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 June 30, 2018

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)

 

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  x    No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuance 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 and post such files).    Yes  x    No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

 

Large accelerated filer o Accelerated filer o
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 August 10, 2018
Common Stock, $0.0001 par value per share 50,368,507

 

 
 

 

AMYRIS, INC.

TABLE OF CONTENTS

 

 

    Page
PART I
Item 1. Financial Statements (unaudited) 3
  Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017 3
  Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2018 and 2017 4
  Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2018 and 2017 5
  Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017 6
  Notes to Condensed Consolidated Financial Statements 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32
Item 3. Quantitative and Qualitative Disclosures about Market Risk 43
Item 4. Controls and Procedures 43
     
PART II
Item 1. Legal Proceedings 45
Item 1A. Risk Factors 45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 46
Item 3. Defaults Upon Senior Securities 46
Item 6. Exhibits 47
SIGNATURES  

 

 

 2 

 

 

PART I

ITEM 1. FINANCIAL STATEMENTS

AMYRIS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

(In thousands, except shares and per share amounts)  June 30,
 2018
  December 31,
 2017
Assets          
Current assets:          
Cash and cash equivalents  $14,050   $57,059 
Restricted cash   1,846    2,994 
Short-term investments   130     
Accounts receivable, net of allowance of $642 as of June 30, 2018 and December 31, 2017   26,814    24,281 
Unbilled receivable   12,683    9,340 
Inventories   6,632    5,408 
Prepaid expenses and other current assets   4,687    5,525 
Total current assets   66,842    104,607 
Property, plant and equipment, net   15,300    13,892 
Unbilled receivable, noncurrent   9,747    7,940 
Restricted cash, noncurrent   959    959 
Recoverable taxes from Brazilian government entities   1,057    1,445 
Other assets   24,747    22,640 
Total assets  $118,652   $151,483 
Liabilities, Mezzanine Equity and Stockholders' Deficit          
Current liabilities:          
Accounts payable  $19,206   $15,921 
Accrued and other current liabilities   20,101    29,402 
Deferred revenue   9,643    4,880 
Debt, current portion   59,987    36,924 
Related party debt, current portion   49,669    20,019 
Total current liabilities   158,606    107,146 
Long-term debt, net of current portion   43,642    61,893 
Related party debt, net of current portion   18,104    46,541 
Derivative liabilities   138,695    119,978 
Other noncurrent liabilities   8,581    10,632 
Total liabilities   367,628    346,190 
Commitments and contingencies (Note 9)          
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 June 30, 2018 and December 31, 2017, and 19,334 and 22,171 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively         
Common stock - $0.0001 par value, 250,000,000 shares authorized as of June 30, 2018 and December 31, 2017; 50,340,680 and 45,637,433 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively   5    5 
Additional paid-in capital   1,086,814    1,048,274 
Accumulated other comprehensive loss   (42,818)   (42,156)
Accumulated deficit   (1,298,914)   (1,206,767)
Total Amyris, Inc. stockholders’ deficit   (254,913)   (200,644)
Noncontrolling interest   937    937 
Total stockholders' deficit   (253,976)   (199,707)
Total liabilities, mezzanine equity and stockholders' deficit  $118,652   $151,483 

 

See the accompanying notes to the unaudited condensed consolidated financial statements.

 

 3 

 

 

AMYRIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

   Three Months Ended June 30,  Six Months Ended June 30,
(In thousands, except shares and per share amounts)  2018  2017  2018  2017
Revenue:                    
Renewable products (includes related party revenue of $144, $0, $295 and $0, respectively)  $6,633   $9,892   $11,828   $17,929 
Licenses and royalties (includes related party revenue of $6,887, $0, $18,287 and $0, respectively)   

6,887

    5,497    18,324    5,752 
Grants and collaborations (includes related party revenue of $1,737, $149, $3,127 and $149, respectively)   

9,674

    10,290    16,040    14,979 
Total revenue (includes related party revenue of $8,768, $149, $21,709 and $149, respectively)   

23,194

    25,679    

46,192

    38,660 
Cost and operating expenses:                    
Cost of products sold   5,984    17,279    11,299    30,047 
Research and development   15,287    14,249    34,100    28,956 
Sales, general and administrative   20,189    15,949    38,946    28,799 
Total cost and operating expenses   41,460    47,477    84,345    87,802 
Loss from operations   (18,266)   (21,798)   (38,153)   (49,142)
Other income (expense):                    
Interest expense   (8,824)   (9,303)   (17,029)   (21,486)
Gain (loss) from change in fair value of derivative instruments   24,365    35,775    (39,548)   38,114 
Gain upon extinguishment of derivative liability   1,857        1,857     
Loss upon extinguishment of debt   (26)   (3,624)   (26)   (3,528)
Other income (expense), net   2,427    (120)   2,936    (440)
Total other income (expense), net   19,799    22,728    (51,810)   12,660 
Income (loss) before income taxes   

1,533

    930    (89,963)   (36,482)
Provision for income taxes       (310)       (269)
Net income (loss) attributable to Amyris, Inc.   

1,533

    620    (89,963)   (36,751)
Less deemed dividend on capital distribution to related parties       (8,648)        (8,648)
Less deemed dividend related to beneficial conversion feature on Series A preferred stock       (562)        (562)
Less cumulative dividends on Series A and B preferred stock   (399)   (1,675)   (794)   (1,675)
Less earnings allocated to participating securities   (67)            
Net income (loss) attributable to Amyris, Inc. common stockholders  $

1,067

   $(10,265)  $(90,757)  $(47,636)
                     
Net income (loss) per share attributable to common stockholders, basic  $0.02   $(0.44)  $(1.71)  $(2.24)
Net loss per share attributable to common stockholders, diluted  $(0.29)  $(0.44)  $(1.71)  $(2.24)
                     
Weighted-average shares of common stock outstanding used in computing net income (loss) per share of common stock, basic   54,932,411    23,155,874    53,076,975    21,226,013 
Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, diluted   

60,729,736

    23,155,874    53,076,975    21,226,013 

 

 

See the accompanying notes to the unaudited condensed consolidated financial statements.

 

 4 

 

 

AMYRIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

 

   Three Months Ended June 30,  Six Months Ended June 30,
(In thousands, except shares and per share amounts)  2018  2017  2018  2017
Comprehensive income (loss):                    
Net income (loss) attributable to Amyris, Inc.  $

1,533

   $620   $(89,963)  $(36,751)
Foreign currency translation adjustment, net of tax   (525)   (1,422)   (662)   (1,099)
Total comprehensive income (loss) attributable to Amyris, Inc.  $1,008   $(802)  $(90,625)  $(37,850)

 

See the accompanying notes to the unaudited condensed consolidated financial statements.

 

 

 

 

 

 

 

 

 5 

 

 

AMYRIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

   Six Months Ended June 30,
(In thousands)  2018  2017
Cash flows from operating activities          
Net loss  $(89,963)  $(36,751)
Adjustments to reconcile net loss to net cash used in operating activities:          
Loss (gain) from change in fair value of derivative liabilities   39,548    (38,115)
Amortization of debt discount   6,587    7,637 
Stock-based compensation   3,178    2,684 
Depreciation and amortization   2,944    5,550 
Loss (gain) on disposal of property, plant and equipment   942    (161)
Loss on foreign currency exchange rates   271    63 
Loss upon extinguishment of debt   26    3,528 
Gain on extinguishment of derivative liability   (1,857)    
Gain on change in fair value of equity investment   (1,717)    
Receipt of equity in connection with collaboration arrangements revenue       (2,660)
Changes in assets and liabilities:          
Accounts receivable   (2,027)   (3,509)
Unbilled receivables   (5,150)    
Inventories   (1,313)   409 
Prepaid expenses and other assets   (1,072)   (4,220)
Accounts payable   2,681    (1,739)
Accrued and other liabilities   (10,031)   7,943 
Deferred revenue   

3,959

    (838)
Net cash used in operating activities   (52,994)   (60,179)
Cash flows from investing activities          
Purchases of property, plant and equipment   (4,207)   (264)
Increase in short-term investments   (157)   (85)
Net cash used in investing activities   (4,364)   (349)
Cash flows from financing activities          
Proceeds from issuance of debt   34,611    12,455 
Proceeds from issuance of common stock upon exercise of warrants   14,549     
Proceeds from issuance of common stock in private placement   1,416     
Proceeds from exercises of ESPP purchases   270     
Proceeds from exercises of common stock options   248    69 
Principal payments on debt   (37,037)   (24,372)
Principal payments on capital leases   (593)   (764)
Payment of minimum employee taxes withheld upon net share settlement of restricted stock units   (185)   (110)
Proceeds from issuance of convertible preferred stock       50,661 
Net cash provided by financing activities   

13,279

    

37,939

 
Effect of exchange rate changes on cash, cash equivalents and restricted cash   (78)   7 
Net decrease in cash, cash equivalents and restricted cash   (44,157)   (22,582)
Cash, cash equivalents and restricted cash at beginning of period   61,012    32,433 
Cash, cash equivalents and restricted cash at end of the period  $16,855   $9,851 
           
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets          
Cash and cash equivalents  $14,050   $5,078 
Restricted cash, current   1,846    3,815 
Restricted cash, noncurrent   959    958 
Total cash, cash equivalents and restricted cash  $16,855   $9,851 

 

See the accompanying notes to the unaudited condensed consolidated financial statements.

 

 6 

 

 

AMYRIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued

(Unaudited)

 

 

   Six Months Ended June 30,
(In thousands)  2018  2017
Supplemental disclosures of cash flow information:          
Cash paid for interest  $8,035   $4,526 
Supplemental disclosures of non-cash investing and financing activities:          
Settlement of derivative liability into equity  $9,536   $ 
Accrued interest added to debt principal  $1,894   $1,745 
Acquisition of property, plant and equipment under accounts payable, accrued liabilities and notes payable  $744   $1,189 
Financing of equipment  $642   $138 
Issuance of convertible preferred stock upon conversion of debt  $   $40,204 
Issuance of common stock upon conversion of debt  $   $28,702 
Issuance of common stock for settlement of debt principal and interest payments  $   $3,233 
Financing of insurance premium under notes payable  $   $191 

 

See the accompanying notes to the unaudited condensed consolidated financial statements.

 

 

 

 

 7 

 

 

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 Flavors & Fragrances 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 six 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 10-K, from which the condensed consolidated balance sheet as of December 31, 2017 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.

 

Liquidity

 

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 financial statements. As of June 30, 2018, the Company had negative working capital of $105.9 million, excluding cash and cash equivalents and short-term investments (compared to negative working capital of $59.6 million as of December 31, 2017), and an accumulated deficit of $1.3 billion.

 

As of June 30, 2018, the Company's debt (including related party debt), net of deferred discount and issuance costs of $25.5 million, totaled $171.4 million, of which $109.7 million is classified as current and $23.2 million is mandatorily convertible into equity and within the control of the Company. The Company's debt service obligations through August 31, 2019 are $114.5 million, including $15.8 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 the covenants and other provisions of the Company’s debt instruments, including any failure to make a payment when required, would generally result in events of default under such instruments, which could permit acceleration 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 $14.1 million as of June 30, 2018 are not sufficient to fund expected future negative cash flows from operations and cash debt service obligations through one year following the issuance of these financial statements. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements are issued. The 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, in addition to the mandatory conversion of certain debt obligations into equity, which conversion is within the control of the Company. Further, the Company's operating plan for the next 12 months from the date of issuance of these financial statements contemplates a significant reduction in its net operating cash outflows as compared to the previous 12 months, resulting from (i) revenue growth from sales of existing and new products with positive gross margins, (ii) significantly increased royalty revenues (previously referred to as value share revenues), (iii) reduced cost of products sold as a percentage of renewable products revenue due to anticipated procurement and production efficiencies, and (iv) cash inflows from grants and collaborations. Finally, during the second half of 2018, the Company plans to obtain project financing for the construction of a new specialty ingredients manufacturing facility in Brazil. 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 forced to liquidate its assets or obtain additional equity or debt financing, which may not occur timely or on reasonable terms, if at all.

 

 8 

 

 

Significant Accounting Policies

 

Note 1, "Basis of Presentation and Summary of Significant Accounting Policies", to the audited consolidated financial statements in the 10-K includes a discussion of the significant accounting policies and estimates used in the preparation of the Company’s consolidated financial statements. Except as noted below for the adoption of Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”), Revenue from Contracts with Customers, and Accounting Standards Update (“ASU”) 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, there have been no material changes to the Company's significant accounting policies and estimates during the three and six months ended June 30, 2018.

 

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, "Significant Revenue Agreements" in Part II, Item 8 of the 10-K.

 

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.

 

 9 

 

 

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 we have 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 outcome 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.

 

 10 

 

 

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.

 

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. Deferred revenue arises from amounts received in advance of performing the research and development activities and is recognized as revenue in future periods as the performance obligations are satisfied.

