UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2019
OR
| o | 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.)
|
Amyris, Inc.
5885 Hollis Street, Suite 100
Emeryville, CA 94608
(510) 450-0761
(Address and telephone number of principal executive offices)
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 | The Nasdaq Stock Market, LLC |
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 o No x
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 o No x
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 the 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 | o | Accelerated filer | x |
| Non-accelerated filer | o | Smaller reporting company | x |
| Emerging growth company | o |
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Shares outstanding of the Registrant's common stock:
| Class | Outstanding as of September 26, 2019 |
| Common Stock, $0.0001 par value per share | 103,400,207 |
EXPLANATORY NOTE
As described in additional detail in the Explanatory Note to our Annual Report on Form 10-K filed on October 1, 2019 for the fiscal year ended December 31, 2018 (the 2018 Form 10-K), 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, determined that the Company would 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 2018 Non-Reliance Periods). The Company also disclosed that investors should no longer rely upon (i) the Company’s previously released condensed consolidated financial statements for the 2018 Non-Reliance Periods, (ii) earnings releases for the 2018 Non-Reliance Periods and (iv) other communications relating to the Company’s previously released condensed consolidated financial statements for the 2018 Non-Reliance Periods. The restated financial statements for such periods are included in Part II, Item 8 of the 2018 Form 10-K/A filed on October 4, 2019.
This Quarterly Report on Form 10-Q for the three months ended March 31, 2019 reflects the comparative restated quarterly financial data for the three months ended March 31, 2018 contained in the 2018 Form 10-K/A filed on October 4, 2019.
Due to the restatement of our historical financial statements, we were unable to file the 2018 Form 10-K and 10-K/A until October 1, 2019 and October 4, 2019, respectively. We were unable to file this Quarterly Report on Form 10-Q until the 2018 Form 10-K was filed, which was after the prescribed May 10, 2019 due date and the five day extension period provided by Rule 12b-25 promulgated under the Securities Exchange Act of 1934.
AMYRIS, INC.
TABLE OF CONTENTS
4
PART I
AMYRIS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (In thousands, except shares and per share amounts) | March 31, 2019 | December 31, 2018 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 5,153 | $ | 45,353 | ||||
| Restricted cash | 623 | 741 | ||||||
| Accounts receivable, net of allowance of $126 and $642, respectively | 10,968 | 16,003 | ||||||
| Accounts receivable - related party, net of allowance of $12 and $0, respectively | 1,334 | 1,349 | ||||||
| Accounts receivable, unbilled - related party | — | 8,021 | ||||||
| Inventories | 8,486 | 9,693 | ||||||
| Deferred cost of products sold - related party | 1,489 | 489 | ||||||
| Prepaid expenses and other current assets | 8,215 | 10,566 | ||||||
| Total current assets | 36,268 | 92,215 | ||||||
| Property, plant and equipment, net | 21,558 | 19,756 | ||||||
| Accounts receivable, unbilled, noncurrent - related party | 1,203 | 1,203 | ||||||
| Deferred cost of products sold, noncurrent - related party | 9,001 | 2,828 | ||||||
| Restricted cash, noncurrent | 960 | 960 | ||||||
| Recoverable taxes from Brazilian government entities | 2,964 | 3,005 | ||||||
| Right-of-use assets under operating leases (Note 2) | 27,645 | — | ||||||
| Other assets | 5,548 | 7,958 | ||||||
| Total assets | $ | 105,147 | $ | 127,925 | ||||
| Liabilities, Mezzanine Equity and Stockholders' Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 28,604 | $ | 26,844 | ||||
| Accrued and other current liabilities | 33,591 | 28,979 | ||||||
| Lease liabilities (Note 2) | 11,424 | — | ||||||
| Contract liabilities | 8,333 | 8,236 | ||||||
| Debt, current portion (instrument measured at fair value $60,048 and $57,918, respectively) | 129,393 | 124,010 | ||||||
| Related party debt, current portion | 24,359 | 23,667 | ||||||
| Total current liabilities | 235,704 | 211,736 | ||||||
| Long-term debt, net of current portion | 42,928 | 43,331 | ||||||
| Related party debt, net of current portion | 19,147 | 18,689 | ||||||
| Lease liabilities, net of current portion (Note 2) | 18,850 | — | ||||||
| Derivative liabilities | 3,798 | 42,796 | ||||||
| Other noncurrent liabilities | 16,920 | 23,192 | ||||||
| Total liabilities | 337,347 | 339,744 | ||||||
| Commitments and contingencies (Note 8) | ||||||||
| Mezzanine equity: | ||||||||
| Contingently redeemable common stock (Note 5) | 5,000 | 5,000 | ||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock - $0.0001 par value, 5,000,000 shares authorized as of March 31, 2019 and December 31, 2018, and 14,656 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively | — | — | ||||||
| Common stock - $0.0001 par value, 250,000,000 shares authorized as of March 31, 2019 and December 31, 2018; 77,210,681 and 76,564,829 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively | 8 | 8 | ||||||
| Additional paid-in capital | 1,383,363 | 1,346,996 | ||||||
| Accumulated other comprehensive loss | (42,379 | ) | (43,343 | ) | ||||
| Accumulated deficit | (1,579,129 | ) | (1,521,417 | ) | ||||
| Total Amyris, Inc. stockholders’ deficit | (238,137 | ) | (217,756 | ) | ||||
| Noncontrolling interest | 937 | 937 | ||||||
| Total stockholders' deficit | (237,200 | ) | (216,819 | ) | ||||
| Total liabilities, mezzanine equity and stockholders' deficit | $ | 105,147 | $ | 127,925 | ||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
5
AMYRIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended March 31, | ||||||||
| (In thousands, except shares and per share amounts) | 2019 | 2018 | ||||||
| Revenue: | ||||||||
| Renewable products (includes related party revenue of $2 and $151, respectively) | $ | 11,884 | $ | 5,195 | ||||
| Licenses and royalties (includes related party revenue of ($380) and $7,918, respectively) | 118 | 7,955 | ||||||
| Grants and collaborations (includes related party revenue of $396 and $734, respectively) | 2,372 | 4,709 | ||||||
| Total revenue (includes related party revenue of $18 and $8,803, respectively) | 14,374 | 17,859 | ||||||
| Cost and operating expenses: | ||||||||
| Cost of products sold | 17,707 | 5,315 | ||||||
| Research and development | 17,839 | 17,825 | ||||||
| Sales, general and administrative | 28,253 | 18,100 | ||||||
| Total cost and operating expenses | 63,799 | 41,240 | ||||||
| Loss from operations | (49,425 | ) | (23,381 | ) | ||||
| Other income (expense): | ||||||||
| Loss on divestiture | — | (1,778 | ) | |||||
| Interest expense | (12,534 | ) | (9,978 | ) | ||||
| Loss from change in fair value of derivative instruments | (2,039 | ) | (58,357 | ) | ||||
| Loss from change in fair value of debt | (2,130 | ) | — | |||||
| Other income (expense), net | (115 | ) | 692 | |||||
| Total other income (expense), net | (16,818 | ) | (69,421 | ) | ||||
| Loss before income taxes | (66,243 | ) | (92,802 | ) | ||||
| Provision for income taxes | — | — | ||||||
| Net loss attributable to Amyris, Inc. | (66,243 | ) | (92,802 | ) | ||||
| Less: losses allocated to participating securities | 2,430 | 7,504 | ||||||
| Net loss attributable to Amyris, Inc. common stockholders | $ | (63,813 | ) | $ | (85,298 | ) | ||
| Loss per share attributable to common stockholders, basic and diluted | $ | (0.82 | ) | $ | (1.67 | ) | ||
| Weighted-average shares of common stock outstanding used in computing loss per share of common stock, basic and diluted | 77,512,059 | 51,200,922 | ||||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
6
AMYRIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
| Three Months Ended March 31, | ||||||||
| (In thousands) | 2019 | 2018 | ||||||
| Comprehensive loss: | ||||||||
| Net loss attributable to Amyris, Inc. | $ | (66,243 | ) | $ | (92,802 | ) | ||
| Foreign currency translation adjustment | 964 | (137 | ) | |||||
| Comprehensive loss attributable to Amyris, Inc. | $ | (65,279 | ) | $ | (92,939 | ) | ||
See the accompanying notes to the unaudited condensed consolidated financial statements.
7
AMYRIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT AND MEZZANINE EQUITY
(Unaudited)
| (In thousands, except number of shares) | Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Noncontrolling Interest | Total Stockholders' Deficit | Mezzanine Equity - Common Stock | |||||||||||||||||||||||||||||||
| Balances at December 31, 2018 | 14,656 | $ | — | 76,564,829 | $ | 8 | $ | 1,346,996 | $ | (43,343 | ) | $ | (1,521,417 | ) | $ | 937 | $ | (216,819 | ) | $ | 5,000 | |||||||||||||||||||
| Cumulative effect of change in accounting principle for ASU 2017-11 (see "Recently Adopted Accounting Pronouncements" in Note 1) | — | — | — | — | 32,512 | — | 8,531 | — | 41,043 | — | ||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants | — | — | 450,568 | — | 1 | — | — | — | 1 | — | ||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | 3,612 | — | 13 | — | — | — | 13 | — | ||||||||||||||||||||||||||||||
| Issuance of common stock and payment of minimum employee taxes withheld upon net share settlement of restricted stock | — | — | 191,672 | — | (9 | ) | — | — | — | (9 | ) | — | ||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 3,452 | — | — | — | 3,452 | — | ||||||||||||||||||||||||||||||
| Fair value of bifurcated embedded conversion feature in connection with debt modification | — | — | — | — | 398 | — | — | — | 398 | — | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | 964 | — | — | 964 | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (66,243 | ) | — | (66,243 | ) | — | ||||||||||||||||||||||||||||
| Balances at March 31, 2019 | 14,656 | $ | — | 77,210,681 | $ | 8 | $ | 1,383,363 | $ | (42,379 | ) | $ | (1,579,129 | ) | $ | 937 | $ | (237,200 | ) | $ | 5,000 | |||||||||||||||||||
| Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Noncontrolling Interest | Total Stockholders' Deficit | Mezzanine Equity - Common Stock | |||||||||||||||||||||||||||||||
| Balances at December 31, 2017 | 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 | — | — | — | — | — | — | (803 | ) | — | (803 | ) | — | ||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants | — | — | 162,392 | — | 835 | — | — | — | 835 | — | ||||||||||||||||||||||||||||||
| Issuance of common stock in private placement, net of issuance costs | — | — | 13,529 | — | 92 | — | — | — | 92 | — | ||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | 7,004 | — | 81 | — | — | — | 81 | — | ||||||||||||||||||||||||||||||
| Issuance of common stock and payment of minimum employee taxes withheld upon net share settlement of restricted stock | — | — | 30,489 | — | (66 | ) | — | — | — | (66 | ) | — | ||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 1,278 | — | — | — | 1,278 | — | ||||||||||||||||||||||||||||||
| Other | — | — | — | — | 93 | — | — | — | 93 | — | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | (137 | ) | — | — | (137 | ) | — | ||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | (92,802 | ) | — | (92,802 | ) | — | ||||||||||||||||||||||||||||
| Balances at March 31, 2018 | 22,171 | $ | — | 45,850,847 | $ | 5 | $ | 1,116,859 | $ | (42,293 | ) | $ | (1,384,025 | ) | $ | 937 | $ | (308,517 | ) | $ | 5,000 | |||||||||||||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
8
AMYRIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended March 31, | ||||||||
| (In thousands) | 2019 | 2018 | ||||||
| Operating activities | ||||||||
| Net loss | (66,243 | ) | (92,802 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of debt discount | 4,628 | 4,789 | ||||||
| Stock-based compensation | 3,452 | 1,278 | ||||||
| Loss from change in fair value of debt | 2,130 | — | ||||||
| Loss from change in fair value of derivative liabilities | 2,039 | 58,357 | ||||||
| Amortization of right-of-use assets under operating leases | 2,826 | — | ||||||
| Depreciation and amortization | 848 | 1,561 | ||||||
| Write-down of property, plant and equipment | 438 | — | ||||||
| Loss on disposal of property, plant and equipment | 1 | 1,035 | ||||||
| (Gain) loss on foreign currency exchange rates | (108 | ) | 243 | |||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | 5,048 | 74 | ||||||
| Accounts receivable, unbilled - related party | 8,021 | 93 | ||||||
| Inventories | 1,196 | 420 | ||||||
| Deferred cost of products sold | (7,173 | ) | — | |||||
| Prepaid expenses and other assets | 1,766 | 6,747 | ||||||
| Accounts payable | 1,834 | (108 | ) | |||||
| Accrued and other liabilities | 6,245 | (11,120 | ) | |||||
| Lease liabilities | (4,036 | ) | — | |||||
| Contract liabilities | 108 | 4,264 | ||||||
| Net cash used in operating activities | (36,980 | ) | (25,169 | ) | ||||
| Investing activities | ||||||||
| Purchases of property, plant and equipment | (3,046 | ) | (1,584 | ) | ||||
| Net cash used in investing activities | (3,046 | ) | (1,584 | ) | ||||
| Financing activities | ||||||||
| Proceeds from issuance of debt, net of issuance costs | 484 | — | ||||||
| Proceeds from exercises of common stock options | 13 | 81 | ||||||
| Proceeds from exercises of warrants | 1 | 133 | ||||||
| Payment of minimum employee taxes withheld upon net share settlement of restricted stock units | (9 | ) | (66 | ) | ||||
| Principal payments on financing leases | (134 | ) | (400 | ) | ||||
| Principal payments on debt | (577 | ) | (6,534 | ) | ||||
| Proceeds from issuance of common stock in private placements, net of issuance costs | — | 92 | ||||||
| Net cash used in financing activities | (222 | ) | (6,694 | ) | ||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (70 | ) | (68 | ) | ||||
| Net decrease in cash, cash equivalents and restricted cash | (40,318 | ) | (33,515 | ) | ||||
| Cash, cash equivalents and restricted cash at beginning of period | 47,054 | 61,012 | ||||||
| Cash, cash equivalents and restricted cash at end of the period | $ | 6,736 | $ | 27,497 | ||||
| Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets | ||||||||
| Cash and cash equivalents | $ | 5,153 | $ | 24,084 | ||||
| Restricted cash, current | 623 | 2,454 | ||||||
| Restricted cash, noncurrent | 960 | 959 | ||||||
| Total cash, cash equivalents and restricted cash | $ | 6,736 | $ | 27,497 | ||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
9
AMYRIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
(Unaudited)
| Three Months Ended March 31, | ||||||||
| (In thousands) | 2019 | 2018 | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | 3,099 | $ | 1,815 | ||||
| Supplemental disclosures of non-cash investing and financing activities: | ||||||||
| Right-of-use assets under operating leases recorded upon adoption of ASC 842 (Note 2) | $ | 29,713 | $ | — | ||||
| Lease liabilities recorded upon adoption of ASC 842 (Note 2) | $ | 33,552 | $ | — | ||||
| Cumulative effect of change in accounting principle for ASU 2017-11 (Note 2) | $ | 41,043 | $ | — | ||||
| Acquisition of property, plant and equipment under accounts payable, accrued liabilities and notes payable | $ | 605 | $ | 264 | ||||
| Acquisition of right-of-use assets under operating leases | $ | 758 | $ | — | ||||
| Right-of-use assets amortization capitalized into inventory | $ | 1,800 | $ | — | ||||
| Accrued interest added to debt principal | $ | 448 | $ | 1,211 | ||||
| Fair value of warrants recorded as debt discount in connection with debt modification | $ | 398 | $ | — | ||||
| Financing of equipment | $ | — | $ | 91 | ||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
10
AMYRIS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation and Summary of Significant Accounting Policies
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.
