholders. The Series B Preferred Stock issued to DSM in the May 2017 Offerings also contained a contingent beneficial conversion feature that was recognized in the three months ending September 30, 2017 upon the July 2017 Stockholder Approval, which eliminated the contingency. As a result, $0.6 million was recorded as a reduction to Additional Paid in Capital and was considered a deemed dividend, increasing net loss attributable to Amyris, Inc. common stockholders.
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As of December 31, 2018, 89,528 shares of Series B Preferred Stock (including the Series B Preferred Stock issued in the August 2017 DSM Offering) have been converted into common stock (with the Make-Whole Payment in each case being made in the form of common stock) and 6,376 shares of Series B Preferred Stock were outstanding. At December 31, 2017, 9,213 shares of Series B Preferred Stock were outstanding.
May 2017 Warrants
The Company issued to each investor in the May 2017 Offerings warrants to purchase a number of shares of common stock equal to 100% of the shares of common stock into which such investor's shares of Series A Preferred Stock or Series B Preferred Stock were initially convertible (including shares of common stock issuable as payment of dividends or the Make-Whole Payment, assuming that all such dividends and the Make-Whole Payment are made in common stock), representing warrants to purchase 14,768,380 shares of common stock in the aggregate for all investors (collectively, the May 2017 Cash Warrants). The exercise price of the May 2017 Cash Warrants is subject to standard adjustments as well as full-ratchet anti-dilution protection for any issuance by the Company of equity or equity-linked securities during the three-year period following the issuance of such warrants (May 2017 Dilution Period) at a per share price less than the then-current exercise price of the May 2017 Cash Warrants, subject to certain exceptions. As of December 31, 2017, the exercise prices of the May 2017 Cash Warrants were $4.40 per share and no May 2017 Cash Warrants had been exercised. As of December 31, 2018, the exercise prices of the May 2017 Cash Warrants were $4.40 per share and 8,523,560 May 2017 Cash Warrants had been exercised (see “April 2018 Warrant Transactions” and “August 2018 Warrant Transactions” above).
In addition, the Company issued to each investor a warrant, with an exercise price of $0.0015 per share as of December 31, 2018 (collectively, the May 2017 Dilution Warrants), to purchase a number of shares of common stock sufficient to provide the investor with full-ratchet anti-dilution protection for any issuance by the Company of equity or equity-linked securities during the May 2017 Dilution Period at a per share price less than $6.30, the effective per share price paid by the investors for the shares of common stock issuable upon conversion of their Series A Preferred Stock or Series B Preferred Stock (including shares of common stock issuable as payment of dividends or the Make-Whole Payment, assuming that all such dividends and the Make-Whole Payment are made in common stock) subject to certain exceptions. As of December 31, 2018, the May 2017 Dilution Warrants were exercisable for an aggregate of 6,377,466 shares based on an effective per share price of $4.40 per share, of which 6,329,488 warrants had been exercised, resulting in a $64.1 million reduction in derivative liability. See “April 2018 Warrant Transactions” and “August 2018 Warrant Transactions” above regarding the cancellation of certain May 2017 Dilution Warrants.
The May 2017 Warrants each have a term of five years from the date such warrants initially became exercisable upon the receipt and effectiveness of the July 2017 Stockholder Approval. The exercise of the May 2017 Warrants (other than the May 2017 Warrants held by DSM) is subject to the May 2017 Offerings Beneficial Ownership Limitation. In connection with the entry by the Company and Foris into a warrant exercise agreement in August 2018 and related transactions (see “August 2018 Warrant Transactions” above), the Company and Foris amended Foris’s May 2017 Cash Warrants and May 2017 Dilution Warrant to remove the May 2017 Offerings Beneficial Ownership Limitation from such warrants. The May 2017 Cash Warrants are freestanding financial instruments that are accounted for as derivative liabilities and recognized at their fair value on the date of issuance of $39.5 million. As of December 31, 2018, the fair value of the May 2017 Cash Warrants was $24.1 million, as determined with the assistance of an independent third-party appraisal.
For the years ended December 31, 2018 and 2017, the Company recorded a loss of $13.5 million and $40.4 million, respectively, to reflect change in fair value of the May 2017 Cash Warrants (including the anti-dilution protection feature). Subsequent changes to the fair value of the May 2017 Cash Warrants will continue to be recorded in earnings until the warrants are exercised or expire in July 2022.
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July 2017 Stockholder Approval
In connection with the May 2017 Offerings, the Company agreed to solicit from its stockholders (i) any approval required by the rules and regulations of the NASDAQ Stock Market, including without limitation for the issuance of common stock upon conversion of the Series A Preferred Stock in excess of the May 2017 Exchange Cap, upon conversion of the Series B Preferred Stock and upon exercise of the May 2017 Warrants (the NASDAQ Approval) and (ii) approval to effect the Reverse Stock Split (collectively, the July 2017 Stockholder Approval) at an annual or special meeting of stockholders to be held on or prior to July 10, 2017, and to use commercially reasonable efforts to secure the July 2017 Stockholder Approval. The Reverse Stock Split was approved by the Company’s stockholders in May 2017 and the NASDAQ Approval was obtained on July 7, 2017.
August 2017 DSM Offering – Related Party
On August 7, 2017, the Company issued and sold the following securities to DSM in a private placement (August 2017 DSM Offering):
| • | 25,000 shares of Series B Preferred Stock (August 2017 DSM Series B Preferred Stock) at a price of $1,000 per share; |
| • | a warrant to purchase 3,968,116 shares of common stock at an initial exercise price of $6.30 per share expiring in five years (August 2017 DSM Cash Warrant); and |
| • | the August 2017 DSM Dilution Warrant (as described below). |
Net proceeds to the Company were $25.9 million after payment of offering expenses and the allocation of total fair value received to the elements in the arrangement.
The exercise price of the August 2017 DSM Cash Warrant is subject to standard adjustments as well as full-ratchet anti-dilution protection for any issuance by the Company of equity or equity-linked securities during the three-year period following August 7, 2017 (DSM Dilution Period) at a per share price less than the then-current exercise price of the August 2017 DSM Cash Warrant, subject to certain exceptions. As of December 31, 2018, the exercise price of the August 2017 DSM Cash Warrant was $4.40 per share.
The August 2017 DSM Dilution Warrant allows DSM to purchase a number of shares of common stock sufficient to provide DSM with full-ratchet anti-dilution protection for any issuance by the Company of equity or equity-linked securities during the DSM Dilution Period at a per share price less than $6.30, the effective per share price paid by DSM for the shares of common stock issuable upon conversion of its Series B Preferred Stock (including shares of common stock issuable as payment of dividends or the Make-Whole Payment (as defined below), assuming that all such dividends and the Make-Whole Payment are made in common stock), subject to certain exceptions and subject to a price floor of $0.10 per share (Dilution Floor). The August 2017 DSM Dilution Warrant expires five years from the date it is initially exercisable.
In connection with the August 2017 DSM Offering, the Company also agreed that, subject to certain exceptions, it would not (i) issue any shares of common stock or securities convertible into or exercisable or exchangeable for common stock prior to October 31, 2017, (ii) effect any issuance of securities involving a variable rate transaction until May 11, 2018 or (iii) issue any shares of common stock or securities convertible into or exercisable or exchangeable for common stock at a price below the Dilution Floor without DSM's consent. On November 19, 2018, the Company entered into an agreement to reduce the exercise price of the August 2017 DSM Cash Warrant from $6.30 to $4.40 to compensate DSM for failure to obtain its consent to reduce the exercise price of the Vivo Warrant discussed in the “August 2018 Warrant Transactions” section of this Note 7 “Stockholders’ Deficit”. The Company determined the fair value of this agreement to be $6.8 million and recorded a legal settlement expense for the period ended December 31, 2018 in that amount. See Note 4, "Fair Value Measurement" for additional information. The accounting treatment for this transaction was evaluated in conjunction with the other November 2018 transactions discussed in Note 11, “Related Party Transactions”. Also, upon execution of this agreement the August 2017 DSM Dilution Warrant became exercisable for 1,713,565 shares based on an effective per share price of $0.0001 per share, all of which were exercised in November 2018.
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In connection with the August 2017 DSM Offering, the Company and DSM also entered into an amendment to the stockholder agreement dated May 11, 2017 (DSM Stockholder Agreement) between the Company and DSM (Amended and Restated DSM Stockholder Agreement). Under the DSM Stockholder Agreement, DSM was granted the right to designate one director selected by DSM, subject to certain restrictions and a minimum beneficial ownership level of 4.5%, to the Board. Furthermore, DSM has the right to purchase additional shares of capital stock of the Company in connection with a sale of equity or equity-linked securities by the Company in a capital raising transaction for cash, subject to certain exceptions, to maintain its proportionate ownership percentage in the Company. Pursuant to the DSM Stockholder Agreement, DSM agreed not to sell or transfer any of the Series B Preferred Stock or warrants purchased by DSM in the May 2017 Offerings (as defined below), or any shares of common stock issuable upon conversion or exercise thereof, other than to its affiliates, without the consent of the Company through May 2018 and to any competitor of the Company thereafter. DSM also agreed that, subject to certain exceptions, until three months after there is no DSM director on the Board, DSM will not, without the prior consent of the Board, acquire common stock or rights to acquire common stock that would result in DSM beneficially owning more than 33% of the Company’s outstanding voting securities at the time of acquisition. Under the DSM Stockholder Agreement, the Company agreed to use its commercially reasonable efforts to register, via one or more registration statements filed with the Securities and Exchange Commission (SEC) under the Securities Act of 1933, as amended (Securities Act), the shares of common stock issuable upon conversion or exercise of the securities purchased by DSM in the May 2017 Offerings. The Amended and Restated DSM Stockholder Agreement provides that (i) DSM has the right to designate a second director to the Board, subject to certain restrictions and a minimum beneficial ownership level of 10%, and (ii) the shares of common stock issuable upon conversion or exercise of the securities purchased by DSM in the August 2017 DSM Offering are (a) entitled to the registration rights provided for in the DSM Stockholder Agreement and (b) subject to the transfer restrictions set forth in the DSM Stockholder Agreement.
In addition, pursuant to the Amended and Restated DSM Stockholder Agreement, the Company and DSM agreed to negotiate in good faith regarding an agreement concerning the development of certain products in the Health & Wellness field and, in the event that the parties did not reach such agreement prior to 90 days after the closing of the August 2017 DSM Offering (August 2017 DSM Closing), (a) certain exclusive negotiating rights granted to DSM in connection with the entry into the DSM Stockholder Agreement would expire and (b) on the first anniversary of the August 2017 DSM Closing and each subsequent anniversary thereof, the Company would make a $5.0 million cash payment to DSM, provided that the aggregate amount of such payments would not exceed $25.0 million. In September 2017, the Company and DSM entered into such agreement, and in connection therewith an intellectual property escrow agreement relating to certain intellectual property licenses granted by the Company to DSM upon the August 2017 DSM Closing became effective.
In connection with the August 2017 DSM Offering and its $25.9 million in net proceeds, the Company also entered into a separate intellectual property license with DSM for consideration of $9.0 million in cash, which DSM remitted to the Company on October 28, 2017, and a credit letter (DSM Credit Letter) to be applied against future collaboration and royalty payments owed by DSM to the Company beginning in 2018. The DSM Credit Letter had a fair value of $7.1 million and was recorded as deferred revenue on the transaction date. The total fixed consideration of $34.0 million was allocated to each of the August 2017 DSM Series B Preferred Stock, August 2017 DSM Cash Warrant, August 2017 DSM Dilution Warrant and DSM Credit Letter at fair value based on level 3 inputs. The August 2017 DSM Series B Preferred Stock was recognized at its fair value on the date of issuance of $15.6 million, net of issuance costs of $0.2 million. The August 2017 Make-Whole Payment met the criteria to be classified in permanent equity and was not bifurcated from the preferred stock but will be recognized as a deemed dividend upon conversion, increasing the net loss attributable to Amyris, Inc. common stockholders. The August 2017 DSM Cash Warrant and August 2017 DSM Dilution Warrant are freestanding financial instruments and were initially recognized at their fair value of $10.6 million. The August 2017 DSM Cash Warrant and August 2017 DSM Dilution Warrant have been reported together as derivative liabilities. Changes in the fair value of the warrant derivatives for the years ended December 31, 2018 and 2017 have been recorded in earnings as a $7.5 million loss and $4.0 million loss, respectively.
As of December 31, 2018, all the August 2017 Series B Preferred Shares have been converted into common stock.
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The DSM Credit Letter was initially recorded as deferred revenue at its $7.1 million fair value, which was determined based on the assumptions that DSM would realize its credit over the next 18 months to 4 years with a 50% to 90% likelihood the credit will be utilized, fully discounted at the Company's 8.6% average cost of debt. After allocating the $34.0 million in fixed consideration to the financial instruments noted above and the DSM Credit Letter, $7.8 million was available for recognition as revenue related to the intellectual property licenses delivered to DSM, of which $3.3 million was recognized as license revenue during the year ended December 31, 2017. The DSM Credit Letter was terminated in December 2017, resulting in the reversal of the remaining unrecognized $4.5 million deferred revenue liability previously recorded as consideration for the DSM License and Collaboration transaction. See Note 10, “Revenue Recognition” for additional information.
August 2017 Vivo Offering – Related Party
On August 3, 2017, the Company issued and sold the following securities to Vivo in a private placement (August 2017 Vivo Offering), resulting in net proceeds to the Company of $24.8 million after payment of offering expenses.
| • | 2,826,711 shares of common stock at a price of $4.26 per share; |
| • | 12,958 shares of Series D Preferred Stock at a price of $1,000 per share; |
| • | warrants to purchase an aggregate of 5,575,118 shares of common stock at an initial exercise price of $6.39 per share, expiring in five years (August 2017 Vivo Cash Warrants); and |
| • | the August 2017 Vivo Dilution Warrants (as described below). |
Each share of Series D Preferred Stock has a stated value of $1,000 and, subject to the August 2017 Vivo Offering Beneficial Ownership Limitation (as defined below), is convertible at any time, at the option of the holders, into common stock at a conversion price of $4.26 per share. The Series D Conversion Rate is subject to adjustment in the event of any dividends or distributions of the common stock, or any stock split, reverse stock split, recapitalization, reorganization or similar transaction.
Prior to declaring any dividend or other distribution of its assets to holders of common stock, the Company shall first declare a dividend per share on the Series D Preferred Stock equal to $0.0001 per share. In addition, the Series D Preferred Stock will be entitled to participate with the common stock on an as-converted basis with respect to any dividends or other distributions to holders of common stock. There were no dividends declared as of December 31, 2018 or 2017.
Unless and until converted into common stock in accordance with its terms, the Series D Preferred Stock has no voting rights, other than as required by law or with respect to matters specifically affecting the Series D Preferred Stock. The Series D Preferred Stock is classified as permanent equity, as the Company controls all actions or events required to settle the optional conversion feature in shares.
The August 2017 Vivo Cash Warrants and August 2017 Vivo Dilution Warrants are freestanding derivative instruments in connection with the issuance of equity instruments, which have been recorded as derivative liabilities. These warrants were recognized at their initial fair value upon issuance of $13.0 million as determined by management with the assistance of an independent third party appraisal based on level 3 inputs. Changes in the fair value of these derivative liabilities from the date of issuance through December 31, 2018 have been recorded in earnings, with losses of $7.7 million and $3.0 million recorded for the years ended December 31, 2018 and 2017, respectively. The remaining $12.0 million of the $25.0 million in gross proceeds received was allocated on a relative fair value basis, resulting in $5.6 million of proceeds, net of $0.2 million in issuance costs being allocated to the common stock sold in the August 2017 Vivo Offering and $6.2 million allocated to the Series D Preferred Stock. The Series D Preferred Stock includes a beneficial conversion feature of $5.8 million as the full fair value of the Series D Preferred Stock of $12.0 million was greater than the $6.2 million allocated to the Series D Preferred Stock. The $5.8 million beneficial conversation feature was recorded as a reduction to Additional Paid in Capital and a deemed dividend increasing net loss attributable to Amyris, Inc. common stockholders upon conversion in the third quarter of 2017.
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At December 31, 2018 and 2017, 8,280 and 12,958 shares, respectively of Series D Preferred Stock were outstanding. In the third quarter of 2018 Vivo converted 4,678 shares of August 2017 Offerings Series D Preferred Stock and the Company recognized a $6.8 million deemed dividend for the unamortized discounts created from the allocation of proceeds, as a reduction to Additional Paid in Capital and increasing net loss attributable to Amyris, Inc. common stockholders.
In the event of a Fundamental Transaction, the holders of the Series D Preferred Stock will have the right to receive the consideration receivable as a result of such Fundamental Transaction by a holder of the number of shares of common stock for which the Series D Preferred Stock is convertible immediately prior to such Fundamental Transaction (without regard to whether such Series D Preferred Stock is convertible at such time), which amount shall be paid pari passu with all holders of common stock. A Fundamental Transaction is defined in the Certificate of Designation of Preferences, Rights and Limitations relating to the Series D Preferred Stock as any of the following: (i) merger with or consolidation into another legal entity; (ii) sale, lease, license, assignment, transfer or other disposition of all or substantially all of the Company’s assets in one or a series of related transactions; (iii) purchase offer, tender offer or exchange offer of the Company’s common stock pursuant to which holders of the Company’s common stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding common stock; (iv) reclassification, reorganization or recapitalization of the Company’s stock; or (v) stock or share purchase agreement that results in another party acquiring more than 50% of the Company’s outstanding shares of common stock.
Upon any liquidation, dissolution or winding-up of the Company, the holders of the Series D Preferred Stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the Series D Preferred Stock were fully converted to common stock immediately prior to such liquidation, dissolution or winding-up (without regard to whether such Series D Preferred Stock is convertible at such time), which amount shall be paid pari passu with all holders of common stock.
The conversion of the Series D Preferred Stock is subject to a beneficial ownership limitation of 9.99% (August 2017 Vivo Offering Beneficial Ownership Limitation), which limitation may be waived by the holders on 61 days’ prior notice.
The exercise price of the August 2017 Vivo Cash Warrants is subject to standard adjustments as well as full-ratchet anti-dilution protection for any issuance by the Company of equity or equity-linked securities during the three-year period following August 3, 2017 (Vivo Dilution Period) at a per share price less than the then-current exercise price of the August 2017 Vivo Cash Warrants, subject to certain exceptions. In connection with the entry by the Company and Vivo into warrant exercise agreements in August 2018 and related transactions (see “August 2018 Warrant Transactions” above), the Company and Vivo amended the August 2017 Vivo Cash Warrants to (i) reduce the exercise price of such warrants from $6.39 per share to $4.40 per share and (ii) remove the August 2017 Vivo Offering Beneficial Ownership Limitation from such warrants.
The August 2017 Vivo Dilution Warrants allow Vivo to purchase a number of shares of common stock sufficient to provide Vivo with full-ratchet anti-dilution protection for any issuance by the Company of equity or equity-linked securities during the Vivo Dilution Period at a per share price less than $4.26, the effective per share price paid by Vivo for the shares of common stock issuable upon conversion of the Series D Preferred Stock, subject to certain exceptions and subject to the Dilution Floor. The August 2017 Vivo Dilution Warrants expire five years from the date they are initially exercisable.
As of December 31, 2017, none of the August 2017 Vivo Warrants were exercised. As of December 31, 2018, 5,575,118 of the August 2017 Vivo Cash Warrants had been exercised and the August 2017 Vivo Dilution Warrants were not exercisable for any shares upon cancellation as part of the August 2018 transaction. See “August 2018 Warrant Transactions” above regarding the exercise of the August 2017 Vivo Cash Warrants and the cancellation of the August 2017 Vivo Dilution Warrants.
In connection with the August 2017 Vivo Offering, the Company agreed that it would not issue any shares of common stock or securities convertible into or exercisable or exchangeable for common stock at a price below the Dilution Floor without Vivo's consent.
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In connection with the August 2017 Vivo Offering, the Company and Vivo also entered into a Stockholder Agreement (Vivo Stockholder Agreement) setting forth certain rights and obligations of Vivo and the Company. Pursuant to the Vivo Stockholder Agreement, Vivo will have the right, subject to certain restrictions and a minimum beneficial ownership level of 4.5%, to (i) designate one director selected by Vivo to the Board and (ii) appoint a representative to attend all Board meetings in a nonvoting observer capacity and to receive copies of all materials provided to directors, subject to certain exceptions. Furthermore, Vivo will have the right to purchase additional shares of capital stock of the Company in connection with a sale of equity or equity-linked securities by the Company in a capital raising transaction for cash, subject to certain exceptions, to maintain its proportionate ownership percentage in the Company. Vivo agreed not to sell or transfer any of the shares of common stock, Series D Preferred Stock or warrants purchased by Vivo in the August 2017 Vivo Offering, or any shares of common stock issuable upon conversion or exercise thereof, other than to its affiliates, without the consent of the Company through August 2018 and to any competitor of the Company thereafter. Vivo also agreed that, subject to certain exceptions, until the later of (i) three years from the closing of the August 2017 Vivo Offering and (ii) three months after there is no Vivo director on the Board, Vivo will not, without the prior consent of the Board, acquire common stock or rights to acquire common stock that would result in Vivo beneficially owning more than 33% of the Company’s outstanding voting securities at the time of acquisition. Under the Vivo Stockholder Agreement, the Company agreed to use its commercially reasonable efforts to register, via one or more registration statements filed with the SEC under the Securities Act, the shares of common stock purchased in the August 2017 Vivo Offering as well as the shares of common stock issuable upon conversion or exercise of the Series D Preferred Stock and warrants purchased by Vivo in the August 2017 Vivo Offering.
May 2017 Exchange of Common Stock for Series C Convertible Preferred Stock - Related Party
In May 2017, Foris and Naxyris agreed to exchange (May 2017 Exchange) their outstanding shares of common stock, representing a total of 1,394,706 shares, for 20,921 shares of the Company's Series C Convertible Preferred Stock, par value $0.0001 per share (Series C Preferred Stock) in a private exchange.
Each share of Series C Preferred Stock had a stated value of $1,000 and would automatically convert into common stock, at a conversion price of $15.00 per share (Series C Conversion Rate), upon the approval by the Company's stockholders and implementation of a reverse stock split.
The shares of Series C Preferred Stock automatically converted to common stock on June 6, 2017 in connection with the effectiveness of the Reverse Stock Split. The Company accounted for the Series C Preferred Stock and the May 2017 Exchange as a non-monetary transaction that had no impact on the consolidated financial statements.
July 2015 PIPE Warrants
In July 2015, the Company entered into a securities purchase agreement with certain purchasers, including entities affiliated with members of the Board, under which the Company agreed to sell 1,068,379 shares of common stock at a price of $23.40 per share, for aggregate proceeds to the Company of $25.0 million. In connection with the sale, the Company granted to each of the purchasers a warrant, exercisable at a price of $0.15 per share, to purchase of a number of shares of common stock equal to 10% of the shares of common stock purchased by such investor. As of December 31, 2018 and 2017, such warrants had been exercised with respect to 25,643 shares of common stock and warrants with respect to 81,197 shares of common stock were outstanding.
For information regarding issuances of equity securities subsequent to December 31, 2018, see Part II, Item 8, “Subsequent Events”.
Right of First Investment to Certain Investors
In connection with investments in the Company has granted certain investors, including Vivo and DSM, a right of first investment if the Company proposes to sell securities in certain financing transactions. With these rights, such investors may subscribe for a portion of any such new financing and require the Company to comply with certain notice periods, which could discourage other investors from participating in, or cause delays in its ability to close, such a financing.
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8. Net Loss per Share Attributable to Common Stockholders
The Company computes net loss per share in accordance with ASC 260, “Earnings per Share.” Basic net loss per share of common stock is computed by dividing the Company’s net loss attributable to Amyris, Inc. common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share of common stock is computed by giving effect to all potentially dilutive securities, including stock options, restricted stock units, convertible preferred stock, convertible promissory notes and common stock warrants, using the treasury stock method or the as converted method, as applicable. For the years ended December 31, 2018 and 2017, basic net loss per share was the same as diluted net loss per share because the inclusion of all potentially dilutive securities outstanding was anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss were the same for those years.
The Company follows the two-class method when computing net loss per common share when shares are issued that meet the definition of participating securities. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The two-class method also requires losses for the period to be allocated between common stock and participating securities based on their respective rights if the participating security contractually participates in losses. The Company’s convertible preferred stock are participating securities as they contractually entitle the holders of such shares to participate in dividends and contractually require the holders of such shares to participate in the Company’s losses.
The following table presents the calculation of basic and diluted net loss per share of common stock attributable to Amyris, Inc. common stockholders:
| Years Ended December 31, (In thousands, except shares and per share amounts) |
2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Net loss attributable to Amyris, Inc. | (230,235 | ) | (155,982 | ) | ||||
| Less deemed dividend related to beneficial conversion feature on Series A preferred stock | — | (562 | ) | |||||
| Less deemed dividend related to beneficial conversion feature on Series B preferred stock | — | (634 | ) | |||||
| Less deemed dividend related to beneficial conversion feature on Series D preferred stock | — | (5,757 | ) | |||||
| Less deemed dividend upon settlement of make-whole provision on Series A preferred stock | — | (10,505 | ) | |||||
| Less deemed dividend upon settlement of make-whole provision on Series B preferred stock | — | (22,632 | ) | |||||
| Less deemed dividend related to the recognition of discounts on Series A preferred stock upon conversion | — | (21,578 | ) | |||||
| Less deemed dividend related to the recognition of discounts on Series B preferred stock upon conversion | — | (24,366 | ) | |||||
| Less deemed dividend related to proceeds discount upon conversion of Series D preferred stock | (6,852 | ) | — | |||||
| Add: losses allocated to participating securities | 13,991 | 40,159 | ||||||
| Net loss attributable to Amyris, Inc. common stockholders | $ | (223,096 | ) | $ | (201,857 | ) | ||
| Denominator: | ||||||||
| Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, basic and diluted | 60,405,910 | 32,253,570 | ||||||
| Basic and diluted loss per share | $ | (3.69 | ) | $ | (6.26 | ) | ||
The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have been anti-dilutive:
| Years Ended December 31, | 2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Period-end common stock warrants | 25,986,370 | 29,921,844 | ||||||
| Convertible promissory notes (1) | 13,703,162 | 8,203,821 | ||||||
| Period-end stock options to purchase common stock | 5,392,269 | 1,338,367 | ||||||
| Period-end restricted stock units | 5,294,848 | 685,007 | ||||||
| Period-end preferred shares on an as-converted basis | 2,955,732 | 4,504,212 | ||||||
| Total potentially dilutive securities excluded from computation of diluted net loss per share | 53,332,381 | 44,653,251 | ||||||
______________
| (1) | The potentially dilutive effect of convertible promissory notes was computed based on conversion ratios in effect at the respective year-end. A portion of the convertible promissory notes issued carries a provision for a reduction in conversion price under certain circumstances, which could potentially increase the dilutive shares outstanding. Another portion of the convertible promissory notes issued carries a provision for an increase in the conversion rate under certain circumstances, which could also potentially increase the dilutive shares outstanding. |
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9. Commitments and Contingencies
Lease Obligations
The Company leases certain facilities and finances certain equipment under operating and capital leases, respectively. Operating leases include leased facilities, and capital leases include leased equipment (see Note 3, "Balance Sheet Details"). The Company recognizes rent expense on a straight-line basis over the noncancelable lease term and records the difference between cash rent payments and the recognition of rent expense as a deferred rent liability. Where leases contain escalation clauses, rent abatements, and/or concessions, such as rent holidays and landlord or tenant incentives or allowances, the Company applies them as straight-line rent expense over the lease term. The Company has noncancelable operating lease agreements for office, research and development, and manufacturing space that expire at various dates, with the latest expiration in May 2023. Rent expense under operating leases was $5.8 million and $5.1 million for the years ended December 31, 2018 and 2017, respectively.
Future minimum payments under the Company's lease obligations as of December 31, 2018, are as follows:
| Years Ending December 31 (In thousands) |
Capital Leases |
Operating Leases |
Total Lease Obligations | |||||||||
| 2019 | $ | 513 | $ | 10,416 | $ | 10,929 | ||||||
| 2020 | 198 | 7,932 | 8,130 | |||||||||
| 2021 | 1 | 7,226 | 7,227 | |||||||||
| 2022 | – | 7,399 | 7,399 | |||||||||
| 2023 | – | 3,034 | 3,034 | |||||||||
| Thereafter | – | – | – | |||||||||
| Total future minimum payments | 712 | $ | 36,007 | $ | 36,719 | |||||||
| Less: amount representing interest | (33 | ) | ||||||||||
| Present value of minimum lease payments | 679 | |||||||||||
| Less: current portion | (484 | ) | ||||||||||
| Long-term portion | $ | 195 | ||||||||||
Guarantor Arrangements
The Company has agreements whereby it indemnifies its executive officers and directors for certain events or occurrences while the executive officer or director is serving in his or her official capacity. The indemnification period remains enforceable for the executive officer's or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and enables the Company to recover a portion of any future payments. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. Accordingly, the Company had no liabilities recorded for these agreements as of December 31, 2018 and 2017.
The GACP Term Loan Facility (see Note 5, "Debt" and Note 16, “Subsequent Events”) is collateralized by first-priority liens on substantially all of the Company's assets, including Company intellectual property. Certain of the Company’s subsidiaries have guaranteed the Company’s obligations under the GACP Term Loan Facility.
The Nikko Note is collateralized by a first-priority lien on 10% of the Aprinnova JV interests owned by the Company, as discussed in Note 5, "Debt".
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Other Matters
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but will only be recorded when one or more future events occur or fail to occur. The Company's management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgement. In assessing loss contingencies related to legal proceedings that are pending against and by the Company or unasserted claims that may result in such proceedings, the Company's management evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be reasonably estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
On April 3, 2019, a securities class action complaint was filed against Amyris and our CEO, John G. Melo, and former CFO (and current Chief Business Officer), Kathleen Valiasek, in the U.S. District Court for the Northern District of California. The complaint seeks unspecified damages on behalf of a purported class that would comprise all persons and entities that purchased or otherwise acquired our securities between March 15, 2018 and March 19, 2019. The complaint alleges securities law violations based on statements and omissions made by the Company during such period. Subsequent to the filing of the securities class action complaint described above, on June 21, 2019, a purported shareholder derivative complaint was filed in the U.S. District Court for the Northern District of California (Bonner v. Doerr, et al., Case No. 4:19-cv-03621) based on similar allegations to those made in the securities class action complaint described above. The derivative complaint names Amyris, Inc. as a nominal defendant and names a number of the Company’s current and former officers and directors as additional defendants. The lawsuit seeks to recover, on the Company's behalf, unspecified damages purportedly sustained by the Company in connection with allegedly misleading statements and/or omissions made in connection with the Company’s securities filings. The derivative complaint also seeks a series of changes to the Company’s corporate governance policies, restitution to the Company from the individual defendants, and an award of attorneys’ fees. These cases are in the initial pleadings stage. We believe the complaints lack merit, and intend to defend ourselves vigorously. Given the early stage of these proceedings, it is not yet possible to reliably determine any potential liability that could result from these matters.
The Company is subject to disputes and claims that arise or have arisen in the ordinary course of business and that have not resulted in legal proceedings or have not been fully adjudicated. Such matters that may arise in the ordinary course of business are subject to many uncertainties and outcomes are not predictable with reasonable assurance and therefore an estimate of all the reasonably possible losses cannot be determined at this time. Therefore, if one or more of these legal disputes or claims resulted in settlements or legal proceedings that were resolved against the Company for amounts in excess of management’s expectations, the Company’s consolidated financial statements for the relevant reporting period could be materially adversely affected.