 

Grants: The Company earns revenues from grants with government agencies to, among other things, provide research and development services to develop molecules using the Company’s technology, and create research and development tools to improve the timeline and predictability for scaling molecules from proof of concept to market by reducing time and costs. Grants typically consist of research and development milestone payments to be received upon the achievement of the milestone events defined in the agreements.

 

The milestone payments are evaluated at inception to determine whether the milestone events are considered probable of achievement and estimates are made of the amount of the milestone payments to include in the transaction price using the most likely amount method which is the single amount in a range of possible amounts. If it is probable that a significant revenue reversal will not occur, the estimated milestone payment amount is included in the transaction price. Each reporting period, the Company re-evaluates the probability of achievement of the milestone events and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative basis, which would affect 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.

 

 11 

 

 

For descriptions of the Company's other significant accounting policies, see the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

 

Recent Accounting Pronouncements

 

(a) Recent Accounting Standards, Pronouncements or Updates Recently Adopted

 

In the six months ended June 30, 2018, the Company adopted these new accounting standards or updates:

 

Revenue Recognition The Company adopted ASC 606 with a date of initial application of January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition as detailed above in “Significant Accounting Policies”. The Company applied ASC 606 using the modified retrospective approach by recognizing the cumulative effect of initially applying ASC 606 to all contracts not completed as of the date of adoption as an adjustment to the opening balance of accumulated deficit at January 1, 2018. Therefore, the comparative information has not been adjusted and continues to be reported under the legacy revenue recognition guidance of ASC 605, "Revenue Recognition".

 

The Company applied ASC 606 using a practical expedient for contracts that were modified before the application date, which allowed us to determine an aggregate effect of all modifications that occurred before January 1, 2018, when determining the satisfied and unsatisfied performance obligations, the transaction price, and allocating that transaction price to the performance obligations instead of retrospectively restating the contracts for such contract modifications.

 

The cumulative effect of initially applying ASC 606 resulted in an increase to accumulated deficit at January 1, 2018 of approximately $0.8 million. The increase in accumulated deficit arose primarily from a $0.8 million increase of deferred revenue related to the effects of measuring and allocating the transaction price to the performance obligations under ASC 606 compared to the legacy guidance of ASC 605. The most significant change in accounting policy is the Company now estimates royalty revenues from licenses of the Company’s intellectual property and recognizes estimated royalty revenues at a point in time when the Company sells its renewable products to its customers (if the sales-based royalty exception does not apply) or when the licensee sells its products to its customer (if the sales-based royalty exception does apply). Also, the transaction price for royalty revenues is reduced for variable incentive payments that may be payable by the Company to customers.

 

The following table presents the amounts by which revenue is affected in the current reporting period by the application of ASC 606 as compared with the legacy guidance that was in effect before the accounting change. No other consolidated statements of operations financial statement line items were impacted by the adoption of ASC 606.

 

   Three Months Ended June 30, 2018  Six Months Ended June 30, 2018
(In thousands)  As
Reported
  Adjustments  Amounts Without
the Adoption of
ASC 606
  As
Reported
  Adjustments  Amounts Without
the Adoption of
ASC 606
Renewable products  $6,633   $   $6,633   $11,828   $   $11,828 
Licenses and royalties   6,887    (4,980)   1,907    18,324    (15,747)   2,577 
Grants and collaborations   9,674    (2,039)   7,635    16,040    (2,265)   13,775 
Total revenue from all customers  $

23,194

   $(7,019)  $16,175   $46,192   $(18,012)  $28,180 

 

 12 

 

 

Financial Instruments In January 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which changes the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The Company adopted ASU 2016-01 on January 1, 2018 and, as a result, has changed its accounting policy to account for investments in equity securities (other than those accounted for using the equity method of accounting) at fair value with changes in fair value recognized in net income. The Company applied the modified retrospective approach by recognizing a $1.4 million cumulative effect adjustment as an increase to the opening balance of accumulated deficit at January 1, 2018 representing an unrealized loss measured as the difference between the fair value and the cost basis of the Company’s equity investments as of January 1, 2018 previously accounted for using the cost method of accounting.

 

Classification of Cash Flow Elements In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which affects the classification of certain cash receipts and cash payments on the statement of cash flows. ASU 2016-15 resulted in a change in cash flow classification of debt prepayment or extinguishment costs. Prior to the adoption of ASU 2016-15, the Company classified gains or losses upon extinguishment of debt as an operating activity in the statements of cash flows. ASU 2016-15 became effective January 1, 2018 on a retrospective basis. Upon the Company's adoption of ASU 2016-15, such gains or losses are now classified in statements of cash flows as a financing activity.

 

Restricted Cash in Statement of Cash Flows In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The accounting standard update became effective January 1, 2018 using a retrospective transition method for each period presented. Upon adoption, ASU 2016-18 has resulted in a change in the presentation of restricted cash in the statement of cash flows for current and prior periods presented.

 

Derecognition of Nonfinancial Assets In February 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which requires entities to apply certain recognition and measurement principles in ASC 606 when they derecognize nonfinancial assets, and in substance, nonfinancial assets, and the counterparty is not a customer. The guidance applies to: (1) contracts to transfer to a noncustomer a nonfinancial asset or group of nonfinancial assets, or an ownership interest in a consolidated subsidiary that does not meet the definition of a business and is not a not-for-profit activity; and (2) contributions of nonfinancial assets that are not a business to a joint venture or other noncontrolled investee. The accounting standard update became effective January 1, 2018 on a modified retrospective basis. Adoption of this ASU did not impact the Company's consolidated financial position, results of operations or cash flows.

 

Staff Accounting Bulletin No 118 - Tax Cuts and Jobs Act of 2017 On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Act) was signed into law, making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21%, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017.

 

Based on the Company’s current operations it is anticipated that the only significant current impact of the Act for the Company will be the reduction in the U.S. corporate tax rate. The Act reduces the corporate tax rate to 21 percent, effective January 1, 2018. In December 2017, Staff Accounting Bulletin No. 118 (SAB 118) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. As of June 30, 2018, due to the complexities of the new law, the Company has not yet completed its accounting for all the tax effects of the Tax Act, but has made a reasonable estimate of the effects on the Company's existing deferred tax balances. In all cases, the Company will continue to make and refine its calculations as additional analysis is completed. In addition, the Company's provisional estimate of the effects on its existing deferred tax balances may also be adjusted as the Company gains a more thorough understanding of the tax law during the one-year measurement period allowed under SAB 118. Additionally, the Act created a new requirement that certain income, referred to as "Global Intangible Low-Taxed Income" (GILTI) earned by controlled foreign corporations (CFCs) must be included currently in the gross income of the CFCs’ U.S. shareholder. The Company’s selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing its global income to determine whether it expects to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. As of June 30, 2018, the Company has not made a policy decision regarding whether to record deferred taxes on GILTI.

 

 13 

 

(b) Recent Accounting Standards Pronouncements or Updates Not Yet Effective as of Period End

 

Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), with fundamental changes as to how entities account for leases. Lessees will need to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. Additional disclosures for leases will also be required. The accounting standard update will be effective beginning in the first quarter of fiscal 2019 using a modified retrospective approach, which requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented. The Company is in the initial stages of evaluating the impact of the new standard on its accounting policies, processes and system requirements. The Company anticipates that the standard may have a material impact on the Company’s condensed consolidated balance sheets due to the requirement to recognize leased right-of-use assets and corresponding liabilities related to leases on the Company’s condensed consolidated balance sheets, but is still evaluating whether the standard might have a material impact on the Company’s other condensed consolidated financial statements.

 

Financial Instruments with "Down Round" Features In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): Accounting for Certain Financial Instruments with Down Round Features. The amendments of this ASU update the classification analysis of certain equity-linked financial instruments, or embedded features, with down round features, as well as clarify existing disclosure requirements for equity-classified instruments. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The accounting standard update will be effective beginning in the first quarter of fiscal 2019 using a modified retrospective approach. The Company is in the initial stages of evaluating the impact of the new standard on its consolidated financial statements.

 

Non-employee Stock-based Compensation In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which more closely aligns the accounting for employee and nonemployee stock-based compensation. Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. This accounting standard update will be effective beginning in the first quarter of fiscal 2019 using a modified retrospective approach. The Company anticipates that the new standard will not materially impact the Company's consolidated financial statements.

 

Use of Estimates

 

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates, and such differences may be material to the financial statements.

 

Reclassifications

 

Certain prior period amounts have been reclassified to conform to the current period presentation in the Company’s condensed consolidated financial statements and the accompanying notes to the condensed consolidated financial statements. The condensed consolidated statements of operations previously presented license fee revenue in combination with grants and collaborations revenue, and royalties (formerly referred to as “value share”) were previously presented in combination with renewable products revenue. Licenses and royalties revenue is presented as a separate line within the condensed consolidated statements of operations. The reclassifications reflect the growth in the Company’s business model of licensing its technology and earning royalties from customers utilizing the Company’s technology in the products it produces and sells. The reclassifications had no impact on total revenue.

 

 14 

 

In the statements of cash flows, the prior period has been restated to reflect accounting standards changes for reporting (i) restricted cash, and (ii) debt extinguishment costs, in statements of cash flows.

 

2. Balance Sheet Details

 

Accounts Receivable, Net

 

Accounts receivable, net is comprised of the following:

 

(In thousands)  June 30,
2018
  December 31,
2017
Accounts receivable  $9,567   $18,953 
Related party accounts receivable   17,247    5,328 
   $26,814   $24,281 

 

Inventories

 

Inventories are stated at the lower of cost or net realizable value and are comprised of the following:

 

(In thousands)  June 30,
2018
  December 31,
2017
Raw materials  $823   $819 
Work-in-process   1,147    364 
Finished goods   4,662    4,225 
Inventories  $6,632   $5,408 

 

Property, Plant and Equipment, Net

 

Property, plant and equipment, net is comprised of the following:

 

(In thousands)  June 30,
2018
  December 31,
2017
Machinery and equipment  $

46,755

   $49,277 
Leasehold improvements   

40,571

    40,036 
Computers and software   

10,497

    9,555 
Furniture and office equipment, vehicles and land   

3,463

    3,415 
Construction in progress   

18,583

    17,438 
    

119,869

    119,721 
Less: accumulated depreciation and amortization   (104,569)   (105,829)
Property, plant and equipment, net  $

15,300

   $13,892 

 

Property, plant and equipment, net includes $4.8 million and $4.2 million of machinery and equipment under capital leases as of June 30, 2018 and December 31, 2017, respectively. Accumulated amortization of assets under capital leases totaled $1.9 million and $1.6 million as of June 30, 2018 and December 31, 2017, respectively.

 

 15 

 

During the three and six months ended June 30, 2018, the Company capitalized $1.2 million and $1.6 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 capital leases, was $1.4 million and $2.7 million for the three months ended June 30, 2018 and 2017, respectively, and $2.9 million and $5.6 million for the six months ended June 30, 2018 and 2017, respectively.

 

Other Assets

 

Other assets are comprised of the following:

 

(In thousands)  June 30,
2018
  December 31,
2017
Contingent consideration  $8,151   $8,151 
Prepaid royalty   7,285    7,409 
Deposits   3,662    2,462 
Equity investment in SweeGen   3,570    3,233 
Goodwill   560    560 
Other   1,519    825 
Other assets  $24,747   $22,640 

 

Accrued and Other Current Liabilities

 

Accrued and other current liabilities are comprised of the following:

 

(In thousands)  June 30,
2018
  December 31,
2017
Payroll and related expenses  $7,074   $7,238 
Accrued interest   2,325    8,213 
SMA relocation accrual   3,417    3,587 
Tax-related liabilities   2,305    5,837 
Professional services   1,400    1,894 
Other   3,580    2,633 
Total accrued and other current liabilities  $20,101   $29,402 

 

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:

 

 16 

 

(In thousands)  June 30, 2018  December 31, 2017
   Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total
Assets                                        
Money market funds  $   $   $   $   $53,199   $   $   $53,199 
Certificates of deposit   130            130    7,813            7,813 
Equity investment in SweeGen       3,570        3,570                 
Total assets measured and recorded at fair value  $130   $3,570   $   $3,700   $61,012   $   $   $61,012 
Liabilities                                        
Embedded derivatives in connection with the issuance of debt and equity instruments  $   $   $6,560   $6,560   $   $   $4,203   $4,203 
Freestanding derivative instruments in connection with the issuance of equity instruments           132,135    132,135            115,775    115,775 
Total liabilities measured and recorded at fair value  $   $   $138,695   $138,695   $   $   $119,978   $119,978 

 

There were no transfers between levels during the periods presented.

 

Equity Investment in SweeGen

 

The Company holds 850,115 unregistered shares of SweeGen, Inc. common stock received as payment in connection with a December 2016 revenue agreement between the Company and Phyto Tech Corp. (d/b/a Blue California). At June 30, 2018, the fair value of the shares was $3.6 million, determined based on the over-the-counter market (OTCMKTS) trading price of the SweeGen shares (Level 2). For the three and six months ended June 30, 2018, the Company recorded unrealized gains of $1.4 million and $1.7 million, respectively, for changes in fair value of the shares. The Company adopted ASU 2016-01 on January 1, 2018 and now accounts for its equity investment in SweeGen at fair value, with changes in fair value recognized in net income; see "Recent Accounting Pronouncements" in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” above. The fair value of the SweeGen shares is included in Other Assets in the condensed consolidated balance sheets.