The accompanying unaudited condensed consolidated financial statements of Amyris, Inc. should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2018 (the 2018 Form 10-K/A), from which the condensed consolidated balance sheet as of December 31, 2018 is derived. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying condensed consolidated financial statements do not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.
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 these condensed consolidated financial statements. As of March 31, 2019, the Company had negative working capital of $199.4 million (compared to negative working capital of $119.5 million as of December 31, 2018), and an accumulated deficit of $1.6 billion.
As of March 31, 2019, the Company's debt (including related party debt), net of debt discount of $13.5 million, totaled $215.8 million, of which $153.8 million is classified as current. Subsequent to March 31, 2019, the Company entered into arrangements with lenders to extend maturities and convert certain debt obligations into common stock; see Note 12, "Subsequent Events" for more information. The Company's debt service obligations through March 31, 2020 are $179.8 million, including $23.5 million of anticipated cash interest payments. 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 and cross-default clauses. A failure to comply with, or cure non-compliance events or obtain waivers for covenant violations, 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 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 the Company's outstanding indebtedness.
Cash and cash equivalents of $5.2 million as of March 31, 2019 are not sufficient to fund expected future negative cash flows from operations and cash debt service obligations through March 31, 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 condensed consolidated financial statements are issued. The condensed 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 extend existing debt maturities by restructuring a majority of its convertible debt, which is uncertain and outside the control of the Company. Further, the Company's operating plan for the twelve months ending March 31, 2020 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) significantly increased cash inflows from grants and collaborations, and (iii) reduced production costs as a result of manufacturing and technical developments. 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 it may be required 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 the Company receives for its assets in liquidation or dissolution could be significantly lower than the value reflected in these condensed consolidated financial statements.
11
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 condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Significant Accounting Policies
Note 1, "Basis of Presentation and Summary of Significant Accounting Policies", to the audited consolidated financial statements in the 2018 Form 10-K/A includes a discussion of the significant accounting policies and estimates used in the preparation of the Company’s consolidated financial statements. There have been no material changes to the Company's significant accounting policies and estimates during the three months ended March 31, 2019, except for the Company's adoption of these accounting standards on January 1, 2019:
• Accounting Standards Codification (ASC) Topic 842 (ASC 842), Leases; and
• Accounting Standards Update (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
Revenue Recognition
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 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 whether 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.
The Company’s significant contracts and contractual terms with its customers are presented in Note 10, "Revenue Recognition" in Part II, Item 8 of the 2018 Form 10-K/A.
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 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. The Company’s renewable products are delivered to customers from the Company’s facilities with shipping terms typically specifying F.O.B. shipping point.
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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 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. 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.
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 and revenue is estimated and 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 amount method, which is the single amount in a range of possible amounts derived from the licensee’s historical sales volumes and sales prices of its products and recent commodity market pricing data and trends.
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.
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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 collaborators 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.
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 the milestones in these agreements 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 collaborators 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. Contract liability 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 collaboration 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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For descriptions of the Company's other significant accounting policies, see the 2018 Form 10-K/A.
Accounting Standards or Updates Recently Adopted
In the three months ended March 31, 2019, the Company adopted these accounting standards or updates:
Leases In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires the recognition of lease liabilities and right-of-use (ROU) assets on the balance sheet arising from lease transactions at the lease commencement date and the disclosure of key information about leasing arrangements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an additional transition method in which the lease standard is applied at the adoption date and recognized as a cumulative-effect adjustment to retained earnings without adjustment to comparative periods (collectively Topic 842). The amendment has the same effective date and transition requirements as the lease standard.
The Company adopted this standard on January 1, 2019 using the modified retrospective approach and elected the package of practical expedients permitted under transition guidance, which allowed the Company to carry forward its historical assessments of: (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs, where applicable. The Company did not elect the practical expedient allowing the use-of-hindsight which would require the Company to reassess the lease term of its leases based on all facts and circumstances through the effective date and did not elect the practical expedient pertaining to land easements as this is not applicable to the Company’s current contracts. The Company elected the post-transition practical expedient to not separate lease components from non-lease components for all leases of manufacturing equipment. The Company also elected a policy of not recording leases on its condensed consolidated balance sheets when the leases have a term of 12 months or less and the Company is not reasonably certain to elect an option to purchase the leased asset.
The adoption of this standard had the effect of increasing assets and liabilities on the condensed consolidated balance sheet by $25.7 million, but did not have a material impact on the condensed consolidated statements of operations or cash flows. The most significant impact relates to (1) the recognition of new ROU assets and lease liabilities on the balance sheet for operating leases; and (2) providing significant new disclosures about leasing activities.
Upon adoption, the Company recognized 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 also recognized ROU assets of $29.7 million, which represents the operating lease liability, adjusted for prepaid expenses and deferred rent. The difference between the operating lease ROU assets and lease liabilities reflects the net of advanced rent payments and deferred rent balances that were derecognized at the time of adoption.
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 became effective in the first quarter of fiscal year 2019, and the Company adopted the standard using a modified retrospective approach. Since the adoption of ASU 2017-11 would have classified the warrants effected as equity at inception, the cumulative-effect adjustment should (i) record the issuance date value of the warrants as if they had been equity classified at the issuance date, (ii) reverse the effects of changes in the fair value of the warrants that had been recorded in the statement of operations of each period, and (iii) eliminate the derivative liabilities from the balance sheet. Upon adoption, the Company (i) recorded an increase of $32.5 million to additional paid-in capital, (ii) recorded a decrease to accumulated deficit of $8.5 million and (iii) decreased the warrant liability by $41.0 million.
Recent Accounting Standards or Updates Not Yet Effective
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 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 standard on its condensed 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 condensed 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 condensed consolidated financial statements will be material.
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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 condensed consolidated 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 condensed consolidated financial statements.
2. Balance Sheet Details
Inventories
| (In thousands) | March 31, 2019 | December 31, 2018 | ||||||
| Raw materials | $ | 2,451 | $ | 3,901 | ||||
| Work-in-process | 238 | 539 | ||||||
| Finished goods | 5,797 | 5,253 | ||||||
| Inventories | $ | 8,486 | $ | 9,693 | ||||
Deferred cost of products sold - related party
| (In thousands) | March 31, 2019 | December 31, 2018 | ||||||
| Deferred cost of products sold - related party | $ | 1,489 | $ | 489 | ||||
| Deferred cost of products sold, noncurrent - related party | 9,001 | 2,828 | ||||||
| Total | $ | 10,490 | $ | 3,317 | ||||
In November 2018, the Company amended the supply agreement with DSM to secure capacity at the Brotas 1 facility for sweetener production through 2022. See Note 10, “Revenue Recognition” in Part II, Item 8 of the 2018 Form 10-K/A for information regarding the November 2018 Supply Agreement Amendment. The supply agreement was included as an element of a combined transaction with DSM, which resulted in a fair value allocation of $24.4 million to the manufacturing capacity fees, of which $3.3 million was recorded as deferred cost of products sold at December 31, 2018. During the three months ended March 31, 2019, the Company paid an additional $7.3 million of reservation capacity fees, which was recorded as additional deferred cost of products sold. The remaining $13.8 million capacity fees will be recorded as deferred cost of products sold in the period the additional payments are made to DSM. The deferred cost of products sold asset is expensed to cost of products sold on a units of production basis as the Company's sweetener product is sold over the five-year term of the supply agreement. Each quarter, the Company evaluates its future production volumes and adjusts the unit cost to be expensed over the remaining estimated production volume. Due to the Company's commercial launch of the product in December 2018, amortization of the deferred cost of products sold asset has been insignificant through March 31, 2019. The deferred cost of products sold asset is evaluated for recoverability at each period end.
Prepaid expenses and other current assets
| (In thousands) | March 31, 2019 | December 31, 2018 | ||||||
| Prepayments, advances and deposits | $ | 3,310 | $ | 5,644 | ||||
| Recoverable taxes from Brazilian government entities | 956 | 631 | ||||||
| Other | 3,949 | 4,291 | ||||||
| Total prepaid expenses and other current assets | $ | 8,215 | $ | 10,566 | ||||
Property, Plant and Equipment, Net
| (In thousands) | March 31, 2019 | December 31, 2018 | ||||||
| Machinery and equipment | $ | 45,874 | $ | 43,713 | ||||
| Leasehold improvements | 39,951 | 39,922 | ||||||
| Computers and software | 10,138 | 9,987 | ||||||
| Furniture and office equipment, vehicles and land | 3,279 | 3,016 | ||||||
| Construction in progress | 1,460 | 1,749 | ||||||
| Total property, plant and equipment, gross | 100,702 | 98,387 | ||||||
| Less: accumulated depreciation and amortization | (79,144 | ) | (78,631 | ) | ||||
| Property, plant and equipment, net | $ | 21,558 | $ | 19,756 | ||||
During the three months ended March 31, 2019 and 2018, the Company capitalized $0.2 million and $0.8 million, respectively, of internal labor costs required to automate, integrate and ready certain laboratory and plant equipment for its intended use.
Depreciation and amortization expense, including amortization of assets under financing leases, was $0.8 million and $1.6 million for the three months ended March 31, 2019 and 2018, respectively.
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Leases
Operating Leases
The Company has entered into operating leases primarily for administrative offices, laboratory equipment and other facilities. The operating leases have remaining terms that range from 1 year to 5 years, and often include one or more options to renew. These renewal terms can extend the lease term from 1 to 5 years and are included in the lease term when it is reasonably certain that the Company will exercise the option. The operating leases are classified as Right-of-use (ROU) assets under operating leases on the Company's March 31, 2019 Condensed Consolidated Balance Sheet and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make operating lease payments is included in "Lease liabilities" and "Lease liabilities, net of current portion" on the Company's March 31, 2019 Condensed Consolidated Balance Sheet. Based on the present value of the lease payments for the remaining lease term of the Company's existing leases, the Company recognized right-of-use assets of $29.7 million and lease liabilities for operating leases of $33.6 million on January 1, 2019. Operating lease right-of-use assets and liabilities commencing after January 1, 2019 are recognized at commencement date based on the present value of lease payments over the lease term. As of March 31, 2019, total right-of-use assets and operating lease liabilities were $27.6 million and $29.7 million, respectively. All operating lease expense is recognized on a straight-line basis over the lease term. In the three months ended March 31, 2019, the Company recorded $2.8 million of operating lease amortization that was charged to expense, and $1.8 million of operating lease amortization for certain contract manufacturing arrangements that was capitalized to inventory.
Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. The Company has certain contracts for real estate and marketing which may contain lease and non-lease components which it has elected to treat as a single lease component.
Information related to the Company's right-of-use assets and related lease liabilities were as follows:
| Amounts in thousands | Three Months Ended March 31, 2019 | |||
| Cash paid for operating lease liabilities | $ | 5,305 | ||
| Right-of-use assets obtained in exchange for new operating lease obligations(1) | $ | 30,472 | ||
| Weighted-average remaining lease term (in years) | 2.7 | |||
| Weighted-average discount rate | 18.0 | % | ||
(1) Includes $29.7 million for operating leases existing on January 1, 2019 and $0.8 million for operating leases that commenced in the first quarter of 2019.
Financing Leases
The Company has entered into financing leases primarily for laboratory and computer equipment. Assets purchased under financing leases are included in "Property, plant and equipment, net" on the condensed consolidated balance sheets. For financing leases, the associated assets are depreciated or amortized over the shorter of the relevant useful life of each asset or the lease term. Property, plant and equipment, net included $5.3 million and $5.0 million of machinery and equipment under financing leases as of March 31, 2019 and December 31, 2018, respectively. Accumulated amortization of assets under financing leases totaled $2.5 million and $2.3 million as of March 31, 2019 and December 31, 2018, respectively.