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10. Revenue Recognition
Disaggregation of Revenue
The following tables present revenue by primary geographical market, based on the location of the customer, as well as by major product and service:
| Years Ended December 31, (In thousands) |
2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Europe | $ | 29,405 | $ | 23,823 | ||||
| United States | 26,241 | 78,286 | ||||||
| Asia | 6,331 | 23,290 | ||||||
| Brazil | 942 | 2,159 | ||||||
| Other | 685 | 113 | ||||||
| $ | 63,604 | $ | 127,671 | |||||
Significant Revenue Agreements
For the years ended December 31, 2018 and 2017, the Company recognized revenue in connection with significant revenue agreements and from all other customers as follows:
| Years Ended December 31, (In thousands) |
2018 | 2017 (As Restated, Note 2) | ||||||||||||||||||||||||||||||
| Renewable Products | Licenses and Royalties | Grants and Collaborations | TOTAL | Renewable Products | Licenses and Royalties | Grants and Collaborations | TOTAL | |||||||||||||||||||||||||
| Revenue from significant revenue agreements with: | ||||||||||||||||||||||||||||||||
| DSM (related party) | $ | 18 | $ | 5,958 | $ | 4,735 | $ | 10,711 | $ | – | $ | 57,972 | $ | 1,679 | $ | 59,651 | ||||||||||||||||
| Firmenich | 3,727 | 1,700 | 5,717 | 11,144 | 9,621 | 1,199 | 5,803 | 16,623 | ||||||||||||||||||||||||
| DARPA | – | – | 8,436 | 8,436 | – | – | 12,333 | 12,333 | ||||||||||||||||||||||||
| Givaudan | 4,078 | – | 4,358 | 8,436 | 1,950 | – | 6,000 | 7,950 | ||||||||||||||||||||||||
| Nenter | – | – | – | – | 12,057 | 2,633 | – | 14,690 | ||||||||||||||||||||||||
| Ginkgo | – | – | – | – | – | (13,113 | ) | – | (13,113 | ) | ||||||||||||||||||||||
| Subtotal revenue from significant revenue agreements | 7,823 | 7,658 | 23,246 | 38,727 | 23,628 | 48,691 | 25,815 | 98,134 | ||||||||||||||||||||||||
| Revenue from all other customers | 25,775 | – | (898 | ) | 24,877 | 18,742 | 12 | 10,783 | 29,537 | |||||||||||||||||||||||
| Total revenue from all customers | $ | 33,598 | $ | 7,658 | $ | 22,348 | $ | 63,604 | $ | 42,370 | $ | 48,703 | $ | 36,598 | $ | 127,671 | ||||||||||||||||
Renewable Products
Firmenich Agreements
In 2013, the Company entered into a collaboration agreement with Firmenich SA (Firmenich) (as amended, the Firmenich Collaboration Agreement), for the development and commercialization of multiple renewable flavors and fragrances compounds. In 2014, the Company entered into a supply agreement with Firmenich (Firmenich Supply Agreement) for compounds developed under the Firmenich Collaboration Agreement. The Firmenich Collaboration Agreement and Firmenich Supply Agreement (Firmenich Agreements) are considered for revenue recognition purposes to comprise a single multiple-element arrangement.
In July 2017, the Company and Firmenich entered into an amendment of the Firmenich Collaboration Agreement, pursuant to which the parties agreed to exclude certain compounds from the scope of the agreement and to amend certain terms connected with the supply and use of such compounds when commercially produced. In addition, the parties agreed to (i) fix at a 70/30 basis (70% for Firmenich) the ratio at which the parties will share profit margins from sales of two compounds; (ii) set at a 70/30 basis (70% for Firmenich) the ratio at which the parties will share profit margins from sales of a distinct form of compound until Firmenich receives $15.0 million more than the Company in the aggregate from such sales, after which time the parties will share the profit margins 50/50 and (iii) a maximum Company cost of a compound where a specified purchase volume is satisfied, and alternative production and margin share arrangements in the event such Company cost cap is not achieved.
In August 2018, the Company and Firmenich entered into a second supply agreement (Firmenich Amended and Restated Supply Agreement), which incorporates all previous amendments and new changes and supersedes the September 2014 supply agreement. With this Amended and Restated Supply Agreement, the parties agreed on the compounds to be supplied under the agreement and the commercial specifications of these products, and made some adjustments to the pricing of the compounds.
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Pursuant to the Firmenich Collaboration Agreement, the Company agreed to pay a one-time success bonus to Firmenich of up to $2.5 million if certain commercialization targets are met. Such targets have not yet been met as of December 31, 2018. The one-time success bonus will expire upon termination of the Firmenich Collaboration Agreement, which has an initial term of 10 years and will automatically renew at the end of such term (and at the end of any extension) for an additional 3-year term unless otherwise terminated. At December 31, 2018, the Company had a $0.5 million liability associated with this one-time success bonus that has been recorded as a reduction to the associated collaboration revenue.
Nenter Agreements
In April 2016, the Company and Nenter & Co., Inc. (Nenter) entered into a renewable farnesene supply agreement (Nenter Supply Agreement) under which the Company agreed to supply farnesene and provide certain exclusive purchase rights, and Nenter committed to purchase minimum quantities and make quarterly royalty payments to the Company representing a portion of Nenter's profit on the sale of products produced using farnesene purchased under the agreement. The agreement expires December 31, 2020 and will automatically renew for an additional five years unless otherwise terminated. In December 2017, the Company assigned the Nenter Supply Agreement to DSM in connection with the Company's sale of its subsidiary Amyris Brasil Ltda., which owned and operated the Brotas, Brazil production facility; see Note 13, "Divestiture" and Note 11, "Related Party Transactions" for additional information.
Licenses and Royalties
DSM Agreements
DSM July and September 2017 Collaboration and Licensing Agreements
In July and September 2017, the Company entered into three separate collaboration agreements with DSM (DSM Collaboration Agreements) to jointly develop three new molecules in the Health & Wellness (DSM Ingredients) market using the Company’s technology, which the Company would produce and DSM would commercialize. Pursuant to the DSM Collaboration Agreements, DSM will, subject to certain conditions, provide funding for the development of the DSM Ingredients and, upon commercialization, the parties would enter into supply agreements whereby DSM would purchase the applicable DSM Ingredients from the Company at prices agreed by the parties. The development services will be directed by a joint steering committee with equal representation by DSM and the Company. In addition, the parties will share profit margin from DSM’s sales of products that incorporate the DSM Ingredients subject to the DSM Collaboration Agreements.
In connection with the entry into the DSM Collaboration Agreements, the Company and DSM also entered into certain license arrangements (DSM License Agreements) providing DSM with certain rights to use the technology underlying the development of the DSM Ingredients to produce and sell products incorporating the DSM Ingredients. Under the DSM License Agreements, DSM agreed to pay the Company $9.0 million for a worldwide, exclusive, perpetual, royalty-free license to produce and sell products incorporating one of the DSM Ingredients in the Health & Wellness field.
As discussed in Note 7, “Stockholders’ Deficit”, the Company received $34.0 million of fixed consideration resulting from the August 2017 DSM Offering and the DSM License Agreements, discussed above, and allocated this consideration to the various elements identified. The Company first allocated $10.6 million to the August 2017 DSM Cash Warrants and DSM Dilution Warrants liabilities and $15.6 million of the proceeds to the August 2017 DSM Series B Preferred Stock. The remaining proceeds in excess of the fair value the equity awards and warrants of $7.8 million was available for recognition as revenue generated from the delivery of the intellectual property licenses to DSM.
In connection with the entry into the DSM Agreements, the Company and DSM entered into the DSM Credit Letter, pursuant to which the Company granted a credit to DSM in an aggregate amount of $12.0 million to be offset against future collaboration payments (in an amount not to exceed $6.0 million) and royalties receivable from DSM beginning in 2018. The $7.8 million available for revenue recognition was reduced by an apportionment of the credit and allocated between delivered license revenue and future revenues associated with the collaboration agreements. This resulted in the recognition of $3.3 million in licenses revenue under the DSM License Agreements and the remaining amount of $4.5 million being recorded as deferred revenue. During the three months ended December 31, 2017, the Company and DSM terminated the DSM Credit Letter, eliminating the $12.0 million credit from the DSM Collaboration Agreements. As a result of the cancelation of the Credit Letter, the $4.5 million of deferred revenue was included as an element of consideration in the series of December 2017 DSM agreements described below, which were evaluated as a combined transaction for accounting purposes in conjunction with the sales of the Brotas 1 facility discussed more fully in Note 11, "Related Party Transactions" and Note 13, "Divestiture".
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DSM Value Sharing Agreement
In December 2017, in conjunction with the Company's divestiture of its Brotas, Brazil production facility (see Note 13, "Divestiture" and Note 11, "Related Party Transactions"), the Company and DSM entered into a value sharing agreement (Value Sharing Agreement), pursuant to which DSM agreed to make certain royalty payments to the Company representing a portion of the profit on the sale of products produced using farnesene purchased under the Nenter Supply Agreement realized by Nenter and paid to DSM in accordance with the Nenter Supply Agreement. In addition, pursuant to the Value Sharing Agreement, DSM agreed to guarantee certain minimum annual royalty payments for the first three calendar years of the Value Sharing Agreement, subject to future offsets in the event that the royalty payments to which the Company would otherwise have been entitled under the Value Sharing Agreement for such years fall below certain milestones. The fair value of the nonrefundable minimum annual royalty payments were determined to be fixed and determinable, and were included as part of the total arrangement consideration subject to allocation of the overall multiple-element transaction that occurred in December 2017 with DSM. Under the Value Sharing Agreement, the Company is required to use certain royalty payments received by the Company with respect to the first three calendar years of the Value Sharing Agreement in excess of the guaranteed minimum annual royalty payments for such years, if any, to repay amounts outstanding under the DSM Credit Agreement; however, in 2018, the Company did not receive royalty payments in excess of the guaranteed minimum annual amount. See Note 5, "Debt". The Value Sharing Agreement will expire in December 2027, subject to the right of each of the parties to terminate for uncured material breach by the other party or in the event the other party is subject to bankruptcy proceedings, liquidation, dissolution or similar proceedings or other specified events. During 2018, the Company and DSM amended the Value Sharing Agreement to (i) provide for the use of estimates in calculating quarterly royalty payments (subject to true-up), (ii) modify how the guaranteed minimum annual royalty payment for 2018 will be offset against value payments accruing during 2018 and (iii) accelerate the minimum annual royalty payment for 2019 from December 31, 2018 to June 30, 2018 in exchange for a fee of $750,000. For the year ended December 31, 2018, the Company recognized $7.9 million of revenue in connection with the DSM Value Sharing Agreement.
In April 2019, the Company assigned to DSM all the Company’s rights and obligations under the Value Sharing Agreement. See Note 16, “Subsequent Events” for additional information.
DSM Performance Agreement
In December 2017, in connection with the Company's divestiture of its Brotas, Brazil production facility (see Note 13, "Divestiture"), the Company and DSM entered into a performance agreement (Performance Agreement), pursuant to which the Company will provide certain research and development services to DSM relating to the development of the technology underlying the farnesene-related products to be manufactured at the Brotas facility in exchange for related funding, including certain bonus payments in the event that specific performance metrics are achieved. The Company will record the bonus payments as earned revenue upon the transfer of the developed technology to DSM. If the Company does not meet the established metrics under the Performance Agreement, the Company will be required to pay $1.8 million to DSM. The Performance Agreement will expire in December 2020, subject to the right of each of the parties to terminate for uncured material breach by the other party or in the event the other party is subject to bankruptcy proceedings, liquidation, dissolution or similar proceedings or other specified events.
In April 2019, the Company and DSM amended the Performance Agreement. See Note 16, “Subsequent Events” for additional information.
DSM November 2017 Intellectual Property License Agreement
In November 2017, in connection with the Company's divestiture of its Brotas, Brazil production facility (see Note 13, "Divestiture"), the Company and DSM entered into a license agreement covering certain intellectual property of the Company useful in the performance of certain commercial supply agreements assigned by the Company to DSM relating to products currently manufactured at the Brotas facility (DSM November 2017 Intellectual Property License Agreement). In December 2017, DSM paid the Company an upfront license fee of $27.5 million. In accounting for the Divestiture with DSM, a multiple-element arrangement, the license of intellectual property to DSM was identified as revenue deliverable with standalone value and qualified as a separate unit of accounting. The Company performed an analysis to determine the fair value for of the license, and allocated the non-contingent consideration based on the relative fair value. The Company determined that the license had been fully delivered, and, as such, license revenue of $54.6 million was recognized for the period ended December 31. 2017.
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DSM December 2017 Supply Agreement and November 2018 Supply Agreement Amendment
On November 19, 2018, the Company and DSM entered into an amendment (Supply Agreement Amendment) to the supply agreement, dated December 28, 2017 (Supply Agreement), by and between the Company and DSM. Under the Supply Agreement, DSM agreed to manufacture and supply to the Company certain products useful in the Company’s business, at prices and on production and delivery terms and specifications set forth in the Supply Agreement, which prices are based upon DSM’s manufacturing cost plus an agreed margin. The Supply Agreement originally provided that it would expire (i) with respect to non-farnesene related products, on the date that the Company’s planned new specialty ingredients manufacturing facility in Brazil is fully operational and meets its production targets, but in any event no later than December 31, 2021 and (ii) with respect to farnesene related products, on December 28, 2037, subject in each case to earlier termination in certain circumstances. Pursuant to the Supply Agreement Amendment, (i) the outside expiration date of the Supply Agreement with respect to non-farnesene related products was extended to December 31, 2022, with specified pricing terms added for products manufactured during 2022, (ii) DSM committed to produce certain non-farnesene related products for the Company for two months of each calendar year during the term of the Supply Agreement and (iii) the Company agreed to (A) pay DSM a cash fee totaling $15.5 million, payable in installments during 2018 and 2019, (B) issue 1,643,991 shares of the Company's common stock to DSM, and (C) pay DSM a cash fee of $7.3 million, payable on or before March 29, 2019, plus, if the closing price of the Common Stock on the trading day immediately preceding the date of such payment is less than $4.41 per share, an amount equal to such deficiency multiplied by 1,643,991.
The Company also entered into other transactions with DSM in November 2018 which resulted in the Company (i) accounting for this series of transactions, including the Supply Agreement Amendment, and certain other transactions with DSM in 2018 as a combined arrangement, and (ii) determining and allocating the fair value to each element. See Note 11, “Related Party Transactions” for additional information.
In April 2019, the Company and DSM further amended the Supply Agreement. See Note 16, “Subsequent Events” for additional information.
DSM November 2018 Letter Agreement
On November 19, 2018, the Company and DSM entered into a letter agreement (November 2018 DSM Letter Agreement), pursuant to which the Company agreed (i) to cause the removal of certain existing liens on intellectual property owned by the Company and licensed to DSM and (ii) if such liens were not removed prior to December 15, 2018, to issue to DSM shares of the Company’s common stock with a value equal to $5.0 million. On December 14, 2018, the Company entered into an amendment to the GACP Term Loan Facility to remove such lien, and the November 2018 DSM Letter Agreement was thereby terminated.
Ginkgo Agreements
Ginkgo Initial Strategic Partnership Agreement and Collaboration Agreement
In June 2016, the Company entered into a collaboration agreement (Initial Ginkgo Agreement) with Ginkgo Bioworks, Inc. (Ginkgo), pursuant to which the Company licensed certain intellectual property to Ginkgo in exchange for a fee of $20.0 million to be paid by Ginkgo to the Company in two installments, and a 10% royalty on net revenue, including without limitation net sales, royalties, fees and any other amounts received by Ginkgo related directly to the license. The Company received the first installment of $15.0 million in July 2016, which the Company recognized as revenue in 2016. However, the Company did not receive the second installment of $5.0 million, as the Company did not meet the milestone criteria for the receipt of such payment.
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In September 2016, the Company and Ginkgo entered into a collaboration agreement (Ginkgo Collaboration Agreement) setting forth the terms of the Ginkgo Collaboration, under which the parties would collaborate to develop, manufacture and sell commercial products, and Ginkgo would pay royalties to the Company. The Ginkgo Collaboration Agreement provided that, subject to certain exceptions, all third-party contracts for the development of chemical small molecule compounds whose manufacture is enabled by the use of microbial strains and fermentation technologies that are entered into by the Company or Ginkgo during the term of the Ginkgo Collaboration Agreement would be subject to the Ginkgo Collaboration and the approval of the other party (not to be unreasonably withheld). Responsibility for the engineering and small-scale process development of the newly developed products would be allocated between the parties on a project-by-project basis, and the Company would be principally responsible for the commercial scale-up and production of such products, with each party generally bearing its own respective costs and expenses relating to the Ginkgo Collaboration, including capital expenditures.
Under the Ginkgo Collaboration Agreement, subject to certain exceptions, including excluded or refused products and cost savings initiatives, the profit on the sale of products subject to the Ginkgo Collaboration Agreement as well as cost-sharing, milestone and “value-creation” payments associated with the development and production of such products would be shared equally between the parties. The parties also agreed to provide each other with a license and other rights to certain intellectual property necessary to support the development and manufacture of the products under the Ginkgo Collaboration, and also to provide each other with access to certain other intellectual property useful in connection with the activities to be undertaken under the Ginkgo Collaboration Agreement, subject to certain carve-outs.
Ginkgo Partnership Agreement
In November 2017, the Company and Ginkgo entered into a partnership agreement (Ginkgo Partnership Agreement) to replace and supersede the Ginkgo Collaboration Agreement. Under the Ginkgo Partnership Agreement, the Company and Ginkgo agreed:
| • | to continue to collaborate on limited research and development; |
| • | to provide each other licenses (with royalties) to specified intellectual property for limited purposes; |
| • | for the Company to pay Ginkgo quarterly fees of $0.8 million (Partnership Payments) for a total of $12.7 million, beginning on December 31, 2018 and ending on September 30, 2022; |
| • | to share profit margins from sales of a certain product to be developed under the Ginkgo Partnership Agreement on a 50/50 basis, subject to certain conditions, provided that net profits will be payable to Ginkgo for any quarterly period to the extent that such net profits exceed the sum of (a) quarterly interest payments due under the November 2017 Ginkgo Note (see Note 5, "Debt") and (b) Partnership Payments due in such quarter; |
| • | for the Company to issue the $12 million Ginkgo Note which effectively guarantees Ginkgo $12 million minimum future royalties under the profit margin sharing provisions noted above; and |
| • | for the Company to pay Ginkgo $0.5 million in connection with certain fees previously owed to Ginkgo under the Ginkgo Collaboration Agreement. |
The Ginkgo Partnership Agreement provides for an initial term of two years and will automatically renew for successive one-year terms thereafter unless otherwise terminated. The Company does not expect to recognize any future revenue under this arrangement.
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The Company recorded the $6.1 million present value of the $12.7 million partnership payments as an other liability (see Note 3, "Balance Sheet Details"), with the remaining $6.6 million recorded as a debt discount to be recognized as interest expense under the effective interest method over the five-year payment term. The Company also concluded the partnership payment obligation under the Ginkgo Partnership Agreement represents consideration payable to a former customer; and consequently, the present value of the partnership payments should be recorded as a reduction of cumulative revenue recognized to date from Ginkgo in the period the partnership agreement was executed. As a result, the Company recorded a $6.1 million reduction in license revenues for the year ended December 31, 2017. The Company reached a similar conclusion regarding the $12.0 million Ginkgo Note (see Note 5, "Debt" under the “Ginkgo Note” section for further discussion regarding the accounting treatment of the Ginkgo Note) and recorded an additional $7.0 million reduction in license revenue for the year ended December 31, 2017 related to the present value of the Ginkgo Note. In total, the Company recorded a $13.1 million reduction in licenses and royalties revenue and $13.1 million in notes payable and other liabilities as of and for the year ended December 31, 2017 upon execution of the Ginkgo Partnership Agreement.
Collaborations
DARPA Technology Investment Agreement
In September 2015, the Company entered into a technology investment agreement (TIA) with The Defense Advanced Research Projects Agency (DARPA), under which the Company, with the assistance of specialized subcontractors, is working to create new research and development tools and technologies for strain engineering and scale-up activities. The agreement is being funded by DARPA on a milestone basis. Under the TIA, the Company and its subcontractors could collectively receive DARPA funding of up to $35.0 million over the program’s four year term if all of the program’s milestones are achieved. In conjunction with DARPA’s funding, the Company and its subcontractors are obligated to collectively contribute approximately $15.5 million toward the program over its four year term (primarily by providing specified labor and/or purchasing certain equipment). For the DARPA agreement, the Company recognizes revenue using an output-based measure of progress of the milestones completed relative to remaining milestones, once acknowledged by DARPA.
Contract Assets and Liabilities
When a contract results in revenue being recognized in excess of the amount the Company has invoiced or has the right to invoice to the customer, a contract asset is recognized. Contract assets are transferred to accounts receivable, net when the rights to the consideration become unconditional. Contract assets are presented as Accounts receivable, unbilled – related party on the consolidated balance sheets.
Contract liabilities consist of payments received from customers, or such consideration that is contractually due, in advance of providing the product or performing services such that control has not passed to the customer.
Trade receivables related to revenue from contracts with customers are included in accounts receivable on the consolidated balance sheets, net of the allowance for doubtful accounts. Trade receivables are recorded at the point of renewable product sale or in accordance with the contractual payment terms for licenses and royalties, and grants and collaborative research and development services for the amount payable by the customer to the Company for sale of goods or the performance of services, and for which the Company has the unconditional right to receive payment.
Contract Balances
The following table provides information about accounts receivable and contract liabilities from contracts with customers:
| December 31, (In thousands) | 2018 | 2017 | ||||||
| Accounts receivable, net | $ | 16,003 | $ | 18,953 | ||||
| Accounts receivable - related party, net | $ | 1,349 | $ | 4,767 | ||||
| Accounts receivable, unbilled - related party | $ | 8,021 | $ | 9,901 | ||||
| Accounts receivable, unbilled, noncurrent - related party | $ | 1,203 | $ | 7,940 | ||||
| Contract liabilities(1) | $ | 8,236 | $ | 4,308 | ||||
| Contract liabilities, noncurrent(2) | $ | 1,587 | $ | – | ||||
(1) The balance in contract liabilities, current at December 31, 2017 represents deferred revenue, current prior to the Company's adoption of ASC 606, "Revenue".
(2) The balances in contract liabilities, noncurrent are included in other noncurrent liabilities on the consolidated balance sheets.
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Unbilled receivables relate to the Company’s right to consideration from DSM for (i) minimum future royalties and (ii) a material right arising from a customer option for a future transfer of technology. The Company’s right to cash receipt for these minimum royalty amounts occurs on or before December 31, 2019, and the right to cash receipt for the customer option occurs on or before December 31, 2020.
Contract liabilities, current increased by $3.9 million at December 31, 2018 resulting from a $0.8 million increase upon adoption of ASC 606 on January 1, 2018 plus the net amount of collaboration and royalty revenues invoiced in excess of amounts recognized as revenue, less $3.3 million of revenue recognized during the year ended December 31, 2018 that was included in deferred revenue at the beginning of the period.
Remaining Performance Obligations
The following table provides information regarding the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) based on the Company's existing agreements with customers as of December 31, 2018.
| (In thousands) | As of December 31, 2018 | |||
| 2019 | $ | 14,131 | ||
| 2020 | 7,925 | |||
| 2021 | — | |||
| 2022 and thereafter | — | |||
| Total from all customers | $ | 22,056 | ||
In accordance with the disclosure provisions of ASC 606, the table above excludes estimated future revenues for performance obligations that are part of a contract that has an original expected duration of one year or less or a performance obligation with variable consideration that is recognized using the sales-based royalty exception for licenses of intellectual property. Additionally, $21.4 million of estimated future revenue is excluded from the table above, as that amount represents constrained variable consideration.
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11. Related Party Transactions
Related Party Divestiture
See Note 13, “Divestiture” for details regarding the sale of Amyris Brasil to DSM in December 2017.
Related Party Equity
See Note 7, "Stockholders' Deficit" for details of these related party equity transactions:
• November 2018 DSM Securities Purchase Agreement
• August 2018 Warrant Transactions
• August 2017 DSM Offering
• May 2017 Offerings
• May 2017 Exchange of Common Stock for Series C Convertible Preferred Stock
• July 2015 PIPE Warrants
• Temasek Funding Warrant
Related Party Debt
See Note 5, "Debt" for details of these related party debt transactions:
• DSM Note (also see Note 13, "Divestiture")
• February 2016 Private Placement
• 2014 Rule 144A Convertible Notes
• August 2013 Financing Convertible Notes
• R&D Note
Related party debt was as follows:
| December 31, (in thousands) |
2018 | 2017 | ||||||||||||||||||||||
| Principal | Unamortized Debt (Discount) Premium |
Net | Principal | Unamortized Debt (Discount) Premium |
Net | |||||||||||||||||||
| Total | ||||||||||||||||||||||||
| 2014 Rule 144A convertible notes | $ | 9,705 | $ | (422 | ) | $ | 9,283 | $ | 9,705 | $ | (1,538 | ) | $ | 8,167 | ||||||||||
| August 2013 financing convertible notes | – | – | – | 21,711 | 897 | 22,608 | ||||||||||||||||||
| R&D note | – | – | – | 3,700 | (18 | ) | 3,682 | |||||||||||||||||
| 9,705 | (422 | ) | 9,283 | 35,116 | (659 | ) | 34,457 | |||||||||||||||||
| DSM | ||||||||||||||||||||||||
| DSM note | 25,000 | (6,311 | ) | 18,689 | 25,000 | (8,039 | ) | 16,961 | ||||||||||||||||
| Other DSM loan | – | – | – | 393 | – | 393 | ||||||||||||||||||
| 25,000 | (6,311 | ) | 18,689 | 25,393 | (8,039 | ) | 17,354 | |||||||||||||||||
| Biolding | ||||||||||||||||||||||||
| February 2016 private placement | – | – | – | 2,000 | – | 2,000 | ||||||||||||||||||
| Foris | ||||||||||||||||||||||||
| 2014 Rule 144A convertible notes | 5,000 | (181 | ) | 4,819 | 5,000 | (660 | ) | 4,340 | ||||||||||||||||
| Temasek | ||||||||||||||||||||||||
| 2014 Rule 144A convertible notes | 10,000 | (435 | ) | 9,565 | 10,000 | (1,591 | ) | 8,409 | ||||||||||||||||
| $ | 49,705 | $ | (7,349 | ) | $ | 42,356 | $ | 77,509 | $ | (10,949 | ) | $ | 66,560 | |||||||||||
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The fair value of the derivative liabilities related to the related party R&D Note, related party August 2013 Financing Convertible Notes (Tranche Notes) and related party 2014 Rule 144A Convertible Notes as of December 31, 2018 and 2017 was $0 and $0.2 million, respectively. The Company recognized (losses) gains from change in the fair value of these derivative liabilities of ($8.5) million and $0.6 million for the years ended December 31, 2018 and 2017, respectively; see Note 4, "Fair Value Measurement".
At December 31, 2018, Temasek was no longer a related party. However, the Company and Temasek were related parties when they entered into the 2014 Rule 144A convertible notes transaction, for which terms have remained unchanged since the borrowing date.
Related Party Revenue
The Company recognized revenue from related parties and from all other customers as follows:
| Years Ended December 31, (In thousands) |
2018 | 2017 (As restated, Note 2) | ||||||||||||||||||||||||||||||
| Renewable Products | Licenses and Royalties | Grants and Collaborations | TOTAL | Renewable Products | Licenses and Royalties | Grants and Collaborations | TOTAL | |||||||||||||||||||||||||
| Revenue from related parties: | ||||||||||||||||||||||||||||||||
| DSM | $ | 18 | $ | 5,958 | $ | 4,735 | $ | 10,711 | $ | — | $ | 57,972 | $ | 1,679 | $ | 59,651 | ||||||||||||||||
| Total | 342 | — | — | 342 | (200 | ) | — | — | (200 | ) | ||||||||||||||||||||||
| Novvi | — | — | — | — | 1,491 | — | — | 1,491 | ||||||||||||||||||||||||
| Subtotal revenue from related parties | 360 | 5,958 | 4,735 | 11,053 | 1,291 | 57,972 | 1,679 | 60,942 | ||||||||||||||||||||||||
| Revenue from all other customers(1) | 33,238 | 1,700 | 17,613 | 52,551 | 41,079 | (9,269 | ) | 34,919 | 66,729 | |||||||||||||||||||||||
| Total revenue from all customers | $ | 33,598 | $ | 7,658 | $ | 22,348 | $ | 63,604 | $ | 42,370 | $ | 48,703 | $ | 36,598 | $ | 127,671 | ||||||||||||||||
| (1) | Licenses and royalties revenue is negative for 2017 due to the $13.1 million reversal of cumulative to date revenue as a result of entering into the 2017 Ginkgo Partnership Agreement. See Note 10. Revenue Recognition. |
See Note 10, "Revenue Recognition" for details of the Company's revenue agreements with DSM.
Related Party Accounts Receivable
Related party accounts receivable was as follows:
| December 31, (In thousands) |
2018 | 2017 | ||||||
| DSM | $ | 1,071 | $ | 12,823 | ||||
| Novvi | 188 | 1,607 | ||||||
| Total | 90 | 238 | ||||||
| Related party accounts receivable, net | $ | 1,349 | $ | 14,668 | ||||
In addition to the amounts shown above, there were the following amounts on the consolidated balance sheet at December 31, 2018:
• a total of $8.0 million of unbilled receivables from DSM, in the lines captioned “Accounts receivable, unbilled - related party” and “Accounts receivable, unbilled, noncurrent - related party”; and
• $4.3 million of contingent consideration receivable from DSM in the line captioned "Other assets".
Related Party Accounts Payable
Amounts due to DSM that were included in Accounts payable and Accrued and other current liabilities at December 31, 2018 were $2.1 million and $0.6 million, respectively.
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Related Party DSM Transactions
The Company is party to the following significant agreements (and related amendments) with related party DSM:
| Related to | Agreement | For Additional Information, See the Note Indicated |
| Debt | DSM Credit Agreement | 5. Debt 10. Revenue Recognition |
| Debt | DSM Note | 5. Debt |
| Debt | November 2018 DSM Letter Agreement | 5. Debt |
| Divestiture | November 2017 Quota Purchase Agreement | 13. Divestiture |
| Divestiture | December 2017 DSM Transition Services Agreement | 13. Divestiture |
| Equity | May 2017 Offerings | 7. Stockholders' Deficit |
| Equity | August 2017 DSM Offering | 7. Stockholders' Deficit |
| Equity | November 2018 DSM Securities Purchase Agreement | 7. Stockholders' Deficit |
| Revenue | July and September 2017 Collaboration and Licensing Agreements | 10. Revenue Recognition |
| Revenue | December 2017 DSM Supply Agreement | 10. Revenue Recognition |
| Revenue | December 2017 DSM Value Sharing Agreement, as amended | 10. Revenue Recognition |
| Revenue | December 2017 DSM Performance Agreement | 10. Revenue Recognition |
| Revenue | November 2017 Intellectual Property License Agreement | 10. Revenue Recognition |
| Revenue | November 2018 Supply Agreement Amendment | 10. Revenue Recognition |
Concurrent with the sale of Amyris Brasil in December 2017, the Company and DSM entered into a series of commercial agreements including (i) a license agreement to DSM of its farnesene product for DSM to use in the Vitamin E and lubricant markets; (ii) a royalty agreement that DSM will pay the Company specified royalties representing a portion of the profit on the sale of Vitamin E produced from farnesene under the Nenter Supply Agreement assigned to DSM; (iii) a performance agreement, which provides an option for DSM to elect a technology transfer upon the achievement of certain development milestones associated with the optimization of farnesene strains; and (iv) a transition services agreement for the Company to provide finance, legal, logistics, and human resource services to support the Brotas facility under DSM ownership for a six-month period with a DSM option to extend for six additional months. At closing, DSM paid the Company a nonrefundable license fee of $27.5 million and a nonrefundable royalty payment of $15.0 million. In addition, in December 2017 the Company entered into a credit agreement with DSM under which the Company borrowed $25 million; see Note 5, "Debt" for additional information.