 

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, 2017  $112,368   $7,610   $119,978 
Loss from change in fair value of derivative liabilities   34,650    6,709    41,359 
Derecognition upon extinguishment of derivative liabilities   (22,642)       (22,642)
Balance at June 30, 2018  $124,376   $14,319   $138,695 

 

The derivative liabilities recognized in connection with the issuance of equity and debt instruments represent the fair value of the make-whole provisions of the Series A and B Preferred Stock as well as the cash and anti-dilution warrants issued concurrently with the Series A, B and D Preferred Stock (see Note 6, “Stockholders’ Deficit” in Part II, Item 8 of the 10-K), and conversion options, conversion price adjustment features and down round provisions associated with the R&D Note, Temasek Funding Warrant, Tranche Notes, 2014 144A Notes and 2015 144A Notes (see Note 4, “Debt” and Note 6, "Stockholders' Deficit" in Part II, Item 8 of the 10-K).

 

The market-based assumptions and estimates used in applying a Monte Carlo simulation approach and Black-Scholes-Merton option value approach for valuing the derivative liabilities in connection with debt and equity instruments include amounts in the following ranges and amounts:

 

 17 

 

   June 30, 2018  June 30, 2017
Risk-free interest rate  1.97% - 2.85%  1.68% - 2.40%
Risk-adjusted yields  15.10% - 25.23%  18.40% - 28.53%
Stock price volatility  45% - 75%  45% - 80%
Probability of change in control  0% - 5%   5% 
Stock price   $6.39    $3.75 
Credit spread  12.96% - 22.98%  16.63% - 26.70%
Estimated conversion dates  2018 - 2025  2018 - 2025

 

The valuation of the embedded derivatives in connection with the issuance of debt and equity instruments and freestanding derivative instruments in connection with the issuance of equity instruments can be significantly affected by changes in valuation assumptions. For example, all other things being equal, a decrease/increase in the Company’s stock price, probability of change of control, credit spread, term to maturity/conversion or stock price volatility decreases/increases the valuation of the liabilities, whereas a decrease/increase in risk adjusted yields or risk-free interest rates increases/decreases the valuation of the liabilities. A third-party valuation specialist assisted in determining estimates of fair value.

 

See Note 6, "Stockholders' Deficit", for more information about the derecognition upon extinguishment of derivative liabilities in connection with the April 2018 warrants exercise.

 

Changes in Fair Value

 

Changes in the fair value of assets or liabilities measured at fair value on a recurring basis are recognized in “Gain (loss) from change in fair value of derivative instruments" in the condensed consolidated statements of operations.

 

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, which is representative of fair value at the date of acquisition. The Company estimates the fair value of loans payable and credit facilities using observable market-based inputs (Level 2) and estimates the fair value of convertible notes based on rates currently offered for instruments with similar maturities and terms (Level 3). The fair values and carrying values of the Company's debt were as follows:

 

(In thousands)  June 30, 2018  December 31, 2017
   Fair Value  Carrying Value  Fair Value  Carrying Value
Total debt  $165,844   $171,402   $156,900   $165,377 

 

 18 

 

4. Debt

 

Net carrying amounts of debt are as follows:

 

   June 30, 2018  December 31, 2017
(In thousands)  Principal  Unamortized
Debt
Discount
  Net Balance  Principal  Unamortized
Debt
Discount
  Net Balance
Nonrelated Party                              
Convertible notes                              
2015 Rule 144A convertible notes  $37,887   $(4,576)  $33,311   $37,887   $(6,872)  $31,015 
2014 Rule 144A convertible notes   24,004    (2,023)   21,981    24,004    (3,170)   20,834 
December 2017 convertible note               5,000    (25)   4,975 
August 2013 financing convertible notes   4,416    (2,541)   1,875    4,009    (2,918)   1,091 
    66,307    (9,140)   57,167    70,900    (12,985)   57,915 
Loans payable and credit facilities                              
GACP term loan facility   36,000    (1,596)   34,404             
Senior secured loan facility               28,566    (253)   28,313 
Ginkgo notes   12,000    (4,599)   7,401    12,000    (4,983)   7,017 
Other loans payable   5,696    (1,234)   4,462    6,463    (1,277)   5,186 
Other credit facilities   195        195    381        381 
    53,891    (7,429)   46,462    47,410    (6,513)   40,897 
Subtotal nonrelated party   120,198    (16,569)   103,629    118,310    (19,498)   98,812 
                               
Related Party                              
Related party convertible notes                              
August 2013 financing convertible notes   23,199    432    23,631    21,711    897    22,608 
2014 Rule 144A convertible notes   24,705    (2,423)   22,282    24,705    (3,784)   20,921 
R&D note   3,700        3,700    3,700    (18)   3,682 
    51,604    (1,991)   49,613    50,116    (2,905)   47,211 
Related party loans payable                              
DSM note   25,000    (6,896)   18,104    25,000    (8,039)   16,961 
Other DSM loan   56        56    393        393 
February 2016 private placement               2,000        2,000 
    25,056    (6,896)   18,160    27,393    (8,039)   19,354 
Subtotal related party   76,660    (8,887)   67,773    77,509    (10,944)   66,565 
Total debt   196,858    (25,456)   171,402    195,819    (30,442)   165,377 
Less: current portion             (109,656)             (56,943)
Long-term debt, net of current portion            $61,746             $108,434 

 

During the six months ended June 30, 2018, aside from debt payments (including payments-in-kind), the following debt transactions occurred:

 

Senior Secured Loan Facility Repayment: On June 29, 2018, the Company repaid in full the $27.3 million outstanding principal balance owed under the Senior Secured Loan Facility.

 

 19 

 

 

GACP Term Loan Facility: On June 29, 2018, the Company, certain of the Company’s subsidiaries and GACP Finance Co., LLC (GACP) entered into a Loan and Security Agreement (the LSA) to borrow $36.0 million (the GACP Term Loan Facility). The LSA also provides for an incremental secured term loan facility in an aggregate principal amount of up to $35.0 million (the Incremental GACP Term Loan Facility and, together with the GACP Term Loan Facility, the GACP Term Loan Facilities), subject to certain conditions and approvals, to fund the construction of a custom-built manufacturing facility in Brazil. The majority of the net proceeds from the GACP Term Loan Facility were used to repay all amounts outstanding under the Senior Secured Loan Facility between the Company and Stegodon. The remaining net proceeds were used on July 2, 2018 to repay amounts outstanding under the R&D Note at maturity.

 

Loans under the GACP Term Loan Facilities have a maturity date of July 1, 2021; provided, that if the Company has not (i) met certain financial conditions on or prior to January 7, 2019 or (ii) refinanced the 2015 144A Notes and 2014 144A Notes with indebtedness that has a maturity date which is later than July 1, 2021 or converted such notes into equity prior to January 12, 2019, then the maturity date will be January 12, 2019. The GACP Term Loan Facilities will amortize beginning on July 1, 2019 in quarterly installments equal to 2.5% of the original loan amounts, with the remaining principal balance payable on the maturity date. Loans under the GACP Term Loan Facilities will accrue interest at a rate per annum equal to the sum of (i) the greater of (A) the U.S. prime rate as reported in the Wall Street Journal and (B) 4.0%, plus (ii) 6.25%, payable monthly. The GACP Term Loan Facilities are guaranteed by the subsidiaries of the Company party to the LSA and collateralized by first-priority liens on substantially all the Company’s and such subsidiaries’ assets, including intellectual property, subject to certain exceptions. The LSA includes customary terms, covenants and restrictions, including mandatory prepayments upon the occurrence of certain events, including asset sales, casualty events, incurrence of additional indebtedness and borrowing base deficiencies, subject to certain exceptions and reinvestment rights. The LSA contains three financial covenants: minimum revenue, liquidity and asset coverage ratio.

 

The Company paid origination fees at closing equal to 4%, or $1.4 million, of the funded amount of the GACP Term Loan Facility and other closing costs totaling $0.2 million, plus an agency fee of $25,000 per quarter during the term of the GACP Term Loan Facilities. The $1.6 million of issuance costs will be amortized using the effective interest method over the expected 3-year loan term.

 

Future Minimum Payments

 

Future minimum payments under the Company's debt agreements as of June 30, 2018 are as follows:

 

Years ending December 31

 (In thousands)

  Convertible
Notes
  Loans
Payable
  Credit
Facilities
  Related
Party
Convertible
Notes
  Related
Party
Loans
Payable
  Total
2018 (remaining six months)  $2,580   $3,323   $1,878   $4,503   $1,306   $13,590 
2019   69,334    1,627    5,912    25,508    2,500    104,881 
2020       1,626    7,289        2,500    11,415 
2021       1,627    32,551        27,500    61,678 
2022       13,417                13,417 
Thereafter       2,528                2,528 
Total future minimum payments   71,914    24,148    47,630    30,011    33,806    207,509 
Less: amount representing interest   (5,160)   (6,453)   (11,434)   (1,606)   (8,750)   (33,403)
Add: amount mandatorily convertible into common stock upon maturity   

            

24,802

        

24,802

 
Less: future interest accruals to be converted to principal   (447)           (1,603)       (2,050)
Present value of minimum debt payments   66,307    17,695    36,196    51,604    25,056    196,858 
Less: current portion of debt principal   (66,307)   (2,714)   (196)   (51,604)   (56)   (120,877)
Noncurrent portion of debt principal  $   $14,981   $36,000   $   $25,000   $75,981 

 

 20 

 

5. Mezzanine Equity

 

Mezzanine equity is comprised of the following:

 

(In thousands)  June 30, 2018  December 31, 2017
Contingently redeemable common stock  $5,000   $5,000 

 

Mezzanine equity at June 30, 2018 and December 31, 2017 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%.

 

6. Stockholders' Deficit

 

Warrants

 

In connection with various debt and equity transactions (see Note 4, "Debt" and Note 6, “Stockholders’ Deficit” in Part II, Item 8 of the 10-K), the Company has issued warrants exercisable for shares of common stock. The following table summarizes warrant activity for the six months ended June 30, 2018:

 

Transaction  Number
Outstanding as of
December 31, 2017
  Additional
Warrants
Issued
  Exercises  Number
Outstanding as of
June 30, 2018
July 2015 private placement   81,197            81,197 
July 2015 related party debt exchange   2,082,010            2,082,010 
February 2016 related party private placement   171,429            171,429 
May 2017 warrants (Series A and B preferred stock)   18,042,568        (3,801,330)   14,241,238 
August 2017 DSM offering (Series B preferred stock)   3,968,116            3,968,116 
August 2017 Vivo offering (Series D preferred stock)   5,575,118            5,575,118 
Tranche 1 new cash warrants       3,616,174        3,616,174 
Other   1,406            1,406 
    29,921,844    3,616,174    (3,801,330)   29,736,688 

 

For the six months ended June 30, 2018, net proceeds were $14.5 million from the issuance of common stock upon exercise of 3,801,330 warrants.

 

Warrants Exercises and New Warrant Issuance

 

On April 12, 2018, certain holders of the May 2017 Warrants (see Note 6, “Stockholders’ Deficit” in Part II, Item 8 of the 10-K) exercised their May 2017 Cash Warrants to purchase 3,616,174 shares of common stock for net proceeds to the Company of $14.5 million and surrendered their May 2017 Dilution Warrants. Upon exercise of such May 2017 Cash Warrants and surrender of such May 2017 Dilution Warrants, certain derivative liabilities representing certain anti-dilution rights embedded in the May 2017 Warrants were effectively settled. Concurrent with the exercise of the May 2017 Cash Warrants and surrender of such May 2017 Dilution Warrants, the Company issued new warrants to these same holders to purchase 3,616,174 shares of common stock, exercisable at a price of $7.00 per share. The new warrants were fully exercisable upon issuance, with an expiration date of July 12, 2019. The new warrants do not provide the holders with anti-dilution protection. Consequently, the new warrants were treated as additional consideration to the May 2017 Warrant holders in exchange for their anti-dilution rights embedded in the original May 2017 Warrants. The Company used the Black-Scholes-Merton option pricing model to determine the fair value of the new warrants, which resulted in a fair value of $9.4 million. Black-Scholes-Merton input assumptions were as follows: volatility of 90%, risk-free rate of 2.16%, expected term of 1.25 years, expected dividend yield of $0, exercise price of $7.00, and Company stock price on issue date of $6.80. As a result of this exchange transaction, the Company recorded a $1.9 million net gain on the extinguishment of the related derivative liability during the three months ended June 30, 2018. This net gain was comprised of an $11.3 million gain on derecognition of the derivative liability and a $9.4 million loss on issuance of the new warrant.