Maturities of Financing and Operating Leases
Maturities of lease liabilities as of March 31, 2019 were as follows:
| Years ending December 31: (In thousands) | Financing Leases | Operating Leases | Total Leases | |||||||||
| 2019 (remaining nine months) | $ | 368 | $ | 12,755 | $ | 13,123 | ||||||
| 2020 | 199 | 9,109 | 9,308 | |||||||||
| 2021 | 1 | 7,226 | 7,227 | |||||||||
| 2022 | — | 7,398 | 7,398 | |||||||||
| 2023 | — | 3,034 | 3,034 | |||||||||
| Thereafter | — | — | — | |||||||||
| Total lease payments | 568 | 39,522 | 40,090 | |||||||||
Less: amount representing interest | (23 | ) | (9,793 | ) | (9,816 | ) | ||||||
| Total lease liability | $ | 545 | $ | 29,729 | $ | 30,274 | ||||||
| Current lease liability | $ | 452 | $ | 10,972 | $ | 11,424 | ||||||
| Noncurrent lease liability | 93 | 18,757 | 18,850 | |||||||||
| Total lease liability | $ | 545 | $ | 29,729 | $ | 30,274 | ||||||
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Other Assets
| (In thousands) | March 31, 2019 | December 31, 2018 | ||||||
| Contingent consideration | $ | 4,286 | $ | 4,286 | ||||
| Deposits | 145 | 2,465 | ||||||
| Other | 1,117 | 1,207 | ||||||
| Other assets | $ | 5,548 | $ | 7,958 | ||||
Accrued and Other Current Liabilities
| (In thousands) | March 31, 2019 | December 31, 2018 | ||||||
| DSM manufacturing capacity fee | $ | 7,250 | $ | — | ||||
| Contract termination fees | 5,337 | 6,247 | ||||||
| Accrued interest | 7,094 | 3,853 | ||||||
| Payroll and related expenses | 5,285 | 9,220 | ||||||
| Asset retirement obligation | 3,111 | 3,063 | ||||||
| Tax-related liabilities | 2,589 | 2,139 | ||||||
| Professional services | 1,871 | 1,173 | ||||||
| Other | 1,054 | 3,284 | ||||||
| Total accrued and other current liabilities | $ | 33,591 | $ | 28,979 | ||||
Other noncurrent liabilities
| (In thousands) | March 31, 2019 | December 31, 2018 | ||||||
| Contract termination fees, net of current portion | $ | 8,207 | $ | 7,715 | ||||
| Liability for unrecognized tax benefit | 6,582 | 6,582 | ||||||
| Contract liability, net of current portion (Note 9) | 1,449 | 1,587 | ||||||
| Deferred rent, net of current portion(1) | — | 6,440 | ||||||
| Other | 682 | 868 | ||||||
| Total other noncurrent liabilities | $ | 16,920 | $ | 23,192 | ||||
(1) Deferred rent at December 31, 2018 was reclassified to ROU asset upon the adoption on January 1, 2019 of ASC 842, "Leases".
3. Fair Value Measurement
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
The following tables summarize assets and liabilities measured at fair value, and the respective fair value by input classification level within the fair value hierarchy:
| (In thousands) | March 31, 2019 | December 31, 2018 | ||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||
| 6% Convertible Notes Due 2021 | $ | — | $ | — | $ | 60,048 | $ | 60,048 | $ | — | $ | — | $ | 57,918 | $ | 57,918 | ||||||||||||||||
| Freestanding derivative instruments in connection with the issuance of equity instruments | — | — | 3,798 | 3,798 | — | — | 42,796 | 42,796 | ||||||||||||||||||||||||
| Total liabilities measured and recorded at fair value | $ | — | $ | — | $ | 63,846 | $ | 63,846 | $ | — | $ | — | $ | 100,714 | $ | 100,714 | ||||||||||||||||
There were no transfers between levels during the periods presented.
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6% Convertible Notes Due 2021
The Company issued $60.0 million of 6% Convertible Notes Due 2021 on December 10, 2018 and elected the fair value option of accounting for this instrument. At March 31, 2019, outstanding principal was $60.0 million, and the fair value was $60.0 million, which was measured using a binomial lattice model and assuming a 23.8% discount yield, 45% equity volatility, 50% / 50% probability of principal repayment in cash / stock, and 5% probability of change in control. See Note 4, “Debt” for further information related to this debt instrument. For the three months ended March 31, 2019, the Company recorded a $2.1 million loss from change in fair value of debt in connection with the 6% Convertible Notes Due 2021, as follows:
| In thousands | ||||
| Fair value at December 31, 2018 | $ | 57,918 | ||
| Change in fair value | 2,130 | |||
| Fair value at March 31, 2019 | $ | 60,048 | ||
Derivative Liabilities Recognized in Connection with the Issuance of Debt and Equity Instruments
The following table provides a reconciliation of the beginning and ending balances for the Company's derivative liabilities recognized in connection with the issuance of debt and equity instruments, measured at fair value using significant unobservable inputs (Level 3):
| (In thousands) | Equity-related Derivative Liability | Debt-related Derivative Liability | Total Derivative Liability | |||||||||
| Balance at December 31, 2018 | $ | 41,272 | $ | 1,524 | $ | 42,796 | ||||||
| Derecognition upon adoption of ASU 2017-11 | (39,513 | ) | (1,524 | ) | (41,037 | ) | ||||||
| Change in fair value of derivative liabilities | 2,039 | — | 2,039 | |||||||||
| Balance at March 31, 2019 | $ | 3,798 | $ | — | $ | 3,798 | ||||||
As of March 31, 2019, the remaining derivative liabilities are in connection with the November 2018 Securities Purchase Agreement with DSM. See Note 10, “Revenue Recognition” in Part II, Item 8 of the 2018 10-K/A. This make-whole provision is effectively marked to market through the condensed consolidated statements of operations, based on the Company’s closing stock price at each reporting period until converted into common stock or cash settled. The fair value of these instruments is directly affected by the volatility of the Company’s stock price between each reporting period or conversion date, if settled during the reporting period.
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 March 31, 2019, excluding the 6% Convertible Notes that the Company records at fair value, was $155.8 million. The fair value of such debt at March 31, 2019 was $155.8 million, 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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4. Debt
Net carrying amounts of debt are as follows:
| March 31, 2019 | December 31, 2018 | |||||||||||||||||||||||||||||||
| (In thousands) | Principal | Unamortized Debt (Discount) Premium | Change in Fair Value | Net Balance | Principal | Unamortized Debt (Discount) Premium | Change in Fair Value | Net Balance | ||||||||||||||||||||||||
| Convertible notes payable | ||||||||||||||||||||||||||||||||
| 6% convertible notes due 2021 | $ | 60,000 | $ | — | $ | 48 | $ | 60,048 | $ | 60,000 | $ | — | $ | (2,082 | ) | $ | 57,918 | |||||||||||||||
| 2015 Rule 144A convertible notes | 37,887 | (358 | ) | — | 37,529 | 37,887 | (2,413 | ) | — | 35,474 | ||||||||||||||||||||||
| 2014 Rule 144A convertible notes | 24,004 | (289 | ) | — | 23,715 | 24,004 | (867 | ) | — | 23,137 | ||||||||||||||||||||||
| August 2013 financing convertible note | 4,863 | (596 | ) | — | 4,267 | 4,415 | (70 | ) | — | 4,345 | ||||||||||||||||||||||
| 126,754 | (1,243 | ) | 48 | 125,559 | 126,306 | (3,350 | ) | (2,082 | ) | 120,874 | ||||||||||||||||||||||
| Related party convertible notes payable | ||||||||||||||||||||||||||||||||
| 2014 Rule 144A convertible notes | 24,705 | (346 | ) | — | 24,359 | 24,705 | (1,038 | ) | — | 23,667 | ||||||||||||||||||||||
| Loans payable and credit facilities | ||||||||||||||||||||||||||||||||
| GACP secured term loan facility | 36,000 | (1,208 | ) | — | 34,792 | 36,000 | (1,349 | ) | — | 34,651 | ||||||||||||||||||||||
| Ginkgo note | 12,000 | (3,832 | ) | — | 8,168 | 12,000 | (4,047 | ) | — | 7,953 | ||||||||||||||||||||||
| Other loans payable | 4,813 | (1,011 | ) | — | 3,802 | 4,910 | (1,047 | ) | — | 3,863 | ||||||||||||||||||||||
| 52,813 | (6,051 | ) | — | 46,762 | 52,910 | (6,443 | ) | — | 46,467 | |||||||||||||||||||||||
| Related party loans payable | ||||||||||||||||||||||||||||||||
| DSM note | 25,000 | (5,853 | ) | — | 19,147 | 25,000 | (6,311 | ) | — | 18,689 | ||||||||||||||||||||||
| Total debt | $ | 229,272 | $ | (13,493 | ) | $ | 48 | 215,827 | $ | 228,921 | $ | (17,142 | ) | $ | (2,082 | ) | 209,697 | |||||||||||||||
| Less: current portion | (153,752 | ) | (147,677 | ) | ||||||||||||||||||||||||||||
| Long-term debt, net of current portion | $ | 62,075 | $ | 62,020 | ||||||||||||||||||||||||||||
The 6% convertible notes due 2021 have been classified as current in the March 31, 2019 and December 31, 2018 balance sheets, due to certain events subsequent to March 31, 2019 but prior to the issuance of the March 31, 2019 and December 31, 2018 financial statements. See Note 12, "Subsequent Events" for additional information.
On January 14, 2019, Wolverine Flagship Fund Trading Limited (Wolverine) agreed to waive payment of the August 2013 Financing Convertible Note held by Wolverine at its January 15, 2019 maturity until July 15, 2019 in exchange for a fee, payable on or prior to July 15, 2019, of $0.6 million. The Company concluded that the term extension represented a debt modification, and the fee was accounted for as additional debt discount to be amortized over the remaining term. 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. See Note 12, “Subsequent Events” for additional information.
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Future Minimum Payments
Future minimum payments under the Company's debt agreements as of March 31, 2019 are as follows:
| (In thousands) | Convertible Notes | Loans Payable and Credit Facilities | Related Party Convertible Notes | Related Party Loans Payable and Credit Facilities | Total | |||||||||||||||
| 2019 (remaining nine months) | $ | 139,303 | $ | 9,689 | $ | 25,618 | $ | 1,875 | $ | 176,485 | ||||||||||
| 2020 | — | 10,113 | — | 2,500 | 12,613 | |||||||||||||||
| 2021 | — | 34,776 | — | 28,146 | 62,922 | |||||||||||||||
| 2022 | — | 13,450 | — | — | 13,450 | |||||||||||||||
| 2023 | — | 399 | — | — | 399 | |||||||||||||||
| Thereafter | — | 2,268 | — | — | 2,268 | |||||||||||||||
| Total future minimum payments | 139,303 | 70,695 | 25,618 | 32,521 | 268,137 | |||||||||||||||
| Less: amount representing interest | (12,303 | ) | (17,883 | ) | (913 | ) | (7,521 | ) | (38,620 | ) | ||||||||||
| Less: future conversion of accrued interest to principal | (245 | ) | — | — | — | (245 | ) | |||||||||||||
| Present value of minimum debt payments | 126,755 | 52,812 | 24,705 | 25,000 | 229,272 | |||||||||||||||
| Less: current portion of debt principal | (126,755 | ) | (4,513 | ) | (24,705 | ) | — | (155,973 | ) | |||||||||||
| Noncurrent portion of debt principal | $ | — | $ | 48,299 | $ | — | $ | 25,000 | $ | 73,299 | ||||||||||
5. Mezzanine Equity
Mezzanine equity is comprised of the following:
| (In thousands) | March 31, 2019 | December 31, 2018 | ||||||
| Contingently redeemable common stock | $ | 5,000 | $ | 5,000 | ||||
Mezzanine equity at March 31, 2019 and December 31, 2018 is comprised of proceeds from shares of common stock sold on May 10, 2016 to the Bill & Melinda Gates Foundation (Gates Foundation). In connection with the stock sale, the Company and the Gates Foundation entered into an agreement under which the Company agreed to expend an aggregate amount not less than the proceeds from the stock sale 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. If the Company defaults in its obligation to use the proceeds from the stock sale as set forth above or defaults under certain other commitments in the agreement, the Gates Foundation will have the right to request that the Company redeem, or facilitate the purchase by a third party, the 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 March 31, 2019, the Company's remaining research and development obligation under this arrangement was $0.6 million.
6. Stockholders' Deficit
Warrants
In connection with various debt and equity transactions (see Note 5, "Debt" and Note 7, “Stockholders’ Deficit” in Part II, Item 8 of the 2018 Form 10-K/A), the Company has issued warrants exercisable for shares of common stock. The following table summarizes warrant activity for the three months ended March 31, 2019:
| Transaction | Number Outstanding as of December 31, 2018 | Additional Warrants Issued | Exercises | Number Outstanding as of March 31, 2019 | ||||||||||||
| August 2018 warrant exercise agreements | 12,097,164 | — | — | 12,097,164 | ||||||||||||
| May 2017 cash and dilution warrants | 6,292,798 | — | — | 6,292,798 | ||||||||||||
| August 2017 cash and dilution warrants | 3,968,116 | — | — | 3,968,116 | ||||||||||||
| April 2018 warrant exercise agreements | 3,616,174 | — | — | 3,616,174 | ||||||||||||
| July 2015 related party debt exchange | 663,228 | — | (471,204 | ) | 192,024 | |||||||||||
| February 2016 related party private placement | 171,429 | — | — | 171,429 | ||||||||||||
| July 2015 private placement | 81,197 | — | (8,547 | ) | 72,650 | |||||||||||
| Other | 1,406 | — | — | 1,406 | ||||||||||||
| 26,891,512 | — | (479,751 | ) | 26,411,761 | ||||||||||||
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For the three months ended March 31, 2019, 479,751 shares of common stock were issued under certain anti-dilution warrants with an exercise price of $0.01 and resulted in no proceeds to the Company. The shares were exercised through net share settlement, resulting in the issuance of 450,568 shares.
7. Loss Per Share
For the three months ended March 31, 2019 and March 31, 2018, basic loss per share was the same as diluted loss per share, because the inclusion of all potentially dilutive securities outstanding was antidilutive.
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 loss per share:
| Three Months Ended March 31, | ||||||||
| (In thousands, except shares and per share amounts) | 2019 | 2018 | ||||||
| Numerator: | ||||||||
| Net loss attributable to Amyris, Inc. | $ | (66,243 | ) | $ | (92,802 | ) | ||
| Less: losses allocated to participating securities | 2,430 | 7,504 | ||||||
| Net loss attributable to Amyris, Inc. common stockholders | $ | (63,813 | ) | $ | (85,298 | ) | ||
| Denominator: | ||||||||
| Weighted-average shares of common stock outstanding used in computing loss per share of common stock, basic and diluted | 77,512,059 | 51,200,922 | ||||||
| Loss per share attributable to common stockholders, basic and diluted | $ | (0.82 | ) | $ | (1.67 | ) | ||
The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted loss per share of common stock because including them would have been antidilutive:
| Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| Period-end stock options to purchase common stock | 5,427,384 | 1,365,447 | ||||||
| Convertible promissory notes(1) | 12,699,607 | 8,347,364 | ||||||
| Period-end common stock warrants | 26,411,761 | 29,759,452 | ||||||
| Period-end restricted stock units | 5,493,579 | 706,697 | ||||||
| Period-end preferred stock | 2,955,732 | 4,504,212 | ||||||
| Total potentially dilutive securities excluded from computation of diluted loss per share | 52,988,063 | 44,683,172 | ||||||
______________
| (1) | The potentially dilutive effect of convertible promissory notes was computed based on conversion ratios in effect as of the respective period end dates. 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. |
8. Commitments and Contingencies
Contingencies
The Company has levied indirect taxes on sugarcane-based biodiesel sales that took place several years ago by Amyris Brasil Ltda. (see Note 12, “Divestiture” in Part II, Item 8 of the 2018 Form 10-K/A) to customers in Brazil, based on advice from external legal counsel. In the absence of definitive rulings from the Brazilian tax authorities on the appropriate indirect tax rate to be applied to such product sales, the actual indirect rate to be applied to such sales could differ from the rate the Company levied.