In June 2018, DSM paid the Company a non-refundable minimum royalty payment of $9.3 million (net of a $0.7 million early payment discount) and will also owe the Company a final payment of $8.1 million in 2019. The future nonrefundable minimum annual royalty payments were determined to be fixed and determinable with a fair value of $17.8 million and were included as part of the total arrangement consideration subject to allocation of this overall multiple-element divestiture transaction.
In November 2018, the Company amended the supply agreement with DSM to secure capacity at the Brotas 1 facility for Reb M production thru 2022. See Note 10, “Revenue Recognition” for information regarding the November 2018 Supply Agreement Amendment and the November 2018 DSM Securities Purchase Agreement. The Company also entered into other transactions with DSM in November 2018 which resulted in the Company (i) evaluating this series of November 2018 transactions and considering other certain transactions with DSM in 2018 as a combined arrangement, and (ii) determining and allocating the fair value to each element. The other transactions entered into concurrently with the November 2018 Supply Agreement Amendment and November 2018 DSM Securities Purchase Agreement included an agreement to finalize the working capital adjustments related to the Brotas 1 facility sale in December 2017 and an amendment to reduce the exercise price of the Cash Warrant issued to DSM in the August 2017 DSM Offering and to provide a waiver for any potential claims arising from failure to obtain consent prior to amending the exercise price of the August 2017 Vivo Cash Warrant in the August 2017 Warrant transaction.
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The contractual consideration transferred to DSM under the combined arrangement was $34.7 million. The Company performed an analysis to determine the fair value of the elements and allocated (i) $24.4 million to the manufacturing capacity, (ii) $6.8 million to the legal settlement and related consent waiver and (iii) $2.1 million to the working capital adjustment. Of the $24.4 million fair value allocated to the manufacturing capacity, $3.3 million was recorded as deferred cost of revenue during the period ended December 31, 2018 and the remaining $21.0 million will be recorded as deferred cost of revenue in the period the additional payments are due and payable to DSM. The deferred cost of revenue asset will be expensed on a units of production basis as products are sold over the five-year term of the supply agreement and evaluated for recoverability at each period end. The $6.8 million of fair value allocated to the legal settlement and related consent waiver was recorded as legal settlement expense for the year ended December 31, 2018. The $2.1 million of fair value allocated to the working capital adjustment was recorded as a loss on divestiture for the year ended December 31, 2018. The contractual consideration transferred to DSM exceeded the fair value of the elements received by $1.4 million and this excess was recorded as a reduction of licenses and royalties revenues in the three months ended December 31, 2018.
Related Party Joint Venture
In December 2016, the Company, Nikko Chemicals Co., Ltd. an existing commercial partner of the Company, and Nippon Surfactant Industries Co., Ltd., an affiliate of Nikko (collectively, Nikko) entered into a joint venture (the Aprinnova JV Agreement) pursuant to which the Company contributed certain assets, including certain intellectual property and other commercial assets relating to its business-to-business cosmetic ingredients business (the Aprinnova JV Business), as well as its Leland production facility. The Company also agreed to provide the Aprinnova JV with exclusive (to the extent not already granted to a third party), royalty-free licenses to certain of the Company's intellectual property necessary to make and sell products associated with the Aprinnova JV Business (the Aprinnova JV Products). Nikko purchased their 50% interest in the Aprinnova JV in exchange for the following payments to the Company: (i) an initial payment of $10.0 million and (ii) the profits, if any, distributed to Nikko in cash as members of the Aprinnova JV during the three-year period from 2017 to 2019, up to a maximum of $10.0 million.
The Aprinnova JV operates in accordance with the Aprinnova Operating Agreement under which the Aprinnova JV is managed by a Board of Directors consisting of four directors: two appointed by the Company and two appointed by Nikko. In addition, Nikko has the right to designate the Chief Executive Officer of the Aprinnova JV from among the directors and the Company has the right to designate the Chief Financial Officer. The Company determined that it has the power to direct the activities of the Aprinnova JV that most significantly impact its economic performance because of its (i) significant control and ongoing involvement in operational decision making, (ii) guarantee of production costs for certain Aprinnova JV products, as discussed below, and (iii) control over key supply agreements, operational and administrative personnel and other production inputs. The Company has concluded that the Aprinnova JV is a variable-interest entity (VIE) under the provisions of ASC 810, Consolidation, and that the Company has a controlling financial interest and is the VIE's primary beneficiary. As a result, the Company accounts for its investment in the Aprinnova JV on a consolidation basis in accordance with ASC 810.
Under the Aprinnova Operating Agreement, profits from the operations of the Aprinnova JV, if any, are distributed as follows: (i) first, to the Company and Nikko (the Members) in proportion to their respective unreturned capital contribution balances, until each Member’s unreturned capital contribution balance equals zero and (ii) second, to the Members in proportion to their respective interests. In addition, any future capital contributions will be made by the Company and Nikko on an equal (50%/50%) basis each time, unless otherwise mutually agreed.
Pursuant to the Aprinnova JV Agreement, the Company and Nikko agreed to make working capital loans to the Aprinnova JV in the amounts of $0.5 million and $1.5 million, respectively, as described in more detail in Note 5, “Debt” under “Aprinnova Working Capital Loans”. In addition, the Company agreed to guarantee a maximum production cost for squalane and hemisqualane to be produced by the Aprinnova JV and to bear any cost of production above such guaranteed costs.
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In connection with the contribution of the Leland Facility by the Company to the Aprinnova JV, at the closing of the formation of the Aprinnova JV, Nikko made a loan to the Company in the principal amount of $3.9 million, and the Company in consideration therefore issued a promissory note to Nikko in an equal principal amount, as described in more detail in Note 5, “Debt” under “Nikko Note.”
The following presents the carrying amounts of the Aprinnova JV’s assets and liabilities included in the accompanying consolidated balance sheets. Assets presented below are restricted for settlement of the Aprinnova JV's obligations and all liabilities presented below can only be settled using the Aprinnova JV resources.
| December 31, (In thousands) |
2018 | 2017 | ||||||
| Assets | $ | 12,904 | $ | 7,635 | ||||
| Liabilities | $ | 2,364 | $ | 3,187 | ||||
The Aprinnova JV's assets and liabilities are primarily comprised of inventory, property, plant and equipment, accounts payable and debt, which are classified in the same categories in the Company's consolidated balance sheets.
There was no change in noncontrolling interest for the Aprinnova JV for the years ended December 31, 2018 and 2017, due to profit sharing provisions whereby the Company retains 100% of the profits from 2017 to 2020.
Office Sublease
The Company subleases certain office space to Novvi, for which the Company charged Novvi $0.6 million and $0.5 million for the years ended December 31, 2018 and 2017, respectively.
See Note 16, “Subsequent Events” for information regarding related party transactions subsequent to December 31, 2018.
12. Stock-based Compensation
Stock-based Compensation Expense Related to All Plans
Stock-based compensation expense related to all employee stock compensation plans, including options, restricted stock units and ESPP, was as follows:
| Years Ended December 31, (In thousands) |
2018 | 2017 | ||||||
| Research and development | $ | 1,797 | $ | 2,204 | ||||
| Sales, general and administrative | 7,393 | 4,061 | ||||||
| Total stock-based compensation expense | $ | 9,190 | $ | 6,265 | ||||
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Plans
2010 Equity Incentive Plan
The Company's 2010 Equity Incentive Plan (2010 Equity Plan) became effective on September 27, 2010 and will terminate in 2020. The 2010 Equity Plan provides for the granting of common stock options, restricted stock awards, stock bonuses, stock appreciation rights, restricted stock units (RSUs) and performance awards. It allows for time-based or performance-based vesting for the awards. Options granted under the 2010 Equity Plan may be either incentive stock options (ISOs) or non-statutory stock options (NSOs). ISOs may be granted only to Company employees (including officers and directors who are also employees). NSOs may be granted to Company employees, non-employee directors and consultants. The Company will be able to issue no more than 2,000,000 shares pursuant to the grant of ISOs under the 2010 Equity Plan. Options under the 2010 Equity Plan may be granted for periods of up to ten years. All options issued to date have had a ten-year life. Under the plan, the exercise price of any ISOs and NSOs may not be less than 100% of the fair market value of the shares on the date of grant. The exercise price of any ISOs and NSOs granted to a 10% stockholder may not be less than 110% of the fair value of the underlying stock on the date of grant. The options and RSUs granted to-date generally vest over three to five years.
As of December 31, 2018 and 2017, options were outstanding to purchase 5,339,214 and 1,255,045 shares, respectively, of the Company's common stock granted under the 2010 Equity Plan, with weighted-average exercise prices per share of $33.40 and $26.29, respectively. In addition, as of December 31, 2018 and 2017, restricted stock units representing the right to receive 5,294,803 and 683,554 shares, respectively, of the Company's common stock granted under the 2010 Equity Plan were outstanding. As of December 31, 2018 and 2017, 2,359,750 and 252,107 shares, respectively, of the Company’s common stock remained available for future awards that may be granted under the 2010 Equity Plan.
The number of shares reserved for issuance under the 2010 Equity Plan increases automatically on January 1 of each year starting with January 1, 2011, by a number of shares equal to 5% of the Company’s total outstanding shares as of the immediately preceding December 31. However, the Company’s Board of Directors or the Leadership Development and Compensation Committee of the Board of Directors retains the discretion to reduce the amount of the increase in any particular year.
In May 2018, shareholders approved amendments to the 2010 Equity Plan to (i) increase the number of shares of common stock available for grant and issuance thereunder by 9.0 million shares and (ii) increase the annual per-participant award limit thereunder to 4.0 million shares. Subsequent to the amendments, the total number of shares available for grant was 9,280,000, not including the annual evergreen increases.
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2005 Stock Option/Stock Issuance Plan
In 2005, the Company established its 2005 Stock Option/Stock Issuance Plan (2005 Plan) which provided for the granting of common stock options, restricted stock units, restricted stock and stock purchase rights awards to employees and consultants of the Company. The 2005 Plan allowed for time-based or performance-based vesting for the awards. Options granted under the 2005 Plan were ISOs or NSOs. ISOs were granted only to Company employees (including officers and directors who are also employees). NSOs were granted to Company employees, non-employee directors, and consultants.
All options issued under the 2005 Plan had a ten-year life. The exercise prices of ISOs and NSOs granted under the 2005 Plan were not less than 100% of the estimated fair value of the shares on the date of grant, as determined by the Board of Directors. The exercise price of an ISO and NSO granted to a 10% stockholder could not be less than 110% of the estimated fair value of the underlying stock on the date of grant as determined by the Board. The options generally vested over 5 years.
As of December 31, 2018 and 2017, options to purchase 52,389 and 79,322 shares, respectively, of the Company’s common stock granted under the 2005 Plan remained outstanding, and as a result of the adoption of the 2010 Equity Plan discussed above, zero shares of the Company’s common stock remained available for future awards issuance under the 2005 Plan. The options outstanding under the 2005 Plan as of December 31, 2018 and 2017 had a weighted-average exercise price per share of $185.93 and $144.58, respectively.
2010 Employee Stock Purchase Plan
The 2010 Employee Stock Purchase Plan (2010 ESPP) became effective on September 27, 2010. The 2010 ESPP is designed to enable eligible employees to purchase shares of the Company’s common stock at a discount. Offering periods under the 2010 ESPP generally commence on each May 16 and November 16, with each offering period lasting for one year and consisting of two six-month purchase periods. The purchase price for shares of common stock under the 2010 ESPP is the lesser of 85% of the fair market value of the Company’s common stock on the first day of the applicable offering period or the last day of each purchase period. During the life of the 2010 ESPP, the number of shares reserved for issuance increases automatically on January 1 of each year, starting with January 1, 2011, by a number of shares equal to 1% of the Company’s total outstanding shares as of the immediately preceding December 31. However, the Company’s Board of Directors or the Leadership Development and Compensation Committee of the Board of Directors retains the discretion to reduce the amount of the increase in any particular year. In May 2018, shareholders approved an amendment to the 2010 ESPP to increase the maximum number of shares of common stock that may be issued over the term of the ESPP by 1 million shares. No more than 1,666,666 shares of the Company’s common stock may be issued under the 2010 ESPP and no other shares may be added to this plan without the approval of the Company’s stockholders.
2018 CEO Performance-based Stock Options
In May 2018, the Company granted its chief executive officer performance-based stock options (PSOs) to purchase 3,250,000 shares. PSOs are equity awards with the final number of PSOs that may vest determined based on the Company’s performance against pre-established EBITDA milestones and Amyris stock price milestones. The EBITDA milestones are measured from the grant date through December 31, 2021, and the stock price milestones are measured from the grant date through December 31, 2022. The PSOs vest in four tranches contingent upon the achievement of both the EBITDA milestones and stock price milestones for each respective tranche, and the chief executive officer’s continued employment with the Company. Over the measurement periods, the number of PSOs that may be issued and the related stock-based compensation expense that is recognized is adjusted upward or downward based upon the probability of achieving the EBITDA milestones. Depending on the probability of achieving the EBITDA milestones and stock price milestones and certification of achievement of those milestones for each vesting tranche by the Company’s Board of Directors or Compensation Committee, the PSOs issued could be from zero to 3,250,000 stock options, with an exercise price of $5.08 per share.
Stock-based compensation expense for this award is recognized using a graded-vesting approach over the service period beginning at the grant date through December 31, 2022, as the Company’s management has determined that certain EBITDA milestones are probable of achievement over the next four years as of December 31, 2018, The Company utilized a Monte Carlo simulation to estimate the grant date fair value of each tranche of the award which totaled $5.1 million. For the year ended December 31, 2018, the Company recognized $0.7 million of compensation expense for this award. The assumptions used to estimate the fair value of this award with performance and market vesting conditions were as follows:
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| Stock Option Award with Performance and Market Vesting Conditions: | ||||
| Fair value of the Company’s common stock on grant date | $ | 5.08 | ||
| Expected volatility | 70 | % | ||
| Risk-free interest rate | 2.75 | % | ||
| Dividend yield | 0.0 | % | ||
Stock Option Activity
Stock option activity is summarized as follows:
| Year ended December 31, | 2018 | 2017 | ||||||
| Options granted | 4,337,119 | 661,094 | ||||||
| Weighted-average grant-date fair value per share | $ | 5.18 | $ | 3.26 | ||||
| Compensation expense related to stock options (in millions) | $ | 2.6 | $ | 3.3 | ||||
| Unrecognized compensation costs as of December 31 (in millions) | $ | 8.5 | $ | 2.7 | ||||
The Company expects to recognize the December 31, 2018 balance of unrecognized costs over a weighted-average period of 3.8 years. Future option grants will increase the amount of compensation expense to be recorded in these periods.
Stock-based compensation expense for stock options and employee stock purchase plan rights is estimated at the grant date and offering date, respectively, based on the fair-value using the Black-Scholes option pricing model. The fair value of employee stock options is amortized on a ratable basis over the requisite service period of the awards. The fair value of employee stock options and employee stock purchase plan rights was estimated using the following weighted-average assumptions:
| Years Ended December 31, | 2018 | 2017 | ||||||
| Expected dividend yield | —% | —% | ||||||
| Risk-free interest rate | 2.8 | % | 2.1 | % | ||||
| Expected term (in years) | 6.90 | 6.12 | ||||||
| Expected volatility | 80 | % | 84 | % | ||||
The expected life of options is based primarily on historical share option exercise experience of the employees for options granted by the Company. All options are treated as a single group in the determination of expected life, as the Company does not currently expect substantially different exercise or post-vesting termination behavior among the employee population. The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant. Expected volatility is based on the historical volatility of the Company's common stock. The Company has no history or expectation of paying dividends on common stock.
Stock-based compensation expense associated with options is based on awards ultimately expected to vest. At the time of an option grant, the Company estimates the expected future rate of forfeitures based on historical experience. These estimates are revised, if necessary, in subsequent periods if actual forfeiture rates differ from those estimates. If the actual forfeiture rate is lower than estimated the Company will record additional expense and if the actual forfeiture is higher than estimated the Company will record a recovery of prior expense.
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The Company’s stock option activity and related information for the year ended December 31, 2018 was as follows:
| Number of Stock Options |
Weighted- average Exercise Price |
Weighted-average Remaining Contractual Life (in years) |
Aggregate Intrinsic Value (in thousands) | |||||||||||||
| Outstanding - December 31, 2017 | 1,338,367 | $ | 33.40 | 7.7 | $ | 97 | ||||||||||
| Options granted | 4,337,119 | $ | 5.18 | |||||||||||||
| Options exercised | (70,807 | ) | $ | 3.68 | ||||||||||||
| Options forfeited or expired | (214,409 | ) | $ | 19.61 | ||||||||||||
| Outstanding - December 31, 2018 | 5,390,270 | $ | 11.55 | 8.5 | $ | 29 | ||||||||||
| Vested or expected to vest after December 31, 2018 | 4,833,615 | $ | 12.28 | 8.4 | $ | 28 | ||||||||||
| Exercisable at December 31, 2018 | 972,229 | $ | 39.73 | 5.8 | $ | 12 | ||||||||||
The aggregate intrinsic value of options exercised under all option plans was $0.2 million and $0 for the years ended December 31, 2018 and 2017, respectively, determined as of the date of option exercise.
Restricted Stock Units Activity and Expense
During the years ended December 31, 2018 and 2017, 5,452,664 and 523,167 RSUs, respectively, were granted with weighted-average service-inception date fair value per unit of $5.36 and $5.51, respectively. The Company recognized RSU-related stock-based compensation expense of $6.4 million and $2.8 million, respectively, for the years ended December 31, 2018 and 2017. As of December 31, 2018 and 2017, unrecognized RSU-related compensation costs totaled $23.8 million and $5.0 million, respectively.
Stock-based compensation expense for RSUs is measured based on the closing fair market value of the Company's common stock on the date of grant.
The Company’s RSU and restricted stock activity and related information for the year ended December 31, 2018 was as follows:
| Number of Restricted Stock Units |
Weighted- average Grant-date Fair Value |
Weighted- average Remaining Contractual Life (in years) | ||||||||||
| Outstanding - December 31, 2017 | 683,554 | $ | 8.66 | 1.4 | ||||||||
| Awarded | 5,452,664 | $ | 5.36 | |||||||||
| Vested | (445,828 | ) | $ | 8.43 | ||||||||
| Forfeited | (395,587 | ) | $ | 5.64 | ||||||||
| Outstanding - December 31, 2018 | 5,294,803 | $ | 5.50 | 1.7 | ||||||||
| Vested or expected to vest after December 31, 2018 | 4,953,264 | $ | 5.50 | 1.6 | ||||||||
ESPP Activity and Expense
During the years ended December 31, 2018 and 2017, 246,230 and 47,058 shares, respectively, of the Company's common stock were purchased under the 2010 ESPP. At December 31, 2018 and 2017, 382,824 and 80,594 shares, respectively, of the Company’s common stock remained reserved for issuance under the 2010 ESPP.
During the years ended December 31, 2018 and 2017, the Company also recognized ESPP-related stock-based compensation expense of $0.2 million and $0.1 million, respectively.
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13. Divestiture
On December 28, 2017, the Company completed the sale of its subsidiary Amyris Brasil Ltda. (Amyris Brasil), which operated the Company’s production facility located in Brotas, Brazil, to DSM and concurrently entered into a series of commercial agreements and a credit agreement with DSM. At closing, the Company received $33.0 million in contractual cash consideration for the capital stock of Amyris Brasil, which was subject to certain post-closing working capital adjustments; and reimbursements contingent upon DSM’s utilization of certain Brazilian tax benefits it acquired with its purchase of Amyris Brasil. The Company used $12.6 million of the cash proceeds received to repay certain indebtedness of Amyris Brasil. The total fair value of the contractual consideration received by the Company for Amyris Brasil was $56.9 million and resulted in a pretax gain of $5.7 million from continuing operations. In November 2018, the Company paid DSM $1.8 million related to the final post-closing working capital adjustment. In connection with the payment, $1.8 million was recorded as a loss on divestiture in the 2018 consolidated statement of operations, in the line captioned "(Loss) gain on divestiture".
Concurrent with the sale of Amyris Brasil, the Company and DSM entered into a series of commercial agreements including (i) a license agreement to DSM of its farnesene product for DSM to use in the Vitamin E and lubricant markets; (ii) a royalty agreement, pursuant to which DSM agreed to pay the Company specified royalties representing a portion of the profit on the sale of Vitamin E produced from farnesene sold under the Nenter Supply Agreement assigned to DSM; (iii) a performance agreement for the Company to perform research and development to optimize farnesene for production and sale of farnesene products; and (iv) a transition services agreement for the Company to provide finance, legal, logistics, and human resource services to support the Brotas facility under DSM ownership for a six-month period with a DSM option to extend for six additional months (see Note 10, “Revenue Recognition” and Note 16, “Subsequent Events” for additional information). At closing, DSM paid the Company a nonrefundable license fee of $27.5 million and a nonrefundable royalty payment of $15.0 million. DSM also paid the Company a nonrefundable minimum annual royalty payment in 2018 and will pay a nonrefundable minimum annual royalty payment in 2019. The future nonrefundable minimum annual royalty payments were determined to be fixed and determinable with a fair value of $17.8 million and were included as part of the total arrangement consideration subject to allocation of this overall multiple-element divestiture transaction. See Note 10, “Revenue Recognition” and Note 11, "Related Party Transactions" for a full listing and details of agreements entered into with DSM. Additionally, the Company and DSM entered into a $25.0 million credit agreement that the Company used to repay all outstanding amounts under the Guanfu Note; see Note 5, “Debt” for additional information.
The Company accounted for the sale of Amyris Brasil as a sale of a business for proceeds of $54.8 million. The agreements entered into concurrently with the sale of Amyris Brasil including the license agreement, royalty agreement, performance agreement, transition services agreement, and credit agreement contain various elements and, as such, are deemed to be an arrangement with multiple deliverables as defined under U.S. GAAP. The Company performed an analysis to determine the fair value for all elements in the agreements with DSM and separated the elements between the non-revenue and revenue elements. After allocating the total fair value of the non-revenue elements from the fixed and determinable consideration received, the Company allocated the remaining fixed and determinable consideration to the revenue elements based on relative fair value. As such, the Company recognized $54.7 million of license revenue and $2.1 million of deferred revenue related to the performance option and transition services agreements with DSM as of December 31, 2017.
Results from the operations of Amyris Brasil are included in the Company's Consolidated Statements of Operations for 2017, and the Company has not segregated the results of operations or net assets of Amyris Brasil on the Company's consolidated financial statements for any period presented. The disposition of the assets and liabilities of Amyris Brasil did not qualify for classification as a discontinued operation as it did not represent a strategic shift that will have a major effect on the Company’s operations and financial results.
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14. Income Taxes
The components of loss before income taxes are as follows:
| Years Ended December 31, (In thousands) |
2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| United States | $ | (218,109 | ) | $ | (156,020 | ) | ||
| Foreign | (12,125 | ) | 6,915 | |||||
| Loss before income taxes | $ | (230,234 | ) | $ | (149,105 | ) | ||
The components of the provision for income taxes are as follows:
| Years Ended December 31, (In thousands) |
2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Current: | ||||||||
| Federal | $ | — | $ | 6,564 | ||||
| State | — | 18 | ||||||
| Foreign | — | 964 | ||||||
| Total current provision | — | 7,546 | ||||||
| Deferred: | ||||||||
| Federal | — | (669 | ) | |||||
| State | — | — | ||||||
| Foreign | — | — | ||||||
| Total deferred benefit | — | (669 | ) | |||||
| Total provision for income taxes$ | $ | — | $ | 6,877 | ||||
A reconciliation between the statutory federal income tax and the Company’s effective tax rates as a percentage of loss before income taxes is as follows:
| Years Ended December 31, | 2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Statutory tax rate | (21.0 | )% | (34.0 | )% | ||||
| State taxes, net of federal tax benefit | — | % | — | % | ||||
| Stock-based compensation | — | % | — | % | ||||
| Federal R&D credit | (0.6 | )% | (0.2 | )% | ||||
| Derivative liability | 4.3 | % | 13.9 | % | ||||
| Nondeductible interest | 1.0 | % | 3.0 | % | ||||
| Other | (0.1 | )% | (0.2 | )% | ||||
| Foreign losses | 0.9 | % | 8.5 | % | ||||
| Change in U.S. federal tax rate | — | % | 25.1 | % | ||||
| IRC Section 382 limitation | — | % | 7.2 | % | ||||
| Change in valuation allowance | 15.5 | % | (18.6 | )% | ||||
| Effective income tax rate | — | % | 4.7 | % | ||||
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Temporary differences and carryforwards that gave rise to significant portions of deferred taxes are as follows:
| December 31, (In thousands) |
2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| Net operating loss carryforwards | $ | 57,921 | $ | 20,066 | ||||
| Property, plant and equipment | 9,269 | 9,653 | ||||||
| Research and development credits | 12,046 | 9,480 | ||||||
| Foreign tax credit | – | – | ||||||
| Accruals and reserves | 8,526 | 7,286 | ||||||
| Stock-based compensation | 6,496 | 5,471 | ||||||
| Disallowed interest carryforward | 2,359 | – | ||||||
| Capitalized start-up costs | – | – | ||||||
| Capitalized research and development costs | 27,888 | 32,085 | ||||||
| Intangible and others | 3,114 | 3,584 | ||||||
| Equity investments | 156 | – | ||||||
| Total deferred tax assets | 127,775 | 87,625 | ||||||
| Debt discount and derivatives | (3,750 | ) | (6,539 | ) | ||||
| Total deferred tax liabilities | (3,750 | ) | (6,539 | ) | ||||
| Net deferred tax assets prior to valuation allowance | 124,025 | 81,086 | ||||||
| Less: valuation allowance | (124,025 | ) | (81,086 | ) | ||||
| Net deferred tax assets | $ | – | $ | – | ||||
Activity in the deferred tax assets valuation allowance is summarized as follows:
| (In thousands) | Balance at Beginning of Year |
Additions | Reductions / Charges |
Balance at End of Year | ||||||||||||
| Deferred tax assets valuation allowance: | ||||||||||||||||
| Year Ended December 31, 2018 | $ | 81,086 | $ | 42,939 | $ | – | $ | 124,025 | ||||||||
| Year Ended December 31, 2017 (As Restated, Note 2) | $ | 386,867 | $ | – | $ | (305,781 | ) | $ | 81,086 | |||||||
Recognition of deferred tax assets is appropriate when realization of such assets is more likely than not. Based on the weight of available evidence, especially the uncertainties surrounding the realization of deferred tax assets through future taxable income, the Company believes that it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company has provided a full valuation allowance against its net deferred tax assets as of December 31, 2018 and 2017. The valuation allowance decreased by $305.8 million during the year ended December 31, 2017 and increased by $42.9 million during the year ended December 31, 2018. The valuation allowance decreased by $305.8 million during the year ended December 31, 2017 due to the partial write-off of federal net operating loss (NOL) carryforwards due to the IRC Section 382 limitation further described below and due to tax reform that changed deferred tax asset rate from 35% down to 21%.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation, commonly referred to as the Tax Cuts and Jobs Act (Tax Act). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (6) creating the base erosion anti-abuse tax, a new minimum tax; (7) creating a new limitation on deductible interest expense; and (8) changing the rules related to uses and limitations of NOL carryforwards created in tax years beginning after December 31, 2017.
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On December 22, 2017, Staff Accounting Bulletin No. 118 (SAB 118) was issued to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. In accordance with SAB 118, the Company recorded a provisional amount related to the remeasurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which resulted in a $37.7 million net decrease related to deferred tax assets and deferred tax liabilities, with a corresponding and fully offsetting adjustment to our valuation allowance for the year ended December 31, 2017. As of December 22, 2018, the Company completed its accounting for the remeasurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. There have been no net benefit changes to the provisional estimates disclosed in the period of enactment under SAB 118. The Tax Act also created a new requirement that certain income (i.e., GILTI) earned by controlled foreign corporations (CFCs) must be included currently in the gross income of the CFCs' U.S. shareholder. The Company has elected to treat GILTI as a period cost in its income tax provision computations.
As of December 31, 2018, the Company had federal net operating loss carryforwards of approximately $290.7 million and state net operating loss carryforwards $154.3 million, available to reduce future taxable income, if any. The Internal Revenue Code of 1986, as amended, imposes restrictions on the utilization of net operating losses in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use net operating losses may be limited as prescribed under Internal Revenue Code Section 382 (IRC Section 382). Events that may cause limitations in the amount of the net operating losses that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. During the year ended December 31, 2017, the Company experienced a cumulative ownership change of greater than 50%. As such, net operating losses generated prior to that change are subject to an annual limitation on their use. Due to the limitations imposed, the Company wrote-off $456.2 million and $115.5 million of federal NOL and state NOL carryovers that are expected to expire before they can be utilized. Additionally, the Company wrote-off $14.7 million of its historical federal research and development credit carryovers as a result of the limitations. As of December 31, 2018, the Company had foreign net operating loss carryovers of $7.3 million.
As of December 31, 2018, the Company had federal research and development credit carryforwards of $1.6 million and California research and development credit carryforwards of $13.5 million.
If not utilized, the federal net operating loss carryforward will begin expiring in 2025, and the California net operating loss carryforward will begin expiring in 2028. The federal research and development credit carryforwards will expire starting in 2038 if not utilized. The California research and development credit carryforwards can be carried forward indefinitely.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
| (In thousands) | ||||
| Balance at December 31, 2016 | $ | 9,101 | ||
| Increases in tax positions for prior period | 50 | |||
| Increases in tax positions during current period | 19,682 | |||
| Balance at December 31, 2017 | 28,833 | |||
| Increases in tax positions for prior period | 55 | |||
| Increases in tax positions during current period | 1,239 | |||
| Balance at December 31, 2018 | $ | 30,127 | ||
The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for taxes. The Company determined that accrual for interest and penalties was not material as of December 31, 2018 or 2017.
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None of the unrecognized tax benefits, if recognized, would affect the effective income tax rate for any of the above years due to the valuation allowance that currently offsets deferred tax assets. The Company does not anticipate that the total amount of unrecognized income tax benefits will significantly increase or decrease in the next 12 months.
The Company’s primary tax jurisdiction is the United States. For United States federal and state tax purposes, returns for tax years 2005 and forward remain open and subject to tax examination by the appropriate federal or state taxing authorities. Brazil tax years 2010 and forward remain open and subject to examination.
As of December 31, 2018, the U.S. Internal Revenue Service (the IRS) has completed its audit of the Company for tax year 2008 and concluded that there were no adjustments resulting from the audit. While the statutes are closed for tax year 2008, the U.S. federal tax carryforwards (net operating losses and tax credits) may be adjusted by the IRS in the year in which the carryforward is utilized.
15. Geographical Information
The chief operating decision maker is the Company's Chief Executive Officer, who makes resource allocation decisions and assesses performance based on financial information presented on a consolidated basis. There are no segment managers who are held accountable by the chief operating decision maker, or anyone else, for operations, operating results, and planning for levels or components below the consolidated unit level. Accordingly, the Company has determined that it has a single reportable segment and operating segment structure.
Revenue
Revenue by geography, based on each customer's location, is shown in Note 10, "Revenue Recognition".
Property, Plant and Equipment
| December 31, (In thousands) |
2018 | 2017 | ||||||
| (As Restated, Note 2) | ||||||||
| United States | $ | 13,111 | $ | 10,357 | ||||
| Brazil | 6,447 | 3,357 | ||||||
| Europe | 198 | 178 | ||||||
| $ | 19,756 | $ | 13,892 | |||||
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16. Subsequent Events
Extension and Exchange of Tranche II Note
On January 14, 2019, Wolverine Flagship Fund Trading Limited (Wolverine) agreed to waive payment of the Tranche II Note held by Wolverine (see Note 5, “Debt”) at maturity until July 15, 2019 in exchange for a fee, payable on or prior to July 15, 2019, of $0.6 million. Effective July 15, 2019, the due date of the waiver fee was extended to October 13, 2019 and will bear interest at a rate of 1.75% per month, compounded, from July 16, 2019 to the date of payment.