 

 21 

 

 

At Market Issuance Sales Agreement

 

On March 8, 2016, the Company entered into an At Market Issuance Sales Agreement (the ATM Sales Agreement) with FBR Capital Markets & Co. and MLV & Co. LLC (the Agents) under which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $50.0 million (the ATM Shares) from time to time through the Agents, acting as its sales agents, under the Company's Registration Statement on Form S-3 (File No. 333-203216), effective April 15, 2015. Sales of the ATM Shares through the Agents may be made by any method that is deemed an "at the market offering" as defined in Rule 415 under the Securities Act of 1933, as amended, including by means of ordinary brokers' transactions at market prices, in block transactions, or as otherwise agreed by the Company and the Agents. The Company will pay the applicable Agent a commission rate of up to 3.0% of the gross proceeds from the sale of any ATM Shares sold through such Agent under the ATM Sales Agreement. The ATM Sales Agreement includes no commitment by other parties to purchase ATM Shares the Company offers for sale.

 

During the three and six months ended June 30, 2018, the Company issued and sold 191,639 and 205,168 shares of common stock under the ATM Sales Agreement, at average prices of $6.91 and $6.90 per share, respectively, resulting in total net proceeds to the Company of $1.4 million. The ATM Sales Agreement expired on April 15, 2018, and as a result, zero remained available for issuance under the ATM Sales Agreement as of June 30, 2018.

 

7. Variable-interest Entities and Unconsolidated Investments

 

Consolidated Variable-interest Entity

 

The table below reflects the carrying value of the Aprinnova JV's (see Note 7, “Variable-interest Entities and Unconsolidated Investments” in Part II, Item 8 of the 10-K) assets and liabilities, for which the Company is the primary beneficiary at June 30, 2018:

 

(In thousands)  June 30, 2018  December 31, 2017
Assets  $37,133   $36,781 
Liabilities  $1,873   $3,187 

 

The Aprinnova JV's creditors have recourse only to the assets of the Aprinnova JV.

 

During the three and six months ended June 30, 2018 and 2017, there was no activity in noncontrolling interest.

 

Unconsolidated Investments

 

The Company's unconsolidated investments are summarized as follows:

 

      Carrying Value of Investment on
Condensed Consolidated Balance Sheets
(Amounts in thousands)  Amyris Equity
Ownership %
  June 30, 2018  December 31, 2017
Equity-method investments:               
Novvi LLC   20%  $   $ 
Total Amyris BioSolutions B.V.   25%  $   $ 
Other unconsolidated equity investment:               
SweeGen, Inc.   3%  $3,570   $3,233 

 

 22 

 

 

8. Net Loss per Share Attributable to Common Stockholders

 

For the three months ended June 30, 2017 and the six months ended June 30, 2018 and June 30, 2017, basic net loss per share attributable to common stockholders was the same as diluted net loss per share attributable to common stockholders because the inclusion of all potentially dilutive securities outstanding was antidilutive. For the three months ended June 30, 2018, income was allocated to participating Series B and Series D preferred shares, as they participate in profits. As the adjustments to net income due to the presumed conversion of dilutive securities created a net loss position for the three months ended June 30, 2018 on a diluted basis, there was no allocation to participating securities for diluted EPS, as the participating securities do not participate in losses.

 

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders:

 

   Three Months Ended June 30,  Six Months Ended June 30,
(In thousands, except shares and per share amounts)  2018  2017  2018  2017
Numerator:            
Net income (loss) attributable to Amyris, Inc.  $1,533   $620   $(89,963)  $(36,751)
Less deemed dividend on capital distribution to related parties       (8,648)       (8,648)
Less deemed dividend related to beneficial conversion feature on Series A preferred stock       (562)       (562)
Less cumulative dividends on Series A and B preferred stock   (399)   (1,675)   (794)   (1,675)
Less earnings allocated to participating securities   (67)            
Net income (loss) attributable to Amyris, Inc. common stockholders, basic   

1,067

    (10,265)   (90,757)   (47,636)
Earnings allocated to participating securities   67             
Gain from change in fair value of dilutive common stock warrants   (13,421)            
Interest on dilutive convertible debt   357             
Accretion of debt discount   (99)            
Gain from change in fair value of derivative instruments   (5,765)            
Net loss attributable to Amyris, Inc. common stockholders, diluted  $(17,794)  $(10,265)  $(90,757)  $(47,636)
                     
Denominator:                    
Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, basic   54,932,411    23,155,874    53,076,975    21,226,013 
Basic income (loss) per share  $0.02   $(0.44)  $(1.71)  $(2.24)
                     
Weighted-average shares of common stock outstanding   54,932,411    23,155,874    53,076,975    21,226,013 
Effect of dilutive convertible debt   2,709,323             
Effect of dilutive common stock warrants   3,088,002             
Weighted-average common stock equivalents used in computing net loss per share of common stock, diluted   60,729,736    23,155,874    53,076,975    21,226,013 
Diluted loss per share  $(0.29)  $(0.44)  $(1.71)  $(2.24)

 

 23 

 

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share of common stock because including them would have been antidilutive:

 

   Three Months Ended June 30,  Six Months Ended June 30,
   2018  2017  2018  2017
Period-end stock options to purchase common stock   5,424,330    997,275    5,424,330    997,275 
Convertible promissory notes (1)   5,695,615    6,270,734    8,390,819    6,270,734 
Period-end common stock warrants   18,177,362    16,871,700    24,341,772    16,871,700 
Period-end restricted stock units   5,211,584    666,336    5,211,584    666,336 
Period-end preferred stock   4,053,905    -    4,053,905    - 
Total potentially dilutive securities excluded from computation of diluted net loss per share   38,562,796    24,806,045    47,422,410    24,806,045 

______________

 

(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.

 

9. Commitments and Contingencies

 

Commitments

 

Future minimum payments under the Company's lease obligations as of June 30, 2018 are as follows (in thousands):

 

Years ending December 31:

 (In thousands)

  Capital
Leases
  Operating
Leases
  Total Lease
Obligations
2018 (remaining six months)  $424   $4,941   $5,365 
2019   451    8,755    9,206 
2020   125    7,017    7,142 
2021       7,241    7,241 
2022       7,414    7,414 
Thereafter       3,281    3,281 
Total future minimum payments  $1,000   $38,649   $39,649 
Less: amount representing interest   (49)          
Present value of minimum lease payments   951           
Less: current portion   (583)          
Long-term portion  $368           

 

Guarantor Arrangements

 

In November 2010, the Company entered into the FINEP Credit Facility to finance a research and development project on sugarcane-based biodiesel; see Note 4, "Debt" in Part II, Item 8 of the 10-K. The FINEP Credit Facility is guaranteed by a chattel mortgage on certain equipment of the Company. The Company's total acquisition cost for the equipment under this guarantee as of June 30, 2018 and December 31, 2017 was R$6.0 million (US$1.6 million and US$1.8 million, respectively) based on exchange rates at each date.

 

Contingencies

 

The Company has levied indirect taxes on sugarcane-based biodiesel sales that took place several years ago by Amyris Brasil Ltda. (see Note 13, “Divestiture” in Part II, Item 8 of the 10-K) 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.

 

 24 

 

The Company and a number of the Company’s current officers and directors are parties to four separate purported shareholder derivative complaints based on allegedly misleading statements and/or omissions made in connection with the Company’s securities filings (the Derivative Complaints). The Derivative Complaints seek to recover, on the Company's behalf, unspecified damages purportedly sustained by the Company and 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. Two of the Derivative Complaints were filed in the U.S. District Court for the Northern District of California (together, the Federal Derivative Cases). On December 21, 2017, the defendants filed a motion to dismiss the Federal Derivative Cases, which was granted on March 9, 2018. On March 29, 2018, the plaintiffs filed an amended complaint, and on May 4, 2018 the defendants filed a motion to dismiss the amended complaint. On July 23, 2018, the court granted defendants’ motion to dismiss the amended complaint with prejudice and entered judgment in favor of the defendants. The remaining two Derivative Complaints were filed in the Superior Court for the State of California and are in the initial pleadings stage. The Company believes the Derivative Complaints lack merit and intends to continue to defend itself vigorously. Given the early stage of these proceedings, it is not yet possible to reliably determine any potential liability that could result from this matter. See Part II, Item 1, “Legal Proceedings” in this Quarterly Report on Form 10-Q for more details.

 

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.

 

10. 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:

 

 25 

 

   Three Months Ended June 30,
(In thousands)  2018  2017
   Renewable
Products
  Licenses
and
Royalties
  Grants and
Collaborations
  Total  Renewable
Products
  Licenses
and
Royalties
  Grants and
Collaborations
  Total
United States  $2,339   $   $4,624   $6,963   $1,902   $2,663   $7,379   $11,944 
Europe   2,987    6,887    4,314    

14,188

    749    202    2,786    3,737 
Asia   1,113            1,113    7,161    2,632    125    9,918 
South America   194        736    930    80            80 
Other                                
   $6,633   $6,887   $9,674   $

23,194

   $9,892   $5,497   $10,290   $25,679 

 

   Six Months Ended June 30,
(In thousands)  2018  2017
   Renewable
Products
  Licenses
and
Royalties
  Grants and
Collaborations
  Total  Renewable
Products
  Licenses
and
Royalties
  Grants and
Collaborations
  Total
United States  $4,301   $   $5,832   $10,133   $2,998   $2,673   $9,369   $15,040 
Europe   5,421    18,324    7,815    31,560    3,307    446    5,359    9,112 
Asia   1,791        1,000    2,791    11,468    2,633    251    14,352 
South America   215        1,393    1,608    144            144 
Other   100            100    12            12 
   $11,828   $18,324   $16,040   $46,192   $17,929   $5,752   $14,979   $38,660 

 

Significant Revenue Agreements

 

In connection with significant revenue agreements (also see Note 10, “Significant Revenue Agreements” in Part II, Item 8 of the 10-K), the Company recognized the following revenues for the three and six months ended June 30, 2018 and 2017:

 

 26 

 

   Three Months Ended June 30,
(In thousands)  2018  2017
   Renewable
Products
  Licenses
and
Royalties
  Grants and
Collaborations
  Total  Renewable
Products
  Licenses
and
Royalties
  Grants and
Collaborations
  Total
DSM - related party  $   $6,887   $1,737   $8,624   $   $   $149   $149 
Givaudan   2,109        1,358    3,467            1,500    1,500 
Firmenich          1,219    1,219        202    2,137    2,339 
Nenter                   4,016    2,633        6,649 
DARPA           4,191    4,191            4,671    4,671 
Subtotal revenue from significant revenue agreements   2,109    6,887    8,505    17,501    4,016    2,835    8,457    15,308 
Revenue from all other customers   4,524        1,169    5,693    5,876    2,662    1,833    10,371 
Total revenue from all customers  $6,633   $6,887   $9,674   $

23,194

  $9,892   $5,497   $10,290   $25,679 

 

   Six Months Ended June 30,
(In thousands)  2018  2017
   Renewable
Products
  Licenses
and
Royalties
  Grants and
Collaborations
  Total  Renewable
Products
  Licenses
and
Royalties
  Grants and
Collaborations
  Total
DSM - related party  $   $18,287   $3,127   $21,414   $   $   $149   $149 
Givaudan   3,184        2,859    6,043    619        3,000    3,619 
Firmenich   207    

37

   2,486    2,730    998    446    3,211    4,655 
Nenter           1,000    1,000    6,324    2,633        8,957 
DARPA           5,038    5,038            5,642    5,642 
Subtotal revenue from significant revenue agreements   3,391    18,324    14,510    36,225    7,941    3,079    12,002    23,022 
Revenue from all other customers   8,437        1,530    9,967    9,988    2,673    2,977    15,638 
Total revenue from all customers  $11,828   $18,324   $16,040   $46,192   $17,929   $5,752   $14,979   $38,660 

 

Contract Assets and Liabilities

 

When a contract results in revenue being recognized in excess of the amount the Company has invoiced or has the right to invoice to the customer, a contract asset is recognized. Contract assets are transferred to accounts receivable, net when the rights to the consideration become unconditional. Contract assets are presented as Unbilled Receivables on the consolidated balance sheets.

 

Contract liabilities consist of payments received from customers, or such consideration that is contractually due, in advance of providing the product or performing services such that control has not passed to the customer. Contract liabilities are presented as deferred revenue on the consolidated balance sheets.

 

 27 

 

 

Trade receivables related to revenue from contracts with customers are included in accounts receivable on the consolidated balance sheets, net of the allowance for doubtful accounts. Trade 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 unbilled receivables, deferred revenue, and accounts receivable from contracts with customers:

 

(In thousands)  June 30,
2018
  December 31,
2017
Unbilled receivable, current  $12,683   $9,340 
Unbilled receivable, noncurrent  $9,747   $7,940 
Deferred revenue, current  $9,643   $4,880 
Deferred revenue, noncurrent  $383(1)  $383(1)
Accounts receivable, net  $26,814   $24,281 

 

(1)     As of June 30, 2018 and December 31, 2017, deferred revenue, noncurrent is presented in Other Noncurrent Liabilities in the consolidated balance sheets because of its insignificance.