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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 and October 1, 2019, respectively, two separate purported shareholder derivative complaints were filed in the U.S. District Court for the Northern District of California (Bonner v. Doerr, et al., Case No. 4:19-cv-03621 and Carlson v. Doerr, et al., Case No. 4:19-cv-06230) based on similar allegations to those made in the securities class action complaint described above. The derivative complaints name Amyris, Inc. as a nominal defendant and name a number of the Company’s current and former officers and directors as additional defendants. The lawsuits seek to recover, on the Company's behalf, unspecified damages purportedly sustained by the Company in connection with allegedly misleading statements and omissions made in connection with the Company’s securities filings. The derivative complaints also seek 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.
Other Matters
Certain conditions may exist as of the date the condensed consolidated 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.
9. Revenue Recognition and Contract Assets and Liabilities
Disaggregation of Revenue
The following table presents revenue by major product and service, as well as by primary geographical market, based on the location of the customer:
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| (In thousands) | 2019 | 2018 | ||||||||||||||||||||||||||||||
| Renewable Products | Licenses and Royalties | Grants and Collaborations | Total | Renewable Products | Licenses and Royalties | Grants and Collaborations | Total | |||||||||||||||||||||||||
| United States | $ | 7,073 | $ | — | $ | 493 | $ | 7,566 | $ | 1,962 | $ | — | $ | 1,209 | $ | 3,171 | ||||||||||||||||
| Europe | 2,854 | 118 | 1,629 | 4,601 | 2,434 | 7,955 | 3,500 | 13,889 | ||||||||||||||||||||||||
| Asia | 1,718 | — | 250 | 1,968 | 678 | — | — | 678 | ||||||||||||||||||||||||
| South America | 220 | — | — | 220 | 21 | — | — | 21 | ||||||||||||||||||||||||
| Other | 19 | — | — | 19 | 100 | — | — | 100 | ||||||||||||||||||||||||
| $ | 11,884 | $ | 118 | $ | 2,372 | $ | 14,374 | $ | 5,195 | $ | 7,955 | $ | 4,709 | $ | 17,859 | |||||||||||||||||
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Significant Revenue Agreements During the Three Months Ended March 31, 2019
In connection with significant revenue agreements, the Company recognized the following revenues for the three months ended March 31, 2019 and 2018:
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| (In thousands) | 2019 | 2018 | ||||||||||||||||||||||||||||||
| Renewable Products | Licenses and Royalties | Grants and Collaborations | Total | Renewable Products | Licenses and Royalties | Grants and Collaborations | Total | |||||||||||||||||||||||||
| Firmenich | $ | 1,891 | $ | 498 | $ | 728 | $ | 3,117 | $ | 207 | $ | 37 | $ | 1,267 | $ | 1,511 | ||||||||||||||||
| Givaudan | 1,575 | — | — | 1,575 | 1,076 | — | 1,500 | 2,576 | ||||||||||||||||||||||||
| American Sugar Refining | 1,494 | — | — | 1,494 | — | — | — | — | ||||||||||||||||||||||||
| DSM - related party | 2 | (380 | ) | 396 | 18 | — | 7,918 | 734 | 8,652 | |||||||||||||||||||||||
| Subtotal revenue from significant revenue agreements | 4,962 | 118 | 1,124 | 6,204 | 1,283 | 7,955 | 3,501 | 12,739 | ||||||||||||||||||||||||
| Revenue from all other customers | 6,922 | — | 1,248 | 8,170 | 3,912 | — | 1,208 | 5,120 | ||||||||||||||||||||||||
| Total revenue from all customers | $ | 11,884 | $ | 118 | $ | 2,372 | $ | 14,374 | $ | 5,195 | $ | 7,955 | $ | 4,709 | $ | 17,859 | ||||||||||||||||
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 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 condensed consolidated balance sheets, net of the allowance for doubtful accounts. Trade accounts receivable 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.
Contract Balances
The following table provides information about accounts receivable and contract liabilities from contracts with customers:
| (In thousands) | March 31, 2019 | December 31, 2018 | ||||||
| Accounts receivable, net | $ | 10,968 | $ | 16,003 | ||||
| Accounts receivable - related party, net | $ | 1,334 | $ | 1,349 | ||||
| Accounts receivable, unbilled - related party | $ | — | $ | 8,021 | ||||
| Accounts receivable, unbilled, noncurrent - related party | $ | 1,203 | $ | 1,203 | ||||
| Contract liabilities | $ | 8,333 | $ | 8,236 | ||||
| Contract liabilities, noncurrent(1) | $ | 1,449 | $ | 1,587 | ||||
(1) As of March 31, 2019 and December 31, 2018, contract liabilities, noncurrent is presented in Other Noncurrent Liabilities in the condensed consolidated balance sheets because of its insignificance.
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Unbilled receivables at the end of the period relate to the Company’s right to consideration from DSM for performance fees. The Company’s right to cash receipt for these minimum royalty amounts occurs on or before December 31, 2019. From December 31, 2018 to March 31, 2019, the combination of current and noncurrent unbilled receivables decreased by $8.0 million as the result of invoices issued to DSM during the period. An $8.0 million unbilled accounts receivable was originally due on December 31, 2019 but was paid early by DSM. The $0.6 million difference between the original amount due and the $7.4 million cash payment received was recorded as a $0.4 million reduction of licenses and royalties revenue during the quarter and a $0.2 million reduction to interest income.
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 March 31, 2019.
| (In thousands) | As of March 31, 2019 | |||
| Remaining 2019 | $ | 23,920 | ||
| 2020 | 38,508 | |||
| 2021 | 31,172 | |||
| 2022 and thereafter | — | |||
| Total from all customers | $ | 93,600 | ||
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, approximately $17.6 million of estimated future revenue is excluded from the table above, as that amount represents constrained variable consideration.
10. Related Party Transactions
Related Party Debt
See Note 4, "Debt" above for related party debt as of March 31, 2019 and December 31, 2018.
Related Party Accounts Receivable and Unbilled Receivables
Related party accounts receivable and unbilled receivables as of March 31, 2019 and December 31, 2018 were as follows:
| (In thousands) | March 31, 2019 | December 31, 2018 | ||||||
| Accounts receivable: | ||||||||
| DSM | $ | 1,334 | $ | 1,071 | ||||
| Novvi | — | 188 | ||||||
| Total | — | 90 | ||||||
| $ | 1,334 | $ | 1,349 | |||||
| Accounts receivable, unbilled, current: | ||||||||
| DSM | $ | — | $ | 8,021 | ||||
| Accounts receivable, unbilled, noncurrent: | ||||||||
| DSM | $ | 1,203 | $ | 1,203 | ||||
Related Party Joint Ventures
The Company holds a 50% interest in the Aprinnova joint venture for business-to-business sales of cosmetic ingredients. This joint venture is consolidated in the accompanying condensed consolidated financial statements.
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11. Stock-based Compensation
The Company’s stock option activity and related information for the three months ended March 31, 2019 was as follows:
| Quantity of Stock Options | Weighted- average Exercise Price | Weighted-average Remaining Contractual Life, in Years | Aggregate Intrinsic Value, in Thousands | |||||||||||||
| Outstanding - December 31, 2018 | 5,390,270 | $ | 11.55 | 8.5 | $ | 29 | ||||||||||
| Granted | 104,452 | $ | 4.73 | |||||||||||||
| Exercised | (3,612 | ) | $ | 3.68 | ||||||||||||
| Forfeited or expired | (63,726 | ) | $ | 14.27 | ||||||||||||
| Outstanding - March 31, 2019 | 5,427,384 | $ | 11.39 | 8.3 | $ | — | ||||||||||
| Vested or expected to vest after March 31, 2019 | 4,874,155 | $ | 12.10 | 8.3 | $ | — | ||||||||||
| Exercisable at March 31, 2019 | 977,466 | $ | 39.20 | 5.8 | $ | — | ||||||||||
The Company’s restricted stock units (RSUs) activity and related information for the three months ended March 31, 2019 was as follows:
| Quantity of Restricted Stock Units | Weighted-average Grant-date Fair Value | Weighted-average Remaining Contractual Life, in Years | ||||||||||
| Outstanding - December 31, 2018 | 5,294,803 | $ | 5.50 | 1.7 | ||||||||
| Awarded | 493,790 | $ | 4.65 | |||||||||
| RSUs released | (192,795 | ) | $ | 6.55 | ||||||||
| RSUs forfeited | (102,219 | ) | $ | 5.61 | ||||||||
| Outstanding - March 31, 2019 | 5,493,579 | $ | 5.38 | 1.5 | ||||||||
| Vested or expected to vest after March 31, 2019 | 5,153,107 | $ | 5.39 | 1.5 | ||||||||
Stock-based compensation expense related to employee and non-employee options, RSUs and ESPP during the three months ended March 31, 2019 and 2018 was allocated to research and development expense and sales, general and administrative expense as follows:
| Three Months Ended March 31, | ||||||||
| (In thousands) | 2019 | 2018 | ||||||
| Research and development | $ | 663 | $ | 363 | ||||
| Sales, general and administrative | 2,789 | 915 | ||||||
| Total stock-based compensation expense | $ | 3,452 | $ | 1,278 | ||||
As of March 31, 2019, there was unrecognized compensation expense of $31.1 million related to stock options and RSUs. The Company expects to recognize this expense over a weighted-average period of 3.0 years.
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 383,824 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.
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12. Subsequent Events
Cannabinoid Agreement
On May 2, 2019, the Company consummated an agreement entered into March 18, 2019 related to 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, subject to certain closing conditions noted below. 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 4, “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 4, “Debt”).
LSA Amendments, Assignment and Waivers
On April 4, 2019, the Company and GACP amended the LSA (see Note 4, “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 canceled 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, subject to quarterly covenants including 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.
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Foris Credit Agreements
On April 8, 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 $8.0 million (the April Foris Credit Agreement), 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 will be reduced to $0.5 million if the Company repays 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 4, “Debt” and above in this Note 12, “Subsequent Events”).
On June 11, 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 $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 6, “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 6, “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 canceled 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. Also, on August 28, 2019 in connection with the entry into the August Foris Credit Agreement, 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, and 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. See Note 6, “Stockholders’ Deficit” for information on the original warrants.
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In connection with the entry into the August Foris Credit Agreement, on August 14, 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.
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).
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 warrant contained a similar limitation.
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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 9, “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. The Company used a majority of the cash proceeds to repay a portion of the 2015 Rule 144A Convertible Notes (see Note 4, “Debt”).
In addition, on April 16, 2019 the Company and DSM entered into amendments to the Supply Agreement and the Performance Agreement (see Note 9, “Revenue Recognition”), as well as the Quota Purchase Agreement relating to the December 2017 sale of Amyris Brasil to DSM (see Note 13, “Divestiture” in Part II, Item 8 of the 2018 Form 10-K/A), 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 a joint venture 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.
2015 and 2014 Rule 144A Convertible Notes Exchanges
On April 16, 2019, the Company repaid in cash the $37.9 million outstanding balance under the 2015 Rule 144A Convertible Notes.
On May 10, 2019, the Company exchanged $13.5 million aggregate principal amount of the 2014 Rule 144A Convertible Notes (see Note 4, “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 10.50% per annum, beginning July 18, 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 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 4, “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 affect 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 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 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 issued on June 24, 2019, 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 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 condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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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.
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 10, “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” in the 2018 Form 10-K/A) 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.
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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.
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.
Ginkgo Note Amendment
On September 29, 2019, in connection with Ginkgo granting certain waivers under the November 2017 Ginkgo Note and the Ginkgo Partnership Agreement (see Note 5, “Debt” and Note 10, "Revenue Recognition" in Part II, Item 8 of the 2018 Form 10-K/A), (i) the Company and Ginkgo amended the November 2017 Ginkgo Note to increase the interest rate from 10.5% per annum to 12% per annum, beginning October 1, 2019 and (ii) the Company agreed to pay Ginkgo a cash waiver fee of $1.3 million, payable in installments on December 15, 2019 and March 31, 2020.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q. These discussions contain forward-looking statements reflecting our current expectations that involve risks and uncertainties which are subject to safe harbors under the Securities Act of 1933, as amended (the Securities Act), and the Securities Exchange Act of 1934 (the Exchange Act). These forward-looking statements include, but are not limited to, statements concerning our strategy of achieving a significant reduction in net cash outflows in 2019 and 2020, aspects of our future operations, our future financial position, including obtaining project financing for a new manufacturing facility, expectations for our future revenues, margins and projected costs, expectations regarding demand and acceptance for our technologies and products, introductions of new products, growth opportunities and trends in the market in which we operate, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q, in Part I, Item 1A, “Risk Factors” in our 2018 10-K for the fiscal year ended December 31, 2018 (the 2018 Form 10-K) and in our other filings with the Securities and Exchange Commission. We do not assume any obligation to update any forward-looking statements.
Overview and Recent Developments
Amyris, Inc. (the Company, Amyris, we, us or our) 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. Our proven technology platform enables us to rapidly engineer microbes and use them as catalysts to metabolize renewable, plant-sourced sugars into large volume, high-value ingredients. Our biotechnology platform and industrial fermentation process replace existing complex and expensive manufacturing processes. We have successfully used our technology to develop and produce eight distinct molecules at commercial volumes, leading to more than 15 commercial ingredients used by thousands of leading global brands.