Evergreen Shares for 2010 Equity Incentive Plan and 2010 Employee Stock Purchase Plan
In February 2019, the Company's Board of Directors (the Board) approved increases to the number of shares available for issuance under the Company's 2010 Equity Incentive Plan (the Equity Plan) and 2010 Employee Stock Purchase Plan (the Purchase Plan). These shares in connection with the Equity Plan represented an automatic annual increase in the number of shares available for grant and issuance under the Equity Plan of 3,828,241 shares. This increase is equal to approximately 5.0% of the 76,564,829 total outstanding shares of the Company’s common stock as of December 31, 2018. This automatic increase was effective as of January 1, 2019. These shares in connection with the Purchase Plan represented an automatic annual increase in the number of shares reserved for issuance under the Purchase Plan of 382,824 shares. This increase is equal to approximately 0.5% of the 76,564,829 total outstanding shares of the Company’s common stock as of December 31, 2018. This automatic increase was effective as of January 1, 2019.
Cannabinoid Agreement
On March 18, 2019, the Company entered into a $300 million research, collaboration and license agreement (the Cannabinoid Agreement) with LAVVAN, Inc., a newly formed investment-backed company (Lavvan), for the development, manufacture and commercialization of cannabinoids. Under the agreement, the Company would perform research and development activities and Lavvan would be responsible for the commercialization of the cannabinoids developed under the agreement. The Cannabinoid Agreement is being principally funded on a milestone basis, with the Company also entitled to receive certain supplementary research and development funding from Lavvan. The Company could receive aggregate funding of up to $300 million over the term of the Cannabinoid Agreement if all of the milestones are achieved. Additionally, the agreement provides for profit share to the Company on Lavvan's gross profit margin once products are commercialized; these payments will be due for the next 20 years. The consummation of the transactions contemplated by the Cannabinoid Agreement is subject to certain conditions, including obtaining certain third party consents and releases and the repayment or refinancing of the 2014 Rule 144A Convertible Notes and the 2015 Rule 144A Convertible Notes (see Note 5, “Debt”). On May 2, 2019, the parties consummated the transactions contemplated by the Cannabinoid Agreement, including the formation of a special purpose entity to hold certain intellectual property created during the collaboration (the Cannabinoid Collaboration IP), the licensing of certain Company intellectual property to Lavvan, the licensing of the Cannabinoid Collaboration IP to the Company and Lavvan, and the granting by the Company to Lavvan of a lien on the Company background intellectual property being licensed to Lavvan under the Cannabinoid Agreement, which lien would be subordinated to the lien on such intellectual property under the GACP Term Loan Facility (see Note 5, “Debt”).
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LSA Amendments, Assignment and Waivers
On April 4, 2019, the Company and GACP amended the LSA (see Note 5, “Debt”) to (i) effective December 31, 2018, eliminate the conditions giving rise to the early maturity date, so that loans under the GACP Term Loan Facilities would have a maturity date of July 1, 2021, (ii) remove certain Company intellectual property related to the Cannabinoid Agreement from the lien granted by the Company to GACP under the LSA, (iii) eliminate the Company’s ability to obtain the Incremental GACP Term Loan Facility, (iv) eliminate the Company’s reinvestment rights with respect to mandatory prepayments upon asset sales, (v) restrict the Company’s ability to pay interest and principal on other indebtedness without the consent of GACP, and (vi) provide that the Company must have at all times at least $15 million of unrestricted, unencumbered cash subject to a control agreement in favor of GACP.
On April 4, 2019, the Company and GACP entered into a waiver agreement, pursuant to which GACP agreed to waive breaches of certain covenants under the LSA occurring prior to, as of and after December 31, 2018 through April 8, 2019, including covenants related to quarterly minimum revenues, minimum liquidity amounts and a minimum asset coverage ratio. In connection with such waiver, the Company agreed to pay GACP fees of $0.8 million.
On April 15, 2019, the Company, GACP and Foris Ventures, LLC (Foris, an entity affiliated with director John Doerr of Kleiner Perkins Caufield & Byers, a current stockholder, and an owner of greater than five percent of the Company’s outstanding common stock) entered into a Loan Purchase Agreement, pursuant to which Foris agreed to purchase and assume from GACP, and GACP agreed to sell and assign to Foris, the outstanding loans under the LSA and all documents and assets related thereto. In connection with such purchase and assignment, the Company agreed to repay Foris $2.5 million of the purchase price paid by Foris to GACP (the Company LPA Obligation). The closing of the loan purchase and assignment occurred on April 16, 2019.
On August 14, 2019, the Company and Foris entered into an Amendment No 5 and Waiver to the LSA (the LSA Amendment and Waiver), pursuant to which (i) the maturity date of the loans under the LSA was extended from July 1, 2021 to July 1, 2022, (ii) the interest rate for the loans under the LSA was modified from the sum of (A) the greater of (x) the prime rate as reported in the Wall Street Journal or (y) 4.75% plus (B) 9% to the greater of (A) 12% or (B) the rate of interest payable with respect to any indebtedness of the Company, (iii) the amortization of the loans under the LSA was delayed until December 16, 2019, (iv) certain accrued and future interest and agency fee payments under the LSA were delayed until December 16, 2019, (v) certain covenants under the LSA, including related definitions, were amended to provide the Company with greater operational and financial flexibility, including, without limitation, to permit the incurrence of the indebtedness under the Naxyris Loan Facility (as described below) and the granting of liens with respect thereto, subject to the terms of an intercreditor agreement between Foris and Naxyris S.A. (Naxyris) governing the respective rights of the parties with respect to, among other things, the assets securing the Naxyris Loan Agreement and the LSA (the Intercreditor Agreement), (vi) certain outstanding unsecured promissory notes issued by the Company to Foris on April 8, 2019, June 11, 2019, July 10, 2019 and July 26, 2019 (as described below under “Foris Credit Agreements”), in an aggregate principal amount of $32.5 million, as well as the Company LPA Obligation, were added to the loans under the LSA, made subject to the LSA and secured by the security interest in the collateral granted to Foris under the LSA, and such promissory notes and contractual obligation were cancelled in connection therewith, and (vii) Foris agreed to waive certain existing defaults under the LSA. After giving effect to the LSA Amendment and Waiver, there is $71.0 million aggregate principal amount of loans outstanding under the LSA, including with respect to covenants related to quarterly minimum revenues, minimum liquidity amounts and a minimum asset coverage ratio. In connection with the entry into the LSA Amendment and Waiver, on August 14, 2019 the Company issued to Foris a warrant to purchase up to 1,438,829 shares of Common Stock at an exercise price of $2.87 per share, with an exercise term of two years from issuance. Pursuant to the terms of the warrant, Foris may not exercise the Foris Warrant to the extent that, after giving effect to such exercise, Foris, together with its affiliates, would beneficially own in excess of 19.99% of the number of shares of common stock outstanding after giving effect to such exercise, unless the Company has obtained stockholder approval to exceed such limit in accordance with Nasdaq rules and regulations, which the Company intends to seek at its 2019 annual meeting of stockholders.
Foris Credit Agreements
On April 8, 2019, the Company and Foris entered into an agreement to make available to the Company an unsecured credit facility in an aggregate principal amount of $8.0 million, which the Company borrowed in full on April 8, 2019 and issued to Foris a promissory note in the principal amount of $8.0 million (the April Foris Note). The April Foris Note has a maturity date of October 14, 2019. In connection with the entry into the April Foris Credit Agreement and the issuance of the April Foris Note, which has no stated interest rate, the Company agreed to pay Foris a fee of $1.0 million, payable on or prior to the maturity date of the April Foris Note (the April Foris Note Fee); provided, that the April Foris Note Fee would be reduced to $0.5 million if the Company repaid the April Foris Note in full by July 15, 2019. The April Foris Note is subordinated in right of payment to the Tranche II Note held by Wolverine (see Note 5, “Debt” and above in this Note 16, “Subsequent Events”).
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On June 11, 2019, the Company and Foris entered into an agreement to make available to the Company an unsecured credit facility in an aggregate principal amount of $8.5 million, which the Company borrowed in full on June 11, 2019 and issued to Foris a promissory note in the principal amount of $8.5 million (the June Foris Note). The June Foris Note (i) accrues interest at a rate of 12.5% per annum from and including June 11, 2019, which interest is payable on the maturity date or the earlier repayment or other satisfaction of the June Foris Note, and (ii) matures on August 28, 2019; provided, that if the May 2017 Cash Warrant held by DSM and the August 2017 DSM Cash Warrant (see Note 7, “Stockholders’ Deficit”) are exercised, then the maturity date of the June Foris Note will be the business day immediately following such exercise.
On July 10, 2019, the Company and Foris entered into a credit agreement to make available to the Company an unsecured credit facility in an aggregate principal amount of $16.0 million (the July Foris Credit Agreement), of which the Company borrowed $8.0 million on July 10, 2019 and $8.0 million on July 26, 2019 and issued to Foris promissory notes, each in the principal amount of $8.0 million, on such dates (the July Foris Notes). The July Foris Notes (i) accrue interest at a rate of 12.5% per annum from and including the respective date of issuance, which interest is payable on the maturity date or the earlier repayment or other satisfaction of the applicable July Foris Note, and (ii) mature on December 31, 2019. In connection with the entry into the July Foris Credit Agreement, the Company and Foris amended the warrant issued to Foris on August 17, 2018 (see Note 7, “Stockholders’ Deficit”) to reduce the exercise price of such warrant from $7.52 per share to $2.87 per share.
The Company may at its option repay the amounts outstanding under the April Foris Note (including the April Foris Note Fee), the June Foris Note and the July Foris Notes before their respective maturity dates, in whole or in part, at a price equal to 100% of the amount being repaid plus, in the case of the June Foris Note and the July Foris Notes, accrued and unpaid interest on such amount to the date of repayment.
On August 14, 2019, the April Foris Note, the June Foris Note and the July Foris Notes were added to the loans under the LSA, made subject to the LSA and secured by the security interest in the collateral granted to Foris under the LSA, and such notes were cancelled in connection therewith. See above under “LSA Amendments, Assignment and Waivers” for additional information.
On August 28, 2019, the Company and Foris entered into a credit agreement to make available to the Company an unsecured credit facility in an aggregate principal amount of $19.0 million (the August Foris Credit Agreement), which the Company borrowed in full on August 28, 2019 and issued to Foris a promissory note in the principal amount of $19.0 million (the August Foris Note). The August Foris Note (i) accrues interest at a rate of 12% per annum from and including August 28, 2019, which interest is payable quarterly in arrears on each March 31, June 30, September 30 and December 31, beginning December 31, 2019, and (ii) matures on January 1, 2023. The Company may at its option repay the amounts outstanding under the August Foris Note before the maturity date, in whole or in part, at a price equal to 100% of the amount being repaid plus accrued and unpaid interest on such amount to the date of repayment.
In connection with the entry into the August Foris Credit Agreement, on August 28, 2019 the Company issued to Foris a warrant to purchase up to 4,871,795 shares of Common Stock at an exercise price of $3.90 per share, with an exercise term of two years from issuance in a private placement pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the Securities Act), and Regulation D promulgated under the Securities Act. The exercise price of the warrant is subject to standard adjustments but does not contain any anti-dilution protection, and the warrants only permit “cashless” or “net” exercise after the six-month anniversary of issuance of the applicable warrant, and only to the extent that there is not an effective registration statement covering the resale of the shares of common stock underlying the applicable warrant. In addition, Foris may not exercise the warrant to the extent that, after giving effect to such exercise, Foris, together with its affiliates, would beneficially own in excess of 19.99% of the number of shares of common stock outstanding after giving effect to such exercise, unless the Company has obtained stockholder approval to exceed such limit in accordance with Nasdaq rules and regulations, which the Company intends to seek at its 2019 annual meeting of stockholders.
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Private Placements
On April 16, 2019, the Company sold and issued to Foris 6,732,369 shares of common stock at a price of $2.87 per share, as well as a warrant to purchase up to 5,424,804 shares of common stock at an exercise price of $2.87 per share, with an exercise term of two years from issuance, in a private placement pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act and Regulation D promulgated under the Securities Act, for aggregate cash proceeds to the Company of $20.0 million (the Foris Investment). The Company used the proceeds from the Foris Investment to repay a portion of the 2015 Rule 144A Convertible Notes (see Note 5, “Debt”).
On April 26, 2019, the Company sold and issued (i) 2,832,440 shares of common stock at a price of $5.12 per share, as well as a warrant to purchase up to 3,983,230 shares of common stock at an exercise price of $5.12 per share, with an exercise term of two years from issuance, to Foris and (ii) an aggregate of 2,043,781 shares of common stock at a price of $4.02 per share, as well as warrants to purchase up to an aggregate of 1,635,025 shares of common stock at an exercise price of $5.02 per share, with an exercise term of two years from issuance, to certain other non-affiliated investors, in each case in private placements pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act and Regulation D promulgated under the Securities Act, for aggregate cash proceeds to the Company of $23.2 million. On August 28, 2019, in connection with the entry into the August Foris Credit Agreement (as described above under "Foris Credit Agreements"), the Company and Foris amended the warrant issued to Foris on April 26, 2019 to reduce the exercise price of such warrant from $5.12 per share to $3.90 per share.
On April 29, 2019, the Company sold and issued (i) 913,529 shares of common stock at a price of $4.76 per share, as well as a warrant to purchase up to 1,212,787 shares of common stock at an exercise price of $4.76 per share, with an exercise term of two years from issuance, to Vivo and (ii) an aggregate of 323,382 shares of common stock at a price of $4.02 per share, as well as warrants to purchase up to an aggregate of 258,704 shares of common stock at an exercise price of $5.02 per share, with an exercise term of two years from issuance, to certain other non-affiliated investors, in each case in private placements pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act and Regulation D promulgated under the Securities Act, for aggregate cash proceeds to the Company of $5.8 million.
On May 3, 2019, the Company sold and issued 1,243,781 shares of common stock at a price of $4.02 per share, as well as a warrant to purchase up to 995,024 shares of common stock at an exercise price of $5.02 per share, with an exercise term of two years from issuance, to a non-affiliated investor in a private placement pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act and Regulation D promulgated under the Securities Act, for aggregate cash proceeds to the Company of $5 million.
The exercise price of the warrants issued in the foregoing private placements is subject to standard adjustments but does not contain any anti-dilution protection, and the warrants only permit “cashless” or “net” exercise after the six-month anniversary of issuance of the applicable warrant, and only to the extent that there is not an effective registration statement covering the resale of the shares of common stock underlying the applicable warrant. In addition, in connection with the foregoing private placements, the Company agreed not to effect any exercise or conversion of any Company security, and the investors agreed not to exercise or convert any portion of any Company security, to the extent that after giving effect to such exercise or conversion, the applicable investor, together with its affiliates, would beneficially own in excess of 19.99% of the number of shares of common stock outstanding immediately after giving effect to such exercise or conversion, and the warrants contained a similar limitation. The Company intends to seek stockholder approval for Foris to exceed such limitation in accordance with Nasdaq rules and regulations at its 2019 annual meeting of stockholders.
DSM Agreements
On April 16, 2019, the Company assigned to DSM, and DSM assumed, all of the Company’s rights and obligations under the Value Sharing Agreement (see Note 10, “Revenue Recognition”), for aggregate consideration to the Company of $57.0 million, $29.1 million of which was paid to the Company in cash, with the remaining $27.9 million being used to pay certain existing obligations of the Company to DSM, including certain obligations under the Supply Agreement Amendment (see Note 10, “Revenue Recognition”). The Company used a majority of the cash proceeds to repay a portion of the 2015 Rule 144A Convertible Notes (see Note 5, “Debt”).
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In addition, on April 16, 2019 the Company and DSM entered into amendments to the Supply Agreement and the Performance Agreement (see Note 10, “Revenue Recognition”), as well as the Quota Purchase Agreement relating to the December 2017 sale of Amyris Brasil to DSM (see Note 13, “Divestiture” and Note 11, "Related Party Transactions"), pursuant to which (i) DSM agreed to reduce certain manufacturing costs and fees paid by the Company related to the production of farnesene under the Supply Agreement through 2021, as well as remove the priority of certain customers over the Company with respect to production capacity at the Brotas, Brazil facility, (ii) the Company agreed to provide DSM rights to conduct certain process and downstream recovery improvements under the Performance Agreement at facilities other than the Brotas, Brazil facility in exchange for DSM providing the Company with a license to such improvements and (iii) the Company released DSM from its obligation to provide manufacturing and support services under the Quota Purchase Agreement in connection with the Company’s planned new manufacturing facility, which is no longer planned to be located at the Brotas, Brazil location.
On September 17, 2019, the Company and DSM entered into a credit agreement (the “2019 DSM Credit Agreement”) to make available to the Company a secured credit facility in an aggregate principal amount of $8.0 million, to be issued in separate installments of $3.0 million, $3.0 million and $2.0 million, respectively, with each installment being subject to certain closing conditions, including the payment of certain existing obligations of the Company to DSM. On September 17, 2019, the Company borrowed the first installment of $3.0 million under the 2019 DSM Credit Agreement, all of which proceeds were used to pay certain existing obligations of the Company to DSM, and issued to DSM a promissory note in the principal amount of $3.0 million. On September 19, 2019, the Company borrowed the second installment of $3.0 million under the 2019 DSM Credit Agreement, all of which proceeds were used to pay certain existing obligations of the Company to DSM, and issued to DSM a promissory note in the principal amount of $3.0 million. On September 23, 2019, the Company borrowed the final installment of $2.0 million under the 2019 DSM Credit Agreement, $1.5 million of which proceeds were used to pay certain existing obligations of the Company to DSM, and issued to DSM a promissory note in the principal amount of $2.0 million. The promissory notes issued under the 2019 DSM Credit Agreement (i) mature on August 7, 2022, (ii) accrue interest at a rate of 12.5% per annum from and including the applicable date of issuance, which interest is payable quarterly in arrears on each January 1, April 1, July 1 and October 1, beginning January 1, 2020, and (iii) are secured by a first-priority lien on certain Company intellectual property licensed to DSM. The Company may at its option repay the amounts outstanding under the 2019 DSM Credit Agreement before the maturity date, in whole or in part, at a price equal to 100% of the amount being repaid plus accrued and unpaid interest on such amount to the date of repayment. In addition, the Company is required to repay the amounts outstanding under the 2019 DSM Credit Agreement (i) in an amount equal to the gross cash proceeds, if any, received by the Company upon the exercise by DSM of any of the common stock purchase warrants issued by the Company to DSM on May 11, 2017 or August 7, 2017 (see Note 7, “Stockholders’ Deficit”) and (ii) in full upon the request of DSM at any time following the receipt by the Company of at least $50.0 million of gross cash proceeds from one or more sales of equity securities of the Company on or prior to June 30, 2020.
Raizen Joint Venture Agreement
On May 10, 2019, the Company and Raizen Energia S.A. (Raizen) entered into an agreement relating to the formation and operation of a joint venture relating to the production, sale and commercialization of alternative sweetener products. In connection with the formation of the joint venture, among other things, (i) the joint venture will construct a manufacturing facility on land owned by Raizen and leased to the joint venture (the Sweetener Plant), (ii) the Company will grant to the joint venture an exclusive, royalty-free, worldwide, license to certain technology owned by the Company relevant to the joint venture’s business, and (iii) the Company and Raizen will enter into a shareholders agreement setting forth the rights and obligations of the parties with respect to, and the management of, the joint venture. The formation of the joint venture is subject to certain conditions, including certain regulatory approvals and the achievement of certain technological and economic milestones relating to the Company’s existing production of its alternative sweetener product. If such conditions are not satisfied by December 31, 2019, the joint venture will automatically terminate. In addition, notwithstanding the satisfaction of the closing conditions, Raizen may elect not to consummate the formation and operation of the joint venture, in which event, the Company will retain the right to construct and operate the Sweetener Plant.
Upon the closing of the joint venture, each party will make an initial capital contribution to the joint venture of 2,500,000 Brazilian Real (R$2,500,000) and the joint venture will be owned 50% by the Company and 50% by Raizen. Within 60 days of the formation, the parties will make an aggregate cash contribution to the joint venture of U.S.$9,000,000 to purchase certain fixed assets currently owned by the Company and located at the site of the Company’s former joint venture with Sao Martinho S.A. in Pradopolis, Brazil for U.S.$3,000,000. In addition, within six months of the formation, the Company will contribute to the joint venture its existing supply agreements related to its alternative sweetener product, subject to certain exceptions, in exchange for shares of dividend-bearing preferred stock in the joint venture, which will be entitled, for a period of 10 years commencing from the initial date of operation of the Sweetener Plant, to certain priority fixed cumulative dividends including, in the event that certain technological and economic milestones are met in any fiscal quarter, a percentage of the operating cash flow of the joint venture in such quarter.
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After the formation of the joint venture, the parties will not conduct activities similar or identical to the joint venture. In the event that certain technological and economic milestones are not met in any fiscal year beginning with the third fiscal year after formation of the joint venture and ending with the seventh fiscal year after formation of the joint venture, Raizen shall have the right to sell all of its shares in the joint venture to the Company at a price per share equal to the higher of the book value and the amount of Raizen’s investments in the joint venture, as adjusted for Raizen’s cost of capital.
2014 Rule 144A Convertible Notes Exchanges
On May 10, 2019, the Company exchanged $13.5 million aggregate principal amount of the 2014 Rule 144A Convertible Notes (see Note 5, “Debt”) held by certain non-affiliated investors, including accrued and unpaid interest thereon up to, but excluding, May 15, 2019, for an aggregate of 3,479,008 shares of common stock and warrants to purchase an aggregate of 1,391,603 shares of common stock at an exercise price of $5.02 per share, with an exercise term of two years from issuance, in a private exchange pursuant to the exemption from registration under Section 3(a)(9) of the Securities Act.
On May 14, 2019, the Company exchanged $5.0 million aggregate principal amount of the 2014 Rule 144A Convertible Notes held by Foris, including accrued and unpaid interest thereon up to, but excluding, May 15, 2019, for 1,122,460 shares of common stock and a warrant to purchase up to 352,638 shares of common stock at an exercise price of $4.56 per share, with an exercise term of two years from issuance, in a private exchange pursuant to the exemption from registration under Section 3(a)(9) of the Securities Act. On August 28, 2019, in connection with the entry into the August Foris Credit Agreement (as described above under "Foris Credit Agreements"), the Company and Foris amended the warrant issued to Foris on May 14, 2019 to reduce the exercise price of such warrant from $4.56 per share to $3.90 per share.
On May 15, 2019, the Company exchanged $10.0 million aggregate principal amount of the 2014 Rule 144A Convertible Notes held by Maxwell (Mauritius) Pte Ltd for 2,500,000 shares of common stock in a private exchange pursuant to the exemption from registration under Section 3(a)(9) of the Securities Act.
On May 15, 2019, the Company exchanged $9.7 million aggregate principal amount of the 2014 Rule 144A Convertible Notes held by Total for a new senior convertible note with an equal principal amount and with substantially identical terms, except that the new note had a maturity date of June 14, 2019, in a private exchange pursuant to the exemption from registration under Section 3(a)(9) of the Securities Act. Effective June 14, 2019, the Company and Total agreed to extend the maturity date of the new note from June 14, 2019 to July 18, 2019. Effective July 18, 2019, the Company and Total agreed to (i) further extend the maturity date of the new note from July 18, 2019 to August 28, 2019 and (ii) increase the interest rate on the new note to 10.5% per annum, beginning July 18, 2019. Effective August 28, 2019, the Company and Total agreed to (i) further extend the maturity date of the new note from August 28, 2019 to October 28, 2019 and (ii) increase the interest rate on the new note to 12% per annum, beginning August 28, 2019.
The exercise price of the warrants issued in the foregoing exchanges is subject to standard adjustments but does not contain any anti-dilution protection, and the warrants only permit “cashless” or “net” exercise after the six-month anniversary of the exercisability of the applicable warrant, and only to the extent that there is not an effective registration statement covering the resale of the shares of common stock underlying the applicable warrant. In addition, (i) the exercisability of the warrant issued to Foris is subject to stockholder approval in accordance with Nasdaq rules and regulations, which the Company intends to seek at its 2019 annual meeting of stockholders, and (ii) each other warrant provides that the Company may not effect any exercise of such warrant to the extent that, after giving effect to such exercise, the applicable holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of common stock outstanding after giving effect to such exercise.
6% Convertible Notes due 2021 Exchanges
On May 15, 2019 and June 24, 2019, the Company exchanged $53.3 million and $4.7 million principal amount, respectively, of the 6% Convertible Notes due 2021 (see Note 5, “Debt”), including accrued and unpaid interest thereon, representing all then-outstanding 6% Convertible Notes due 2021, for new senior convertible notes with an equal principal amount and warrants to purchase up to 2,000,000 and 181,818 shares of common stock, respectively, at an exercise price of $5.12 per share, with an exercise term of two years from issuance, in private exchanges pursuant to the exemption from registration under Section 3(a)(9) of the Securities Act. The new notes have substantially identical terms as the 6% Convertible Notes due 2021 being exchanged, except that (i) the holders agreed to waive, until July 22, 2019, certain covenants relating to the effectiveness of the registration statement covering the shares of common stock issuable upon conversion of, or otherwise pursuant to, the new notes and the filing by the Company of reports with the SEC and (ii) during the period from July 22, 2019 to July 29, 2019, inclusive, the holders have the right to require the Company to redeem the new notes, in whole or in part, at a price equal to 125% of the principal amount being redeemed. The exercise price of the warrants is subject to standard adjustments but does not contain any anti-dilution protection, and the warrants only permit “cashless” or “net” exercise after the six-month anniversary of issuance, and only to the extent that there is not an effective registration statement covering the resale of the shares of common stock underlying the applicable warrant. In addition, the holders may not exercise the warrants, and the Company may not effect any exercise of the warrants, to the extent that, after giving effect to such exercise, the applicable holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of common stock outstanding after giving effect to such exercise.
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On July 26, 2019, one of the holders of the senior convertibles notes issued in exchange for the 6% Convertible Notes due 2021, holding a senior convertible note in the principal amount of $4.7 million, exercised its right to require the Company to redeem such note in whole at a price equal to 125% of the principal amount being redeemed, plus accrued and unpaid interest on such note to the date of repayment. Redemption of such note was initially due on July 30, 2019 and subsequently extended to August 30, 2019. The Company redeemed such note in full on August 30, 2019.
On July 24, 2019, Company further exchanged $53.3 million principal amount of the previously-exchanged 6% Convertible Senior Notes due 2021 as well as the warrant to purchase up to 2,000,000 shares of common stock issued on May 15, 2019, for a new senior convertible note with a principal amount of $68.3 million (the Second Exchange Note) and a new warrant to purchase up to 2,000,000 shares of common stock at an exercise price of $2.87 per share, with an exercise term of two years from May 15, 2019 (the Second Exchange Warrant) in a private exchange pursuant to the exemption from registration under Section 3(a)(9) of the Securities Act. The Second Exchange Note and Second Exchange Warrant have substantially similar terms as the note and warrant, respectively, issued on May 15, 2019, except that (i) the principal amount of the Second Exchange Note would be $68.3 million, reflecting accrued and unpaid interest and late charges under the exchanged note and a 25% premium accruing as a result of the Company’s failure to make an installment payment on the exchanged note due July 1, 2019 in the amount of $6.4 million, provided that upon an event of default under the Second Exchange Note, the Company would not be required to redeem the Second Exchange Note in cash at a price greater than the intrinsic value of the shares of common stock underlying the Second Exchange Note, (ii) the Second Exchange Note bears interest at a rate of 18% per annum, (iii) the holder agreed to extend its waiver of certain covenant breaches relating to the failure by the Company to timely file periodic reports with the SEC from July 22, 2019 to September 16, 2019, (iv) the first installment date under the Second Exchange Note will occur on October 1, 2019, (v) the Company is required to (A) make principal payments on the Second Exchange Note in the amount of $3.2 million on each of August 2, 2019 and August 22, 2019, and (B) pay all remaining amounts then outstanding under the Second Exchange Note on September 16, 2019, and if the Company fails to make any such payment on the applicable payment date, the conversion price of the Second Exchange Note will be reset to the volume-weighted average price of the common stock on the trading day immediately following the Company’s filing of a Current Report on Form 8-K with respect to its failure to make the payment due on September 16, 2019, if such volume-weighted average price is lower than the conversion price of the Second Exchange Note then in effect, subject to a price floor and (vi) the Second Exchange Warrant has an exercise price of $2.87 per share.
On September 16, 2019, the Company failed to pay an aggregate of $63.6 million of outstanding principal and accrued interest on the Second Exchange Note when due. The failure resulted in an event of default under the Second Exchange Note and also triggered cross-defaults under other debt instruments of the Company which permitted the holders of such indebtedness to accelerate the amounts owing under such instruments. The Company subsequently received waivers from substantially all holders of such other debt instruments to waive the right to accelerate. As a result, the indebtedness with respect to which the Company has obtained such waivers continues to be classified as long-term on the Company’s balance sheet. The indebtedness reflected by the Second Exchange Note continues to be classified as a current liability on the Company’s balance sheet. In addition, as a result of the payment default, the conversion price of the Second Exchange Note is subject to adjustment in accordance with the terms of the Second Exchange Note.
The Company does not currently have sufficient funds to repay the amounts outstanding under the Second Exchange Note. To date, negotiations with the holder of the Second Exchange Note have not been successful, and there can be no assurance that a favorable outcome for the Company will be reached. The Company has executed a term sheet with an existing investor for a term loan, the proceeds of which would be used to repay a portion of the Second Exchange Note. However, there can be no assurance that the Company will be able to obtain such financing on its expected timeline, or on acceptable terms, if at all. Even if the Company does obtain such financing, it will not have sufficient funds to repay the Second Exchange Note in full without obtaining additional financing, which the Company is attempting to source.
The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Exchange of August 2013 Financing Convertible Note
On July 8, 2019, the August 2013 Financing Convertible Note held by Wolverine (see Note 4, “Debt”) was exchanged for 1,767,632 shares of common stock and a warrant to purchase 1,080,000 shares of common stock in a private exchange pursuant to the exemption from registration under Section 3(a)(9) of the Securities Act. The exercise price of the warrant is subject to standard adjustments but does not contain any anti-dilution protection, and the warrant only permits “cashless” or “net” exercise after the six-month anniversary of issuance, and only to the extent that there is not an effective registration statement covering the resale of the shares of common stock underlying the warrant. In addition, Wolverine may not exercise the warrant to the extent that, after giving effect to such exercise, Wolverine, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of common stock outstanding after giving effect to such exercise.
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Nikko Loan Agreement
On July 29, 2019, the Company and Nikko Chemicals Co., Ltd. (Nikko) entered into a loan agreement (the Nikko Loan Agreement) to make available to the Company secured loans in an aggregate principal amount of $5.0 million, to be issued in separate installments of $3.0 million and $2.0 million, respectively, with each installment being subject to certain closing conditions, including the entry into certain commercial agreements and other arrangements relating to the Aprinnova JV (see Note 11, “Related Party Transactions”). On July 30, 2019, the Company borrowed the first installment of $3.0 million under the Nikko Loan Agreement and received net cash proceeds of $2.8 million, with the remaining $0.2 million being withheld by Nikko as prepayment of the interest payable on such loan through the maturity date. On August 8, 2019, the Company borrowed the remaining $2.0 million available under the Nikko Loan Agreement and received net cash proceeds of $1.9 million, with the remaining $0.1 million being withheld by Nikko as prepayment of the interest payable on such loan through the maturity date. The loans (i) mature on December 18, 2020, (ii) accrue interest at a rate of 5% per annum from and including the applicable loan date through the maturity date, which interest is required to be prepaid in full on the date of the applicable loan, and (iii) are secured by a first-priority lien on 12.8% of the Aprinnova JV interests owned by the Company.