 

Unbilled receivables, current, as of June 30, 2018 relate to satisfied performance obligations that the Company has not invoiced to the customer and, as of December 31, 2017, primarily relate to the Company’s right to consideration from DSM for minimum future royalties which the Company received cash of $9,250,000 during the three months ended June 30, 2018. Unbilled receivables, noncurrent, relate to the Company’s right to consideration from DSM for minimum future royalties. The Company’s right to cash receipt for these minimum royalty amounts occurs on or before December 31, 2019.

 

Deferred revenue, current increased by $4.8 million at June 30, 2018 resulting from a $0.8 million increase upon adoption of ASC 606 on January 1, 2018 plus the net amount of collaboration and royalty revenues invoiced in excess of amounts recognized as revenue, less $3.3 million of revenue recognized during the six months ended June 30, 2018 that was included in deferred revenue at the beginning of the period.

 

Remaining Performance Obligations

 

The following table provides information regarding the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) based on the Company's existing agreements with customers as of June 30, 2018.

 

(In thousands)  June 30, 2018
Remaining 2018  $4,032 
2019   6,338 
2020   6,338 
2021 and thereafter   572 
Total from all customers  $17,280 

 

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 $12.4 million of estimated future revenue is excluded from the table above, as that amount represents constrained variable consideration.

 

 28 

 

 

11. Related Party Transactions

 

Related Party Debt

 

See Note 4. Debt, for related party debt balances as of June 30, 2018 and December 31, 2017.

 

Related Party Accounts Receivable and Unbilled Receivables

 

Related party accounts receivable and unbilled receivables as of June 30, 2018 and December 31, 2017 were as follows:

 

(In thousands)  June 30, 2018  December 31, 2017
Accounts receivable, net:          
DSM  $15,829   $3,483 
Novvi   472    1,607 
Total   384    238 
   $16,685   $5,328 
Unbilled receivable, current:          
DSM  $12,683   $9,340 
Unbilled receivable, noncurrent:          
DSM  $9,747   $7,940 

 

Related Party Joint Ventures

 

See Note 7, "Variable-interest Entities and Unconsolidated Investments" above and in Part II, Item 8 of the 10-K for information about the Company's:

 

Aprinnova joint venture with Nikko, and
TAB joint venture with Total

 

12. Stock-based Compensation

 

The Company’s stock option activity and related information for the six months ended June 30, 2018 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, 2017   1,338,367   $33.40    7.7   $97 
Granted   4,192,476   $5.12           
Exercised   (43,055)  $3.68           
Forfeited or expired   (63,458)  $29.29           
Outstanding - June 30, 2018   5,424,330   $11.83    9.2   $8,541 
Vested or expected to vest after June 30, 2018   4,981,859   $12.42    9.2   $7,790 
Exercisable at June 30, 2018   949,237   $42.07    6.7   $1,119 

 

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The Company’s restricted stock units (RSUs) activity and related information for the six months ended June 30, 2018 was as follows:

 

   Quantity of
Restricted Stock
Units
  Weighted-average
Grant-date
Fair Value
  Weighted-average
Remaining
Contractual
Life, in Years
Outstanding - December 31, 2017   683,554   $8.62    1.40 
Awarded   4,712,787   $5.27      
RSUs released   (144,572)  $11.18      
RSUs forfeited   (37,879)  $7.01      
Outstanding - June 30, 2018   5,213,890   $5.53    2.03 
Vested or expected to vest after June 30, 2018   4,927,426   $5.54    2.00 

 

Stock-based compensation expense related to options and RSUs granted to employees and non-employees during the three and six months ended June 30, 2018 and 2017 was allocated to research and development expense and sales, general and administrative expense as follows:

 

   Three Months Ended June 30,  Six Months Ended June 30,
(In thousands)  2018  2017  2018  2017
Research and development  $333   $441   $696   $925 
Sales, general and administrative   1,567    597    2,482    1,759 
Total stock-based compensation expense  $1,900   $1,038   $3,178   $2,684 

 

As of June 30, 2018, there was unrecognized compensation expense of $36.0 million related to stock options and RSUs. The Company expects to recognize this expense over a weighted-average period of 3.7 years.

 

The fair value of employee stock options was estimated using the following weighted-average assumptions:

 

   Three Months Ended June 30,  Six Months Ended June 30,
   2018  2017  2018  2017
Expected dividend yield   %   %   %   %
Risk-free interest rate   2.7%   1.8%   2.7%   1.8%
Expected term (in years)   6.86    5.38    6.85    5.38 
Expected volatility   79.6%   85.7%   79.7%   85.7%

 

In May 2018, shareholders approved amendments to the Company's 2010 Equity Incentive Plan (EIP) to (i) increase the number of shares of common stock available for grant and issuance thereunder by 9 million shares and (ii) increase the annual per-participant award limit thereunder to 4 million shares.

 

Also in May 2018, shareholders approved an amendment to the Company's 2010 Employee Stock Purchase Plan (ESPP) to increase the maximum number of shares of common stock that may be issued over the term of the ESPP by 1 million shares.

 

In May 2018, the Company granted its chief executive officer performance-based stock options (PSOs) to purchase 3,250,000 shares. PSOs are equity awards with the final number of PSOs that may vest determined based on the Company’s performance against pre-established EBITDA milestones and Amyris stock price milestones. The EBITDA milestones are measured from the grant date through December 31, 2021, and the stock price milestones are measured from the grant date through December 31, 2022. The PSOs vest in four tranches contingent upon the achievement of both the EBITDA milestones and stock price milestones for each respective tranche, and the chief executive officer’s continued employment with the Company. Over the measurement periods, the number of PSOs that may be issued and the related stock-based compensation expense that is recognized is adjusted upward or downward based upon the probability of achieving the EBITDA milestones. Depending on the probability of achieving the EBITDA milestones and stock price milestones and certification of achievement of those milestones for each vesting tranche by the Company’s Board of Directors or Compensation Committee, the PSOs issued could be from zero to 3,250,000 stock options, with an exercise price of $5.08 per share.

 

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Stock-based compensation expense for this award will be recognized using a graded-vesting approach over the service period beginning at the grant date thru December 31, 2022, as the Company’s management has determined that certain EBITDA milestones are probable of achievement as of June 30, 2018, The Company utilized a Monte Carlo simulation model to estimate the grant date fair value of each tranche of the award which totaled $5.1 million. Approximately, $0.1 million of compensation expense was recognized for this award for the three and six months ended June 30, 2018. The assumptions used to estimate the fair value of this award with performance and market vesting conditions were as follows:

 

Stock Option Award with Performance and Market Vesting Conditions   
Fair value of the Company’s common stock on grant date  $5.08 
Expected volatility   70%
Risk-free interest rate   2.75%
Dividend yield   0.0%

 

13. Subsequent Events

 

R&D Note Repayment

 

On July 2, 2018, the Company repaid the R&D Note (see Note 4, "Debt" above and Note 4, "Debt" and Note 18, “Subsequent Events” in Part II, Item 8 of the 10-K) in full at maturity. The principal amount was $3.7 million.

 

 

 

 

 

 

 

 

 

 

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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 2018 and 2019, aspects of our future operations, our future financial position, including the expected extension of debt maturities and obtaining project financing for a new manufacturing facility, revenues and projected costs, expectations regarding demand and acceptance for our technologies, 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2017 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 Flavors & Fragrances 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 seven distinct molecules at commercial volumes.

 

We believe that industrial biotechnology 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 the leading companies in the world 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 more than 1,000 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 Flavors & Fragrances 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.

 

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We have invested over $500 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 seven distinct molecules, leading to more than 15 commercial ingredients used in over 1,000 consumer products. 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.

 

Our technology platform has been in active use since 2008 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.

 

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 squalene 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 Flavors & Fragrances and Cosmetic Ingredients 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. We plan to bring two to three new molecules a year to commercial production.

 

In the first half of 2017, management made the decision to monetize the use of one of our lower margin molecules, farnesene, in certain fields of use (e.g., the human and animal health and nutrition field) while retaining any associated royalties. We began discussions with our partners and ultimately made the decision to license farnesene to DSM for use in these fields, which we announced in November 2017. During the discussions with DSM, management also made the decision to sell to DSM our manufacturing facility, Brotas, which we completed on December 28, 2017.

 

Brotas 1 was built to batch manufacture one commodity product at a time (originally for high-volume production of biofuels, a business the Company 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 will be increasing 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. With the sale of Brotas 1, we expect that our gross margins will markedly improve due to the reduction in manufacturing costs caused by these inefficiencies. Additionally, we currently are constructing our new facility in Brazil, which will allow for the manufacture of five products concurrently and over 10 different products annually. Concurrent with the sale of Brotas 1, we contracted with DSM for the use of Brotas 1 to manufacture products for us to fulfill our product supply commitments to our customers until the new production facility is completed in 2019. In addition, in 2019, we plan to resume construction of a production facility in Pradópolis, Brazil that we partially built prior to 2013. This facility will support production of our alternative sweetener products.

 

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As discussed above, on December 28, 2017, we completed the sale of Amyris Brasil, which operated our Brotas 1 production facility, to DSM and concurrently entered into a series of commercial agreements and a credit agreement with DSM. At closing, we received $33.0 million in cash for the capital stock of Amyris Brasil, which is subject to certain post-closing working capital adjustments and reimbursements from DSM contingent on DSM’s utilization of certain Brazilian tax benefits it acquired with its purchase of Amyris Brasil. We used $12.6 million of the cash proceeds received to repay certain indebtedness of Amyris Brasil. The total fair value of the consideration in connection with the sales agreement for Amyris Brasil was $56.9 million and resulted in a pretax gain of $5.7 million from continuing operations.

 

Concurrent with the sale of Amyris Brasil, we entered into a series of commercial agreements with DSM including (i) a license agreement to DSM of its farnesene product for DSM to use in the Vitamin E, Lubricant, and Flavors & Fragrances specialty markets; (ii) a value share agreement that DSM will pay specified royalties representing a portion of the profit on the sale of Vitamin E produced from farnesene under the Nenter Supply Agreement assigned to DSM; (iii) a performance agreement to perform research and development to optimize farnesene for production and sale of farnesene products; and (iv) a transition services agreement where we provide finance, legal, logistics, and human resource services to support the Brotas 1 facility under DSM ownership for a six-month period with a DSM option to extend for six additional months. At closing, DSM paid to us a nonrefundable license fee of $27.5 million and a nonrefundable minimum royalty revenue payment (previously referred to as value share) of $15.0 million. DSM will also pay the Company nonrefundable minimum royalty amounts in 2018 and 2019. The future nonrefundable minimum annual royalty payments were determined to be fixed and determinable with a fair value of $17.8 million, and were included as part of the total arrangement consideration subject to allocation of this overall multiple-element divestiture transaction. See Note 10, “Significant Revenue Agreements”, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (the 10-K) for a full listing and details of agreements entered into with DSM. Additionally, we entered into a $25.0 million credit agreement with DSM that we used to repay all outstanding amounts under the Guanfu Note; see Note 4, “Debt” in the 10-K.

 

In the second quarter of 2018, we successfully demonstrated our industrial process at full scale to produce a high-purity, zero calorie, natural sweetener from sugar cane. The molecule we are producing from sugar cane, Reb M, is recognized as the leading natural sweetener but is found in very limited quantities when derived from the Stevia plant and has many impurities from the Stevia plant that leave an unacceptable taste in the mouth of the consumer. The Reb M we produce from sugar cane is more sustainable, lower cost and has a specific technical profile that is advantaged in taste and total process economics for blends and formulations. Initial feedback on our samples has been very positive due to this unique sweetness profile and the lack of the undesired taste impact of Stevia plant sourced and other fermentation and bio transformation Reb products on the market. Our FDA Generally Regarded As Safe (GRAS) filing has been initiated and we will have commercial quantities of product produced at the Brotas facility by the end of the year.

 

In June 2018, we and our contract manufacturer, Antibióticos de León (“ADL”), executed an amendment to our January 2018 production agreement, thereby providing us additional tank capacity at ADL’s production facility in León, Spain. This amendment was necessary to provide additional, cost-effective manufacturing capability to meet higher than expected product demand from its partners. The amended agreement includes a commitment to running a certain number of batches at ADL’s production facility from the period September 1, 2018 through December 31, 2019 for up to four of our products.

 

On June 29, 2018, we closed a $36 million term loan with Great American Capital Partners, LLC (GACP), a subsidiary of B. Riley Capital Management, LLC, an SEC Registered Investment Advisor and wholly-owned subsidiary of B. Riley Financial, Inc. The term loan matures on July 1, 2021, subject to certain early maturity conditions. Cash proceeds from the term loan were used to pay off the Company’s senior secured loan facility with Stegodon and the related party R&D Note with Total Raffinage Chimie SA. The term loan also includes an additional $35 million accordion credit facility that provides us with another option for financing construction of a production facility, if necessary. See Note 4. Debt in the Condensed Consolidated Financial Statements included in Part I of this Form 10-Q for more information.