We believe that industrial synthetic biology represents a third industrial revolution, bringing together biology and engineering to generate new, more sustainable materials to meet the growing global demand for bio-based replacements for petroleum-based and traditional animal- or plant-derived ingredients. We continue to build demand for our current portfolio of products through an extensive sales network provided by our collaboration partners that represent leading companies for our target market sectors. We also have a small group of direct sales and distributors who support our Clean Beauty market. Via our partnership model, our partners invest in the development of each molecule to bring it from the lab to commercial scale and use their extensive sales force to sell our ingredients and formulations to their customers as part of their core business. We capture long-term revenue both through the production and sale of the molecule to our partners and through royalty revenues (previously referred to as value share) from our partners' product sales to their customers.
We were founded in 2003 in the San Francisco Bay area by a group of scientists from the University of California, Berkeley. Our first major milestone came in 2005 when, through a grant from the Bill & Melinda Gates Foundation, we developed technology capable of creating microbial strains that produce artemisinic acid, which is a precursor of artemisinin, an effective anti-malarial drug. In 2008, we granted royalty-free licenses to allow Sanofi-Aventis to produce artemisinic acid using our technology. Building on our success with artemisinic acid, in 2007 we began applying our technology platform to develop, manufacture and sell sustainable alternatives to a broad range of markets.
We focused our initial development efforts primarily on the production of Biofene®, our brand of renewable farnesene, a long-chain, branched hydrocarbon molecule that we manufacture through fermentation using engineered microbes. Our farnesene derivatives are sold in thousands of products as nutraceuticals, skincare products, fragrances, solvents, polymers, and lubricant ingredients. The commercialization of farnesene pushed us to create a more cost efficient, faster and accurate development process in the lab and drive manufacturing costs down. This investment has enabled our technology platform to rapidly develop microbial strains and commercialize target molecules. In 2014, we began manufacturing additional molecules for the Flavor & Fragrance industry; in 2015 we began investing to expand our capabilities to other small molecule chemical classes beyond terpenes via our collaboration with the Defense Advanced Research Projects Agency (DARPA); and in 2016 we expanded into proteins.
We have invested over $600 million in infrastructure and technology to create microbes that produce molecules from sugar or other feedstocks at commercial scale. This platform has been used to design, build, optimize and upscale strains producing eight distinct molecules at commercial volumes, leading to more than 15 commercial ingredients used by thousands of leading global brands. Our time to market for molecules has decreased from seven years to less than a year for our most recent molecule, mainly due to our ability to leverage the technology platform we have built.
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Our technology platform has been in active use since 2007 and has been integrated with our commercial production since 2011, creating an organism development process that we believe makes us an industry leader in the successful scale-up and commercialization of biotech-produced ingredients. The key performance characteristics of our platform that we believe differentiate us include our proprietary computational tools, strain construction tools, screening and analytics tools, and advanced lab automation and data integration. Having this fully integrated with our large-scale manufacturing process and capability enables us to always engineer with the end specification and requirements guiding our technology. Our state-of-the-art infrastructure includes industry-leading strain engineering and lab automation located in Emeryville, California, pilot scale production facilities in Emeryville, California and Campinas, Brazil, a demonstration-scale facility in Campinas, Brazil and a commercial-scale production facility in Leland, North Carolina, which is owned and operated by our Aprinnova joint venture to convert our Biofene into squalane and other final products.
We are able to use a wide variety of feedstocks for production, but have focused on accessing Brazilian sugarcane for our large-scale production because of its renewability, low cost and relative price stability. We have also successfully used other feedstocks such as sugar beets, corn dextrose, sweet sorghum and cellulosic sugars at various manufacturing facilities.
Several years ago, we made the strategic decision to transition our business model from collaborating and commercializing molecules in low margin commodity markets to higher margin specialty markets. We began the transition by first commercializing and supplying farnesene-derived squalane as a cosmetic ingredient sold to formulators and distributors. We also entered into collaboration and supply agreements for the development and commercialization of molecules within the Flavor & Fragrance and Clean Beauty markets where we utilize our strain generation technology to develop molecules that meet the customer’s rigorous specifications.
During this transition, we solidified the business model of partnering with our customers to create sustainable, high performing, low-cost molecules that replace an ingredient in their supply chain, commercially scale and manufacture those molecules, and share in the profits earned by our customers once our customer sells its product into these specialty markets. These three steps constitute our collaboration revenues, renewable product revenues, and royalty revenues (previously referred to as value share revenues).
During 2017, we completed several development agreements with DSM and others for new products such as Vitamin A, a human nutrition molecule and others, and in late 2018 we began commercial production and shipment of a new sweetener product developed from the Reb M molecule, which is a superior sweetener and sugar replacement. Our goal is to bring two to three new molecules per year to commercial production in the future.
In 2017, we decided to monetize the use of one of our lower margin molecules, farnesene, in the Vitamin E and Lubricants specialty markets while retaining any associated royalties, and licensed farnesene to Koninklijke DSM N.V. (DSM) for use in these fields. Also in 2017, we sold to DSM our subsidiary Amyris Brasil Ltda. (Amyris Brasil), which operated our purpose-built, large-scale manufacturing facility located in Brotas, Brazil.
The Brotas facility was built to batch manufacture one commodity product at a time (originally for high-volume production of biofuels, a business Amyris has exited), which is an inefficient manufacturing process that is not suited for the high margin specialty markets in which we operate today. We currently manufacture nine specialty products and expect to increase the number of specialty products we manufacture by two to three products a year. The inefficiencies we experienced included having to idle the facility for two weeks at a time to prepare for the next product batch manufacture. These inefficiencies caused our cost of goods sold to be significantly higher. We are building a new purpose-built, large-scale specialty ingredients plant in Brazil, which we anticipate will allow for the manufacture of five products concurrently and over 10 different products annually. As part of the December 2017 sale of Brotas, we contracted with DSM for the use of Brotas to manufacture products for us to fulfill our product supply commitments to our customers until our new production facility becomes operational.
In September 2019, we obtained the necessary permits and broke ground on our Specialty Ingredients Plant (SIP). We expect the facility to be fully operational in Q1 of 2021. This facility will allow us to manufacture five products at once and to produce both our specialty ingredients portfolio and our new sweetener product. During construction, we are manufacturing our products at four contract manufacturing sites in Brazil, the U.S. and Spain.
In addition, in May 2019 we entered into an agreement with Raizen Energia S.A. (Raizen) for the formation and operation of a joint venture relating to the production, sale and commercialization of alternative sweetener products whereby the parties would construct a manufacturing facility exclusively for sweetener molecules on land owned by Raizen and leased to the joint venture; see Note 12, “Subsequent Events” in Part I, Item 1 of this Quarterly Report on Form 10-Q for more details.
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Also, in May 2019, we consummated a $300 million research, collaboration and license agreement with LAVVAN, Inc., a newly formed investment-backed company (Lavvan), for the development, manufacture and commercialization of cannabinoids. Under the agreement, we 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 Amyris also entitled to receive certain supplementary research and development funding from Lavvan. We 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 Amyris on Lavvan's gross profit margin once products are commercialized; these payments will be due for the next 20 years.
Sales and Revenue
We recognize revenue from product sales, license fees and royalties, and grants and collaborations.
We have research and development collaboration arrangements for which we receive payments from our collaborators, which include DARPA, DSM, Firmenich SA (Firmenich), Givaudan International SA (Givaudan), and others. Some of our collaboration arrangements provide for advance payments to us in consideration for grants of exclusivity or research efforts that we will perform. In 2017 we signed collaboration agreements for an infant nutrition ingredient, and in 2018 we signed a collaboration agreement for two vitamins that we expect will contribute to our collaboration revenue and ultimately product sales. Our collaboration agreements, which may require us to achieve milestones prior to receiving payments, are expected to contribute revenues from product sales and royalties (previously referred to as value share) if and when they are commercialized. See Note 10, “Revenue Recognition” in Part II, Item 8 of the 2018 Form 10-K/A for additional information.
All of our non-government partnerships include commercial terms for the supply of molecules we successfully upscale and produce at commercial volumes. The first molecule to generate revenue for us outside of farnesene was a fragrance molecule launched in 2015. Since the launch, the product has continued to grow in sales year over year. In 2016, we launched our second fragrance molecule and in 2017, we launched our third fragrance molecule as well as our first cosmetic active ingredient. Our partners for these molecules are indicating continued strong growth due to their cost advantaged position, high purity and sustainable production method. We are continuing to identify new opportunities to apply our technology and deliver sustainable access to key molecules. As a result, we have a pipeline that we believe can deliver two to three new molecules each year over the coming years with a flavor ingredient, a cosmetic active ingredient and a fragrance molecule. In 2019, we are commercially producing and shipping our Reb M product that is a superior sweetener and sugar replacement for food and beverages.
As part of the DSM acquisition in 2017 of our farnesene for Vitamin E business, we would receive a royalty payment on certain sales by Nenter & Co., Inc. of Vitamin E utilizing farnesene produced and sold by DSM from our technology. In addition, DSM would be obligated to pay us minimum royalties totaling $18.1 million for 2019 and 2020, of which we received $9.3 million as a discounted accelerated payment (from an original payment amount of $10.0 million) during 2018. In April 2019, we assigned the right to receive such royalty payments to DSM; see Note 12, “Subsequent Events” in Part 1, Item 1 of this Quarterly Report on Form 10-Q for additional information.
We have several other collaboration molecules in our development pipeline with partners including DSM, Givaudan and Firmenich that we expect will contribute revenues from product sales and royalties (previously referred to as value share) if and when they are commercialized.
Critical Accounting Policies and Estimates
Management's discussion and analysis of results of operations and financial condition are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). We believe that the critical accounting policies described in this section are those that significantly impact our financial condition and results of operations and require the most difficult, subjective or complex judgements, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. Because of this uncertainty, actual results may vary from these estimates.
Our most critical accounting estimates include:
| • | Recognition of revenue including arrangements with multiple performance obligations; |
| • | Valuation and allocation of fair value to various elements of complex related party transactions; |
| • | The valuation of freestanding and embedded derivatives, which impacts gains or losses on such derivatives, the carrying value of debt, preferred stock, interest expense and deemed dividends; and |
| • | The valuation of debt for which we have elected fair value accounting. |
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For more information about our critical accounting estimates and policies, see Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" in Part I, Item 1 of this Quarterly Report on Form 10-Q and in Part II, Item 8 of the 2018 10-K/A.
Results of Operations
Revenue
| Three Months Ended March 31, | ||||||||
| (In thousands) | 2019 | 2018 | ||||||
| Revenue | ||||||||
| Renewable products | $ | 11,884 | $ | 5,195 | ||||
| Licenses and royalties | 118 | 7,955 | ||||||
| Grants and collaborations | 2,372 | 4,709 | ||||||
| Total revenue | $ | 14,374 | $ | 17,859 | ||||
Three Months Ended March 31, 2019 and 2018
Total revenue decreased by 20% to $14.4 million for the three months ended March 31, 2019, compared to the same period in 2018. The decrease was primarily due to a $7.8 million decrease in licenses and royalties revenue and $2.3 million decrease in grants and collaborations revenue, mostly offset by a $6.7 million increase in renewable products revenue.
Renewable products revenue increased by 129% to $11.9 million for the three months ended March 31, 2019 compared to the same period in 2018, with increases among all renewable products, led by RebM, Squalene and Biossance.
Licenses and royalties revenue decreased by 99% to $0.1 million for the three months ended March 31, 2019 compared to the same period in 2018, primarily due to negative $0.4 million of royalty revenue from DSM (related to an early payment discount) during the current period as compared to $7.9 million during the prior year period.
Grants and collaborations revenue decreased by 50% to $2.4 million for the three months ended March 31, 2019, compared to the same period in 2018, primarily due to $0 revenue from Givaudan in 2019 as compared to $1.5 million in 2018, and a $0.7 million decrease in collaboration revenue from DARPA.
Costs and Operating Expenses
| Three Months Ended March 31, | ||||||||
| (In thousands) | 2019 | 2018 | ||||||
| Cost and operating expenses | ||||||||
| Cost of products sold | $ | 17,707 | $ | 5,315 | ||||
| Research and development | 17,839 | 17,825 | ||||||
| Sales, general and administrative | 28,253 | 18,100 | ||||||
| Total cost and operating expenses | $ | 63,799 | $ | 41,240 | ||||
Cost of Products Sold
Cost of products sold includes the raw materials, labor and overhead, amounts paid to contract manufacturers, inventory write-downs, and costs related to production scale-up. Because of our product mix, our overall cost of products sold does not necessarily increase or decrease proportionately with changes in our renewable product revenues.
Three Months Ended March 31, 2019 and 2018
Cost of products sold increased by 233% to $17.7 million for the three months ended March 31, 2019, compared to the same period in 2018, primarily due to costs associated with ramping up our RebM sweetener product, which we began shipping in late 2018, and to a lesser extent an increase in volume of products sold.
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Research and Development Expenses
Three Months Ended March 31, 2019 and 2018
Research and development expenses were flat at $17.8 million for the three months ended March 31, 2019, compared to the same period in 2018.
Sales, General and Administrative Expenses
Three Months Ended March 31, 2019 and 2018
Sales, general and administrative expenses increased by 56% to $28.3 million for the three months ended March 31, 2019, compared to the same period in 2018, primarily due to increases in employee compensation, outside services and audit fees. The increase in employee compensation was driven by increased head count, the timing of changes in our compensation plan for most non-executive level employees, and increased stock-based compensation related to increased head count.
Other (Expense) Income, Net
| Three Months Ended March 31, | ||||||||
| (In thousands) | 2019 | 2018 | ||||||
| Other income (expense): | ||||||||
| Loss on divestiture | $ | — | $ | (1,778 | ) | |||
| Interest expense | (12,534 | ) | (9,978 | ) | ||||
| Loss from change in fair value of derivative instruments | (2,039 | ) | (58,357 | ) | ||||
| Loss from change in fair value of debt | (2,130 | ) | — | |||||
| Other income (expense), net | (115 | ) | 692 | |||||
| Total other income (expense), net | $ | (16,818 | ) | $ | (69,421 | ) | ||
Three Months Ended March 31, 2019 and 2018
Total other expense, net was $16.8 million for the three months ended March 31, 2019, compared to total other expense, net of $69.4 million for the same period in 2018. The $52.6 million decrease was primarily due to a $56.3 million decrease in loss from change in fair value of derivative instruments, partly offset by a $2.6 million increase in interest expense and a $2.1 million loss from change in fair value of debt. The decrease in loss from change in fair value of derivative instruments was due to the extinguishment of certain equity-related derivatives in the second and third quarter of 2018, which are no longer impacting the 2019 quarters, and in part as the result of adopting 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" which eliminated the need to record a derivative liability for equity instruments with down-round anti-dilution provisions. See Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" and Note 3, "Fair Value Measurement" for a discussion of the adoption impact to our condensed consolidated financial statements.