Aprinnova Working Capital Loan
Effective July 31, 2019, the Company and Nikko agreed to extend the term of the Second Aprinnova Note (see Note 5, “Debt”) from August 1, 2019 to August 1, 2020.
Naxyris Loan and Security Agreement
On August 14, 2019, the Company, certain of the Company’s subsidiaries (the Subsidiary Guarantors) and, as lender, Naxyris, an existing stockholder of the Company and an investment vehicle owned by Naxos Capital Partners SCA Sicar, which is affiliated with NAXOS S.A.R.L. (Switzerland), for which director Carole Piwnica serves as director, entered into a Loan and Security Agreement (the Naxyris Loan Agreement) to make available to the Company a secured term loan facility in an aggregate principal amount of up to $10,435,000 (the Naxyris Loan Facility), which the Company borrowed in full on August 14, 2019.
Loans under the Naxyris Loan Facility have a maturity date of July 1, 2022 and accrue interest at a rate per annum equal to the greater of (i) 12% or (ii) the rate of interest payable with respect to any indebtedness of the Company plus 25 basis points, which interest will be payable monthly in arrears, provided that all interest accruing from and after August 14, 2019 through December 1, 2019 shall be due and payable on December 15, 2019.
The obligations of the Company under the Naxyris Loan Facility are (i) guaranteed by the Subsidiary Guarantors and (ii) secured by a perfected security interest in substantially all of the assets of the Company and the Subsidiary Guarantors (the Collateral), junior in payment priority to Foris Ventures subject to certain limitations and exceptions, as well as the terms of the Intercreditor Agreement (as defined above).
Mandatory prepayments of the outstanding amounts under the Naxyris Loan Facility will be required upon the occurrence of certain events, including asset sales, a change in control, and the incurrence of additional indebtedness, subject to certain exceptions and reinvestment rights. Outstanding amounts under the Naxyris Loan Facility must also be prepaid to the extent that the borrowing base exceeds the outstanding principal amount of the loans under the Naxyris Loan Facility. In addition, the Company may at its option prepay the outstanding principal amount of the loans under the Naxyris Loan Facility in full before the maturity date. Any prepayment of the loans under the Naxyris Loan Facility prior to the maturity date, whether pursuant to a mandatory or optional prepayment, is subject to a prepayment charge equal to one year’s interest at the then-current interest rate for the Naxyris Loan Facility. Upon the repayment of the loans under the Naxyris loan facility, whether on the maturity date or earlier pursuant to an optional or mandatory prepayment, the Company will pay Naxyris an end of term fee. In addition, (i) the Company will be required to pay a fee equal to 6% of any amount the Company fails to pay within three business days of its due date and (ii) any interest that is not paid when due will be added to principal and will bear compound interest at the applicable rate.
The affirmative and negative covenants in the Naxyris Loan Agreement relate to, among other items: (i) payment of taxes; (ii) financial reporting; (iii) maintenance of insurance; and (iv) limitations on indebtedness, liens, mergers, consolidations and acquisitions, transfers of assets, dividends and other distributions in respect of capital stock, investments, loans and advances, and corporate changes. The Naxyris Loan Agreement also contains financial covenants, including covenants related to minimum revenue, liquidity, and asset coverage.
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September 2019 Credit Agreements
On September 10, 2019, the Company entered into separate credit agreements (the “Investor Credit Agreements”) with each of Schottenfeld Opportunities Fund II, L.P., Phase Five Partners, LP and Koyote Trading, LLC (the “Investors”) to make available to the Company unsecured credit facilities in an aggregate principal amount of $12.5 million, which the Company borrowed in full on September 10, 2019 and issued to the Investors separate promissory notes in the aggregate principal amount of $12.5 million (the “Investor Notes”). Each Investor Note (i) accrues interest at a rate of 12% per annum from and including September 10, 2019, which interest is payable quarterly in arrears on each March 31, June 30, September 30 and December 31, beginning December 31, 2019, and (ii) matures on January 1, 2023. The Company may at its option repay the amounts outstanding under the Investor Notes before the maturity date, in whole or in part, at a price equal to 100% of the amount being repaid plus accrued and unpaid interest on such amount to the date of repayment.
In connection with the entry into the Investor Credit Agreements, on September 10, 2019, the Company issued to the Investors warrants to purchase up to an aggregate of 3,205,128 shares of Common Stock at an exercise price of $3.90 per share, with an exercise term of two years from issuance in a private placement pursuant to the exemption from registration under Section 4(a)(2) of the Securities Act and Regulation D promulgated under the Securities Act. The exercise price of the warrants is subject to standard adjustments but does not contain any anti-dilution protection, and the warrants only permit “cashless” or “net” exercise after the six-month anniversary of issuance of the applicable warrant, and only to the extent that there is not an effective registration statement covering the resale of the shares of common stock underlying the applicable warrant. In addition, no Investor may exercise its warrant to the extent that, after giving effect to such exercise, such Investor, together with its affiliates, would beneficially own in excess of 9.99% of the number of shares of common stock outstanding after giving effect to such exercise. In addition, the Company agreed to file a registration statement providing for the resale by the Investors of the shares of Common Stock underlying the warrants with the SEC within 60 days following the date of the issuance of the warrants and to use commercially reasonable efforts to (i) cause such registration statement to become effective within 120 days following the date of the issuance of the warrants and (ii) keep such registration statement effective until the Investors no longer beneficially own any such shares of Common Stock or such shares of Common Stock are eligible for resale under Rule 144 under the Securities Act without regard to volume limitations. If the Company fails to file the registration statement by the filing deadline or the registration statement is not declared effective by the effectiveness deadline, or the Company fails to maintain the effectiveness of the registration statement as required by the warrants, then the exercise price of the warrants will be reduced by 10%, and by an additional 5% if such failure continues for longer than 90 days, subject to an exercise price floor of $3.31 per share, provided that upon the cure by the Company of such failure, the exercise price of the warrants will revert to $3.90 per share.
In connection with the entry into the Investor Credit Agreements and the issuance of the warrants, on September 10, 2019, the Company and the Investors entered into a Standstill Agreement (the “Investor Standstill Agreement”), pursuant to which the Investors agreed that, until the earliest to occur of (i) the Investors no longer beneficially owning any shares underlying the warrants, (ii) the Company entering into a definitive agreement involving the direct or indirect acquisition of all or a majority of the Company’s equity securities or all or substantially all of the Company’s assets or (iii) a person or group, with the prior approval of the Company’s Board of Directors (the “Board”), commencing a tender offer for all or a majority of the Company's equity securities, neither the Investors nor any of their respective affiliates will (without the prior written consent of the Board), among other things, (i) acquire any loans, debt securities, equity securities, or assets of the Company or any of its subsidiaries, or rights or options with respect thereto, except that the Investors shall be permitted to (a) purchase the shares underlying the warrants pursuant to the exercise of the warrants and (b) acquire beneficial ownership of up to 6.99% of the Common Stock, or (ii) make any proposal, public announcement, solicitation or offer with respect to, or otherwise solicit, seek or offer to effect, or instigate, encourage, or assist any third party with respect to: (a) any business combination, merger, tender offer, exchange offer, or similar transaction involving the Company or any of its subsidiaries; (b) any restructuring, recapitalization, liquidation, or similar transaction involving the Company or any of its subsidiaries; (c) any acquisition of any of the Company’s loans, debt securities, equity securities or assets, or rights or options with respect thereto; or (d) any proposal to seek representation on the Board or otherwise seek to control or influence the management, Board, or policies of the Company, in each case subject to certain exceptions.
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Selected Quarterly Financial Data (Unaudited)
Summary of Quarterly Results of Operations
| 2017 | 2018 | |||||||||||||||||||||||||||||||
| (In thousands) | Three Months Ended March 31, 2017 |
Three Months Ended June 30, 2017 |
Three Months Ended September 30, 2017 |
Three Months Ended December 31, 2017 |
Three Months Ended March 31, 2018 |
Three Months Ended June 30, 2018 |
Three Months Ended September 30, 2018 |
Three Months Ended December 31, 2018 | ||||||||||||||||||||||||
| As Restated | As Restated | As Restated | As Restated | As Restated | As Restated | As Restated | ||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||
| Renewable products | $ | 8,037 | $ | 9,892 | $ | 10,996 | $ | 13,445 | $ | 5,195 | $ | 6,633 | $ | 9,639 | $ | 12,131 | ||||||||||||||||
| Licenses and royalties | 255 | 1,236 | 4,483 | 42,729 | 7,955 | (513 | ) | 142 | 74 | |||||||||||||||||||||||
| Grants and collaborations | 4,688 | 10,291 | 12,179 | 9,440 | 4,709 | 8,939 | 4,534 | 4,166 | ||||||||||||||||||||||||
| Revenue | $ | 12,980 | $ | 21,419 | $ | 27,658 | $ | 65,614 | $ | 17,859 | $ | 15,059 | $ | 14,315 | $ | 16,371 | ||||||||||||||||
| Gross profit (loss) from product sales | $ | (4,731 | ) | $ | (6,305 | ) | $ | (6,641 | ) | $ | (2,260 | ) | $ | (120 | ) | $ | 99 | $ | 1,065 | $ | (4,144 | ) | ||||||||||
| Net income (loss) | $ | (38,037 | ) | $ | (23,621 | ) | $ | (58,235 | ) | $ | (36,089 | ) | $ | (92,802 | ) | $ | (14,381 | ) | $ | (74,453 | ) | $ | (48,599 | ) | ||||||||
| Net loss attributable to Amyris, Inc. common stockholders: | ||||||||||||||||||||||||||||||||
| Basic and diluted | $ | (38,037 | ) | $ | (39,784 | ) | $ | (85,691 | ) | $ | (33,191 | ) | $ | (85,298 | ) | $ | (13,411 | ) | $ | (76,814 | ) | $ | (46,738 | ) | ||||||||
| Net loss per share attributable to common stockholders: | ||||||||||||||||||||||||||||||||
| Basic and diluted | $ | (1.97 | ) | $ | (1.71 | ) | $ | (2.34 | ) | $ | (0.69 | ) | $ | (1.67 | ) | $ | (0.24 | ) | $ | (1.26 | ) | $ | (0.63 | ) | ||||||||
| Weighted-average shares of common stock outstanding used in computing net loss per share of common stock: | ||||||||||||||||||||||||||||||||
| Basic and diluted | 19,268,060 | 23,200,460 | 36,643,901 | 47,895,238 | 51,200,922 | 54,932,411 | 60,966,071 | 74,265,076 | ||||||||||||||||||||||||
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2017 AND 2018 QUARTERLY DATA — RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In lieu of filing amended Quarterly Reports on Form 10-Q/A for the periods ended March 31, 2017, June 30, 2017 and September 30, 2017, and March 31, 2018, June 30, 2018 and September 30, 2018, quarterly financial data as restated is included in this Annual Report on Form 10-K in the tables that follow. Amounts are computed independently each quarter, therefore, the sum of the quarterly amounts may not equal the total amount for the respective year due to rounding.
2017 and 2018 Quarterly Data - Restated Condensed Consolidated Balance Sheets
| (In thousands) | March 31, 2017 |
June 30, 2017 |
September 30, 2017 |
December 31, 2017 |
March 31, 2018 |
June 30, 2018 |
September 30, 2018 | |||||||||||||||||||||
| Restated | Restated | Restated | Restated | Restated | Restated | Restated | ||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||
| Current assets: | ||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 1,297 | $ | 5,078 | $ | 15,865 | $ | 57,059 | $ | 24,084 | $ | 14,050 | $ | 19,045 | ||||||||||||||
| Restricted cash | 301 | 3,815 | 4,078 | 2,994 | 2,454 | 1,846 | 1,258 | |||||||||||||||||||||
| Short-term investments | 1,188 | 1,556 | 1,743 | — | — | 130 | — | |||||||||||||||||||||
| Accounts receivable, net | 8,122 | 15,958 | 14,843 | 18,953 | 6,035 | 9,567 | 15,001 | |||||||||||||||||||||
| Accounts receivable - related party, net | 416 | 1,431 | 10,079 | 4,767 | 18,695 | 4,265 | 7,581 | |||||||||||||||||||||
| Accounts receivable, unbilled - related party | — | — | — | 9,901 | 9,247 | 12,683 | 56 | |||||||||||||||||||||
| Inventories | 7,077 | 5,729 | 6,410 | 5,408 | 4,998 | 6,632 | 6,260 | |||||||||||||||||||||
| Prepaid expenses and other current assets | 5,652 | 7,440 | 9,244 | 4,919 | 7,340 | 4,687 | 5,541 | |||||||||||||||||||||
| Total current assets | 24,053 | 41,007 | 62,262 | 104,001 | 72,853 | 53,860 | 54,742 | |||||||||||||||||||||
| Property, plant and equipment, net | 53,045 | 49,303 | 50,130 | 13,892 | 13,262 | 15,300 | 16,622 | |||||||||||||||||||||
| Accounts receivable, unbilled - related party, noncurrent | — | — | — | 7,940 | 7,940 | 9,747 | 9,767 | |||||||||||||||||||||
| Restricted cash, noncurrent | 958 | 958 | 958 | 959 | 959 | 959 | 959 | |||||||||||||||||||||
| Recoverable taxes from Brazilian government entities | — | — | — | 1,445 | 1,226 | 1,057 | 1,053 | |||||||||||||||||||||
| Other assets | 17,388 | 18,204 | 21,998 | 12,559 | 12,287 | 14,329 | 14,396 | |||||||||||||||||||||
| Total assets | $ | 95,444 | $ | 109,472 | $ | 135,348 | $ | 140,796 | $ | 108,527 | $ | 95,252 | $ | 97,539 | ||||||||||||||
| Liabilities, Mezzanine Equity and Stockholders' Deficit | ||||||||||||||||||||||||||||
| Current liabilities: | ||||||||||||||||||||||||||||
| Accounts payable | $ | 16,453 | $ | 13,575 | $ | 19,314 | $ | 15,515 | $ | 15,648 | $ | 19,206 | $ | 11,380 | ||||||||||||||
| Accrued and other current liabilities | 32,211 | 29,873 | 28,883 | 29,202 | 27,702 | 22,746 | 37,711 | |||||||||||||||||||||
| Contract liabilities | 3,487 | 6,029 | 4,594 | 4,308 | 9,376 | 6,971 | 4,026 | |||||||||||||||||||||
| Debt, current portion | 15,290 | 7,954 | 6,070 | 36,924 | 35,950 | 60,105 | 62,056 | |||||||||||||||||||||
| Related party debt, current portion | 34,165 | 5,331 | 5,634 | 20,019 | 27,171 | 49,669 | 47,020 | |||||||||||||||||||||
| Total current liabilities | 101,606 | 62,762 | 64,495 | 105,968 | 115,847 | 158,697 | 162,193 | |||||||||||||||||||||
| Long-term debt, net of current portion | 132,425 | 107,906 | 106,699 | 60,220 | 60,462 | 43,763 | 43,788 | |||||||||||||||||||||
| Related party debt, net of current portion | 39,724 | 40,920 | 43,736 | 46,541 | 39,147 | 17,834 | 18,256 | |||||||||||||||||||||
| Derivative liabilities | 5,144 | 58,606 | 75,767 | 116,497 | 174,152 | 133,845 | 93,561 | |||||||||||||||||||||
| Other noncurrent liabilities | 23,462 | 20,767 | 18,271 | 23,658 | 22,436 | 22,073 | 21,293 | |||||||||||||||||||||
| Total liabilities | 302,361 | 290,961 | 308,968 | 352,884 | 412,044 | 376,212 | 339,091 | |||||||||||||||||||||
| Commitments and contingencies | ||||||||||||||||||||||||||||
| Mezzanine equity: | ||||||||||||||||||||||||||||
| Contingently redeemable common stock | 5,000 | 5,000 | 5,000 | 5,000 | 5,000 | 5,000 | 5,000 | |||||||||||||||||||||
| Stockholders’ deficit: | ||||||||||||||||||||||||||||
| Common stock - $0.0001 par value | 2 | 3 | 4 | 5 | 5 | 5 | 6 | |||||||||||||||||||||
| Additional paid-in capital | 1,000,200 |
1,050,670 |
1,115,371 | 1,114,546 | 1,116,859 | 1,154,625 | 1,268,679 | |||||||||||||||||||||
| Accumulated other comprehensive loss | (40,581 | ) | (42,003 | ) | (40,601 | ) | (42,156 | ) | (42,293 | ) | (43,120 | ) | (43,314 | ) | ||||||||||||||
| Accumulated deficit | (1,172,475 | ) | (1,196,096 | ) | (1,254,331 | ) | (1,290,420 | ) | (1,384,025 | ) | (1,398,407 | ) | (1,472,860 | ) | ||||||||||||||
| Total Amyris, Inc. stockholders’ deficit | (212,854 | ) | (200,256 | ) | (179,557 | ) | (218,025 | ) | (309,454 | ) | (286,897 | ) | (247,489 | ) | ||||||||||||||
| Noncontrolling interest | 937 | 937 | 937 | 937 | 937 | 937 | 937 | |||||||||||||||||||||
| Total stockholders' deficit | (211,917 | ) | (199,319 | ) | (178,620 | ) | (217,088 | ) | (308,517 | ) | (285,960 | ) | (246,552 | ) | ||||||||||||||
| Total liabilities, mezzanine equity and stockholders' deficit | $ | 95,444 | $ | 109,472 | $ | 135,348 | $ | 140,796 | $ | 108,527 | $ | 95,252 | $ | 97,539 | ||||||||||||||
| 91 |
2017 and 2018 Quarterly Data - Restated Condensed Consolidated Statements of Operations
2017
| (In thousands, except shares and per share amounts) | Three Months Ended March 31, 2017 |
Three Months Ended June 30, 2017 |
Six Months Ended June 30, 2017 |
Three Months Ended September 30, 2017 |
Nine Months Ended September 30, 2017 |
Three Months Ended December 31, 2017 |
Year Ended December 31, 2017 | |||||||||||||||||||||
| Restated | Restated | Restated | Restated | Restated | Restated | Restated | ||||||||||||||||||||||
| Renewable products | $ | 8,037 | $ | 9,892 | $ | 17,929 | $ | 10,996 | $ | 28,925 | $ | 13,445 | $ | 42,370 | ||||||||||||||
| Licenses and royalties | 255 | 1,236 | 1,491 | 4,483 | 5,974 | 42,729 | 48,703 | |||||||||||||||||||||
| Grants and collaborations | 4,688 | 10,291 | 14,979 | 12,179 | 27,158 | 9,440 | 36,598 | |||||||||||||||||||||
| Total revenue | 12,980 | 21,419 | 34,399 | 27,658 | 62,057 | 65,614 | 127,671 | |||||||||||||||||||||
| Cost and operating expenses | ||||||||||||||||||||||||||||
| Cost of products sold | 12,768 | 16,197 | 28,965 | 17,637 | 46,602 | 15,705 | 62,307 | |||||||||||||||||||||
| Research and development | 14,778 | 14,178 | 28,956 | 15,185 | 44,141 | 13,421 | 57,562 | |||||||||||||||||||||
| Sales, general and administrative | 12,778 | 16,583 | 29,361 | 15,454 | 44,815 | 19,038 | 63,853 | |||||||||||||||||||||
| Total cost and operating expenses | 40,324 | 46,958 | 87,282 | 48,276 | 135,558 | 48,164 | 183,722 | |||||||||||||||||||||
| Loss from operations | (27,344 | ) | (25,539 | ) | (52,883 | ) | (20,618 | ) | (73,501 | ) | 17,450 | (56,051 | ) | |||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||
| (Loss) gain on divestiture | — | — | — | — | — | 5,732 | 5,732 | |||||||||||||||||||||
| Interest expense | (12,850 | ) | (9,973 | ) | (22,823 | ) | (8,433 | ) | (31,256 | ) | (5,825 | ) | (37,081 | ) | ||||||||||||||
| (Loss) gain from change in fair value of derivative instruments | 2,339 | 26,322 | 28,661 | (29,827 | ) | (1,166 | ) | (47,686 | ) | (48,852 | ) | |||||||||||||||||
| Loss upon extinguishment of debt | 96 | (14,000 | ) | (13,904 | ) | 461 | (13,443 | ) | 1,546 | (11,897 | ) | |||||||||||||||||
| Other income (expense), net | (319 | ) | (121 | ) | (440 | ) | (136 | ) | (576 | ) | (380 | ) | (956 | ) | ||||||||||||||
| Total other expense, net | (10,734 | ) | 2,228 | (8,506 | ) | (37,935 | ) | (46,441 | ) | (46,613 | ) | (93,054 | ) | |||||||||||||||
| Loss before income taxes | (38,078 | ) | (23,311 | ) | (61,389 | ) | (58,553 | ) | (119,942 | ) | (29,163 | ) | (149,105 | ) | ||||||||||||||
| Provision for income taxes | 41 | (310 | ) | (269 | ) | 318 | 49 | (6,926 | ) | (6,877 | ) | |||||||||||||||||
| Net loss attributable to Amyris, Inc. | (38,037 | ) | (23,621 | ) | (61,658 | ) | (58,235 | ) | (119,893 | ) | (36,089 | ) | (155,982 | ) | ||||||||||||||
| Less deemed dividend related to beneficial conversion feature on Series A preferred stock | — | (562 | ) | (562 | ) | — | (562 | ) | — | (562 | ) | |||||||||||||||||
| Less deemed dividend related to beneficial conversion feature on Series B preferred stock | — | — | — | (634 | ) | (634 | ) | — | (634 | ) | ||||||||||||||||||
| Less deemed dividend related to beneficial conversion feature on Series D preferred stock | — | — | — | (5,757 | ) | (5,757 | ) | — | (5,757 | ) | ||||||||||||||||||
| Less deemed dividend upon settlement of make-whole provision on Series A preferred stock | — | (9,453 | ) | (9,453 | ) | (1,026 | ) | (10,479 | ) | (26 | ) | (10,505 | ) | |||||||||||||||
| Less deemed dividend upon settlement of make-whole provision on Series B preferred stock | — | — | — | (21,992 | ) | (21,992 | ) | (640 | ) | (22,632 | ) | |||||||||||||||||
| Less deemed dividend related to proceeds discount and issuance costs upon conversion of Series A preferred stock | — | (18,362 | ) | (18,362 | ) | (1,784 | ) | (20,146 | ) | (1,432 | ) | (21,578 | ) | |||||||||||||||
| Less deemed dividend related to proceeds discount and issuance costs upon conversion of Series B preferred stock | — | — | — | (24,366 | ) | (24,366 | ) | — | (24,366 | ) | ||||||||||||||||||
| Add: losses allocated to participating securities | — | 12,214 | 12,985 | 28,103 | 38,813 | 4,996 | 40,159 | |||||||||||||||||||||
| Net loss attributable to Amyris, Inc. common stockholders | $ | (38,037 | ) | $ | (39,784 | ) | $ | (77,050 | ) | $ | (85,691 | ) | $ | (165,016 | ) | $ | (33,191 | ) | $ | (201,857 | ) | |||||||
| Loss per share attributable to common stockholders: | ||||||||||||||||||||||||||||
| Basic and diluted | $ | (1.97 | ) | $ | (1.71 | ) | $ | (3.63 | ) | $ | (2.34 | ) | $ | (6.12 | ) | $ | (0.69 | ) | $ | (6.26 | ) | |||||||
| Weighted-average shares of common stock outstanding used in computing loss per share of common stock: | ||||||||||||||||||||||||||||
| Basic and diluted | 19,268,060 | 23,200,460 | 21,248,306 | 36,643,901 | 26,982,385 | 47,895,238 | 32,253,570 | |||||||||||||||||||||
| 92 |
2018
Results of Operations
| (In thousands, except shares and per share amounts) | Three Months Ended March 31, 2018 |
Three Months Ended June 30, 2018 |
Six Months Ended June 30, 2018 |
Three Months Ended September 30, 2018 |
Nine Months Ended September 30, 2018 | |||||||||||||||
| Restated | Restated | Restated | Restated | Restated | ||||||||||||||||
| Renewable products | $ | 5,195 | $ | 6,633 | $ | 11,828 | $ | 9,639 | $ | 21,467 | ||||||||||
| Licenses and royalties | 7,955 | (513 | ) | 7,442 | 142 | 7,584 | ||||||||||||||
| Grants and collaborations | 4,709 | 8,939 | 13,648 | 4,534 | 18,182 | |||||||||||||||
| Total revenue | 17,859 | 15,059 | 32,918 | 14,315 | 47,233 | |||||||||||||||
| Cost and operating expenses | ||||||||||||||||||||
| Cost of products sold | 5,315 | 6,534 | 11,849 | 8,574 | 20,423 | |||||||||||||||
| Research and development | 17,825 | 15,669 | 33,494 | 16,445 | 49,939 | |||||||||||||||
| Sales, general and administrative | 18,100 | 19,454 | 37,554 | 27,239 | 64,793 | |||||||||||||||
| Total cost and operating expenses | 41,240 | 41,657 | 82,897 | 52,258 | 135,155 | |||||||||||||||
| Loss from operations | (23,381 | ) | (26,598 | ) | (49,979 | ) | (37,943 | ) | (87,922 | ) | ||||||||||
| Other income (expense) | ||||||||||||||||||||
| (Loss) gain on divestiture | (1,778 | ) | — | (1,778 | ) | — | (1,778 | ) | ||||||||||||
| Interest expense | (9,978 | ) | (9,580 | ) | (19,558 | ) | (9,180 | ) | (28,738 | ) | ||||||||||
| (Loss) gain from change in fair value of derivative instruments | (58,357 | ) | 21,990 | (36,367 | ) | (24,797 | ) | (61,164 | ) | |||||||||||
| Loss upon extinguishment of debt | — | (26 | ) | (26 | ) | — | (26 | ) | ||||||||||||
| Other income (expense), net | 692 | (168 | ) | 524 | (2,533 | ) | (2,009 | ) | ||||||||||||
| Total other expense, net | (69,421 | ) | 12,216 | (57,205 | ) | (36,510 | ) | (93,715 | ) | |||||||||||
| Loss before income taxes | (92,802 | ) | (14,382 | ) | (107,184 | ) | (74,453 | ) | (181,637 | ) | ||||||||||
| Provision for income taxes | — | — | — | — | — | |||||||||||||||
| Net loss attributable to Amyris, Inc. | (92,802 | ) | (14,382 | ) | (107,184 | ) | (74,453 | ) | (181,637 | ) | ||||||||||
| Less deemed dividend related to proceeds discount and issuance costs upon conversion of Series D preferred stock | — | — | — | (6,852 | ) | (6,852 | ) | |||||||||||||
| Add: losses allocated to participating securities | 7,504 | 970 | 7,932 | 4,491 | 12,824 | |||||||||||||||
| Net loss attributable to Amyris, Inc. common stockholders | $ | (85,298 | ) | $ | (13,412 | ) | $ | (99,252 | ) | $ | (76,814 | ) | $ | (175,665 | ) | |||||
| Loss per share attributable to common stockholders: | ||||||||||||||||||||
| Basic and diluted | $ | (1.67 | ) | $ | (0.24 | ) | $ | (1.87 | ) | $ | (1.26 | ) | $ | (3.15 | ) | |||||
| Weighted-average shares of common stock outstanding used in computing loss per share of common stock: | ||||||||||||||||||||
| Basic and diluted | 51,200,922 | 54,932,411 | 53,076,975 | 60,966,071 | 55,735,571 | |||||||||||||||
Revenue
Three Months Ended September 30, 2018 Compared with Three Months Ended September 30, 2017. Total revenue decreased by 48%. Renewable products revenue decreased by 12% primarily due to the assignment of certain farnesene supply agreements to DSM and discontinuing the sales of low-margin products, partially offset by a $1.6 million increase in revenue from Biossance products. Licenses and royalties revenue decreased by 97% due to a license fee in 2017 from DSM for which there was no comparable revenue in 2018. Grants and collaborations revenue decreased by 63% mainly due to one-time revenue in 2017 upon the termination of the Braskem/Michelin agreement and lower grant revenue from DARPA.
Three Months Ended June 30, 2018 Compared with Three Months Ended June 30, 2017. Total revenue decreased by 30%. Renewable products revenue decreased by 33% to $6.6 million due to the assignment of certain farnesene supply agreements to DSM and discontinuing low margin product sales, partly offset by increases in sales of our Biossance and Neossance products. Licenses and royalties revenue decreased by 141% due to no royalty revenue in the June 30, 2018 period combined with early payment discounts taken in the 2018 period. Grants and collaborations revenue decreased by 13% primarily due to decreases from Biogen, Firmenich and DARPA totaling $2.5 million, partly offset by a $1.6 million increase from DSM.
Three Months Ended March 31, 2018 Compared with Three Months Ended March 31, 2017. Total revenue increased by 38% primarily due to a $7.7 million increase in license and royalty revenue related to royalty revenue from DSM. Renewable products revenue decreased by 37% as a result of the assignment of certain farnesene supply agreements to DSM and discontinuing low margin product sales, partially offset by increases in Biossance and Aprinnova revenue streams. Licenses and royalties revenue increased significantly due to royalty revenues from DSM, primarily due to the adoption of ASC 606, discussed elsewhere in this document. Grants and collaborations revenue was unchanged for the comparative period.
| 93 |
Costs and Operating Expenses
Three Months Ended September 30, 2018 Compared with Three Months Ended September 30, 2017. Costs of products sold decreased by 51%, primarily due to (i) the December 2017 sale of our Brotas production facility to DSM, which substantially reduced our fixed production costs, (ii) the assignment of certain farnesene supply agreements to DSM with a resulting 12% decrease in renewable products revenue, and (iii) our discontinuing manufacturing of low-margin products. Research and development expenses increased by 8% due to increases in headcount to support new product development and one-time costs related to product development. Sales, general and administrative expenses increase by 76%, primarily due to increases in headcount to support our growth and expansion, professional services costs, one-time costs associated with a contract termination, and a $6.8 million charge for legal expense in connection to the August warrants exercise transaction.
Three Months Ended June 30, 2018 Compared with Three Months Ended June 30, 2017. Costs of products sold decreased 62%, primarily due to (i) the December 2017 sale of our Brotas production facility to DSM, which substantially reduced our fixed production costs, (ii) the assignment of certain farnesene supply agreements to DSM with a resulting 33% decrease in renewable products revenue, and (iii) our discontinuing manufacturing of low-margin products. Research and development expenses increased by 11% due to increases in headcount to support new product development and one-time costs related to product development. Sales, general and administrative expenses increased by 17% primarily due to increases in headcount to support our growth and expansion, and professional services costs, partially offset by a $0.7 million credit for services provided to a related party.
Three Months Ended March 31, 2018 Compared with Three Months Ended March 31, 2017. Costs of products sold decreased by 58% to $7.4 million primarily due to the December 2017 sale of our Brotas 1 production facility to DSM, which substantially reduced our fixed production costs, and due to the assignment of certain farnesene supply agreements to DSM and our discontinuing manufacturing of low-margin products. Research and development expenses increased by 21% to $17.8 million due to increases in headcount to support new product development and one-time costs related by product development. Sales, general and administrative expenses increased by 42% as a result of increases in headcount to support our growth, professional services costs, and costs related to the Amyris Brasil Ltda. transaction.