 

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In the second quarter of 2018, we executed an agreement for a significant project consortium in Europe with the Universidade Católica Portuguesa (UCP) Porto Campus and AICEP Portugal Global (AICEP). UCP is a university system, including the leading biotech school in Portugal, and operates 15 research centers. AICEP is an independent public entity of the Government of Portugal, focused in encouraging the best foreign companies to invest in Portugal. In conjunction with this agreement, we opened a subsidiary in Porto, Portugal. The primary purpose of this subsidiary is to conduct a research and development project together with Escola Superior de Biotecnologia o Universidade Católica Portuguese. This subsidiary will be the second R&D center of Amyris and will be responsible for certain areas of research, namely valorization of fermentation residues and wastes and the advancement of the Company's Artificial Intelligence (AI) and Informatics platform.

 

The overall multi-year project is valued up to approximately $50 million including investment funding and incentives allotted across the parties involved. Amyris believes this is the largest biotechnology grant ever awarded in Portugal and one of the largest ever approved by the AICEP for commercial applications. Amyris has sole responsibility for commercialization and majority ownership of all intellectual property (IP) generated.

 

Also in the second quarter of 2018, we announced plans to partner with BGI Genomics, one of the world’s largest genomics companies to apply our respective synthetic biology platforms in a new joint venture to discover, develop and commercialize human microbiome-targeting health and nutrition products in Greater China. The joint venture seeks to combine Amyris’ best-in-class science and technology with BGI’s gene sequencing expertise, data and analytics. The goal will be to develop health products for the Greater China market using natural products including traditional Chinese medicinal ingredients produced with sustainable resources and through Amyris’ proprietary clean fermentation capabilities.

 

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 The Defense Advanced Research Projects Agency (DARPA), affiliates of Koninklijke DSM N.V. (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, and others require us to achieve milestones prior to receiving payments. In addition, all of our non-government partnerships include commercial terms for the supply of molecules we successfully upscale and produce at commercial volumes, and we expect such partnerships will contribute revenues from product sales and royalties (previously referred to as value share) if and when such molecules are commercialized. See Note 10, “Revenue Recognition” in Part I, Item 1 of this Quarterly Report on Form 10-Q, and Note 10, “Significant Revenue Agreements” in Part II, Item 8 of the 10-K for more details.

 

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 is expected to commercialize two to three new molecules each year over the coming years with a sweetener, and a flavor and a fragrance molecule expected to be commercialized in 2018. We are currently finalizing the commercial terms for the molecules we expect to commercialize in 2018, including our Reb-M product that is a superior sweetener and sugar replacement for food and beverages. We currently manufacture nine specialty products and will be increasing the number of specialty products we manufacture by two to three products a year.

 

As part of the DSM acquisition of our farnesene-for-Vitamin-E business, we will receive a royalty payment on all Nenter sales of Vitamin E utilizing farnesene produced and sold by DSM from our technology. DSM will pay us minimum royalties totaling $33 million for 2018, 2019 and 2020, the first three years of the agreement. These minimum royalty payments are creditable against future royalties due should the total royalties from Nenter not meet or exceed the minimum.

 

We have several other 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) when they are commercialized.

 

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Critical Accounting Policies and Estimates

 

Management's discussion and analysis of results of operations and financial condition are based on the Company's 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 involving arrangements with multiple revenue-generating activities; and
the valuation of financial instruments including embedded derivatives and freestanding financial instruments such as warrants, which impact gains or losses on derivatives, the carrying value of debt, preferred stock, interest expense and deemed dividends.

 

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 Part II, Item 8 of the 10-K.

 

Results of Operations

 

On August 6, 2018, we filed a Current Report on Form 8-K, Items 2.02 and 9.01, and a press release related to our unaudited preliminary financial results for the three and six months ended June 30, 2018.  In that Form 8-K, we disclosed total revenue of $24.8 million and $47.8 million for the three and six months ended June 30, 2018, respectively, and deferred revenue of $7.9 million as of June 30, 2018.  In the unaudited Condensed Consolidated Financial Statements presented in Part I, Item 1 of this Form 10-Q, we disclose total revenue of $23.2 million and $46.2 million for the three and six months ended June 30, 2018, respectively, and deferred revenue of $9.6 million as of June 30, 2018. We anticipate the increase in deferred revenue will be recognized in revenue over the next three quarters.

 

Revenue

 

   Three Months Ended
June 30,
  Six Months Ended
June 30,
(In thousands)  2018  2017  2018  2017
Revenue            
Renewable products  $6,633   $9,892   $11,828   $17,929 
Licenses and royalties   6,887    5,497    18,324    5,752 
Grants and collaborations   9,674    10,290    16,040    14,979 
Total revenue  $

23,194

   $25,679   $46,192   $38,660 

 

Three Months Ended June 30, 2018 and 2017

 

Total revenue decreased by 10% to $23.2 million for the three months ended June 30, 2018, compared to the same period in 2017. The decrease was primarily due to a $3.3 million decrease in renewable products revenue due to discontinuing low margin product sales, partly offset by an increase in revenue from licenses and royalties. A $1.4 million increase in licenses and royalties revenue was due to royalty revenue from DSM, and a $0.6 million decrease in collaborations revenue was primarily due to Biogen.

 

Renewable products revenue decreased by 33% to $6.6 million for the three months ended June 30, 2018, compared to the same period in 2017. The decrease was attributable to the assignment of certain farnesene supply agreements to DSM and discontinuing low margin product sales, partly offset by increases in sales of our Biossance and Neossance products.

 

Licenses and royalties revenue increased by 25% to $6.9 million for the three months ended June 30, 2018, compared to the same period in 2017, due to royalty revenues from DSM.

 

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Grants and collaborations revenue decreased by 6% to $9.7 million for the three months ended June 30, 2018, compared to the same period in 2017, primarily due to no collaboration revenue from Biogen.

 

Six Months Ended June 30, 2018 and 2017

 

Total revenue increased by 19% to $46.2 million for the six months ended June 30, 2018, compared to the same period in 2017, primarily due to a $12.6 million increase in licenses and royalties revenue due to royalty revenue from DSM, and a $1.1 million increase in collaborations revenue, primarily from DSM.

 

Renewable products revenue decreased by 34% to $11.8 million for the six months ended June 30, 2018, compared to the same period in 2017. The decline was attributable to the assignment of certain farnesene supply agreements to DSM and discontinuing low margin product sales, partially offset by increases in sales of our Biossance and Neossance products.

 

Licenses and royalties revenue increased by 219% to $18.3 million for the six months ended June 30, 2018, compared to the same period in 2017, due to royalty revenues from DSM.

 

Grants and collaborations revenue increased by 7% to $16.0 million for the six months ended June 30, 2018, compared to the same period in 2017, primarily due to increases in collaboration revenues from DSM, partially offset by decreases from DARPA and Biogen.

 

Costs and Operating Expenses

 

   Three Months Ended
June 30,
  Six Months Ended
June 30,
(In thousands)  2018  2017  2018  2017
Cost and operating expenses                    
Cost of products sold  $5,984   $17,279   $11,299   $30,047 
Research and development   15,287    14,249    34,100    28,956 
Sales, general and administrative   20,189    15,949    38,946    28,799 
Total cost and operating expenses  $41,460   $47,477    84,345   $87,802 

 

Cost of Products Sold

 

Cost of products sold includes the costs of raw materials, labor and overhead, amounts paid to contract manufacturers, inventory write-downs resulting from applying lower of cost or net realizable value inventory adjustments, 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 June 30, 2018 and 2017

 

Cost of products sold decreased by 65% to $6.0 million for the three months ended June 30, 2018, compared to the same period in 2017, primarily due to the (i) December 2017 sale of our Brotas production facility to DSM, which substantially reduced our fixed production costs, (ii) the assignment of certain farnesene supply agreements to DSM with a resulting 33% decrease in renewable products revenue, and (iii) our discontinuing manufacturing of low-margin products.

 

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Six Months Ended June 30, 2018 and 2017

 

Cost of products sold decreased by 62% to $11.3 million for the six months ended June 30, 2018, compared to the same period in 2017, primarily due to (i) December 2017 sale of our Brotas production facility to DSM, which substantially reduced our fixed production costs, (ii) the assignment of certain farnesene supply agreements to DSM with a resulting 34% decrease in renewable products revenue, and (iii) our discontinuing manufacturing of low-margin products.

 

Research and Development Expenses

 

Three Months Ended June 30, 2018 and 2017

 

Research and development expenses increased by 7% to $15.3 million for the three months ended June 30, 2018, compared to the same period in 2017, due to increases in headcount to support new product development and one-time costs related to product development. During the three months ended June 30, 2018, we capitalized $1.2 million of internal labor costs required to automate, integrate and ready certain laboratory and plant equipment for its intended use.

 

Six Months Ended June 30, 2018 and 2017

 

Research and development expenses increased by 18% to $34.1 million for the six months ended June 30, 2018, compared to the same period in 2017, due to increases in headcount to support new product development and one-time costs related to product development. During the six months ended June 30, 2018, we capitalized $1.6 million of internal labor costs required to automate, integrate and ready certain laboratory and plant equipment for its intended use.

 

Sales, General and Administrative Expenses

 

Three Months Ended June 30, 2018 and 2017

 

Sales, general and administrative expenses increased by 27% to $20.2 million for the three months ended June 30, 2018, compared to the same period in 2017, primarily due to increases in headcount to support our growth and expansion, and professional services costs.

 

Six Months Ended June 30, 2018 and 2017

 

Sales, general and administrative expenses increased by 35% to $38.9 million for the six months ended June 30, 2018, compared to the same period in 2017, primarily due to increases in headcount to support our growth and expansion, and professional services costs.

 

Other (Expense) Income, Net

 

   Three Months Ended
June 30,
  Six Months Ended
June 30,
(In thousands)  2018  2017  2018  2017
Other income (expense)                    
Interest expense  $(8,824)  $(9,303)  $(17,029)  $(21,486)
Gain (loss) from change in fair value of derivative instruments   24,365    35,775    (39,548)   38,114 
Gain upon extinguishment of derivative liability   1,857        1,857     
Loss upon extinguishment of debt   (26)   (3,624)   (26)   (3,528)
Other income (expense), net   2,427    (120)   2,936    (440)
Total other income (expense), net  $19,799   $22,728   $(51,810)  $12,660 

 

Three Months Ended June 30, 2018 and 2017

 

Total other income, net was $19.8 million for the three months ended June 30, 2018, compared to total other income, net of $22.7 million for the same period in 2017. The $2.9 million decrease was primarily due to an $11.4 million decrease in gain on change in fair value of derivative instruments, offset by the decrease in debt extinguishment loss and by increases in gain upon extinguishment of derivative liability associated with certain May 2017 warrant exercises and new warrant issuances that occurred in the second quarter 2018. Also offsetting the decrease was a mark-to-market gain of $1.4 million related to our equity investment in SweeGen, which in 2017 was carried at cost, and a foreign currency gain of $0.9 million. These gains are reflected in the Other income (expense), net line in the table above.

 

 38 

 

Six Months Ended June 30, 2018 and 2017

 

Total other expense, net was $51.8 million for the six months ended June 30, 2018, compared to total other income, net of $12.7 million for the same period in 2017. The $64.5 million change was primarily due to a $39.5 million loss on change in fair value of derivative instruments in 2018, compared to a $38.1 million gain on change in fair value of derivative instruments in 2017. The loss from change in fair value of derivative instruments for the six months ended June 30, 2018 was the result of a significant increase in derivative instruments issued subsequent to March 31, 2017, and a 70% increase in our stock price during the six months ended June 30, 2018. This increase in loss was offset by decreases in interest expense due to a decrease in average debt balances and loss upon debt extinguishment, the gain upon extinguishment of derivative liability due to the warrant exchange that occurred in Q2 2018, a mark-to-market gain of $1.7 million related to our equity investment in SweeGen, which in 2017 was carried at cost, and a foreign currency gain of $1.1 million.

 

Provision for Income Taxes

 

   Three Months Ended
June 30,
  Six Months Ended
June 30,
(In thousands)  2018  2017  2018  2017
Provision for income taxes  $   $310   $   $269 

 

Three Months Ended June 30, 2018 and 2017

 

For the three months ended June 30, 2018, we recorded a provision for income taxes of $0, and for the three months ended June 30, 2017, we recorded a provision for income taxes of $0.3 million. The provision for the three months ended June 30, 2017 consisted of an accrual of Brazilian withholding tax on intercompany interest, offset by an income tax benefit in continuing operations related to foreign exchange movement in other comprehensive income. Other than the above-mentioned amounts, no additional provision for income taxes has been made, net of the valuation allowance, due to cumulative losses since the commencement of operations.