Provision for Income Taxes
Three Months Ended March 31, 2019 and 2018
For the three months ended March 31, 2019 and 2018, we recorded $0 provisions for income taxes. No additional provision for income taxes has been made, net of the valuation allowance, due to cumulative losses since the commencement of operations.
Liquidity and Capital Resources
| (In thousands) | March 31, 2019 | December 31, 2018 | ||||||
| Working capital deficit | $ | (199,436 | ) | $ | (119,521 | ) | ||
| Cash and cash equivalents | $ | 5,153 | $ | 45,353 | ||||
| Debt and lease obligations(1) | $ | 246,101 | $ | 210,376 | ||||
| Accumulated deficit | $ | (1,579,129 | ) | $ | (1,521,417 | ) | ||
(1) Lease obligations at December 31, 2018 include capital leases (which at March 31, 2019 are described as financing leases), but do not include operating leases. Lease obligations at March 31, 2019 also include operating lease liabilities upon the adoption of ASC 842, "Leases". See Part I, Item 1, Note 2, for additional information.
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| Three Months Ended March 31, | ||||||||
| (In thousands) | 2019 | 2018 | ||||||
| Net cash (used in) provided by: | ||||||||
| Operating activities | $ | (36,980 | ) | $ | (25,169 | ) | ||
| Investing activities | $ | (3,046 | ) | $ | (1,584 | ) | ||
| Financing activities | $ | (222 | ) | $ | (6,694 | ) | ||
Liquidity. We have incurred significant operating losses since our inception, and we expect to continue to incur losses and negative cash flows from operations through at least the next 12 months following issuance of the condensed consolidated financial statements. As of March 31, 2019, we had negative working capital, excluding cash and cash equivalents and short-term investments, of $199.4 million, (compared to negative working capital (excluding cash) of $119.5 million as of December 31, 2018), an accumulated deficit of $1.6 billion, and cash and cash equivalents of $5.2 million (compared to $45.4 million as of December 31, 2018).
As of March 31, 2019, our debt (including related party debt), net of deferred discount and issuance costs of $13.5 million, totaled $215.8 million, of which $153.8 million is classified as current. Our debt service obligations through March 31, 2020 are $179.8 million, including $23.5 million of anticipated cash interest payments. Our debt agreements contain various covenants, including certain restrictions on our business that could cause us to be at risk of defaults, such as restrictions on additional indebtedness and cross-default clauses. A failure to comply with the covenants, or cure non-compliance or obtain waivers for covenants violations, and other provisions of our 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 of such indebtedness. If such indebtedness is accelerated, it would generally also constitute an event of default under our other outstanding indebtedness, permitting acceleration of a substantial portion of our outstanding indebtedness.
On September 16, 2019, we 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 Amyris which permitted the holders of such indebtedness to accelerate the amounts owing under such instruments. We 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 Amyris has obtained such waivers continues to be classified as long-term on our balance sheet. The indebtedness reflected by the Second Exchange Note continues to be classified as a current liability on our 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.
We do 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 us will be reached. We have 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 we will be able to obtain such financing on its expected timeline, or on acceptable terms, if at all. Even if we do obtain such financing, it will not have sufficient funds to repay the Second Exchange Note in full without obtaining additional financing, which we are attempting to source. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our consolidated financial statements as of and for the three months ended March 31, 2019 have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Due to the factors described above, there is substantial doubt about our ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued. Our ability to continue as a going concern will depend, in large part, on our ability to extend existing debt maturities by restructuring a majority of our convertible debt, which is uncertain and outside management's control. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty, which could have a material adverse effect on our financial condition. In addition, if we are unable to continue as a going concern, we may be unable to meet our obligations under our existing debt facilities, which could result in an acceleration of our obligation to repay all amounts outstanding under those facilities, and we may be forced to liquidate our assets. In such a scenario, the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.
Our operating plan for the next 12 months contemplates a significant reduction in our net cash outflows, 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) cash inflows from grants and collaborations.
If we are unable to generate sufficient cash contributions from product sales, licenses and royalties, and payments from existing and new collaboration partners, and new financing commitments due to contractual restrictions and covenants, we may need to obtain additional funding from equity or debt financings, which may not occur in a timely manner or on reasonable terms, if at all, agree to burdensome covenants, grant further security interests in our assets, enter into collaboration and licensing arrangements that require us to relinquish commercial rights, or grant licenses on terms that are not favorable.
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If we do not achieve our planned operating results, our ability to continue as a going concern would be jeopardized and we may need to take the following actions to support our liquidity needs during the next 12 months:
| • | Shift focus to existing products and customers with significantly reduced investment in new product and commercial development efforts; |
| • | Reduce expenditures for third party contractors, including consultants, professional advisors and other vendors; |
| • | Reduce or delay uncommitted capital expenditures, including expenditures related to the construction and commissioning of the new production facility in Brazil, non-essential facility and lab equipment, and information technology projects; and |
| • | Closely monitor our working capital position with customers and suppliers, as well as suspend operations at pilot plants and demonstration facilities. |
Implementing this plan could have a negative impact on our ability to continue our business as currently contemplated, including, without limitation, delays or failures in our ability to:
| • | Achieve planned production levels; |
| • | Develop and commercialize products within planned timelines or at planned scales; and |
| • | Continue other core activities. |
We expect to fund operations for the foreseeable future with cash and investments currently on hand, cash inflows from collaborations, grants, product sales, license and royalties and equity and debt financings, to the extent necessary. Some of our research and development collaborations are subject to risk that we may not meet milestones. Future equity and debt financings, if needed, are subject to the risk that we may not be able to secure financing in a timely manner or on reasonable terms, if at all. Our planned working capital and capital expenditure needs for the remainder of 2019 are dependent on significant inflows of cash from renewable product sales, license and royalties and existing collaboration partners, as well as additional funding from new collaborations.
Cash Flows during the Three Months Ended March 31, 2019 and 2018
Cash Flows from Operating Activities
Our primary uses of cash from operating activities are costs related to the production and sale of our products and personnel-related expenditures, offset by cash received from renewable product sales, licenses and royalties, and grants and collaborations.
For the three months ended March 31, 2019, net cash used in operating activities was $37.0 million, consisting primarily of a $66.2 million net loss, partially offset by $16.3 million of favorable non-cash adjustments that were primarily comprised of $4.6 million of debt discount amortization, $3.5 million of stock-based compensation and a $2.1 million loss on change in fair value of debt. Additionally, there was a $13.0 million decrease in working capital.
For the three months ended March 31, 2018, net cash used in operating activities was $25.2 million, consisting of a $92.8 million net loss, $67.3 million of favorable non-cash adjustments and a $0.4 million decrease in working capital. The non-cash adjustments were primarily comprised of a $58.4 million loss from change in fair value of derivative liabilities and $4.8 million of debt discount amortization.
Cash Flows from Investing Activities
For the three months ended March 31, 2019 and March 31, 2018, net cash used in investing activities was $3.0 million, and $1.6 million, respectively, comprised of property, plant and equipment purchases.
Cash Flows from Financing Activities
For the three months ended March 31, 2019, net cash used in financing activities was $0.2 million, primarily comprised of $0.6 million of debt principal payments, partly offset by $0.5 million of net proceeds from debt issuance.
For the three months ended March 31, 2018, net cash used in financing activities was $6.7 million, primarily comprised of $6.5 million of debt principal payments.
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Off-Balance Sheet Arrangements
March 31, 2019, we did not have any material off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.
Contractual Obligations
The following is a summary of our contractual obligations as of March 31, 2019:
| Payable by year ending December 31, (In thousands) | Total | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | |||||||||||||||||||||
| Principal payments on debt | $ | 229,517 | $ | 112,038 | $ | 26,451 | $ | 76,493 | $ | 12,281 | $ | 293 | $ | 1,961 | ||||||||||||||
| Interest payments on debt (1) | 38,622 | 15,704 | 12,588 | 8,747 | 1,170 | 106 | 307 | |||||||||||||||||||||
| Financing and operating leases | 40,090 | 13,123 | 9,308 | 7,227 | 7,398 | 3,034 | — | |||||||||||||||||||||
| Manufacturing reservation fee | 21,036 | 21,036 | — | — | — | — | — | |||||||||||||||||||||
| Partnership payment obligation | 11,906 | 3,175 | 3,175 | 3,175 | 2,381 | — | — | |||||||||||||||||||||
| Inducement fee | 4,585 | 2,745 | 1,840 | — | — | — | — | |||||||||||||||||||||
| Total | $ | 345,756 | $ | 167,821 | $ | 53,362 | $ | 95,642 | $ | 23,230 | $ | 3,433 | $ | 2,268 | ||||||||||||||
____________________
| (1) | Does not include any obligations related to make-whole interest or down-round provisions. Fixed and variable interest rates are described in Note 5, "Debt" in Part II, Item 8 of this Annual Report on Form 10-K/A. Future interest payments shown above for variable-rate debt instruments are measured on the basis of interest rates for such instruments as of March 31, 2019. The fixed interest rates are more fully described in Note 5, "Debt" in Part II, Item 8 of the 2018 10-K/A. |
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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (Exchange Act). In designing and evaluating the disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit of possible controls and procedures.
Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of March 31, 2019. This conclusion was based on the material weaknesses in our internal control over financial reporting described in Part II, Item 9A “Controls and Procedures” of our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2018 (the 2018 Form 10-K/A). The material weaknesses have not been remediated as of March 31, 2019.
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 the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. If not remediated, the material weakness in our internal control over financial reporting described in the 2018 Form 10-K/A could result in a material misstatement of our annual or interim consolidated financial statements that would not be prevented or detected on a timely basis.
Changes in Internal Control over Financial Reporting
During the fiscal quarter ended March 31, 2019, there were no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
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PART II
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 and October 1, 2019, respectively, two separate purported shareholder derivative complaints were filed in the U.S. District Court for the Northern District of California (Bonner v. Doerr, et al., Case No. 4:19-cv-03621 and Carlson v. Doerr, et al., Case No. 4:19-cv-06230) based on similar allegations to those made in the securities class action complaint described above. The derivative complaints name Amyris, Inc. as a nominal defendant and name a number of the Company’s current and former officers and directors as additional defendants. The lawsuits seek to recover, on the Company's behalf, unspecified damages purportedly sustained by the Company in connection with allegedly misleading statements and omissions made in connection with the Company’s securities filings. The derivative complaints also seek 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.
We may be involved, from time to time, in legal proceedings and claims arising in the ordinary course of our business. Such matters are subject to many uncertainties and there can be no assurance that legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on our business, results of operations, financial position or cash flows.
The risks described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the 2018 Form 10-K) could materially and adversely affect our business, financial condition and results of operations, and the trading price of our common stock could decline. These risk factors do not identify all risks that we face; our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. The “Risk Factors” section of the 2018 Form 10-K remains current in all material respects.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
None.