Other Expense, Net
Three Months Ended September 30, 2018 Compared with Three Months Ended September 30, 2017. Total other expense, net was $36.5 million for the three months ended September 30, 2018, compared to total other expense, net of $37.9 million for the same period in 2017. The $1.4 million decrease was primarily due to a $5.0 million decrease in the loss from change in fair value of derivative instruments, partially offset by a $2.4 million increase in other expense, which was primarily comprised of issuance costs incurred in connection with our August 2018 secondary offering in which existing shareholders sold approximately 7.7 million shares, and an additional $0.7 million increase related to an increase in interest expense.
Three Months Ended June 30, 2018 Compared with Three Months Ended June 30, 2017. The $8.2 million increase in total other income, net, was primarily due to a decrease in expense of $12.2 million associated with certain May 2017 warrant exercise, partially offset by the decrease in gain in fair value of derivative instruments.
Three Months Ended March 31, 2018 Compared with Three Months Ended March 31, 2017. The $59.3 million change in total other expense, net, was primarily due to a $58.3 million loss on the change in fair value of derivative instruments, partially offset by a $2.2 million decrease in interest expense. The loss from change in fair value of derivative instruments for the three months ended March 31, 2018 was the result of a significant increase in derivative instruments issued subsequent to March 31, 2017, and a 78% increase to our stock price during the first quarter of 2018. The $1.8 million loss on divestiture was the result of a working capital adjustment to the sale price of the Brotas 1 facility, which we sold to a related party in December 2017.
| 94 |
Q1 2017 Operating Highlights
Condensed Consolidated Balance Sheet
| March 31, 2017 | ||||||||||||||
| (In thousands) | As Previously Reported | Adjustments | Ref. | As Restated | ||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 1,297 | $ | — | $ | 1,297 | ||||||||
| Restricted cash | 301 | — | 301 | |||||||||||
| Short-term investments | 1,188 | — | 1,188 | |||||||||||
| Accounts receivable, net | 8,122 | — | 8,122 | |||||||||||
| Accounts receivable - related party, net | 416 | — | 416 | |||||||||||
| Inventories | 7,077 | — | 7,077 | |||||||||||
| Prepaid expenses and other current assets | 5,652 | — | 5,652 | |||||||||||
| Total current assets | 24,053 | — | 24,053 | |||||||||||
| Property, plant and equipment, net | 53,045 | — | 53,045 | |||||||||||
| Restricted cash, noncurrent | 958 | — | 958 | |||||||||||
| Other assets | 17,388 | — | 17,388 | |||||||||||
| Total assets | $ | 95,444 | $ | — | $ | 95,444 | ||||||||
| Liabilities, Mezzanine Equity and Stockholders' Deficit | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 16,453 | $ | — | $ | 16,453 | ||||||||
| Accrued and other current liabilities | 32,211 | — | 32,211 | |||||||||||
| Contract liabilities | 3,487 | — | 3,487 | |||||||||||
| Debt, current portion | 15,290 | — | 15,290 | |||||||||||
| Related party debt, current portion | 34,165 | — | 34,165 | |||||||||||
| Total current liabilities | 101,606 | — | 101,606 | |||||||||||
| Long-term debt, net of current portion | 131,759 | 666 | j | 132,425 | ||||||||||
| Related party debt, net of current portion | 39,724 | — | 39,724 | |||||||||||
| Derivative liabilities | 5,144 | — | 5,144 | |||||||||||
| Other noncurrent liabilities | 23,462 | — | 23,462 | |||||||||||
| Total liabilities | 301,695 | 666 | 302,361 | |||||||||||
| Commitments and contingencies | ||||||||||||||
| Mezzanine equity: | ||||||||||||||
| Contingently redeemable common stock | 5,000 | — | 5,000 | |||||||||||
| Stockholders’ deficit: | ||||||||||||||
| Common stock - $0.0001 par value(1) | 2 | — | 2 | |||||||||||
| Additional paid-in capital | 1,000,200 | — | 1,000,200 | |||||||||||
| Accumulated other comprehensive loss | (40,581 | ) | — | (40,581 | ) | |||||||||
| Accumulated deficit | (1,171,809 | ) | (666 | ) | p | (1,172,475 | ) | |||||||
| Total Amyris, Inc. stockholders’ deficit | (212,188 | ) | (666 | ) | (212,854 | ) | ||||||||
| Noncontrolling interest | 937 | — | 937 | |||||||||||
| Total stockholders' deficit | (211,251 | ) | (666 | ) | (211,917 | ) | ||||||||
| Total liabilities, mezzanine equity and stockholders' deficit | $ | 95,444 | $ | — | $ | 95,444 | ||||||||
(1) Reflects the 15:1 reverse stock split effected by the Company on June 5, 2017.
Restatement adjustments:
j. Correction to amortization of debt discounts.
p. Impact to net loss of correction to amortization of debt discounts.
| 95 |
Condensed Consolidated Statements of Operations
| Three Months Ended March 31, 2017 | ||||||||||||||||||
| (In thousands, except shares and per share amounts) | As Previously Reported | Reclassifications(1) | Corrections | Ref | As Restated | |||||||||||||
| Revenue | ||||||||||||||||||
| Renewable products | $ | 8,292 | $ | (255 | ) | $ | – | $ | 8,037 | |||||||||
| Licenses and royalties | – | 255 | – | 255 | ||||||||||||||
| Grants and collaborations | 4,688 | – | – | 4,688 | ||||||||||||||
| Total revenue | 12,980 | – | – | 12,980 | ||||||||||||||
| Cost and operating expenses | ||||||||||||||||||
| Cost of products sold | 12,768 | – | – | 12,768 | ||||||||||||||
| Research and development | 14,778 | – | – | 14,778 | ||||||||||||||
| Sales, general and administrative | 12,778 | – | – | 12,778 | ||||||||||||||
| Total cost and operating expenses | 40,324 | – | – | 40,324 | ||||||||||||||
| Loss from operations | (27,344 | ) | – | – | (27,344 | ) | ||||||||||||
| Other income (expense) | ||||||||||||||||||
| Interest expense | (12,184 | ) | – | (666 | ) | ah | (12,850 | ) | ||||||||||
| (Loss) gain from change in fair value of derivative instruments | 2,339 | – | – | 2,339 | ||||||||||||||
| Loss upon extinguishment of debt | 96 | – | – | 96 | ||||||||||||||
| Other income (expense), net | (319 | ) | – | – | (319 | ) | ||||||||||||
| Total other expense, net | (10,068 | ) | – | (666 | ) | (10,734 | ) | |||||||||||
| Loss before income taxes | (37,412 | ) | – | (666 | ) | (38,078 | ) | |||||||||||
| Provision for income taxes | 41 | – | – | 41 | ||||||||||||||
| Net loss attributable to Amyris, Inc. | (37,371 | ) | – | (666 | ) | (38,037 | ) | |||||||||||
| Add: losses allocated to participating securities | – | – | – | – | ||||||||||||||
| Net loss attributable to Amyris, Inc. common stockholders | $ | (37,371 | ) | $ | – | $ | (666 | ) | $ | (38,037 | ) | |||||||
| Loss per share attributable to common stockholders: | ||||||||||||||||||
| Basic and diluted | $ | (1.93 | ) | $ | (1.97 | ) | ||||||||||||
| Weighted-average shares of common stock outstanding used in computing loss per share of common stock: | ||||||||||||||||||
| Basic and diluted | 19,335,948 | av | 19,268,060 | |||||||||||||||
(1) Reclassification of revenue by type to conform to the Company's current presentation.
Restatement adjustments:
ah. Correction to amortization of debt discounts.
av. Correction to weighted-average shares outstanding.
| 96 |
Condensed Consolidated Statements of Cash Flows
| Three Months Ended March 31, 2017 | ||||||||||||
| (In thousands) | As Previously Reported | Corrections(1) | As Restated | |||||||||
| Operating activities | ||||||||||||
| Net loss | $ | (37,371 | ) | (666 | ) | $ | (38,037 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation and amortization | 2,715 | — | 2,715 | |||||||||
| (Gain) loss on disposal of property, plant and equipment | (55 | ) | — | (55 | ) | |||||||
| Stock-based compensation | 1,646 | — | 1,646 | |||||||||
| Amortization of debt discount | 4,473 | 666 | 5,139 | |||||||||
| (Gain) loss upon extinguishment of debt | (96 | ) | — | (96 | ) | |||||||
| (Gain) loss from change in fair value of derivative liabilities | (2,339 | ) | — | (2,339 | ) | |||||||
| (Gain) loss on foreign currency exchange rates | (295 | ) | — | (295 | ) | |||||||
| Changes in assets and liabilities: | ||||||||||||
| Accounts receivable | 5,388 | — | 5,388 | |||||||||
| Inventories | (867 | ) | — | (867 | ) | |||||||
| Prepaid expenses and other assets | (713 | ) | — | (713 | ) | |||||||
| Accounts payable | 450 | — | 450 | |||||||||
| Accrued and other liabilities | 3,515 | — | 3,515 | |||||||||
| Contract liabilities | (1,844 | ) | — | (1,844 | ) | |||||||
| Net cash used in operating activities | (25,393 | ) | — | (25,393 | ) | |||||||
| Investing activities | ||||||||||||
| Change in short-term investments | 329 | — | 329 | |||||||||
| Purchases of property, plant and equipment | (457 | ) | — | (457 | ) | |||||||
| Net cash (used in) provided by investing activities | (128 | ) | — | (128 | ) | |||||||
| Financing activities | ||||||||||||
| Payment of minimum employee taxes withheld upon net share settlement of restricted stock units | (22 | ) | — | (22 | ) | |||||||
| Principal payments on capital leases | (627 | ) | — | (627 | ) | |||||||
| Proceeds from issuance of debt, net of issuance costs | 1,500 | — | 1,500 | |||||||||
| Principal payments on debt | (5,124 | ) | — | (5,124 | ) | |||||||
| Net cash provided by financing activities | (4,273 | ) | — | (4,273 | ) | |||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (83 | ) | — | (83 | ) | |||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | (29,877 | ) | — | (29,877 | ) | |||||||
| Cash, cash equivalents and restricted cash at beginning of year | 32,433 | — | 32,433 | |||||||||
| Cash, cash equivalents and restricted cash at end of year | $ | 2,556 | $ | — | $ | 2,556 | ||||||
| Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets | ||||||||||||
| Cash and cash equivalents | $ | 1,297 | $ | 1,297 | ||||||||
| Restricted cash, current | 301 | 301 | ||||||||||
| Restricted cash, noncurrent | 958 | 958 | ||||||||||
| Total cash, cash equivalents and restricted cash | $ | 2,556 | $ | 2,556 | ||||||||
(1) To reflect the impact of restatement corrections on the statement of cash flows.
| 97 |
Q2 2017
Condensed Consolidated Balance Sheet
| June 30, 2017 | ||||||||||||||
| (In thousands) | As Previously Reported | Corrections | Ref. | As Restated | ||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 5,078 | — | $ | 5,078 | |||||||||
| Restricted cash | 3,815 | — | 3,815 | |||||||||||
| Short-term investments | 1,556 | — | 1,556 | |||||||||||
| Accounts receivable, net | 15,958 | — | 15,958 | |||||||||||
| Accounts receivable - related party, net | 1,431 | — | 1,431 | |||||||||||
| Inventories | 5,729 | — | 5,729 | |||||||||||
| Prepaid expenses and other current assets | 7,440 | — | 7,440 | |||||||||||
| Total current assets | 41,007 | — | 41,007 | |||||||||||
| Property, plant and equipment, net | 49,303 | — | 49,303 | |||||||||||
| Restricted cash, noncurrent | 958 | — | 958 | |||||||||||
| Other assets | 21,437 | (3,233 | ) | d | 18,204 | |||||||||
| Total assets | $ | 112,705 | $ | (3,233 | ) | $ | 109,472 | |||||||
| Liabilities, Mezzanine Equity and Stockholders' Deficit | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 14,657 | $ | (1,082 | ) | e | $ | 13,575 | ||||||
| Accrued and other current liabilities | 29,873 | — | 29,873 | |||||||||||
| Contract liabilities | 5,001 | 1,028 | g | 6,029 | ||||||||||
| Debt, current portion | 7,954 | — | 7,954 | |||||||||||
| Related party debt, current portion | 5,331 | — | 5,331 | |||||||||||
| Total current liabilities | 62,816 | (54 | ) | 62,762 | ||||||||||
| Long-term debt, net of current portion | 111,112 | (3,206 | ) | j | 107,906 | |||||||||
| Related party debt, net of current portion | 40,920 | — | 40,920 | |||||||||||
| Derivative liabilities | 58,606 | — | 58,606 | |||||||||||
| Other noncurrent liabilities | 20,767 | — | 20,767 | |||||||||||
| Total liabilities | 294,221 | (3,260 | ) | 290,961 | ||||||||||
| Commitments and contingencies | ||||||||||||||
| Mezzanine equity: | ||||||||||||||
| Contingently redeemable common stock | 5,000 | — | 5,000 | |||||||||||
| Convertible preferred stock | 12,830 | (12,830 |
) | m | — | |||||||||
| Stockholders’ deficit: | ||||||||||||||
| Common stock - $0.0001 par value | 3 | — | 3 | |||||||||||
| Additional paid-in capital | 1,012,906 |
37,764 | m / n | 1,050,670 |
||||||||||
| Accumulated other comprehensive loss | (42,003 | ) | — | (42,003 | ) | |||||||||
| Accumulated deficit | (1,171,189 | ) | (24,907 | ) | p | (1,196,096 | ) | |||||||
| Total Amyris, Inc. stockholders’ deficit | (200,283 | ) | 12,857 | (187,426 | ) | |||||||||
| Noncontrolling interest | 937 | — | 937 | |||||||||||
| Total stockholders' deficit | (199,346 | ) | 12,857 | (186,489 | ) | |||||||||
| Total liabilities, mezzanine equity and stockholders' deficit | $ | 112,705 | $ | (3,233 | ) | $ | 109,472 | |||||||
Restatement adjustments:
d. Revision to accounting for a license sale to a customer for which the customer paid the Company in equity.
e. Correction to uninvoiced receipts liability.
g. Revision to accounting for a license sale to a customer for which the customer paid the Company in equity, and shift in timing of royalty revenue recognition.
j. Correction to debt discount in connection with Fidelity 2015 144A Note.
m. Correction to temporary equity classification of the May 2017 Preferred Stock Series B.
n. Correction to the settlement of a make-whole provision, and loss on extinguishment of related party debt in connection with May 2017 equity offering and correction to debt discount related to 2015 144A Notes.
p. Cumulative impact of restatement corrections on accumulated deficit.
| 98 |
Condensed Consolidated Statements of Operations
| Three Months Ended June 30, 2017 | Six Months Ended June 30, 2017 | |||||||||||||||||||||||||||||||||||
| (In thousands, except shares and per share amounts) | As Previously Reported | Reclassifications(1) | Corrections | Ref | As Restated | As Previously Reported | Reclassifications(1) | Corrections | Ref | As Restated | ||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||
| Renewable products | $ | 12,729 | $ | (2,837 | ) | $ | – | $ | 9,892 | $ | 21,021 | $ | (3,092 | ) | $ | – | $ | 17,929 | ||||||||||||||||||
| Licenses and royalties | – | 5,497 | (4,261 | ) | ab | 1,236 | – | 5,752 | (4,261 | ) | ab | 1,491 | ||||||||||||||||||||||||
| Grants and collaborations | 12,950 | (2,660 | ) | 1 | 10,291 | 17,638 | (2,660 | ) | 1 | 14,979 | ||||||||||||||||||||||||||
| Total revenue | 25,679 | – | (4,260 | ) | 21,419 | 38,659 | – | (4,260 | ) | 34,399 | ||||||||||||||||||||||||||
| Cost and operating expenses | ||||||||||||||||||||||||||||||||||||
| Cost of products sold | 17,279 | – | (1,082 | ) | ad | 16,197 | 30,047 | – | (1,082 | ) | ad | 28,965 | ||||||||||||||||||||||||
| Research and development | 14,249 | (72 | ) | 1 | 14,178 | 29,027 | (72 | ) | 1 | 28,956 | ||||||||||||||||||||||||||
| Sales, general and administrative | 15,949 | 72 | 562 | af | 16,583 | 28,727 | 72 | 562 | af | 29,361 | ||||||||||||||||||||||||||
| Total cost and operating expenses | 47,477 | – | (519 | ) | 46,958 | 87,801 | – | (519 | ) | 87,282 | ||||||||||||||||||||||||||
| Loss from operations | (21,798 | ) | – | (3,741 | ) | (25,539 | ) | (49,142 | ) | – | (3,741 | ) | (52,883 | ) | ||||||||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||||||||||
| (Loss) gain on divestiture | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||
| Interest expense | (9,303 | ) | – | (670 | ) | ah | (9,973 | ) | (21,487 | ) | – | (1,336 | ) | ah | (22,823 | ) | ||||||||||||||||||||
| (Loss) gain from change in fair value of derivative instruments | 35,775 | – | (9,453 | ) | ai | 26,322 | 38,114 | – | (9,453 | ) | ai | 28,661 | ||||||||||||||||||||||||
| Loss upon extinguishment of debt | (3,624 | ) | – | (10,376 | ) | ak | (14,000 | ) | (3,528 | ) | – | (10,376 | ) | ak | (13,904 | ) | ||||||||||||||||||||
| Other income (expense), net | (120 | ) | – | (1 | ) | (121 | ) | (439 | ) | – | (1 | ) | (440 | ) | ||||||||||||||||||||||
| Total other expense, net | 22,728 | – | (20,500 | ) | 2,228 | 12,660 | – | (21,166 | ) | (8,506 | ) | |||||||||||||||||||||||||
| Loss before income taxes | 930 | – | (24,241 | ) | (23,311 | ) | (36,482 | ) | – | (24,907 | ) | (61,389 | ) | |||||||||||||||||||||||
| Provision for income taxes | (310 | ) | – | – | (310 | ) | (269 | ) | – | – | (269 | ) | ||||||||||||||||||||||||
| Net loss attributable to Amyris, Inc. | 620 | – | (24,241 | ) | (23,621 | ) | (36,751 | ) | – | (24,907 | ) | (61,658 | ) | |||||||||||||||||||||||
| Less deemed dividend on capital distribution to related parties | (8,648 | ) | – | 8,648 | an | – | (8,648 | ) | – | 8,648 | an | – | ||||||||||||||||||||||||
| Less deemed dividend related to beneficial conversion feature on Series A preferred stock | (562 | ) | – | – | (562 | ) | (562 | ) | – | – | (562 | ) | ||||||||||||||||||||||||
| Less deemed dividend upon settlement of make-whole provision on Series A preferred stock | – | – | (9,453 | ) | ap | (9,453 | ) | – | – | (9,453 | ) | ap | (9,453 | ) | ||||||||||||||||||||||
| Less deemed dividend related to proceeds discount and issuance costs upon conversion of Series A preferred stock | – | – | (18,362 | ) | ar | (18,362 | ) | – | – | (18,362 | ) | ar | (18,362 | ) | ||||||||||||||||||||||
| Less cumulative dividends on Series A and Series B preferred stock | (1,675 | ) | 1,675 | aw | – | (1,675 | ) | – | 1,675 | aw | – | |||||||||||||||||||||||||
| Add: losses allocated to participating securities | – | – | 12,214 | au | 12,214 | – | – | 12,985 | au | 12,985 | ||||||||||||||||||||||||||
| Net loss attributable to Amyris, Inc. common stockholders | $ | (10,265 | ) | – | $ | (29,519 | ) | $ | (39,784 | ) | $ | (47,636 | ) | – | $ | (29,414 | ) | $ | (77,050 | ) | ||||||||||||||||
| Loss per share attributable to common stockholders: | ||||||||||||||||||||||||||||||||||||
| Basic and diluted | $ | (0.44 | ) | $ | (1.71 | ) | $ | (2.24 | ) | $ | (3.63 | ) | ||||||||||||||||||||||||
| Weighted-average shares of common stock outstanding used in computing loss per share of common stock: | ||||||||||||||||||||||||||||||||||||
| Basic and diluted | 23,155,874 | av | 23,200,460 | 21,226,013 | av | 21,248,306 | ||||||||||||||||||||||||||||||
(1) Reclassification of revenue and operating expense by type to conform to the Company's current presentation.
Restatement adjustments:
ab. Adjustment for revenue reversal related to non-cash consideration and timing of revenue recognition between quarters.
ad. Correction in connection with a sales return.
af. Correction to accounting for expenses incurred in connection with May 2017 Offering.
ah. Correction to amortization of debt discounts.
ai. Correction to accounting for make-whole liability in connection with May 2017 Offering.
ak. Correction to accounting for debt exchanges.
an. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings
ap. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings.
ar. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings
au. Correction in the computation of net loss per share to reflect participating securities.
av. Correction to weighted-average shares outstanding.
aw. Correction in the computation of net loss per share related to make-whole deemed dividends.
| 99 |
Condensed Consolidated Statements of Cash Flows
| Six Months Ended June 30, 2017 | ||||||||||||
| (In thousands) | As Previously Reported | Corrections (1) | As Restated | |||||||||
| Operating activities | ||||||||||||
| Net loss | $ | (36,751 | ) | $ | (24,907 | ) | $ | (61,658 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation and amortization | 5,550 | – | 5,550 | |||||||||
| (Gain) loss on disposal of property, plant and equipment | (161 | ) | – | (161 | ) | |||||||
| Stock-based compensation | 2,684 | – | 2,684 | |||||||||
| Amortization of debt discount | 7,637 | 4,042 | 11,679 | |||||||||
| (Gain) loss upon extinguishment of debt | 3,528 | 10,376 | 13,904 | |||||||||
| Receipt of equity in connection with collaboration arrangements revenue | (2,660 | ) | 2,660 | – | ||||||||
| (Gain) loss from change in fair value of derivative liabilities | (38,115 | ) | 9,453 | (28,662 | ) | |||||||
| (Gain) loss on foreign currency exchange rates | 63 | – | 63 | |||||||||
| Changes in assets and liabilities: | ||||||||||||
| Accounts receivable | (3,509 | ) | – | (3,509 | ) | |||||||
| Inventories | 409 | – | 409 | |||||||||
| Prepaid expenses and other assets | (4,220 | ) | 3,233 | (987 | ) | |||||||
| Accounts payable | (1,739 | ) | 657 | (1,082 | ) | |||||||
| Accrued and other liabilities | 7,105 | (7,105 | ) | |||||||||
| Contract liabilities | – | 1,028 | 1,028 | |||||||||
| Net cash used in operating activities | (60,179 | ) | (563 | ) | (60,742 | ) | ||||||
| Investing activities | ||||||||||||
| Change in short-term investments | (85 | ) | – | (85 | ) | |||||||
| Purchases of property, plant and equipment | (264 | ) | – | (264 | ) | |||||||
| Net cash (used in) provided by investing activities | (349 | ) | – | (349 | ) | |||||||
| Financing activities | ||||||||||||
| Proceeds from issuance of convertible preferred stock | 50,661 | 562 | 51,223 | |||||||||
| Proceeds from exercises of common stock options | 69 | – | 69 | |||||||||
| Payment of minimum employee taxes withheld upon net share settlement of restricted stock units | (110 | ) | – | (110 | ) | |||||||
| Principal payments on capital leases | (764 | ) | – | (764 | ) | |||||||
| Proceeds from issuance of debt, net of issuance costs | 12,455 | – | 12,455 | |||||||||
| Principal payments on debt | (24,372 | ) | – | (24,372 | ) | |||||||
| Net cash provided by financing activities | 37,939 | 562 | 38,501 | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 7 | – | 7 | |||||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | (22,582 | ) | – | (22,582 | ) | |||||||
| Cash, cash equivalents and restricted cash at beginning of year | 32,433 | – | 32,433 | |||||||||
| Cash, cash equivalents and restricted cash at end of year | $ | 9,851 | $ | – | $ | 9,851 | ||||||
| Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets | ||||||||||||
| Cash and cash equivalents | $ | 5,078 | $ | 5,078 | ||||||||
| Restricted cash, current | 3,815 | 3,815 | ||||||||||
| Restricted cash, noncurrent | 958 | 958 | ||||||||||
| Total cash, cash equivalents and restricted cash | $ | 9,851 | $ | 9,851 | ||||||||
(1) To reflect the impact of restatement corrections on the statement of cash flows.
| 100 |
Q3 2017 Quarterly Data Restatement Adjustments
Condensed Consolidated Balance Sheet
| September 30, 2017 | ||||||||||||||
| (In thousands) | As Previously Reported | Corrections | Ref. | As Restated | ||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 15,865 | $ | — | $ | 15,865 | ||||||||
| Restricted cash | 4,078 | — | 4,078 | |||||||||||
| Short-term investments | 1,743 | — | 1,743 | |||||||||||
| Accounts receivable, net | 24,922 | (10,079 | ) | a | 14,843 | |||||||||
| Accounts receivable - related party, net | — | 10,079 | a | 10,079 | ||||||||||
| Inventories | 6,410 | — | 6,410 | |||||||||||
| Prepaid expenses and other current assets | 9,244 | — | 9,244 | |||||||||||
| Total current assets | 62,262 | — | 62,262 | |||||||||||
| Property, plant and equipment, net | 50,130 | — | 50,130 | |||||||||||
| Restricted cash, noncurrent | 958 | — | 958 | |||||||||||
| Other assets | 25,231 | (3,233 | ) | d | 21,998 | |||||||||
| Total assets | $ | 138,581 | $ | (3,233 | ) | $ | 135,348 | |||||||
| Liabilities, Mezzanine Equity and Stockholders' Deficit | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 20,396 | $ | (1,082 | ) | e | $ | 19,314 | ||||||
| Accrued and other current liabilities | 28,883 | — | 28,883 | |||||||||||
| Contract liabilities | 7,027 | (2,433 | ) | g | 4,594 | |||||||||
| Debt, current portion | 6,070 | — | 6,070 | |||||||||||
| Related party debt, current portion | 5,634 | — | 5,634 | |||||||||||
| Total current liabilities | 68,010 | (3,515 | ) | 64,495 | ||||||||||
| Long-term debt, net of current portion | 109,205 | (2,506 | ) | j | 106,699 | |||||||||
| Related party debt, net of current portion | 43,736 | — | 43,736 | |||||||||||
| Derivative liabilities | 89,770 | (14,003 | ) | l | 75,767 | |||||||||
| Other noncurrent liabilities | 18,271 | 18,271 | ||||||||||||
| Total liabilities | 328,992 | (20,024 | ) | 308,968 | ||||||||||
| Commitments and contingencies | ||||||||||||||
| Mezzanine equity: | ||||||||||||||
| Contingently redeemable common stock | 5,000 | — | 5,000 | |||||||||||
| Stockholders’ deficit: | ||||||||||||||
| Common stock - $0.0001 par value | 4 | — | 4 | |||||||||||
| Additional paid-in capital | 1,049,299 | 66,072 | n | 1,115,371 | ||||||||||
| Accumulated other comprehensive loss | (40,601 | ) | — | (40,601 | ) | |||||||||
| Accumulated deficit | (1,205,050 | ) | (49,281 | ) | p | (1,254,331 | ) | |||||||
| Total Amyris, Inc. stockholders’ deficit | (196,348 | ) | 16,791 | (179,557 | ) | |||||||||
| Noncontrolling interest | 937 | — | 937 | |||||||||||
| Total stockholders' deficit | (195,411 | ) | 16,791 | (178,620 | ) | |||||||||
| Total liabilities, mezzanine equity and stockholders' deficit | $ | 138,581 | $ | (3,233 | ) | $ | 135,348 | |||||||
Restatement adjustments:
a. Reclassification of related party accounts receivable to a separate line on the balance sheet.
d. Reversal of the fair value of non-cash consideration received in connection with a revenue arrangement.
e. Correction in connection with a sales return.
g. Revision to accounting for a license sale to a customer for which the customer paid the Company in equity, and shift in timing of royalty revenue recognition.
j. Correction to debt discount in connection with Fidelity 2015 144A Note.
l. Correction to extinguishment accounting for a make-whole equity instrument, and loss on extinguishment of related party debt in connection with May 2017 equity offering.
n. Correction to the settlement of a make-whole equity instrument, and loss on extinguishment of related party debt in connection with May 2017 equity offering.
p. Cumulative impact of restatement corrections on accumulated deficit.
| 101 |
Condensed Consolidated Statements of Operations
| Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | |||||||||||||||||||||||||||||||||||
| (In thousands, except shares and per share amounts) | As Previously Reported | Reclassifications(1) | Corrections | Ref | As Restated | As Previously Reported | Reclassifications(1) | Corrections | Ref | As Restated | ||||||||||||||||||||||||||
| Renewable products | $ | 11,315 | $ | (319 | ) | $ | – | $ | 10,996 | $ | 32,336 | $ | (3,411 | ) | $ | – | $ | 28,925 | ||||||||||||||||||
| Licenses and royalties | – | 1,022 | 3,461 | ab | 4,483 | – | 6,774 | (800 | ) | ab | 5,974 | |||||||||||||||||||||||||
| Grants and collaborations | 12,882 | (703 | ) | – | 12,179 | 30,520 | (3,363 | ) | 1 | 27,158 | ||||||||||||||||||||||||||
| Total revenue | 24,197 | – | 3,461 | 27,658 | 62,856 | – | (799 | ) | 62,057 | |||||||||||||||||||||||||||
| Cost and operating expenses | ||||||||||||||||||||||||||||||||||||
| Cost of products sold | 17,637 | – | – | 17,637 | 47,684 | – | (1,082 | ) | ad | 46,602 | ||||||||||||||||||||||||||
| Research and development | 15,185 | – | – | 15,185 | 44,212 | (72 | ) | 1 | 44,141 | |||||||||||||||||||||||||||
| Sales, general and administrative | 15,454 | – | – | 15,454 | 44,181 | 72 | 562 | af | 44,815 | |||||||||||||||||||||||||||
| Total cost and operating expenses | 48,276 | – | – | 48,276 | 136,077 | – | (519 | ) | 135,558 | |||||||||||||||||||||||||||
| Loss from operations | (24,079 | ) | – | 3,461 | (20,618 | ) | (73,221 | ) | – | (280 | ) | (73,501 | ) | |||||||||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||||||||||
| Interest expense | (7,733 | ) | – | (700 | ) | ah | (8,433 | ) | (29,220 | ) | – | (2,036 | ) | ah | (31,256 | ) | ||||||||||||||||||||
| (Loss) gain from change in fair value of derivative instruments | (2,692 | ) | – | (27,135 | ) | ai | (29,827 | ) | 35,422 | – | (36,588 | ) | ai | (1,166 | ) | |||||||||||||||||||||
| Loss upon extinguishment of debt | 461 | – | – | 461 | (3,067 | ) | – | (10,376 | ) | ak | (13,443 | ) | ||||||||||||||||||||||||
| Other income (expense), net | (136 | ) | – | – | (136 | ) | (575 | ) | – | (1 | ) | (576 | ) | |||||||||||||||||||||||
| Total other expense, net | (10,100 | ) | – | (27,835 | ) | (37,935 | ) | 2,560 | – | (49,001 | ) | (46,441 | ) | |||||||||||||||||||||||
| Loss before income taxes | (34,179 | ) | – | (24,374 | ) | (58,553 | ) | (70,661 | ) | – | (49,281 | ) | (119,942 | ) | ||||||||||||||||||||||
| Provision for income taxes | 318 | – | – | 318 | 49 | – | – | 49 | ||||||||||||||||||||||||||||
| Net loss attributable to Amyris, Inc. | (33,861 | ) | – | (24,374 | ) | (58,235 | ) | (70,612 | ) | – | (49,281 | ) | (119,893 | ) | ||||||||||||||||||||||
| Less deemed dividend on capital distribution to related parties | – | – | – | – | (8,648 | ) | – | 8,648 | an | – | ||||||||||||||||||||||||||
| Less deemed dividend related to beneficial conversion feature on Series A preferred stock | – | – | – | – | (562 | ) | – | – | (562 | ) | ||||||||||||||||||||||||||
| Less deemed dividend related to beneficial conversion feature on Series B preferred stock | (634 | ) | – | – | (634 | ) | (634 | ) | – | – | (634 | ) | ||||||||||||||||||||||||
| Less deemed dividend related to beneficial conversion feature on Series D preferred stock | (5,757 | ) | – | – | (5,757 | ) | (5,757 | ) | – | – | (5,757 | ) | ||||||||||||||||||||||||
| Less deemed dividend upon settlement of make-whole provision on Series A preferred stock | – | – | (1,026 | ) | ap | (1,026 | ) | – | – | (10,479 | ) | ap | (10,479 | ) | ||||||||||||||||||||||
| Less deemed dividend upon settlement of make-whole provision on Series B preferred stock | – | – | (21,992 | ) | aq | (21,992 | ) | – | – | (21,992 | ) | aq | (21,992 | ) | ||||||||||||||||||||||
| Less deemed dividend related to proceeds discount and issuance costs upon conversion of Series A preferred stock | – | – | (1,784 | ) | ar | (1,784 | ) | – | – | (20,146 | ) | ar | (20,146 | ) | ||||||||||||||||||||||
| Less deemed dividend related to proceeds discount and issuance costs upon conversion of Series B preferred stock | – | – | (24,366 | ) | as | (24,366 | ) | – | – | (24,366 | ) | as | (24,366 | ) | ||||||||||||||||||||||
| Less cumulative dividends on Series A and Series B preferred stock | (2,567 | ) | 2,567 | aw | – | (4,242 | ) | – | 4,242 | aw | – | |||||||||||||||||||||||||
| Add: losses allocated to participating securities | – | – | 28,103 | au | 28,103 | – | – | 38,813 | au | 38,813 | ||||||||||||||||||||||||||
| Net loss attributable to Amyris, Inc. common stockholders | $ | (42,819 | ) | – | $ | (42,872 | ) | $ | (85,691 | ) | $ | (90,455 | ) | – | $ | (74,561 | ) | $ | (165,016 | ) | ||||||||||||||||
| Loss per share attributable to common stockholders: | ||||||||||||||||||||||||||||||||||||
| Basic and diluted | $ | (1.14 | ) | $ | (2.34 | ) | $ | (3.32 | ) | $ | (6.12 | ) | ||||||||||||||||||||||||
| Weighted-average shares of common stock outstanding used in computing loss per share of common stock: | ||||||||||||||||||||||||||||||||||||
| Basic and diluted | 37,529,694 | av | 36,643,901 | 27,280,894 | av | 26,982,385 | ||||||||||||||||||||||||||||||
(1) Reclassification of revenue by type to conform to the Company's current presentation.