 

Six Months Ended June 30, 2018 and 2017

 

For the six months ended June 30, 2018, we recorded a provision for income taxes of $0, and for the six months ended June 30, 2017, we recorded a provision for income taxes of $0.3 million. The provision for the six months ended June 30, 2017 consisted of an accrual of Brazilian withholding tax on intercompany interest, offset by an income tax benefit in continuing operations related to foreign exchange movement in other comprehensive income. Other than the above-mentioned amounts, 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)  June 30,
 2018
  December 31,
 2017
Working capital deficit, excluding cash and cash equivalents and short-term investments  $(105,944)  $(59,598)
Cash and cash equivalents  $14,050   $57,059 
Debt and capital lease obligations  $172,353   $166,318 
Accumulated deficit  $(1,298,914)  $(1,206,767)

 

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   Six Months Ended
June 30,
(In thousands)  2018  2017
Net cash provided by (used in):          
Operating activities  $(52,994)  $(60,179)
Investing activities  $(4,364)  $(349)
Financing activities  $13,279   $37,939 

 

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 financial statements. As of June 30, 2018, we had negative working capital, excluding cash and cash equivalents and short-term investments, of $105.9 million, (compared to negative working capital (excluding cash) of $59.6 million as of December 31, 2017), an accumulated deficit of $1.3 billion, and cash and cash equivalents of $14.1 million (compared to $57.1 million as of December 31, 2017).

 

As of June 30, 2018, our debt (including related party debt), net of deferred discount and issuance costs of $25.5 million, totaled $171.4 million, of which $109.7 million is classified as current and $23.2 million is mandatorily convertible into equity and within our control. Our debt service obligations through August 31, 2019 are $114.5 million (excluding $23.2 million of principal that will be mandatorily converted into common stock upon maturity), including $15.8 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 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.

 

Our consolidated financial statements as of and for the three months ended June 30, 2018 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 financial statements are issued. Our ability to continue as a going concern will depend, in large part, on our ability to begin achieving positive cash flows from operations within the next 12 months, to extend existing debt maturities, which is uncertain, and to complete the mandatory conversion of certain debt obligations into equity, which conversion is within the control of the Company. The 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) significantly increased royalty revenues (previously referred to as value share revenues), (iii) reduced production costs as a result of anticipated efficiencies, and (iv) cash inflows from grants and collaborations. In addition, during the second half of 2018, we plan to obtain project financing for the construction of a new specialty ingredients manufacturing facility in Brazil.

 

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.

 

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:

 

 40 

 

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 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 2018 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.

 

For details, see the following Notes in “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q and/or in “Notes to Consolidated Financial Statements” included in the 10-K:

Note 4, "Debt"
Note 5, "Mezzanine Equity"
Note 6, "Stockholders' Deficit"

 

Cash Flows during the Six Months Ended June 30, 2018 and 2017

 

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 six months ended June 30, 2018, net cash used in operating activities was $53.0 million, consisting primarily of our $90.0 million net loss, partially offset by $49.9 million of non-cash adjustments that were primarily comprised of a $39.5 million loss on change in fair value of derivative instruments, $6.6 million of debt discount amortization, $3.2 million of stock-based compensation and $2.9 million of depreciation and amortization on property, plant and equipment. Additionally, there was a $13.0 million decrease in working capital.

 

For the six months ended June 30, 2017, net cash used in operating activities was $60.2 million consisting primarily of our $36.8 million net loss and a $2.0 million increase in working capital, partly offset by non-cash adjustments primarily comprised of a $38.1 million non-cash gain from the change in fair value of derivative instruments, $7.6 million of debt discount amortization and $5.6 million of depreciation and amortization on property, plant and equipment, and a $3.5 million loss on debt extinguishment.

 

Cash Flows from Investing Activities

 

Our investing activities consist primarily of capital expenditures and changes in short-term investments.

 

 41 

 

For the six months ended June 30, 2018, net cash used in investing activities was $4.4 million, primarily comprised of purchases of property, plant and equipment, which included $1.6 million of capitalized internal labor costs required to automate, integrate and ready certain laboratory and plant equipment for its intended use.

 

For the six months ended June 30, 2017, net cash used in investing activities was $0.3 million, primarily comprised of $0.3 million of purchases of property, plant and equipment.

 

Cash Flows from Financing Activities

 

For the six months ended June 30, 2018, net cash provided by financing activities was $13.3 million, primarily due to $34.6 million of net proceeds from debt issuance and $14.5 million of net proceeds from issuance of common stock upon the exercise of warrants, partly offset by $37.0 million of debt principal payments.

 

For the six months ended June 30, 2017, net cash provided by financing activities was $37.9 million, primarily due to $50.7 million of net proceeds from issuance of convertible preferred stock and $12.5 million of net proceeds from debt issuance, partly offset by $24.4 million of debt principal payments.

 

Off-Balance Sheet Arrangements

 

We did not have during the periods presented, and we do not currently have, any material off-balance sheet arrangements, as defined under the rules of the Securities and Exchange Commission, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our condensed consolidated financial statements.

 

Contractual Obligations

 

The following is a summary of our contractual obligations as of June 30, 2018:

 

Year Ended December 31,

 (In thousands)

  Total  2018  2019  2020  2021  2022  Thereafter
Principal payments on debt (1)  $174,106   $6,492   $93,545   $3,830   $55,843   $12,255   $2,141 
Interest payments on debt (2)   33,402    7,098    11,336    7,584    5,835    1,162    387 
Operating leases   38,649    4,941    8,755    

7,017

    7,241    7,414    3,281 
Principal payments on capital leases   951    400    429    122             
Interest payments on capital leases   49    25    22    2             
Purchase obligations (3)   7,035    1,592    2,800    2,643             
Total  $254,192   $20,548   $116,887   $21,198   $68,919   $20,831   $5,809 

____________________

(1)Principal payments on debt shown above include a total of $23.2 million in 2018 and 2019 subject to a Maturity Treatment Agreement, which will be converted to common stock at maturity, subject to there being no default under the terms of the debt.
(2)Does not include any obligations related to make-whole interest or down-round provisions. The fixed interest rates are more fully described in Note 4, "Debt" in Part 1, Item 1 of this Quarterly Report on Form 10-Q and Part II, Item 8 of the 10-K.
(3)Purchase obligations include noncancelable contractual obligations.

 

Recently Issued Accounting Standards Not Yet Adopted

 

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 for a discussion of recently issued accounting standards not yet adopted.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The market risk inherent in our market risk sensitive instruments and positions is the potential loss arising from adverse changes in: commodity market prices, foreign currency exchange rates and interest rates as described below.

 

Interest Rate Risk

 

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and our outstanding debt obligations, including embedded derivatives therein. We generally invest our cash in investments with short maturities or with frequent interest reset terms. Accordingly, our interest income fluctuates with short-term market conditions. As of June 30, 2018, our investment portfolio consisted of certificates of deposit, which are highly liquid. Due to the short-term nature of our investment portfolio, we do not believe that an immediate 10% increase in interest rates would have a material effect on the fair value of our portfolio. Since we believe we have the ability to liquidate our investment portfolio, we expect that our operating results or cash flows would not be materially affected by a sudden change in market interest rates on the portfolio.

 

As of June 30, 2018, 82% of our outstanding debt is in fixed rate instruments. The remaining 18% of our outstanding debt is comprised of variable-rate loans under the GACP secured term loan facility, for which the interest rate is based on the U.S. prime rate, subject to a rate floor (see Note 4, “Debt” in Part 1, Item 1 of this Quarterly Report on Form 10-Q for details). As a result, changes in interest rates could affect interest expense and payments in relation to that component of our debt.

 

In addition, changes in interest rates may significantly change the fair value of our derivative liabilities (see Note 3, "Fair Value Measurement" in Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q).

 

Foreign Currency Risk

 

Most of our sales contracts are denominated in U.S. dollars, and therefore our revenues are not currently subject to significant foreign currency risk.

 

The functional currency of our consolidated Brazilian subsidiary is the local currency (Brazilian real), in which recurring business transactions occur. We do not use currency exchange contracts as hedges against our investment in that subsidiary.

 

Our permanent investment in Brazil was $24.7 million as of June 30, 2018 ($17.8 million as of December 31, 2017), using the exchange rate at each date. A hypothetical 10% adverse change in Brazilian real exchange rates would have had an adverse impact to Other Comprehensive Loss of $2.5 million as of June 30, 2018 ($1.8 million as of December 31, 2017).

 

We have also evaluated foreign currency exposure in relation to our other non-U.S. Dollar denominated assets and liabilities and determined that there would be an immaterial effect on our results of operations from 10% exchange rate fluctuations between those currencies and the U.S. Dollar.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Under the rules of the Securities and Exchange Commission (the SEC), “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)) are controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.

 

 43 

 

 

At June 30, 2018, our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were not effective as of June 30, 2018. This conclusion was based on the material weakness in our internal control over financial reporting described in Part II, Item 9A “Controls and Procedures” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (the 10-K). The material weakness has not been remediated as of June 30, 2018.

 

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 10-K 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 June 30, 2018, we completed our assessment and analysis of key control deficiencies and began to implement additional review controls over routine transactions and more robust review procedures over our more complex and non-routine transactions. We continue to address and supplement our resource needs with qualified personnel possessing the appropriate level of technical accounting expertise and we continue to make progress in addressing the material weakness in our internal control over financial reporting described in the 10-K. Otherwise, there were no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We are taking further actions to remediate the material weakness in our internal control over financial reporting and will report on those actions in upcoming Quarterly and Annual Reports on Form 10-Q and 10-K, respectively.

 

Limitations on the Effectiveness of Controls and Procedures

 

Our management, including our CEO and CFO, 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.

 

 44 

 

 

PART II

ITEM 1. LEGAL PROCEEDINGS

 

On April 20, 2017, a securities class action complaint (the Securities Class Action Complaint) was filed against the Company and its CEO, John G. Melo, and CFO, Kathleen Valiasek, in the U.S. District Court for the Northern District of California (Case No. 3:17-cv-02210-WHO). The Securities Class Action Complaint sought unspecified damages on behalf of a purported class that would comprise all individuals who acquired the Company’s common stock between March 2, 2017 and April 17, 2017. The Securities Class Action Complaint alleged securities law violations based on statements made by the Company in its earnings press release issued on March 2, 2017 and Form 12b-25 filed with the Securities and Exchange Commission on April 3, 2017. On September 21, 2017, an order of dismissal was entered on the plaintiff’s notice of voluntary dismissal without prejudice.

 

Subsequent to the filing of the Securities Class Action Complaint, four separate purported shareholder “derivative” complaints were filed based on substantially the same facts as the Securities Class Action Complaint (the Derivative Complaints). The Derivative Complaints named Amyris, Inc. as a nominal defendant and named a number of the Company’s then-current 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/or 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.  Two of the Derivative Complaints were filed in the U.S. District Court for the Northern District of California (together, the Federal Derivative Cases): Bonner v. John Melo, et al., Case No. 4:17-cv-04719, filed August 15, 2017, and Goldstein v. John Melo, et al., Case No. 3:17-cv-04927, filed on August 24, 2017. On September 19, 2017, an order was entered consolidating the Federal Derivative Cases into a single consolidated action, captioned: In re Amyris, Inc., Shareholder Derivative Litigation, Lead Case No. 2:15-cv-04719, and ordering the plaintiffs to file a consolidated complaint or designate an operative complaint by November 3, 2017. On November 3, 2017, the plaintiffs in the Federal Derivative Cases filed a Notice of Designation of Operative Complaint, designating the complaint filed in the Bonner case as the operative complaint. On December 21, 2017, the defendants filed a motion to dismiss the Federal Derivative Cases; and on March 9, 2018, the Court granted defendants’ motion to dismiss. On March 29, 2018, the plaintiffs filed an Amended Complaint with the Court. On May 4, 2018, the defendants filed a motion to dismiss the Amended Complaint; and on July 23, 2018, the Court granted defendants’ motion to dismiss the amended complaint with prejudice and entered judgment in favor of the defendants. The remaining two Derivative Complaints were filed in the Superior Court for the State of California (together, the State Derivative Cases): Gutierrez v. John G. Melo, et al., Case. No. BC 665782, filed on June 20, 2017, in the Superior Court for the County of Los Angeles, and Soleimani v. John G. Melo, et al., Case No. RG 17865966, filed on June 29, 2017, in the Superior Court for the County of Alameda. On August 31, 2017, the Gutierrez case was transferred to the Superior Court for the State of California, County of Alameda and assigned a case number, RG17876383. The State Derivative Cases are in the initial pleadings stage. We believe the claims lack merit and intend to continue to defend ourselves vigorously. Given the nature of these proceedings, it is not yet possible to reliably determine any potential liability that could result from this matter.

 

ITEM 1A. RISK FACTORS

 

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, 2017 (the 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 10-K remains current in all material respects.