| a | 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. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
| AMYRIS, INC. | |||
| By: | /s/ John G. Melo | ||
| John G. Melo | |||
| President and Chief Executive Officer (Principal Executive Officer) |
|||
| October 7, 2019 | |||
| By: | /s/ Jonathan Wolter | ||
| Jonathan Wolter | |||
| Interim Chief Financial Officer (Principal Financial Officer) |
|||
| October 7, 2019 |
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Exhibit 31.01
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(c) and 15d-(14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
I, John G. Melo, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Amyris, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date: October 7, 2019 | /s/ John G. Melo |
| John G. Melo | |
| President and Chief Executive Officer |
Exhibit 31.02
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(c) and 15d-(14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
I, Jonathan Wolter, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Amyris, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date: October 7, 2019 | /s/ Jonathan Wolter |
| Jonathan Wolter | |
| Interim Chief Financial Officer |
Exhibit 32.01
Certification of CEO Furnished Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 of The Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Amyris, Inc. (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2019, as filed with the Securities and Exchange Commission on the date hereof, I, John G. Melo, Chief Executive Officer of the Company, certify for the purposes of section 1350 of chapter 63 of title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge,
(i) the Quarterly Report of the Company on Form 10-Q for the quarterly period ended March 31, 2019 (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: October 7, 2019 | /s/ John G. Melo |
| John G. Melo | |
| President and Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 32.02
Certification of CFO Furnished Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 of The Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Amyris, Inc. (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2019, as filed with the Securities and Exchange Commission on the date hereof, I, Jonathan Wolter, Interim Chief Financial Officer of the Company, certify for the purposes of section 1350 of chapter 63 of title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge,
(i) the Quarterly Report of the Company on Form 10-Q for the quarterly period ended March 31, 2019 (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: October 7, 2019 | /s/ Jonathan Wolter |
| Jonathan Wolter | |
| Interim Chief Financial Officer | |
| (Principal Financial Officer) |
Note 10 - Related Party Transactions |
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| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions Disclosure [Text Block] | 10. Related Party TransactionsRelated Party Debt See Note as of 4, "Debt" above for related party debt March 31, 2019 and December 31, 2018. Related Party Accounts Receivable and Unbilled Receivables Related party accounts receivable and unbilled receivables as of March 31, 2019 and December 31, 2018 were as follows:
Related Party Joint Ventures The Company holds a 50% interest in the Aprinnova joint venture for business-to-business sales of cosmetic ingredients. This joint venture is consolidated in the accompanying condensed consolidated financial statements. |
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Note 2 - Balance Sheet Details |
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| Supplemental Balance Sheet Disclosures [Text Block] | 2. Balance Sheet DetailsInventories
Deferred cost of products sold - related party
In November 2018, the Company amended the supply agreement with DSM to secure capacity at the Brotas 1 facility for sweetener production through 2022. See Note 10, “Revenue Recognition” in Part II, Item 8 of the 2018 Form 10 -K/A for information regarding the November 2018 Supply Agreement Amendment. The supply agreement was included as an element of a combined transaction with DSM, which resulted in a fair value allocation of $24.4 million to the manufacturing capacity fees, of which $3.3 million was recorded as deferred cost of products sold at December 31, 2018. During the three months ended March 31, 2019, the Company paid an additional $7.3 million of reservation capacity fees, which was recorded as additional deferred cost of products sold. The remaining $13.8 million capacity fees will be recorded as deferred cost of products sold in the period the additional payments are made to DSM. The deferred cost of products sold asset is expensed to cost of products sold on a units of production basis as the Company's sweetener product is sold over the five -year term of the supply agreement. Each quarter, the Company evaluates its future production volumes and adjusts the unit cost to be expensed over the remaining estimated production volume. Due to the Company's commercial launch of the product in December 2018, amortization of the deferred cost of products sold asset has been insignificant through March 31, 2019. The deferred cost of products sold asset is evaluated for recoverability at each period end.Prepaid expenses and other current assets
Property, Plant and Equipment, Net
During the three months ended March 31, 2019 and 2018, the Company capitalized $0.2 million and $0.8 million, respectively, of internal labor costs required to automate, integrate and ready certain laboratory and plant equipment for its intended use.Depreciation and amortization expense, including amortization of assets under financing leases, was $0.8 million and $1.6 million for the three months ended March 31, 2019 and 2018, respectively.Leases Operating Leases The Company has entered into operating leases primarily for administrative offices, laboratory equipment and other facilities. The operating leases have remaining terms that range from 1 year to 5 years, and often include one or more options to renew. These renewal terms can extend the lease term from 1 to 5 years and are included in the lease term when it is reasonably certain that the Company will exercise the option. The operating leases are classified as Right-of-use (ROU) assets under operating leases on the Company's March 31, 2019 Condensed Consolidated Balance Sheet and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make operating lease payments is included in "Lease liabilities" and "Lease liabilities, net of current portion" on the Company's March 31, 2019 Condensed Consolidated Balance Sheet. Based on the present value of the lease payments for the remaining lease term of the Company's existing leases, the Company recognized right-of-use assets of $29.7 million and lease liabilities for operating leases of $33.6 million on January 1, 2019. Operating lease right-of-use assets and liabilities commencing after January 1, 2019 are recognized at commencement date based on the present value of lease payments over the lease term. As of March 31, 2019, total right-of-use assets and operating lease liabilities were $27.6 million and $29.7 million, respectively. All operating lease expense is recognized on a straight-line basis over the lease term. In the three months ended March 31, 2019, the Company recorded $2.8 million of operating lease amortization that was charged to expense, and $1.8 million of operating lease amortization for certain contract manufacturing arrangements that was capitalized to inventory.Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. The Company has certain contracts for real estate and marketing which may contain lease and non-lease components which it has elected to treat as a single lease component.Information related to the Company's right-of-use assets and related lease liabilities were as follows:
( 1 ) Includes $29.7 million for operating leases existing on January 1, 2019 and $0.8 million for operating leases that commenced in the first quarter of 2019. Financing Leases The Company has entered into financing leases primarily for laboratory and computer equipment. Assets purchased under financing leases are included in "Property, plant and equipment, net" on the condensed consolidated balance sheets. For financing leases, the associated assets are depreciated or amortized over the shorter of the relevant useful life of each asset or the lease term. Property, plant and equipment, net included $5.3 million and $5.0 million of machinery and equipment under financing leases as of March 31, 2019 and December 31, 2018, respectively. Accumulated amortization of assets under financing leases totaled $2.5 million and $2.3 million as of March 31, 2019 and December 31, 2018, respectively.Maturities of Financing and Operating Leases Maturities of lease liabilities as of March 31, 2019 were as follows:
Other Assets
Accrued and Other Current Liabilities
Other noncurrent liabilities
( Deferred rent at 1 ) December 31, 2018 was reclassified to ROU asset upon the adoption on January 1, 2019 of ASC 842, "Leases". |
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Note 6 - Stockholders' Deficit |
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| Stockholders' Equity Note Disclosure [Text Block] | 6. Stockholders' DeficitWarrants In connection with various debt and equity transactions (see Note 5, "Debt" and Note 7, “Stockholders’ Deficit” in Part II, Item 8 of the 2018 Form 10 -K/A), the Company has issued warrants exercisable for shares of common stock. The following table summarizes warrant activity for the three months ended March 31, 2019:
For the three months ended March 31, 2019, 479,751 shares of common stock were issued under certain anti-dilution warrants with an exercise price of $0.01 and resulted in no proceeds to the Company. The shares were exercised through net share settlement, resulting in the issuance of 450,568 shares. |
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Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Accounts receivable, allowance | $ 126 | $ 642 |
| Accounts receivable, related party, allowance | 12 | 0 |
| Debt, current portion, fair value | $ 60,048 | $ 57,918 |
| Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
| Preferred stock, shares issued (in shares) | 14,656 | 14,656 |
| Preferred stock, shares outstanding (in shares) | 14,656 | 14,656 |
| Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized (in shares) | 250,000,000 | 250,000,000 |
| Common stock, shares issued (in shares) | 77,210,681 | 76,564,829 |
| Common stock, shares outstanding (in shares) | 77,210,681 | 76,564,829 |
Note 2 - Balance Sheet Details - Right-of-use Assets and Related Lease Liabilities (Details) $ in Thousands |
3 Months Ended | |||
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Mar. 31, 2019
USD ($)
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| Cash paid for operating lease liabilities | $ 5,305 | |||
| Right-of-use assets obtained in exchange for new operating lease obligations(1) | $ 30,472 | [1] | ||
| Weighted-average remaining lease term (in years) (Year) | 2 years 255 days | |||
| Weighted-average discount rate | 18.00% | |||
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Note 2 - Balance Sheet Details - Inventory, Current (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Raw materials | $ 2,451 | $ 3,901 |
| Work-in-process | 238 | 539 |
| Finished goods | 5,797 | 5,253 |
| Inventories | $ 8,486 | $ 9,693 |
Note 9 - Revenue Recognition and Contract Assets and Liabilities - Remaining Performance Obligations (Details) $ in Millions |
Mar. 31, 2019
USD ($)
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|---|---|
| Revenue, Remaining Performance Obligation, Amount | $ 93.6 |
Note 11 - Stock-based Compensation (Details Textual) - USD ($) $ in Millions |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
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| Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total | $ 31.1 | ||
| Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition | 3 years | ||
| Shares, Outstanding, Ending Balance | 76,564,829 | ||
| Equity Incentive Plan, 2010 [Member] | |||
| Automatic Annual Increase in the Number of Shares Available for Grant and Issuance | 3,828,241 | ||
| Automatic Annual Increase in Shares Available for Grant and Issuance, Percentage of Outstanding Stock | 5.00% | ||
| Automatic Annual Increase in the Number of Shares Reserved for Issuance | 383,824 | ||
| Automatic Annual Increase in Shares Reserved for Issuance, Percentage of Outstanding Stock | 0.5 |
Note 2 - Balance Sheet Details (Tables) |
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Note 6 - Stockholders' Deficit (Tables) |
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| Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block] |
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Note 4 - Debt (Details Textual) - Second Tranche [Member] - Related Party Convertible Notes [Member] - USD ($) $ in Millions |
Jul. 15, 2019 |
Jan. 14, 2019 |
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| Debt Instrument, Cash Waiver Fee Amount Payable | $ 0.6 | |
| Subsequent Event [Member] | ||
| Debt Instrument, Interest Rate, Stated Percentage | 1.75% |
Note 3 - Fair Value Measurement (Tables) |
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| Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] |
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| Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block] |
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Note 7 - Loss Per Share (Tables) |
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| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2019 |
Mar. 31, 2018 |
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| Comprehensive loss: | ||
| Net loss attributable to Amyris, Inc. | $ (66,243) | $ (92,802) |
| Foreign currency translation adjustment | 964 | (137) |
| Comprehensive loss attributable to Amyris, Inc. | $ (65,279) | $ (92,939) |
Note 3 - Fair Value Measurement |
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| Financial Instruments Disclosure [Text Block] | 3. Fair Value MeasurementAssets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis The following tables summarize assets and liabilities measured at fair value, and the respective fair value by input classification level within the fair value hierarchy:
There were no transfers between levels during the periods presented.6% Convertible Notes Due 2021 The Company issued $60.0 million of 6% Convertible Notes Due 2021 on December 10, 2018 and elected the fair value option of accounting for this instrument. At March 31, 2019, outstanding principal was $60.0 million, and the fair value was $60.0 million, which was measured using a binomial lattice model and assuming a 23.8% discount yield, 45% equity volatility, 50% / 50% probability of principal repayment in cash / stock, and 5% probability of change in control. See Note 4, “Debt” for further information related to this debt instrument. For the three months ended March 31, 2019, the Company recorded a $2.1 million loss from change in fair value of debt in connection with the 6% Convertible Notes Due 2021, as follows:
Derivative Liabilities Recognized in Connection with the Issuance of Debt and Equity Instruments The following table provides a reconciliation of the beginning and ending balances for the Company's derivative liabilities recognized in connection with the issuance of debt and equity instruments, measured at fair value using significant unobservable inputs (Level 3 ):
As of March 31, 2019, the remaining derivative liabilities are in connection with the November 2018 Securities Purchase Agreement with DSM. See Note 10, “Revenue Recognition” in Part II, Item 8 of the 2018 10 -K/A. This make-whole provision is effectively marked to market through the condensed consolidated statements of operations, based on the Company’s closing stock price at each reporting period until converted into common stock or cash settled. The fair value of these instruments is directly affected by the volatility of the Company’s stock price between each reporting period or conversion date, if settled during the reporting period.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 March 31, 2019, excluding the 6% Convertible Notes that the Company records at fair value, was $155.8 million. The fair value of such debt at March 31, 2019 was $155.8 million, 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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Note 7 - Loss Per Share |
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| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Text Block] | 7. Loss Per ShareFor the three months ended March 31, 2019 and March 31, 2018, basic loss per share was the same as diluted loss per share, because the inclusion of all potentially dilutive securities outstanding was antidilutive.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 loss per share:
The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted loss per share of common stock because including them would have been antidilutive:
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Note 11 - Stock-based Compensation |
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| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Payment Arrangement [Text Block] | 11. Stock-based CompensationThe Company’s stock option activity and related information for the three months ended March 31, 2019 was as follows:
The Company’s restricted stock units (RSUs) activity and related information for the three months ended March 31, 2019 was as follows:
Stock-based compensation expense related to employee and non-employee options, RSUs and ESPP during the three months ended March 31, 2019 and 2018 was allocated to research and development expense and sales, general and administrative expense as follows:
As of March 31, 2019, there was unrecognized compensation expense of $31.1 million related to stock options and RSUs. The Company expects to recognize this expense over a weighted-average period of 3.0 years.Evergreen Shares for 2010 Equity Incentive Plan and 2010 Employee Stock Purchase PlanIn February 2019, the Company's Board of Directors (the Board) approved increases to the number of shares available for issuance under the Company's 2010 Equity Incentive Plan (the Equity Plan) and 2010 Employee Stock Purchase Plan (the Purchase Plan). These shares in connection with the Equity Plan represented an automatic annual increase in the number of shares available for grant and issuance under the Equity Plan of 3,828,241 shares. This increase is equal to approximately 5.0% of the 76,564,829 total outstanding shares of the Company’s common stock as of December 31, 2018. This automatic increase was effective as of January 1, 2019. These shares in connection with the Purchase Plan represented an automatic annual increase in the number of shares reserved for issuance under the Purchase Plan of 383,824 shares. This increase is equal to approximately 0.5% of the 76,564,829 total outstanding shares of the Company’s common stock as of December 31, 2018. This automatic increase was effective as of January 1, 2019. |