Restatement adjustments:
ab. Revision to accounting for license revenue for non-cash consideration and change in timing of recognition from a customer.
ad. Correction in connection with a sales return.
af. Correction to accounting for expenses incurred in connection with May 2017 Offering.
ah. Correction to amortization of debt discounts.
ai. Correction to accounting for make-whole liability in connection with May 2017 Offering.
ak. Correction to accounting for certain debt exchanges.
an. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings
ap. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings
aq. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings
ar. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings
as. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings
au. Correction in the computation of net loss per share to reflect participating securities.
av. Correction to weighted-average shares outstanding.
aw. Correction in the computation of net loss per share related to make-whole deemed dividends.
| 102 |
Condensed Consolidated Statements of Cash Flows
| Nine Months Ended September 30, 2017 | ||||||||||||
| (In thousands) | As Previously Reported | Corrections (1) | As Restated | |||||||||
| Operating activities | ||||||||||||
| Net loss | $ | (70,612 | ) | (49,281 | ) | $ | (119,893 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation and amortization | 8,124 | – | 8,124 | |||||||||
| (Gain) loss on disposal of property, plant and equipment | 37 | – | 37 | |||||||||
| Stock-based compensation | 3,942 | – | 3,942 | |||||||||
| Amortization of debt discount | 10,108 | 4,327 | 14,435 | |||||||||
| (Gain) loss upon extinguishment of debt | 3,067 | 10,376 | 13,443 | |||||||||
| Receipt of equity in connection with collaboration arrangements revenue | (2,660 | ) | 2,660 | – | ||||||||
| (Gain) loss from change in fair value of derivative liabilities | (35,054 | ) | 36,220 | 1,166 | ||||||||
| (Gain) loss on foreign currency exchange rates | (205 | ) | – | (205 | ) | |||||||
| Changes in assets and liabilities: | ||||||||||||
| Accounts receivable | (10,947 | ) | – | (10,947 | ) | |||||||
| Inventories | (126 | ) | – | (126 | ) | |||||||
| Prepaid expenses and other assets | (12,962 | ) | 3,233 | (9,729 | ) | |||||||
| Accounts payable | 3,119 | (1,082 | ) | 2,037 | ||||||||
| Accrued and other liabilities | 404 | – | 404 | |||||||||
| Contract liabilities | 1,113 | (2,433 | ) | (1,320 | ) | |||||||
| Net cash used in operating activities | (102,652 | ) | 4,020 | (98,632 | ) | |||||||
| Investing activities | ||||||||||||
| Change in short-term investments | 2,999 | – | 2,999 | |||||||||
| Purchases of property, plant and equipment | (487 | ) | – | (487 | ) | |||||||
| Net cash (used in) provided by investing activities | 2,512 | – | 2,512 | |||||||||
| Financing activities | ||||||||||||
| Proceeds from issuance of convertible preferred stock | 101,427 | 562 | 101,989 | |||||||||
| Proceeds from exercises of common stock options | 147 | – | 147 | |||||||||
| Payment of minimum employee taxes withheld upon net share settlement of restricted stock units | (87 | ) | – | (87 | ) | |||||||
| Proceeds from issuance of debt, net of issuance costs | 13,965 | – | 13,965 | |||||||||
| Principal payments on debt | (26,708 | ) | – | (26,708 | ) | |||||||
| Net cash provided by financing activities | 88,744 | 562 | 89,306 | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (136 | ) | – | (136 | ) | |||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | (11,532 | ) | 4,582 | (6,950 | ) | |||||||
| Cash, cash equivalents and restricted cash at beginning of year | 32,433 | – | 32,433 | |||||||||
| Cash, cash equivalents and restricted cash at end of year | $ | 20,901 | $ | 4,582 | $ | 25,483 | ||||||
| Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets | ||||||||||||
| Cash and cash equivalents | $ | 15,865 | $ | 15,865 | ||||||||
| Restricted cash, current | 4,078 | 4,078 | ||||||||||
| Restricted cash, noncurrent | 958 | 958 | ||||||||||
| Total cash, cash equivalents and restricted cash | $ | 20,901 | $ | 20,901 | ||||||||
(1) To reflect the impact of restatement corrections on the statement of cash flows.
| 103 |
Q4 2017 Quarterly Data Restatement Adjustments
Condensed Consolidated Balance Sheet
Consolidated balance sheet as of December 31, 2017 is shown in Note 2, "Restatement of 2017 Consolidated Financial Statements".
Condensed Consolidated Statements of Operations
| Three Months Ended December 31, 2017 | Year Ended December 31, 2017 | |||||||||||||||||||||||||||||||
| (In thousands, except shares and per share amounts) | As Previously Reported | Corrections | Ref | As Restated | As Previously Reported | Reclassifications(1) | Corrections | Ref | As Restated | |||||||||||||||||||||||
| Renewable products | $ | 13,445 | $ | – | $ | 13,445 | $ | 45,781 | $ | (3,411 | ) | $ | – | $ | 42,370 | |||||||||||||||||
| Licenses and royalties | 57,703 | (14,974 | ) | ab | 42,729 | 57,703 | 6,774 | (15,774 | ) | ab | 48,703 | |||||||||||||||||||||
| Grants and collaborations | 9,440 | – | 9,440 | 39,960 | (3,363 | ) | 1 | 36,598 | ||||||||||||||||||||||||
| Total revenue | 80,588 | (14,974 | ) | 65,614 | 143,444 | – | (15,773 | ) | 127,671 | |||||||||||||||||||||||
| Cost and operating expenses | – | |||||||||||||||||||||||||||||||
| Cost of products sold | 15,029 | 676 | ad | 15,705 | 62,713 | – | (406 | ) | ad | 62,307 | ||||||||||||||||||||||
| Research and development | 12,815 | 606 | ae | 13,421 | 57,027 | (72 | ) | 607 | ae | 57,562 | ||||||||||||||||||||||
| Sales, general and administrative | 19,038 | – | 19,038 | 63,219 | 72 | 562 | af | 63,853 | ||||||||||||||||||||||||
| Total cost and operating expenses | 46,882 | 1,282 | 48,164 | 182,959 | – | 763 | 183,722 | |||||||||||||||||||||||||
| Loss from operations | 33,706 | (16,256 | ) | 17,450 | (39,515 | ) | – | (16,536 | ) | (56,051 | ) | |||||||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||||||
| (Loss) gain on divestiture | 5,732 | – | 5,732 | 5,732 | – | – | 5,732 | |||||||||||||||||||||||||
| Interest expense | (4,813 | ) | (1,012 | ) | ah | (5,825 | ) | (34,033 | ) | – | (3,048 | ) | ah | (37,081 | ) | |||||||||||||||||
| (Loss) gain from change in fair value of derivative instruments | (37,164 | ) | (10,522 | ) | ai | (47,686 | ) | (1,742 | ) | – | (47,110 | ) | ai | (48,852 | ) | |||||||||||||||||
| Loss upon extinguishment of debt | 1,546 | – | 1,546 | (1,521 | ) | – | (10,376 | ) | ak | (11,897 | ) | |||||||||||||||||||||
| Other income (expense), net | (380 | ) | – | (380 | ) | (955 | ) | – | (1 | ) | (956 | ) | ||||||||||||||||||||
| Total other expense, net | (35,079 | ) | (11,534 | ) | (46,613 | ) | (32,519 | ) | – | (60,535 | ) | (93,054 | ) | |||||||||||||||||||
| Loss before income taxes | (1,373 | ) | (27,790 | ) | (29,163 | ) | (72,034 | ) | – | (77,071 | ) | (149,105 | ) | |||||||||||||||||||
| Provision for income taxes | (344 | ) | (6,582 | ) | am | (6,926 | ) | (295 | ) | – | (6,582 | ) | am | (6,877 | ) | |||||||||||||||||
| Net loss attributable to Amyris, Inc. | (1,717 | ) | (34,372 | ) | (36,089 | ) | (72,329 | ) | – | (83,653 | ) | (155,982 | ) | |||||||||||||||||||
| Less deemed dividend on capital distribution to related parties | – | – | – | (8,648 | ) | – | 8,648 | an | – | |||||||||||||||||||||||
| Less deemed dividend related to beneficial conversion feature on Series A preferred stock | – | – | – | (562 | ) | – | – | (562 | ) | |||||||||||||||||||||||
| Less deemed dividend related to beneficial conversion feature on Series B preferred stock | – | – | – | (634 | ) | – | – | (634 | ) | |||||||||||||||||||||||
| Less deemed dividend related to beneficial conversion feature on Series D preferred stock | – | – | – | (5,757 | ) | – | – | (5,757 | ) | |||||||||||||||||||||||
| Less deemed dividend upon settlement of make-whole provision on Series A preferred stock | – | (26 | ) | ap | (26 | ) | – | – | (10,505 | ) | ap | (10,505 | ) | |||||||||||||||||||
| Less deemed dividend upon settlement of make-whole provision on Series B preferred stock | – | (640 | ) | aq | (640 | ) | – | – | (22,632 | ) | aq | (22,632 | ) | |||||||||||||||||||
| Less deemed dividend related to proceeds discount and issuance costs upon conversion of Series A preferred stock | – | (1,432 | ) | ar | (1,432 | ) | – | – | (21,578 | ) | ar | (21,578 | ) | |||||||||||||||||||
| Less deemed dividend related to proceeds discount and issuance costs upon conversion of Series B preferred stock | – | – | – | – | – | (24,366 | ) | as | (24,366 | ) | ||||||||||||||||||||||
| Less cumulative dividends on Series A and Series B preferred stock | (1,197 | ) | 1,197 | aw | – | (5,439 | ) | – | 5,439 | aw | – | |||||||||||||||||||||
| Add: losses allocated to participating securities | – | 4,996 | au | 4,996 | – | – | 40,159 | au | 40,159 | |||||||||||||||||||||||
| Net loss attributable to Amyris, Inc. common stockholders | $ | (2,914 | ) | $ | (30,277 | ) | $ | (33,191 | ) | $ | (93,369 | ) | $ | – | $ | (108,488 | ) | $ | (201,857 | ) | ||||||||||||
| Loss per share attributable to common stockholders: | ||||||||||||||||||||||||||||||||
| Basic and diluted | $ | (0.06 | ) | $ | (0.69 | ) | $ | (2.89 | ) | $ | (6.26 | ) | ||||||||||||||||||||
| Weighted-average shares of common stock outstanding used in computing loss per share of common stock: | ||||||||||||||||||||||||||||||||
| Basic and diluted | 47,895,238 | 47,895,238 | 32,253,570 | 32,253,570 | ||||||||||||||||||||||||||||
(1) Reclassification of revenue and operating expense by type to conform to the Company's current presentation.
Restatement adjustments:
ab. Ginkgo partnership obligation and promissory note issuance recorded as reduction in revenue, and reversal of revenue in connection with non-cash consideration.
ad. Correction in connection with a sales return, and adjustment to uninvoiced receipts liability.
ae. Write-off of unrecoverable receivable in connection with facilities subleased to a related party, and reclassification of operating expense by classification to conform to the Company's current presentation.
af. (i) Expense incurred in connection with May 2017 equity offering, and (ii) reclassification of amounts from related party services revenue to expense offset, and reclassification of operating expense by classification to conform to the Company's current presentation.
ah. Correction to amortization of debt discounts, and interest expense in connection with Ginkgo partnership obligation.
ai. Correction to accounting for make-whole liability in connection with May 2017 Offering.
ak. Correction to accounting for certain debt exchanges.
am. Tax provision to accrue liability for uncertain tax benefit.
an. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings.
ap. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings.
aq. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings.
ar. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings.
as. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings.
au. Correction in the computation of net loss per share to reflect participating securities.
aw. Correction in the computation of net loss per share related to make-whole deemed dividends.
| 104 |
Condensed Consolidated Statements of Cash Flows
Consolidated statement of cash flows for the year ended December 31, 2017 is shown in Note 2, "Restatement of 2017 Consolidated Financial Statements".
Q1 2018 Quarterly Data Restatement Adjustments
Condensed Consolidated Balance Sheet
| March 31, 2018 | ||||||||||||||
| (In thousands) | As Previously Reported |
Corrections | Ref. | As Restated | ||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 24,084 | $ | – | $ | 24,084 | ||||||||
| Restricted cash | 2,454 | – | 2,454 | |||||||||||
| Accounts receivable, net | 25,730 | (19,695 | ) | a | 6,035 | |||||||||
| Accounts receivable - related party, net | – | 18,695 | a | 18,695 | ||||||||||
| Accounts receivable, unbilled - related party | 9,247 | – | 9,247 | |||||||||||
| Inventories | 4,998 | – | 4,998 | |||||||||||
| Prepaid expenses and other current assets | 7,340 | – | 7,340 | |||||||||||
| Total current assets | 73,853 | (1,000 | ) | 72,853 | ||||||||||
| Property, plant and equipment, net | 12,880 | 382 | b | 13,262 | ||||||||||
| Accounts receivable, unbilled - related party, noncurrent | 7,940 | – | 7,940 | |||||||||||
| Restricted cash, noncurrent | 959 | – | 959 | |||||||||||
| Recoverable taxes from Brazilian government entities | 1,226 | – | 1,226 | |||||||||||
| Other assets | 21,302 | (9,015 | ) | d | 12,287 | |||||||||
| Total assets | $ | 118,160 | $ | (9,633 | ) | $ | 108,527 | |||||||
| Liabilities, Mezzanine Equity and Stockholders' Deficit | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 16,054 | $ | (406 | ) | e | $ | 15,648 | ||||||
| Accrued and other current liabilities | 26,622 | 1,080 | f | 27,702 | ||||||||||
| Contract liabilities | 6,466 | 2,910 | g | 9,376 | ||||||||||
| Debt, current portion | 34,252 | 1,698 | h | 35,950 | ||||||||||
| Related party debt, current portion | 27,171 | – | 27,171 | |||||||||||
| Total current liabilities | 110,565 | 5,282 | 115,847 | |||||||||||
| Long-term debt, net of current portion | 62,489 | (2,027 | ) | h | 60,462 | |||||||||
| Related party debt, net of current portion | 39,147 | – | 39,147 | |||||||||||
| Derivative liabilities | 183,189 | (9,037 | ) | l | 174,152 | |||||||||
| Other noncurrent liabilities | 8,981 | 13,455 | m | 22,436 | ||||||||||
| Total liabilities | 404,371 | 7,673 | 412,044 | |||||||||||
| Commitments and contingencies | ||||||||||||||
| Mezzanine equity: | ||||||||||||||
| Contingently redeemable common stock | 5,000 | – | 5,000 | |||||||||||
| Stockholders’ deficit: | ||||||||||||||
| Common stock - $0.0001 par value | 5 | – | 5 | |||||||||||
| Additional paid-in capital | 1,050,587 | 66,272 | n | 1,116,859 | ||||||||||
| Accumulated other comprehensive loss | (42,293 | ) | – | (42,293 | ) | |||||||||
| Accumulated deficit | (1,300,447 | ) | (83,578 | ) | p | (1,384,025 | ) | |||||||
| Total Amyris, Inc. stockholders’ deficit | (292,148 | ) | (17,306 | ) | (309,454 | ) | ||||||||
| Noncontrolling interest | 937 | – | 937 | |||||||||||
| Total stockholders' deficit | (291,211 | ) | (17,306 | ) | (308,517 | ) | ||||||||
| Total liabilities, mezzanine equity and stockholders' deficit | $ | 118,160 | $ | (9,633 | ) | $ | 108,527 | |||||||
Restatement adjustments:
a. Reclassification of related party accounts receivable to a separate line on the balance sheet and a shift in revenue recognition and accounts receivable recognition timing.
b. Revision to capitalization of internal labor cost.
d. Reversal of the fair value of an equity instrument received as consideration in a revenue arrangement.
e. Correction to uninvoiced receipts liability.
f. Liability in connection with December 2017 divestiture of Amyris Brasil Ltda.
g. Revision to accounting for a license sale to a customer for which the customer paid the Company in equity, and shift in timing of royalty revenue recognition.
h. Correction to debt discount amortization.
l. Correction to extinguishment accounting for a make-whole equity instrument, and loss on extinguishment of related party debt in connection with May 2017 equity offering.
m. Income tax liability and Ginkgo partnership liability.
n. Correction to the settlement of a make-whole equity instrument, and loss on extinguishment of related party debt in connection with May 2017 equity offering.
p. Cumulative impact of restatement corrections on accumulated deficit.
| 105 |
Condensed Consolidated Statements of Operations
| Three Months Ended March 31, 2018 | ||||||||||||||
| (In thousands, except shares and per share amounts) | As Previously Reported | Corrections | Ref | As Restated | ||||||||||
| Renewable products | $ | 5,195 | $ | – | $ | 5,195 | ||||||||
| Licenses and royalties | 11,437 | (3,482 | ) | ab | 7,955 | |||||||||
| Grants and collaborations | 6,366 | (1,657 | ) | ac | 4,709 | |||||||||
| Total revenue | 22,998 | (5,139 | ) | 17,859 | ||||||||||
| Cost and operating expenses | ||||||||||||||
| Cost of products sold | 5,315 | – | 5,315 | |||||||||||
| Research and development | 18,813 | (988 | ) | ae | 17,825 | |||||||||
| Sales, general and administrative | 18,757 | (657 | ) | af | 18,100 | |||||||||
| Total cost and operating expenses | 42,885 | (1,645 | ) | 41,240 | ||||||||||
| Loss from operations | (19,887 | ) | (3,494 | ) | (23,381 | ) | ||||||||
| Other income (expense) | ||||||||||||||
| (Loss) gain on divestiture | – | (1,778 | ) | ag | (1,778 | ) | ||||||||
| Interest expense | (8,205 | ) | (1,773 | ) | ah | (9,978 | ) | |||||||
| (Loss) gain from change in fair value of derivative instruments | (63,913 | ) | 5,556 | ai | (58,357 | ) | ||||||||
| Other income (expense), net | 509 | 183 | al | 692 | ||||||||||
| Total other expense, net | (71,609 | ) | 2,188 | (69,421 | ) | |||||||||
| Loss before income taxes | (91,496 | ) | (1,306 | ) | (92,802 | ) | ||||||||
| Provision for income taxes | – | – | – | |||||||||||
| Net loss attributable to Amyris, Inc. | (91,496 | ) | (1,306 | ) | (92,802 | ) | ||||||||
| Less cumulative dividends on Series A and Series B preferred stock | (395 | ) | 395 | aw | – | |||||||||
| Add: losses allocated to participating securities | – | 7,504 | au | 7,504 | ||||||||||
| Net loss attributable to Amyris, Inc. common stockholders | $ | (91,891 | ) | $ | 6,593 | $ | (85,298 | ) | ||||||
| Loss per share attributable to common stockholders: | ||||||||||||||
| Basic and diluted | $ | (1.79 | ) | $ | (1.67 | ) | ||||||||
| Weighted-average shares of common stock outstanding used in computing loss per share of common stock: | ||||||||||||||
| Basic and diluted | 51,200,922 | 51,200,922 | ||||||||||||
Restatement adjustments:
ab. Reduction to revenue previously recognized in connection with DSM royalty revenue arrangement.
ac. Reclassification of a related party transaction from collaboration revenue to expense offset.
ae. Write-off of unrecoverable receivable in connection with facilities subleased to a related party, and revision to capitalization of internal labor cost.
af. Expense incurred in connection with May 2017 equity offering, and reclassification of amounts from related party services revenue to expense offset.
ag. Loss incurred in 2018 on December 2017 divestiture of Amyris Brasil Ltda.
ah. Correction to amortization of debt discounts, and interest expense in connection with Ginkgo partnership obligation.
ai. Adjustments to change in fair value of derivative liabilities in connection with May and August 2017 equity offerings.
al. Revision to accounting for shares received in satisfaction of a 2017 revenue arrangement, equity issuance costs recorded as expense, and adjustment to gain (loss) on change in accumulated other comprehensive income.
au. Correction in the computation of net loss per share to reflect participating securities.
aw. Correction in the computation of net loss per share related to make-whole deemed dividends.
| 106 |
Condensed Consolidated Statements of Cash Flows
| Three Months Ended March 31, 2018 | ||||||||||||
| (In thousands) | As Previously Reported | Corrections(1) | As Restated | |||||||||
| Operating activities | ||||||||||||
| Net loss | $ | (91,496 | ) | (1,306 | ) | $ | (92,802 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation and amortization | 1,561 | — | 1,561 | |||||||||
| Gain on change in fair value of equity investment | (315 | ) | 315 | — | ||||||||
| (Gain) loss on disposal of property, plant and equipment | 1,035 | — | 1,035 | |||||||||
| Stock-based compensation | 1,278 | — | 1,278 | |||||||||
| Amortization of debt discount | 3,016 | 1,773 | 4,789 | |||||||||
| (Gain) loss from change in fair value of derivative liabilities | 63,913 | (5,556 | ) | 58,357 | ||||||||
| (Gain) loss on foreign currency exchange rates | 243 | — | 243 | |||||||||
| Changes in assets and liabilities: | ||||||||||||
| Accounts receivable | (926 | ) | 1,000 | 74 | ||||||||
Accounts receivable, unbilled – related party |
93 | — | 93 | |||||||||
| Inventories | 420 | — | 420 | |||||||||
| Prepaid expenses and other assets | (2,268 | ) | 9,015 | 6,747 | ||||||||
| Accounts payable | (108 | ) | — | (108 | ) | |||||||
| Accrued and other liabilities | (2,779 | ) | (8,341 | ) | (11,120 | ) | ||||||
| Contract liabilities | 782 | 3,482 | 4,264 | |||||||||
| Net cash used in operating activities | (25,551 | ) | 382 | (25,169 | ) | |||||||
| Investing activities | ||||||||||||
| Purchases of property, plant and equipment | (1,202 | ) | (382 | ) | (1,584 | ) | ||||||
| Net cash (used in) provided by investing activities | (1,202 | ) | (382 | ) | (1,584 | ) | ||||||
| Financing activities | ||||||||||||
| Proceeds from exercises of common stock options | 81 | — | 81 | |||||||||
| Payment of minimum employee taxes withheld upon net share settlement of restricted stock units | (66 | ) | — | (66 | ) | |||||||
| Principal payments on capital leases | (400 | ) | — | (400 | ) | |||||||
| Principal payments on debt | (6,534 | ) | — | (6,534 | ) | |||||||
| Proceeds from exercise of warrants | 133 | — | 133 | |||||||||
| Proceeds from issuance of common stock in private placements, net of issuance costs | 92 | — | 92 | |||||||||
| Net cash provided by financing activities | (6,694 | ) | — | (6,694 | ) | |||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (68 | ) | — | (68 | ) | |||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | (33,515 | ) | — | (33,515 | ) | |||||||
| Cash, cash equivalents and restricted cash at beginning of year | 61,012 | — | 61,012 | |||||||||
| Cash, cash equivalents and restricted cash at end of year | $ | 27,497 | $ | — | $ | 27,497 | ||||||
| Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets | ||||||||||||
| Cash and cash equivalents | $ | 24,084 | $ | 24,084 | ||||||||
| Restricted cash, current | 2,454 | 2,454 | ||||||||||
| Restricted cash, noncurrent | 959 | 959 | ||||||||||
| Total cash, cash equivalents and restricted cash | $ | 27,497 | $ | 27,497 | ||||||||
(1) To reflect the impact of restatement corrections on the statement of cash flows.
| 107 |
Q2 2018 Quarterly Data Restatement Adjustments
Condensed Consolidated Balance Sheet
| June 30, 2018 | ||||||||||||||
| (In thousands) | As Previously Reported | Corrections | Ref. | As Restated | ||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 14,050 | $ | — | $ | 14,050 | ||||||||
| Restricted cash | 1,846 | — | 1,846 | |||||||||||
| Short-term investments | 130 | — | 130 | |||||||||||
| Accounts receivable, net | 26,814 | (17,247 | ) | a | 9,567 | |||||||||
| Accounts receivable - related party, net | — | 4,265 | a | 4,265 | ||||||||||
| Accounts receivable, unbilled - related party | 12,683 | — | 12,683 | |||||||||||
| Inventories | 6,632 | — | 6,632 | |||||||||||
| Prepaid expenses and other current assets | 4,687 | — | 4,687 | |||||||||||
| Total current assets | 66,842 | (12,982 | ) | 53,860 | ||||||||||
| Property, plant and equipment, net | 15,300 | — | 15,300 | |||||||||||
Accounts receivable, unbilled, noncurrent – related party |
9,747 | — | 9,747 | |||||||||||
| Deferred cost of products sold, noncurrent – related party | — | — | — | |||||||||||
| Restricted cash, noncurrent | 959 | — | 959 | |||||||||||
| Recoverable taxes from Brazilian government entities | 1,057 | — | 1,057 | |||||||||||
| Other assets | 24,747 | (10,418 | ) | d | 14,329 | |||||||||
| Total assets | $ | 118,652 | $ | (23,400 | ) | $ | 95,252 | |||||||
| Liabilities, Mezzanine Equity and Stockholders' Deficit | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 19,206 | $ | — | $ | 19,206 | ||||||||
| Accrued and other current liabilities | 20,101 | 2,645 | f | 22,746 | ||||||||||
| Contract liabilities | 9,643 | (2,672 | ) | g | 6,971 | |||||||||
| Debt, current portion | 59,987 | 118 | h | 60,105 | ||||||||||
| Related party debt, current portion | 49,669 | — | 49,669 | |||||||||||
| Total current liabilities | 158,606 | 91 | 158,697 | |||||||||||
| Long-term debt, net of current portion | 43,642 | 121 | h | 43,763 | ||||||||||
| Related party debt, net of current portion | 18,104 | (270 | ) | k | 17,834 | |||||||||
| Derivative liabilities | 138,695 | (4,850 | ) | l | 133,845 | |||||||||
| Other noncurrent liabilities | 8,581 | 13,492 | m | 22,073 | ||||||||||
| Total liabilities | 367,628 | 8,584 | 376,212 | |||||||||||
| Commitments and contingencies | ||||||||||||||
| Mezzanine equity: | ||||||||||||||
| Contingently redeemable common stock | 5,000 | — | 5,000 | |||||||||||
| Stockholders’ deficit: | ||||||||||||||
| Common stock - $0.0001 par value | 5 | — | 5 | |||||||||||
| Additional paid-in capital | 1,086,814 | 67,811 | n | 1,154,625 | ||||||||||
| Accumulated other comprehensive loss | (42,818 | ) | (302 | ) | o | (43,120 | ) | |||||||
| Accumulated deficit | (1,298,914 | ) | (99,493 | ) | p | (1,398,407 | ) | |||||||
| Total Amyris, Inc. stockholders’ deficit | (254,913 | ) | (31,984 | ) | (286,897 | ) | ||||||||
| Noncontrolling interest | 937 | — | 937 | |||||||||||
| Total stockholders' deficit | (253,976 | ) | (31,984 | ) | (285,960 | ) | ||||||||
| Total liabilities, mezzanine equity and stockholders' deficit | $ | 118,652 | $ | (23,400 | ) | $ | 95,252 | |||||||
Restatement adjustments:
a. Reclassification of related party accounts receivable to a separate line on the balance sheet, and revision to accounting for a related party royalties arrangement.
d. Reversal of prepaid royalty asset related to Ginkgo Partnership promissory note and the fair value of an equity instrument received as consideration in a revenue arrangement.
f. Liability in connection with December 2017 divestiture of Amyris Brasil Ltda.
g. Revision to accounting for a license sale to a customer for non-cash consideration, and shift in timing of royalty revenue recognition.
h. Correction to debt discount amortization.
l. Correction to extinguishment accounting for a make-whole equity instrument, and loss on extinguishment of related party debt in connection with May 2017 equity offering.
m. Income tax and Ginkgo partnership obligation liabilities.
n. Correction to the settlement of a make-whole equity instrument, and loss on extinguishment of related party debt in connection with May 2017 equity offering.
o. Correction to accumulated other comprehensive loss related to foreign currency translation gains / losses.
p. Cumulative impact of restatement corrections on accumulated deficit.