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Note 2 - Balance Sheet Details - Property, Plant and Equipment (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Property, plant and equipment | $ 100,702 | $ 98,387 |
| Less: accumulated depreciation and amortization | (79,144) | (78,631) |
| Property, plant and equipment, net | 21,558 | 19,756 |
| Machinery and Equipment [Member] | ||
| Property, plant and equipment | 45,874 | 43,713 |
| Leasehold Improvements [Member] | ||
| Property, plant and equipment | 39,951 | 39,922 |
| Computer Equipment and Software [Member] | ||
| Property, plant and equipment | 10,138 | 9,987 |
| Furniture and Office Equipment, Vehicles and Land [Member] | ||
| Property, plant and equipment | 3,279 | 3,016 |
| Construction in Progress [Member] | ||
| Property, plant and equipment | $ 1,460 | $ 1,749 |
Note 2 - Balance Sheet Details (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Jan. 01, 2019 |
Dec. 31, 2018 |
|
| Manufacturing Capacity Reservation Fee Current | $ 7,250 | |||
| Deferred Cost of Products Sold, Related Party | 10,490 | 3,317 | ||
| Capitalized Computer Software, Additions | 200 | |||
| Operating Lease, Right-of-Use Asset | 27,645 | $ 800 | ||
| Operating Lease, Liability, Total | 29,729 | |||
| Operating Lease, Expense | 2,800 | |||
| Finance Lease, Right-of-use Asset, Accumulated Amortization | 2,500 | 2,300 | ||
| Property, Plant and Equipment, Net [Member] | ||||
| Finance Lease, Right-of-Use Asset | 5,300 | 5,000 | ||
| Cost of Sales [Member] | ||||
| Operating Lease, Expense | $ 1,800 | |||
| Accounting Standards Update 2016-02 [Member] | ||||
| Operating Lease, Right-of-Use Asset | 29,700 | |||
| Operating Lease, Liability, Total | $ 33,600 | |||
| Minimum [Member] | ||||
| Lessee Operating Lease, Remaining Lease Term | 1 year | |||
| Lessee, Operating Lease, Renewal Term | 1 year | |||
| Maximum [Member] | ||||
| Lessee Operating Lease, Remaining Lease Term | 5 years | |||
| Lessee, Operating Lease, Renewal Term | 5 years | |||
| Machinery and Equipment, Furniture and Office Equipment Under Capital Lease [Member] | ||||
| Depreciation, Depletion and Amortization, Nonproduction, Total | $ 800 | $ 1,600 | ||
| DSM International B.V. [Member] | ||||
| Manufacturing Capacity Reservation Fee Current | 24,400 | |||
| Deferred Cost of Products Sold, Related Party | 13,800 | $ 3,300 | ||
| Payments of Reservation Capacity Fees | $ 7,300 | |||
Note 7 - Loss Per Share - Calculation of Basic and Diluted Net Loss Per Share of Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Net loss | $ (66,243) | $ (92,802) |
| Less: losses allocated to participating securities | 2,430 | 7,504 |
| Net loss attributable to Amyris, Inc. common stockholders | $ (63,813) | $ (85,298) |
| Weighted-average shares of common stock outstanding used in computing loss per share of common stock, basic and diluted (in shares) | 77,512,059 | 51,200,922 |
| Loss per share attributable to common stockholders, basic and diluted (in dollars per share) | $ (0.82) | $ (1.67) |
Note 9 - Revenue Recognition and Contract Assets and Liabilities - Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
| Revenues | $ 14,374 | $ 17,859 | $ 17,859 |
| Renewable Products [Member] | |||
| Revenues | 11,884 | 5,195 | 5,195 |
| Licenses and Royalties [Member] | |||
| Revenues | 118 | 7,955 | 7,955 |
| Grants and Collaborations [Member] | |||
| Revenues | 2,372 | $ 4,709 | 4,709 |
| UNITED STATES | |||
| Revenues | 7,566 | 3,171 | |
| UNITED STATES | Renewable Products [Member] | |||
| Revenues | 7,073 | 1,962 | |
| UNITED STATES | Licenses and Royalties [Member] | |||
| Revenues | |||
| UNITED STATES | Grants and Collaborations [Member] | |||
| Revenues | 493 | 1,209 | |
| Europe [Member] | |||
| Revenues | 4,601 | 13,889 | |
| Europe [Member] | Renewable Products [Member] | |||
| Revenues | 2,854 | 2,434 | |
| Europe [Member] | Licenses and Royalties [Member] | |||
| Revenues | 118 | 7,955 | |
| Europe [Member] | Grants and Collaborations [Member] | |||
| Revenues | 1,629 | 3,500 | |
| Asia [Member] | |||
| Revenues | 1,968 | 678 | |
| Asia [Member] | Renewable Products [Member] | |||
| Revenues | 1,718 | 678 | |
| Asia [Member] | Licenses and Royalties [Member] | |||
| Revenues | |||
| Asia [Member] | Grants and Collaborations [Member] | |||
| Revenues | 250 | ||
| South America [Member] | |||
| Revenues | 220 | 21 | |
| South America [Member] | Renewable Products [Member] | |||
| Revenues | 220 | 21 | |
| South America [Member] | Licenses and Royalties [Member] | |||
| Revenues | |||
| South America [Member] | Grants and Collaborations [Member] | |||
| Revenues | |||
| Other Area [Member] | |||
| Revenues | 19 | 100 | |
| Other Area [Member] | Renewable Products [Member] | |||
| Revenues | 19 | 100 | |
| Other Area [Member] | Licenses and Royalties [Member] | |||
| Revenues | |||
| Other Area [Member] | Grants and Collaborations [Member] | |||
| Revenues | |||
Note 10 - Related Party Transactions - Related Party Accounts Receivable (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
||
|---|---|---|---|---|
| Accounts receivable, net | $ 1,334 | $ 1,349 | ||
| Contract assets, current | 8,021 | |||
| Contract assets, noncurrent | [1] | 1,203 | 1,203 | |
| DSM International B.V. [Member] | ||||
| Accounts receivable, net | 1,334 | 1,071 | ||
| Contract assets, current | 8,021 | |||
| Contract assets, noncurrent | 1,203 | 1,203 | ||
| Novvi LLC [Member] | ||||
| Accounts receivable, net | 188 | |||
| Total [Member] | ||||
| Accounts receivable, net | $ 90 | |||
| ||||
Note 11 - Stock-based Compensation - Employee Service Share-based Compensation, Allocation of Recognized Period Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Allocated share-based compensation expense | $ 3,452 | $ 1,278 |
| Research and Development Expense [Member] | ||
| Allocated share-based compensation expense | 663 | 363 |
| Selling, General and Administrative Expenses [Member] | ||
| Allocated share-based compensation expense | $ 2,789 | $ 915 |
Note 3 - Fair Value Measurement - Convertible Debt (Details) - Long-term Debt [Member] $ in Thousands |
3 Months Ended |
|---|---|
|
Mar. 31, 2019
USD ($)
| |
| Fair value | $ 57,918 |
| Change in fair value | 2,130 |
| Fair value | $ 60,048 |
Note 2 - Balance Sheet Details - Accrued and Other Current Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| DSM manufacturing capacity fee | $ 7,250 | |
| Contract termination fees | 5,337 | 6,247 |
| Accrued interest | 7,094 | 3,853 |
| Payroll and related expenses | 5,285 | 9,220 |
| Asset retirement obligation | 3,111 | 3,063 |
| Tax-related liabilities | 2,589 | 2,139 |
| Professional services | 1,871 | 1,173 |
| Other | 1,054 | 3,284 |
| Total accrued and other current liabilities | $ 33,591 | $ 28,979 |
Note 4 - Debt - Long-term Debt Instruments (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
|---|---|
| 2019 (remaining nine months) | $ 176,485 |
| 2020 | 12,613 |
| 2021 | 62,922 |
| 2022 | 13,450 |
| 2023 | 399 |
| Thereafter | 2,268 |
| Total future minimum payments | 268,137 |
| Less: amount representing interest | (38,620) |
| Less: future conversion of accrued interest to principal | (245) |
| Present value of minimum debt payments | 229,272 |
| Less: current portion of debt principal | (155,973) |
| Noncurrent portion of debt principal | 73,299 |
| Convertible Debt [Member] | |
| 2019 (remaining nine months) | 139,303 |
| 2020 | |
| 2021 | |
| 2022 | |
| 2023 | |
| Thereafter | |
| Total future minimum payments | 139,303 |
| Less: amount representing interest | (12,303) |
| Less: future conversion of accrued interest to principal | (245) |
| Present value of minimum debt payments | 126,755 |
| Less: current portion of debt principal | (126,755) |
| Noncurrent portion of debt principal | |
| Loans Payable and Credit Facilities [Member] | |
| 2019 (remaining nine months) | 9,689 |
| 2020 | 10,113 |
| 2021 | 34,776 |
| 2022 | 13,450 |
| 2023 | 399 |
| Thereafter | 2,268 |
| Total future minimum payments | 70,695 |
| Less: amount representing interest | (17,883) |
| Less: future conversion of accrued interest to principal | |
| Present value of minimum debt payments | 52,812 |
| Less: current portion of debt principal | (4,513) |
| Noncurrent portion of debt principal | 48,299 |
| Related Party Convertible Notes [Member] | |
| 2019 (remaining nine months) | 25,618 |
| 2020 | |
| 2021 | |
| 2022 | |
| 2023 | |
| Thereafter | |
| Total future minimum payments | 25,618 |
| Less: amount representing interest | (913) |
| Less: future conversion of accrued interest to principal | |
| Present value of minimum debt payments | 24,705 |
| Less: current portion of debt principal | (24,705) |
| Noncurrent portion of debt principal | |
| Related Party Loans Payable and Credit Facilities [Member] | |
| 2019 (remaining nine months) | 1,875 |
| 2020 | 2,500 |
| 2021 | 28,146 |
| 2022 | |
| 2023 | |
| Thereafter | |
| Total future minimum payments | 32,521 |
| Less: amount representing interest | (7,521) |
| Less: future conversion of accrued interest to principal | |
| Present value of minimum debt payments | 25,000 |
| Less: current portion of debt principal | |
| Noncurrent portion of debt principal | $ 25,000 |
Note 10 - Related Party Transactions (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Related Party Accounts Receivables [Table Text Block] |
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Significant Accounting Policies (Policies) |
3 Months Ended |
|---|---|
Mar. 31, 2019 | |
| Accounting Policies [Abstract] | |
| Liquidity [Policy Text Block] | 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 these condensed consolidated financial statements. As of March 31, 2019, the Company had negative working capital of $199.4 million (compared to negative working capital of $119.5 million as of December 31, 2018 ), and an accumulated deficit of $1.6 billion.As of March 31, 2019, the Company's debt (including related party debt), net of debt discount of $13.5 million, totaled $215.8 million, of which $153.8 million is classified as current. Subsequent to March 31, 2019, the Company entered into arrangements with lenders to extend maturities and convert certain debt obligations into common stock; see Note 12, "Subsequent Events" for more information. The Company's debt service obligations through March 31, 2020 are $179.8 million, including $23.5 million of anticipated cash interest payments. 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 and cross-default clauses. A failure to comply with, or cure non-compliance events or obtain waivers for covenant violations, 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 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 the Company's outstanding indebtedness.Cash and cash equivalents of $5.2 million as of March 31, 2019 are not sufficient to fund expected future negative cash flows from operations and cash debt service obligations through March 31, 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 condensed consolidated financial statements are issued. The condensed 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 extend existing debt maturities by restructuring a majority of its convertible debt, which is uncertain and outside the control of the Company. Further, the Company's operating plan for the twelve months ending March 31, 2020 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) significantly increased cash inflows from grants and collaborations, and (iii) reduced production costs as a result of manufacturing and technical developments. 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 it may be required 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 the Company receives for its assets in liquidation or dissolution could be significantly lower than the value reflected in these condensed consolidated financial statements.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 condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
| Revenue from Contract with Customer [Policy Text Block] | Revenue Recognition 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 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 whether 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.The Company’s significant contracts and contractual terms with its customers are presented in Note 10, "Revenue Recognition" in Part II, Item 8 of the 2018 Form 10 -K/A.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 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. The Company’s renewable products are delivered to customers from the Company’s facilities with shipping terms typically specifying F.O.B. shipping point. 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 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. 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.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 and revenue is estimated and 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 amount method, which is the single amount in a range of possible amounts derived from the licensee’s historical sales volumes and sales prices of its products and recent commodity market pricing data and trends. 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 collaborators 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.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 the milestones in these agreements 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 collaborators 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. Contract liability 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 collaboration 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.For descriptions of the Company's other significant accounting policies, see the 2018 Form 10 -K/A. |
| New Accounting Pronouncements, Policy [Policy Text Block] | Accounting Standards or Updates Recently Adopted In the three months ended March 31, 2019, the Company adopted these accounting standards or updates:Leases February 2016, the FASB issued ASU No. 2016 -02, Leases (Topic The standard requires the recognition of lease liabilities and right-of-use (ROU) assets on the balance sheet arising from lease transactions at the lease commencement date and the disclosure of key information about leasing arrangements. In 842 ). July 2018, the FASB issued ASU 2018 -11, Leases (Topic , which provides an additional transition method in which the lease standard is applied at the adoption date and recognized as a cumulative-effect adjustment to retained earnings without adjustment to comparative periods (collectively Topic 842 ) Targeted Improvements842 ). The amendment has the same effective date and transition requirements as the lease standard.The Company adopted this standard on January 1, 2019 using the modified retrospective approach and elected the package of practical expedients permitted under transition guidance, which allowed the Company to carry forward its historical assessments of: (1 ) whether contracts are or contain leases, (2 ) lease classification and (3 ) initial direct costs, where applicable. The Company did not elect the practical expedient allowing the use-of-hindsight which would require the Company to reassess the lease term of its leases based on all facts and circumstances through the effective date and did not elect the practical expedient pertaining to land easements as this is not applicable to the Company’s current contracts. The Company elected the post-transition practical expedient to not separate lease components from non-lease components for all leases of manufacturing equipment. The Company also elected a policy of not recording leases on its condensed consolidated balance sheets when the leases have a term of 12 months or less and the Company is not reasonably certain to elect an option to purchase the leased asset.The adoption of this standard had the effect of increasing assets and liabilities on the condensed consolidated balance sheet by $25.7 million, but did not have a material impact on the condensed consolidated statements of operations or cash flows. The most significant impact relates to (1 ) the recognition of new ROU assets and lease liabilities on the balance sheet for operating leases; and (2 ) providing significant new disclosures about leasing activities.Upon adoption, the Company recognized 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 also recognized ROU assets of $29.7 million, which represents the operating lease liability, adjusted for prepaid expenses and deferred rent. The difference between the operating lease ROU assets and lease liabilities reflects the net of advanced rent payments and deferred rent balances that were derecognized at the time of adoption.Financial Instruments with "Down Round" Features July 2017, the FASB issued ASU 2017 -11, Earnings Per Share (Topic . 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 260 ); Distinguishing Liabilities from Equity (Topic 480 ); Derivatives and Hedging (Topic 815 ): Accounting for Certain Financial Instruments with Down Round Featuresno longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The accounting standard update became effective in the first quarter of fiscal year 2019, and the Company adopted the standard using a modified retrospective approach. Since the adoption of ASU 2017 -11 would have classified the warrants effected as equity at inception, the cumulative-effect adjustment should (i) record the issuance date value of the warrants as if they had been equity classified at the issuance date, (ii) reverse the effects of changes in the fair value of the warrants that had been recorded in the statement of operations of each period, and (iii) eliminate the derivative liabilities from the balance sheet. Upon adoption, the Company (i) recorded an increase of $32.5 million to additional paid-in capital, (ii) recorded a decrease to accumulated deficit of $8.5 million and (iii) decreased the warrant liability by $41.0 million.Recent Accounting Standards or Updates Not Yet EffectiveFair Value Measurement August 2018, the FASB issued ASU 2018 -13, Fair Value Measurement (Topic , which amends ASC 820 ): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement820, 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 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 standard on its condensed consolidated financial statements.Collaborative Revenue Arrangements November 2018, the FASB issued ASU 2018 -18, Clarifying the Interaction between Topic , that clarifies the interaction between the guidance for certain collaborative arrangements and Topic 808 and Topic 606 606, 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 condensed consolidated financial statements will be material.Credit Losses June 2016, the FASB issued ASU 2016 -13, Financial Instruments—Credit Losses (Topic . ASU 326 ), Measurement of Credit Losses on Financial Instruments2016 -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 condensed consolidated financial statements will be material. |
| Use of Estimates, Policy [Policy Text Block] | 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 condensed consolidated 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 condensed consolidated financial statements. |
Note 5 - Mezzanine Equity (Tables) |
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