| 108 |
Condensed Consolidated Statements of Operations
| Three Months Ended June 30, 2018 | Six Months Ended June 30, 2018 | |||||||||||||||||||||||||||
| (In thousands, except shares and per share amounts) | As Previously Reported | Corrections | Ref | As Restated | As Previously Reported | Corrections | Ref | As Restated | ||||||||||||||||||||
| Renewable products | $ | 6,633 | $ | – | $ | 6,633 | $ | 11,828 | $ | – | $ | 11,828 | ||||||||||||||||
| Licenses and royalties | 6,887 | (7,400 | ) | ab | (513 | ) | 18,324 | (10,882 | ) | ab | 7,442 | |||||||||||||||||
| Grants and collaborations | 9,674 | (735 | ) | ac | 8,939 | 16,040 | (2,392 | ) | ac | 13,648 | ||||||||||||||||||
| Total revenue | 23,194 | (8,135 | ) | 15,059 | 46,192 | (13,274 | ) | 32,918 | ||||||||||||||||||||
| Cost and operating expenses | ||||||||||||||||||||||||||||
| Cost of products sold | 5,984 | 550 | ad | 6,534 | 11,299 | 550 | ad | 11,849 | ||||||||||||||||||||
| Research and development | 15,287 | 382 | ae | 15,669 | 34,100 | (606 | ) | ae | 33,494 | |||||||||||||||||||
| Sales, general and administrative | 20,189 | (735 | ) | af | 19,454 | 38,946 | (1,392 | ) | af | 37,554 | ||||||||||||||||||
| Total cost and operating expenses | 41,460 | 197 | 41,657 | 84,345 | (1,448 | ) | 82,897 | |||||||||||||||||||||
| Loss from operations | (18,266 | ) | (8,332 | ) | (26,598 | ) | (38,153 | ) | (11,826 | ) | (49,979 | ) | ||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||
| (Loss) gain on divestiture | – | – | – | – | (1,778 | ) | ag | (1,778 | ) | |||||||||||||||||||
| Interest expense | (8,824 | ) | (756 | ) | ah | (9,580 | ) | (17,029 | ) | (2,529 | ) | ah | (19,558 | ) | ||||||||||||||
| (Loss) gain from change in fair value of derivative instruments | 24,365 | (2,375 | ) | ai | 21,990 | (39,548 | ) | 3,181 | ai | (36,367 | ) | |||||||||||||||||
| Gain upon extinguishment of derivative liability | 1,857 | (1,857 | ) | aj | – | 1,857 | (1,857 | ) | aj | – | ||||||||||||||||||
| Loss upon extinguishment of debt | (26 | ) | – | (26 | ) | (26 | ) | – | (26 | ) | ||||||||||||||||||
| Other income (expense), net | 2,427 | (2,595 | ) | al | (168 | ) | 2,936 | (2,412 | ) | al | 524 | |||||||||||||||||
| Total other expense, net | 19,799 | (7,583 | ) | 12,216 | (51,810 | ) | (5,395 | ) | (57,205 | ) | ||||||||||||||||||
| Loss before income taxes | 1,533 | (15,915 | ) | (14,382 | ) | (89,963 | ) | (17,221 | ) | (107,184 | ) | |||||||||||||||||
| Provision for income taxes | – | – | – | – | – | – | ||||||||||||||||||||||
| Net loss attributable to Amyris, Inc. | 1,533 | (15,915 | ) | (14,382 | ) | (89,963 | ) | (17,221 | ) | (107,184 | ) | |||||||||||||||||
| Less cumulative dividends on Series A and Series B preferred stock | (399 | ) | 399 | aw | – | (794 | ) | 794 | aw | – | ||||||||||||||||||
| Add: losses allocated to participating securities | (67 | ) | 1,037 | au | 970 | (67 | ) | 7,999 | au | 7,932 | ||||||||||||||||||
| Net loss attributable to Amyris, Inc. common stockholders | $ | 1,067 | $ | (14,479 | ) | $ | (13,412 | ) | $ | (90,824 | ) | $ | (8,428 | ) | $ | (99,252 | ) | |||||||||||
| Loss per share attributable to common stockholders: | ||||||||||||||||||||||||||||
| Basic and diluted | $ | 0.02 | $ | (0.24 | ) | $ | (1.71 | ) | $ | (1.87 | ) | |||||||||||||||||
| Weighted-average shares of common stock outstanding used in computing loss per share of common stock: | ||||||||||||||||||||||||||||
| Basic and diluted | 54,932,411 | 54,932,411 | 53,076,975 | 53,076,975 | ||||||||||||||||||||||||
Restatement adjustments:
ab. Reduction to revenue previously recognized in connection with DSM royalty revenue arrangement.
ac. Reclassification of a related party transaction from collaboration revenue to expense offset.
ad. Adjustment to uninvoiced receipts liability, and revision in connection with change in timing of revenue recognition.
ae. Write-off of unrecoverable receivable in connection with facilities subleased to a related party, and revision to capitalization of internal labor cost.
af. Expense incurred in connection with May 2017 equity offering, and reclassification of amounts from related party services revenue to expense offset.
ag. Loss incurred in 2018 in connection with the December 2017 divestiture of Amyris Brasil Ltda.
ah. Correction to amortization of debt discounts, and interest expense in connection with various debt instruments.
ai. Correction to accounting for settlement of a make-whole equity instrument in connection with May 2017 equity offering.
aj. Reclassification to (loss) gain from change in fair value of derivative instruments.
al. Revision to accounting for shares received in satisfaction of a 2017 revenue arrangement, equity issuance costs recorded as expense, and adjustment to gain (loss) on change in accumulated other comprehensive income.
au. Correction in the computation of net loss per share to reflect participating securities.
aw. Correction in the computation of net loss per share related to make-whole deemed dividends.
| 109 |
Condensed Consolidated Statements of Cash Flows
| Six Months Ended June 30, 2018 | ||||||||||||
| (In thousands) | As Previously Reported | Corrections(1) | As Restated | |||||||||
| Operating activities | ||||||||||||
| Net loss | $ | (89,963 | ) | (17,221 | ) | $ | (107,184 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation and amortization | 2,944 | — | 2,944 | |||||||||
| Gain on change in fair value of equity investment | (1,717 | ) | 1,717 | — | ||||||||
| (Gain) loss on disposal of property, plant and equipment | 942 | — | 942 | |||||||||
| Stock-based compensation | 3,178 | — | 3,178 | |||||||||
| Amortization of debt discount | 6,587 | 1,642 | 8,229 | |||||||||
| (Gain) loss upon extinguishment of debt | 26 | — | 26 | |||||||||
| Receipt of equity in connection with collaboration arrangements revenue | — | |||||||||||
| (Gain) loss from change in fair value of derivative liabilities | 39,548 | (3,181 | ) | 36,367 | ||||||||
| (Gain) loss from extinguishment of derivative liabilities | (1,857 | ) | 1,857 | — | ||||||||
| (Gain) loss on foreign currency exchange rates | 271 | (302 | ) | (31 | ) | |||||||
| Changes in assets and liabilities: | ||||||||||||
| Accounts receivable | (2,027 | ) | 12,983 | 10,956 | ||||||||
Accounts receivable, unbilled – related party |
(5,150 | ) | — | (5,150 | ) | |||||||
| Inventories | (1,313 | ) | — | (1,313 | ) | |||||||
| Deferred cost of products sold | — | — | — | |||||||||
| Prepaid expenses and other assets | (1,072 | ) | (606 | ) | (1,678 | ) | ||||||
| Accounts payable | 2,681 | 406 | 3,087 | |||||||||
| Accrued and other liabilities | (10,031 | ) | 3,311 | (6,720 | ) | |||||||
| Contract liabilities | 3,959 | (2,100 | ) | 1,859 | ||||||||
| Net cash used in operating activities | (52,994 | ) | (1,494 | ) | (54,488 | ) | ||||||
| Investing activities | ||||||||||||
| Change in short-term investments | (157 | ) | — | (157 | ) | |||||||
| Purchases of property, plant and equipment | (4,207 | ) | — | (4,207 | ) | |||||||
| Net cash (used in) provided by investing activities | (4,364 | ) | — | (4,364 | ) | |||||||
| Financing activities | ||||||||||||
| Proceeds from exercises of common stock options | 248 | — | 248 | |||||||||
| Payment of minimum employee taxes withheld upon net share settlement of restricted stock units | (185 | ) | — | (185 | ) | |||||||
| Principal payments on capital leases | (593 | ) | — | (593 | ) | |||||||
| Proceeds from issuance of debt, net of issuance costs | 34,611 | 1,494 | 36,105 | |||||||||
| Principal payments on debt | (37,037 | ) | — | (37,037 | ) | |||||||
| Proceeds from exercise of warrants | 14,549 | — | 14,549 | |||||||||
| Proceeds from issuance of common stock in private placements, net of issuance costs | 1,416 | — | 1,416 | |||||||||
| Proceeds from ESPP purchases | 270 | — | 270 | |||||||||
| Net cash provided by financing activities | 13,279 | 1,494 | 14,773 | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (78 | ) | — | (78 | ) | |||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | (44,157 | ) | — | (44,157 | ) | |||||||
| Cash, cash equivalents and restricted cash at beginning of year | 61,012 | — | 61,012 | |||||||||
| Cash, cash equivalents and restricted cash at end of year | $ | 16,855 | $ | — | $ | 16,855 | ||||||
| Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets | ||||||||||||
| Cash and cash equivalents | $ | 14,050 | $ | 14,050 | ||||||||
| Restricted cash, current | 1,846 | 1,846 | ||||||||||
| Restricted cash, noncurrent | 959 | 959 | ||||||||||
| Total cash, cash equivalents and restricted cash | $ | 16,855 | $ | 16,855 | ||||||||
(1) To reflect the impact of restatement corrections on the statement of cash flows.
| 110 |
Q3 018 Quarterly Data Restatement Adjustments
Condensed Consolidated Balance Sheet
| September 30, 2018 | ||||||||||||||
| (In thousands) | As Previously Reported | Corrections | Ref. | As Restated | ||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 19,045 | $ | — | $ | 19,045 | ||||||||
| Restricted cash | 1,258 | — | 1,258 | |||||||||||
| Accounts receivable, net | 35,564 | (20,563 | ) | a | 15,001 | |||||||||
| Accounts receivable - related party, net | — | 7,581 | a | 7,581 | ||||||||||
| Accounts receivable, unbilled- related party | 56 | — | 56 | |||||||||||
| Inventories | 6,260 | — | 6,260 | |||||||||||
| Prepaid expenses and other current assets | 5,541 | — | 5,541 | |||||||||||
| Total current assets | 67,724 | (12,982 | ) | 54,742 | ||||||||||
| Property, plant and equipment, net | 16,622 | — | 16,622 | |||||||||||
| Accounts receivable, unbilled, noncurrent - related party | 9,767 | — | 9,767 | |||||||||||
| Restricted cash, noncurrent | 959 | — | 959 | |||||||||||
| Recoverable taxes from Brazilian government entities | 1,053 | — | 1,053 | |||||||||||
| Other assets | 26,557 | (12,161 | ) | d | 14,396 | |||||||||
| Total assets | $ | 122,682 | $ | (25,143 | ) | $ | 97,539 | |||||||
| Liabilities, Mezzanine Equity and Stockholders' Deficit | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 11,380 | $ | — | $ | 11,380 | ||||||||
| Accrued and other current liabilities | 27,263 | 10,448 | f | 37,711 | ||||||||||
| Contract liabilities | 6,698 | (2,672 | ) | g | 4,026 | |||||||||
| Debt, current portion | 61,904 | 152 | h | 62,056 | ||||||||||
| Related party debt, current portion | 47,020 | — | 47,020 | |||||||||||
| Total current liabilities | 154,265 | 7,928 | 162,193 | |||||||||||
| Long-term debt, net of current portion | 43,667 | 121 | j | 43,788 | ||||||||||
| Related party debt, net of current portion | 18,526 | (270 | ) | j | 18,256 | |||||||||
| Derivative liabilities | 98,662 | (5,101 | ) | l | 93,561 | |||||||||
| Other noncurrent liabilities | 8,152 | 13,141 | m | 21,293 | ||||||||||
| Total liabilities | 323,272 | 15,819 | 339,091 | |||||||||||
| Commitments and contingencies | ||||||||||||||
| Mezzanine equity: | ||||||||||||||
| Contingently redeemable common stock | 5,000 | — | 5,000 | |||||||||||
| Stockholders’ deficit: | ||||||||||||||
| Common stock - $0.0001 par value | 6 | — | 6 | |||||||||||
| Additional paid-in capital | 1,202,850 | 65,829 | n | 1,268,679 | ||||||||||
| Accumulated other comprehensive loss | (42,148 | ) | (1,166 | ) | o | (43,314 | ) | |||||||
| Accumulated deficit | (1,367,235 | ) | (105,625 | ) | p | (1,472,860 | ) | |||||||
| Total Amyris, Inc. stockholders’ deficit | (206,527 | ) | (40,962 | ) | (247,489 | ) | ||||||||
| Noncontrolling interest | 937 | — | 937 | |||||||||||
| Total stockholders' deficit | (205,590 | ) | (40,962 | ) | (246,552 | ) | ||||||||
| Total liabilities, mezzanine equity and stockholders' deficit | $ | 122,682 | $ | (25,143 | ) | $ | 97,539 | |||||||
Restatement adjustments:
a. Reclassification of related party accounts receivable to a separate line on the balance sheet, and revision to accounting for a related party royalties arrangement.
d. Reversal of revenue and the fair value of an equity instrument received as consideration in a revenue arrangement.
f. Liability related to modification of warrants recorded as legal expense, and liability in connection with December 2017 divestiture of Amyris Brasil Ltda.
g. Revision to accounting for a related party royalties arrangement, and revision to accounting for a license sale to a customer for non-cash consideration.
h. Correction to debt discount amortization.
j. Correction to debt discount amortization.
l. Correction to extinguishment accounting for a make-whole equity instrument.
m. Income tax and Ginkgo partnership obligation liabilities.
n. Correction to the settlement of a make-whole equity instrument, and loss on extinguishment of related party debt in connection with May 2017 equity offering.
o. Correction to accumulated other comprehensive loss related to foreign currency translation gains / losses.
p. Cumulative impact of restatement corrections on accumulated deficit.
| 111 |
Condensed Consolidated Statements of Operations
| Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 | |||||||||||||||||||||||||||
| (In thousands, except shares and per share amounts) | As Previously Reported | Corrections | Ref | As Restated | As Previously Reported | Corrections | Ref | As Restated | ||||||||||||||||||||
| Renewable products | $ | 9,639 | $ | – | $ | 9,639 | $ | 21,467 | $ | – | $ | 21,467 | ||||||||||||||||
| Licenses and royalties | 142 | – | 142 | 18,466 | (10,882 | ) | ab | 7,584 | ||||||||||||||||||||
| Grants and collaborations | 5,085 | (551 | ) | ac | 4,534 | 21,125 | (2,943 | ) | ac | 18,182 | ||||||||||||||||||
| Total revenue | 14,866 | (551 | ) | 14,315 | 61,058 | (13,825 | ) | 47,233 | ||||||||||||||||||||
| Cost and operating expenses | ||||||||||||||||||||||||||||
| Cost of products sold | 8,574 | – | 8,574 | 19,873 | 550 | ad | 20,423 | |||||||||||||||||||||
| Research and development | 16,445 | – | 16,445 | 50,545 | (606 | ) | ae | 49,939 | ||||||||||||||||||||
| Sales, general and administrative | 21,026 | 6,213 | af | 27,239 | 59,972 | 4,821 | af | 64,793 | ||||||||||||||||||||
| Total cost and operating expenses | 46,045 | 6,213 | 52,258 | 130,390 | 4,765 | 135,155 | ||||||||||||||||||||||
| Loss from operations | (31,179 | ) | (6,764 | ) | (37,943 | ) | (69,332 | ) | (18,590 | ) | (87,922 | ) | ||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||
| (Loss) gain on divestiture | – | – | – | – | (1,778 | ) | ag | (1,778 | ) | |||||||||||||||||||
| Interest expense | (8,658 | ) | (522 | ) | ah | (9,180 | ) | (25,687 | ) | (3,051 | ) | ah | (28,738 | ) | ||||||||||||||
| (Loss) gain from change in fair value of derivative instruments | (25,048 | ) | 251 | ai | (24,797 | ) | (64,596 | ) | 3,432 | ai | (61,164 | ) | ||||||||||||||||
| Gain upon extinguishment of derivative liability | (1,782 | ) | 1,782 | aj | – | 75 | (75 | ) | aj | – | ||||||||||||||||||
| Loss upon extinguishment of debt | – | – | – | (26 | ) | – | (26 | ) | ||||||||||||||||||||
| Other income (expense), net | (1,654 | ) | (879 | ) | al | (2,533 | ) | 1,282 | (3,291 | ) | al | (2,009 | ) | |||||||||||||||
| Total other expense, net | (37,142 | ) | 632 | (36,510 | ) | (88,952 | ) | (4,763 | ) | (93,715 | ) | |||||||||||||||||
| Loss before income taxes | (68,321 | ) | (6,132 | ) | (74,453 | ) | (158,284 | ) | (23,353 | ) | (181,637 | ) | ||||||||||||||||
| Provision for income taxes | – | – | – | – | – | – | ||||||||||||||||||||||
| Net loss attributable to Amyris, Inc. | (68,321 | ) | (6,132 | ) | (74,453 | ) | (158,284 | ) | (23,353 | ) | (181,637 | ) | ||||||||||||||||
| Less deemed dividend related to proceeds discount and issuance costs upon conversion of Series D preferred stock | – | (6,852 | ) | at | (6,852 | ) | – | (6,852 | ) | at | (6,852 | ) | ||||||||||||||||
| Less cumulative dividends on Series A and Series B preferred stock | (279 | ) | 279 | aw | – | (1,073 | ) | 1,073 | aw | – | ||||||||||||||||||
| Add: losses allocated to participating securities | – | 4,491 | au | 4,491 | (67 | ) | 12,891 | au | 12,824 | |||||||||||||||||||
| Net loss attributable to Amyris, Inc. common stockholders | $ | (68,600 | ) | $ | (8,214 | ) | $ | (76,814 | ) | $ | (159,424 | ) | $ | (16,241 | ) | $ | (175,665 | ) | ||||||||||
| Loss per share attributable to common stockholders: | ||||||||||||||||||||||||||||
| Basic and diluted | $ | (1.13 | ) | $ | (0.13 | ) | $ | (1.26 | ) | $ | (2.86 | ) | $ | (0.29 | ) | $ | (3.15 | ) | ||||||||||
| Weighted-average shares of common stock outstanding used in computing loss per share of common stock: | ||||||||||||||||||||||||||||
| Basic and diluted | 60,966,071 | 60,966,071 | 55,735,571 | 55,735,571 | ||||||||||||||||||||||||
Restatement adjustments:
ab. Reduction to revenue previously
recognized in connection with DSM royalty revenue arrangement.
ac. Reclassification of a related party transaction from collaboration revenue to expense offset.
ad. Adjustment to uninvoiced receipts liability.
ae. Write-off of unrecoverable receivable in connection with facilities subleased to a related party.
af. Expense incurred in connection with warrant exercise in August 2018, and reclassification of amounts from related party services revenue to expense offset.
ag. Loss incurred in 2018 on December 2017 divestiture of Amyris Brasil Ltda.
ah. Interest expense in connection with various debt instruments.
ai. Adjustments to change in fair value of derivative liabilities in connection with May and August 2017 equity offerings.
aj. Correction to extinguishment accounting for a make-whole equity instrument.
al. Revision to accounting for shares received in satisfaction of a 2017 revenue arrangement, equity issuance costs recorded as expense, and adjustment to gain (loss) on change in accumulated other comprehensive income.
at. Correction to record deemed dividend in connection with discounts and freestanding instruments related to preferred stock offerings.
au. Correction in the computation of net loss per share to reflect participating securities.
aw. Correction in the computation of net loss per share related to make-whole deemed dividends.
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Condensed Consolidated Statements of Cash Flows
| Nine Months Ended September 30, 2018 | ||||||||||||
| (In thousands) | As Previously Reported | Corrections(1) | As Restated | |||||||||
| Operating activities | ||||||||||||
| Net loss | $ | (158,284 | ) | (23,353 | ) | $ | (181,637 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation and amortization | 3,957 | — | 3,957 | |||||||||
| Gain on change in fair value of equity investment | (3,460 | ) | 3,460 | — | ||||||||
| (Gain) loss on disposal of property, plant and equipment | 943 | — | 943 | |||||||||
| Stock-based compensation | 6,115 | — | 6,115 | |||||||||
| Amortization of debt discount | 10,568 | 1,676 | 12,244 | |||||||||
| (Gain) loss upon extinguishment of debt | 26 | — | 26 | |||||||||
| (Gain) loss from change in fair value of derivative liabilities | 64,596 | (3,432 | ) | 61,164 | ||||||||
| (Gain) loss from extinguishment of derivative liabilities | (75 | ) | 75 | |||||||||
| (Gain) loss on foreign currency exchange rates | 34 | (1,166 | ) | (1,132 | ) | |||||||
| Changes in assets and liabilities: | ||||||||||||
| Accounts receivable | (10,756 | ) | 12,982 | 2,226 | ||||||||
Accounts receivable, unbilled – related party |
7,457 | — | 7,457 | |||||||||
| Inventories | (890 | ) | — | (890 | ) | |||||||
| Prepaid expenses and other assets | (1,781 | ) | (606 | ) | (2,387 | ) | ||||||
| Accounts payable | (5,201 | ) | 406 | (4,795 | ) | |||||||
| Accrued and other liabilities | (2,216 | ) | 10,564 | 8,348 | ||||||||
| Contract liabilities | 1,014 | (2,100 | ) | (1,086 | ) | |||||||
| Net cash used in operating activities | (87,953 | ) | (1,494 | ) | (89,447 | ) | ||||||
| Investing activities | ||||||||||||
| Purchases of property, plant and equipment | (6,362 | ) | — | (6,362 | ) | |||||||
| Net cash (used in) provided by investing activities | (6,362 | ) | — | (6,362 | ) | |||||||
| Financing activities | ||||||||||||
| Proceeds from exercises of common stock options | 301 | — | 301 | |||||||||
| Payment of minimum employee taxes withheld upon net share settlement of restricted stock units | (196 | ) | — | (196 | ) | |||||||
| Principal payments on capital leases | (848 | ) | — | (848 | ) | |||||||
| Proceeds from issuance of debt, net of issuance costs | 35,149 | 1,494 | 36,643 | |||||||||
| Principal payments on debt | (41,970 | ) | — | (41,970 | ) | |||||||
| Proceeds from exercise of warrants | 60,544 | — | 60,544 | |||||||||
| Proceeds from issuance of common stock in private placements, net of issuance costs | 1,416 | — | 1,416 | |||||||||
| Proceeds from ESPP purchases | 270 | — | 270 | |||||||||
| Net cash provided by financing activities | 54,666 | 1,494 | 56,160 | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (101 | ) | — | (101 | ) | |||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | (39,750 | ) | — | (39,750 | ) | |||||||
| Cash, cash equivalents and restricted cash at beginning of year | 61,012 | — | 61,012 | |||||||||
| Cash, cash equivalents and restricted cash at end of year | $ | 21,262 | $ | — | $ | 21,262 | ||||||
| Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets | ||||||||||||
| Cash and cash equivalents | $ | 19,045 | $ | 19,045 | ||||||||
| Restricted cash, current | 1,258 | 1,258 | ||||||||||
| Restricted cash, noncurrent | 959 | 959 | ||||||||||
| Total cash, cash equivalents and restricted cash | $ | 21,262 | $ | 21,262 | ||||||||
(1) To reflect the impact of restatement corrections on the statement of cash flows.
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ITEM 9A. CONTROLS AND PROCEDURES
As described in additional detail in the Explanatory Note to this Annual Report on Form 10-K, in May 2019, our Board, upon the recommendation of the Audit Committee after consultation with senior management, concluded that there were material misstatements in our audited consolidated financial statements for the year ended December 31, 2017. Accordingly, our Board and senior management concluded that our audited consolidated financial statements for the year ended December 31, 2017 should no longer be relied upon and required restatement. The restated audited consolidated financial statements for year ended December 31, 2017 are provided in this Annual Report on Form 10-K.
| (a) | Evaluation of Disclosure Controls and Procedures |
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer (CEO) and interim chief financial officer (CFO) and, as appropriate, to allow timely decisions regarding required disclosures.
In connection with the preparation of this Annual Report on Form 10-K, we carried out an evaluation under the supervision of and with the participation of management, including our CEO and CFO, as of December 31, 2018, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon this evaluation, our CEO and CFO concluded that as of December 31, 2018, our disclosure controls and procedures were not effective because of the material weaknesses in our internal control over financial reporting described below.
Notwithstanding the existence of the material weaknesses described below, management performed additional analysis and other procedures to ensure that our consolidated financial statements were prepared in accordance with U.S. GAAP. Accordingly, management believes that the consolidated financial statements and disclosures included in this Annual Report on Form 10-K fairly present, in all material respects, in accordance with U.S. GAAP, our financial position, results of operations and cash flows for the periods presented.
| (b) | Management’s Annual Report on Internal Control over Financial Reporting |
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed by and under the supervision of our CEO and CFO and effected by our board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Management, under the supervision of our CEO and CFO, and oversight of the board of directors, conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2018, based on the criteria set forth in Internal Control–Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013 Framework). Based on this assessment, management has identified deficiencies in our internal controls over financial reporting that contributed to the identified material weaknesses described below:
| • | The Company’s control environment is not effective because the Company lacked a sufficient number of trained resources with assigned responsibility and accountability over the application of generally accepted accounting principles and financial reporting and related internal controls over complex, significant non-routine transactions and routine transactions; |
| • | The Company did not have an effective risk assessment process to identify and analyze necessary changes in business operations resulting from complex significant non-routine transactions and completeness and adequacy of required disclosures; |
| • | The Company did not have an effective internal and external information and communication process to ensure that relevant and reliable information was communicated timely across the organization, to enable financial personnel to effectively carry out their financial reporting and internal control roles and responsibilities; and |
| • | The Company did not design, implement and operate effective monitoring activities over complex, significant non-routine transactions and the accounting for income taxes to ascertain whether the processes and internal controls were present and functioning. |
As a consequence of the ineffective control environment, risk assessment, information and communication and monitoring activities components, the Company did not design, implement, and maintain effective control activities at the transaction level over all significant accounts to mitigate the risk of material misstatement in financial reporting, specifically:
| • | The Company did not retain the required documentation to demonstrate the consistent and timely operation of the controls at a sufficient level of precision to prevent and detect potential misstatements; and |
| • | The Company did not design and operate effective controls over account reconciliations, review and approval of manual journal entries, complex, significant non-routine transactions related to licenses and royalty revenue recognition, derivative liabilities, NOL carryforward limitations, currency translation adjustments and the completeness and accuracy and timely preparation of financial statement presentation and disclosures, including earnings per share. |
The control deficiencies create a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis. Therefore, we concluded that these control deficiencies are material weaknesses and our internal control over financial reporting is not effective as of December 31, 2018.
The Company’s independent registered public accounting firm, Macias, Gini & O’Connell LLP, who audited the December 31, 2018 consolidated financial statements included in this annual report, has issued an adverse audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018. Macias, Gini & O’Connell LLP's report appears under Part II, Item 8 of this Annual Report on Form 10-K.
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| (c) | Changes in Internal Control over Financial Reporting |
Except for the material weaknesses discussed above in this Item 9A that were identified in the fourth quarter (and that arose in an earlier period), there were no changes in our internal control over financial reporting during the fourth quarter of 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| (d) | Remediation Plan |
Management has begun implementing the plan to assess risks of material misstatement over financial reporting, including the enhancement of internal control activities, and training of key process owners. The plan will be accomplished by the execution of the following:
| • | Management will augment the finance and accounting function with qualified personnel commensurate with the complexity of our processes and financial reporting requirements. Management will review the assignment of roles and responsibilities to qualified personnel to ensure our financial reporting objectives are met. |
| • | Management will ensure key process owners and other relevant personnel are adequately trained on our financial reporting processes and internal controls to ensure such processes and controls are performed timely and supported with adequate documentation evidencing control performance. |
| • | Management will enhance internal communication processes through the formalization of internal control documentation and related documentation standards. |
| • | Management will formalize and strengthen our oversight and monitoring controls to assess the effective functioning of controls over all components and functional areas of the organization and to monitor compliance with policies and procedures. |
| • | Management will document and augment key policies and internal control procedures to strengthen our identification of and accounting for complex, significant non-routine transactions and routine transactions. |
We believe these activities will remediate the control deficiencies identified above and strengthen our internal controls over financial reporting. Management, with the oversight of the Audit Committee, has dedicated incremental resources to successfully implement and test effectiveness of the enhanced controls throughout 2019 and into 2020.
As we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above. We cannot be certain, however, that we will effectively remediate such material weaknesses or when we will do so, nor can we be certain of whether additional actions will be required or the costs of any such actions. In designing and evaluating disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgement in evaluating the benefits of possible controls and procedures relative to their costs.
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Amyris, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Amyris, Inc. and Subsidiaries (the “Company”) as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.
We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet as of December 31, 2018 and the related consolidated statement of operations, comprehensive loss, stockholders’ deficit and mezzanine equity and cash flow for the year end December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”) and our report dated October 1, 2019 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, management’s annual report on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Several material weaknesses regarding management’s failure to design, implement and maintain internal control over financial reporting have been identified and described in management’s assessment in Item 9A. The material weaknesses related to 1) control environment, due to material weaknesses related to lack of a sufficient number of trained resources with assigned responsibility and accountability over the application of generally accepted accounting principles and financial reporting and related internal controls over complex, significant non-routine transactions and routine transactions; 2) risk assessment, as to the lack of processes to identify and analyze necessary changes in business operations resulting from complex significant non-routine transactions and completeness and adequacy of required disclosures; 3) information and communication, as to the lack of processes to ensure that relevant and reliable information was communicated timely across the organization, to enable financial personnel to effectively carry out their financial reporting and internal control roles and responsibilities and 4) monitoring, given the lack of control activities over complex, significant non-routine transactions and accounting for income taxes to ascertain whether the processes and internal controls were present and functioning. These material weaknesses contributed to additional material weaknesses with the Company not retaining the required documentation to demonstrate the consistent and timely operation of the controls at a sufficient level of precision to prevent and detect potential misstatements and did not design and operate effective controls over account reconciliations, review and approval of manual journal entries, complex, significant non-routine transactions related to licenses and royalty revenue recognition, derivative liabilities, NOL carryforward limitations, currency translation adjustments and the completeness and accuracy and timely preparation of financial statement presentation and disclosures, including earnings per share.
These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2018 consolidated financial statements, and this report does not affect our report dated October 1, 2019 on those consolidated financial statements.
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Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Macias Gini & O'Connell LLP
San Francisco, California
October 1, 2019
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ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
We have filed the following documents as part of this Annual Report on Form 10-K/A:
| 1. | Financial Statements: See "Index to Consolidated Financial Statements" in Part II, Item 8 of this Annual Report on Form 10-K/A. |
| 2. | Financial Statement Schedule: |
a. Allowance for doubtful accounts: see Note 3, "Balance Sheet Details" in Part II, Item 8 of this Annual Report on Form 10-K/A.
b. Deferred tax assets valuation allowance: see Note 14, "Income Taxes" in Part II, Item 8 of this Annual Report on Form 10-K/A.
| 3. | Exhibits: See "Index to Exhibits" immediately following the signature page of this Annual Report on Form 10-K/A. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AMYRIS, INC. | ||
| By: | /s/ Jonathan Wolter | |
| Jonathan Wolter | ||
| Interim Chief Financial Officer | ||
| October 4, 2019 |
| 120 |
INDEX TO EXHIBITS
| 121 |
| 122 |
| 123 |
| 124 |
| 125 |
| a | Portions of this exhibit, which have been granted confidential treatment by the Securities and Exchange Commission, have been omitted. |
| b | Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K promulgated under the Exchange Act. |
| c | Registrant issued substantially identical warrants to the purchasers under that certain Securities Purchase Agreement entered into on July 24, 2015. Registrant has filed the warrant issued to Total Energies Nouvelles Activites USA and has included with such exhibit a schedule (Schedule A to Exhibit 4.11) identifying each of the warrants and setting forth the material details in which the other warrants differ from the filed warrant (i.e., the names of the purchasers, the certificate numbers and the respective numbers of shares underlying the warrants). |
| d | Substantially identical warrants were issued to three separate investors. Registrant has filed the warrant issued to Foris Ventures, LLC, which is substantially identical in all material respects to all of such warrants except as to the parties thereto, the issue date and the number of underlying shares. |
| e | Translation to English from Portuguese in accordance with Rule 12b-12(d) of the regulations promulgated by the Securities and Exchange Commission under the Exchange Act. |
| f | Indicates management contract or compensatory plan or arrangement. |
| g | This certification shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act. |
126