 

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On April 12, 2018, we issued warrants to purchase an aggregate of 3,616,174 shares of our common stock (the April 2018 Warrants), exercisable at a price of $7.00 per share and for a term of fifteen months, to certain holders of the May 2017 Warrants (see Note 6, “Stockholders’ Deficit” in Part II, Item 8 of the 10-K), in exchange for such holders exercising for cash their May 2017 Cash Warrants, representing an aggregate of 3,616,174 shares issued and gross proceeds to the Company of $15.9 million, and surrendering their May 2017 Dilution Warrants, which were not currently exercisable for any shares, for cancellation, pursuant to warrant exercise agreements (the Warrant Exercise Agreements) entered into with such holders. The April 2018 Warrants do not contain any non-standard anti-dilution protection and only permit “cashless” exercise after six months, and only to the extent that there is no effective registration statement covering the shares issuable upon exercise.. In addition, in connection with the Warrant Exercise Agreements, the Company and the holders entered into separate letter agreements (the Leak-Out Agreements), pursuant to which each holder agreed, subject to certain exceptions, not to dispose of shares of our common stock on any trading day in an amount greater than such holder’s pro rata share of 30% of the daily average composite trading volume of our common stock for such trading day for a period of thirty trading days.

 

Oppenheimer & Co. Inc. acted as placement agent in connection with the issuance of the April 2018 Warrants. The April 2018 Warrants were issued in private placements 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 investors acquired the April 2018 Warrants for investment purposes only and without intent to resell, were able to fend for themselves in these transactions, and are accredited investors as defined in Rule 501 of Regulation D promulgated under Section 3(b) of the Securities Act. These holders had adequate access, through their relationships with us, to information about us.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

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ITEM 6. EXHIBITS

 

Exhibit No.  Description 
     
 4.01  Eighth Amendment, dated May 30, 2018, to Loan and Security Agreement, dated March 29, 2014, between registrant and Stegodon Corporation, as assignee of Hercules Capital, Inc. 
 4.02  Fourth Amendment, dated May 31, 2018, to 12% Senior Convertible Note issued March 21, 2016 (RS-10) by registrant to Total Energies Nouvelles Activités USA 
 4.03  Form of April 2018 Warrant 
 10.01  Form of Warrant Exercise Agreement 
 10.02  Form of Leak-Out Agreement 
 10.03  2010 Equity Incentive Plan, as amended, and forms of award agreements thereunder 
 10.04  2010 Employee Stock Purchase Plan, as amended, and form of subscription agreement thereunder 
 10.05  Performance Stock Option Award Agreement, dated May 29, 2018, between the registrant and John Melo 
 10.06  Amendment #1, dated May 30, 2018, to Executive Severance Plan Participation Agreement, dated December 18, 2013, between the registrant and John Melo 
 10.07  Loan and Security Agreement, dated June 29, 2018, by and among the registrant, certain subsidiaries of the registrant and GACP Finance Co., LLC 
 31.01  Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(c) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
 31.02  Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(c) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
 32.01 *  Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 
 32.02 *  Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 
 101. INS  XBRL Instance Document 
 101. SCH  XBRL Taxonomy Extension Schema Document 
 101. CAL  XBRL Taxonomy Extension Calculation Linkbase Document 
 101. DEF  XBRL Taxonomy Extension Definition Linkbase Document 
 101. LAB  XBRL Taxonomy Extension Label Linkbase Document 
 101. PRE  XBRL Taxonomy Extension Presentation Linkbase Document 

 

* 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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SIGNATURES

 

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)
    August 14, 2018  
       
  By: /s/ Kathleen Valiasek  
    Kathleen Valiasek  
    Chief Financial Officer  
(Principal Financial Officer)
    August 14, 2018  

 

 

 

 

 

 

 

 

48

 

 

EXHIBIT 4.01

 

Eighth Amendment To Loan And Security Agreement

This EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as of May 30, 2018, is among AMYRIS, INC., a Delaware corporation (the “Parent”), and each of its Subsidiaries that has delivered a Joinder Agreement (as defined herein) (each a “Subsidiary Guarantor” and collectively, the “Subsidiary Guarantors” and together with Parent, collectively, “Borrower”), the several banks and other financial institutions or entities from time to time parties to this Agreement (collectively, referred to as “Lender”) and STEGODON CORPORATION, a Delaware corporation, as successor-in-interest to Hercules Technology Growth Capital, Inc., a Maryland corporation, in its capacity as administrative agent for itself and the Lender (in such capacity, the “Agent”).

Recitals

A.              WHEREAS, Parent, Subsidiary Guarantors, Lender and Agent have previously entered into that certain Loan and Security Agreement, dated as of March 29, 2014, as previously amended on June 12, 2014, March 31, 2015, October 12, 2015, November 30, 2015, May 9, 2016, June 24, 2016, June 29, 2016, July 18, 2016, October 5, 2016, October 6, 2016, October 27, 2016, November 29, 2016, December 5, 2016, December 14, 2016, December 17, 2016, December 30, 2016, January 10, 2017, April 13, 2017, November 13, 2017, December 28, 2017, and March 30, 2018 (as further amended from time to time, the “Loan Agreement”), pursuant to which, among other things, Lender has provided certain term loans and other financial accommodations to Borrower;

B.              WHEREAS, Borrower desires to amend the Loan Agreement by extending the date for a principal payment in the amount of $5,500,000 due under the terms of the Loan Agreement from May 31, 2018 to July 2, 2018; and

C.              WHEREAS, Agent and the Lenders are willing to so amend the Loan Agreement as more specifically set forth herein, subject to the terms and conditions contained herein.

Now, Therefore, for good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), in reliance upon the representations and warranties made in support thereof and contained herein, the parties hereto agree as follows:

1.               Defined Terms. Each capitalized term used but not otherwise defined herein has the meaning ascribed thereto in the Loan Agreement.

2.               Amendments to Loan and Security Agreement. Subject to the satisfaction of the conditions precedent set forth in Section 3 of this Amendment and effective as of the Eighth Amendment Effective Date (notwithstanding the date of execution of this Amendment), the Loan Agreement is hereby amended as follows:

(a)             Section 1.1 (Definitions). The Loan Agreement is hereby amended by inserting the following definition to appear alphabetically in Section 1.1 thereof:

“      “July 2018 Principal Payment” is defined in Section 2.2(d)(ii)(y).”

 

 

(b)            Section 2.2(d) (Payments). The Loan Agreement is hereby amended by amending Section 2.2(d)(ii)(y) in its entirety and replacing it with the following:

“     (y) on or prior to July 2, 2018, a principal payment of $5,500,000 (the “July 2018 Principal Payment”), which payment shall be applied to the principal amount of Secured Obligations then outstanding. The date on which such payment is received by Agent shall be the “2018 Principal Payment Date”.”

3.               Conditions to Effectiveness. The provisions of this Amendment shall become effective on the date, which date (if ever) shall be on or prior to May 31, 2018, that all of the following conditions precedent have been satisfied (the “Eighth Amendment Effective Date”):

(a)             Agent shall have received a pdf copy of this Amendment, duly executed and delivered by Parent and the Subsidiary Guarantor;

(b)            Each of the representations and warranties of Borrower in Section 4 of this Amendment shall be true, correct and accurate in all material respects as of the Eighth Amendment Effective Date;

(c)             No Material Adverse Effect has occurred;

(d)            Agent shall have received either (i) a secretary’s certificate certifying as to the Borrower’s charter documents, authorizations and incumbency matters in form and substance satisfactory to Agent, or (ii) a confirmation satisfactory to Agent in its sole discretion that the Borrower’s charter documents, authorizations and incumbency have not changed since previously delivered to Agent;

(e)             No Event of Default exists under the Loan Agreement or any Loan Document;

(f)             Borrower shall have paid to Agent’s counsel all legal fees and out-of-pocket expenses incurred in connection with the Loan Documents and this Amendment; and

(g)            All legal matters incident to the execution and delivery of this Amendment shall be satisfactory to Agent and its counsel.

4.               Representations, Warranties and Agreements. Borrower hereby represents, warrants and agrees in favor of Agent and Lender as follows:

(a)             No Event of Default has occurred and is continuing (or would result from the amendment of the Loan Agreement contemplated hereby);

(b)            The execution, delivery and performance by Borrower of this Amendment have been duly authorized by all necessary corporate and/or other action and do not and will not require any registration with, consent or approval of, notice to or action by, any Person in order to be effective and enforceable. Each of the Loan Agreement and the other Loan Documents to which Borrower is a party constitutes and continues to constitute the legally, valid and binding obligation of Borrower, in each case enforceable against Borrower in accordance with its terms;

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(c)             All of the representations and warranties of Borrower contained in the Loan Agreement and the other Loan Documents are true and correct in all material respects on and as of the date hereof and will be true and correct on the Eighth Amendment Effective Date (except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date, and in each case, without duplication of any materiality qualifiers);

(d)            No Material Adverse Effect has occurred;

(e)             Borrower is entering into this Amendment on the basis of such Person’s own business judgment, without reliance upon Agent or Lender; and

(f)             Borrower acknowledges and agrees that the execution and delivery by Agent and Lender of this Amendment shall not be deemed to create a course of dealing or otherwise obligate Agent or Lender to execute similar agreements under the same or similar circumstances in the future. Neither Agent nor Lender has any obligation to Borrower or any other Person to further amend provisions of the Loan Agreement or the other Loan Documents. Other than as specifically contemplated hereby, all of the terms, covenants and provisions of the Loan Agreement (and the other Loan Documents) are and shall remain in full force and effect.

5.               Amendment Fee. As consideration for this Amendment, Borrower shall pay to Agent an amendment fee equal to $100,000.00 (the “Amendment Fee”), for the ratable benefit of the Lenders, which fee shall be fully earned on the Eighth Amendment Effective Date and due and payable on July 2, 2018. The Amendment Fee shall not be refunded or repaid to Borrower under any circumstances; provided, that the Amendment Fee shall be forgiven by the Agent and the Lenders if Borrower shall have indefeasibly paid the July 2018 Principal Payment in full in cash on or prior to July 2, 2018.

6.               General Provisions.

(a)             Upon the effectiveness of this Amendment, all references in the Loan Agreement and in the other Loan Documents to the Loan Agreement shall refer to the Loan Agreement as modified hereby. This Amendment shall be deemed incorporated into, and a part of, the Loan Agreement. This Amendment is a Loan Document. THIS AMENDMENT IS EXPRESSLY SUBJECT TO THE PROVISIONS OF SECTION 11.8 (GOVERNING LAW), SECTION 11.9 (CONSENT TO JURISDICTION AND VENUE) AND SECTION 11.10 (MUTUAL WAIVER OF JURY TRIAL; JUDICIAL REFERENCE) OF THE LOAN AGREEMENT, WHICH PROVISIONS ARE INCORPORATED HEREIN AND MADE APPLICABLE HERETO BY THIS REFERENCE.

(b)            This Amendment is made pursuant to Section 11.3(b) and 11.7 of the Loan Agreement and shall be binding upon and inure to the benefit of the parties hereto and thereto and their respective successors and assigns. No third party beneficiaries are intended in connection with this Amendment.

(c)             This Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Amendment by telecopy or other electronic means shall be effective as delivery of a manually executed counterpart of this Amendment.

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(d)            Each provision of this Amendment shall be severable from every other provision of this Amendment for the purpose of determining the legal enforceability of any specific provision.

(e)             Borrower shall promptly pay to Agent’s counsel all attorneys’ fees and expenses incurred in connection with the preparation, negotiation and closing of this Amendment.

(f)             The appearing parties herein declare that all the terms and conditions of the Loan Agreement continue to remain, as herein amended, in full force and effect and by these presents the appearing parties hereby ratify, reaffirm and confirm all the terms and conditions of the Loan Agreement and further declare that it is their express intention that the transactions set forth in this Amendment shall in no way, manner or form be construed or be interpreted as an extinctive novation of any of the obligations and agreements set forth in the Loan Agreement.

[Document continues with signature pages.]

 

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Eighth Amendment to Loan and Security Agreement to be duly executed and delivered as of the date first written above.

 

AMYRIS, INC.
   
  By:  /s/ Kathleen Valiasek
  Print Name: Kathleen Valiasek
  Title: Chief Financial Officer
   
   
   
   
  AMYRIS FUELS, LLC
   
  By:  /s/ Kathleen Valiasek
  Print Name: Kathleen Valiasek
  Title: Chief Financial Officer
   
   
  AGENT:
   
  STEGODON CORPORATION
   
   
  Signature: /s/ Austin Che
  Print Name: Austin Che
  Title: President
   
   
  LENDER:
   
  STEGODON CORPORATION
   
   
  Signature: /s/ Austin Che
  Print Name: Austin Che
  Title: President

 

 

EXHIBIT 4.02

 

FOURTH AMENDMENT TO 12% SENIOR CONVERTIBLE NOTE (RS-10)

This Fourth Amendment to 12% Senior Convertible Note (RS-10) (this “Amendment”) is made and entered into as of May 31st, 2018, by and between Amyris, Inc., a Delaware corporation (the “Company”), and Total Raffinage Chimie S.A., as assignee of Total Energies Nouvelles Activités USA (the “Investor”).

 

RECITALS

 

WHEREAS, on March 21, 2016 the Company issued to the Investor a Senior Convertible Note (RS-10) in the principal amount of $3,700,000, as amended by (i) that First Amendment to 1.5% Senior Convertible Note (RS-10) dated February 27, 2017, (ii) that Second Amendment to 1.5% Senior Convertible Note (RS-10) dated May 12, 2017 and (iii) that Third Amendment to 1.5% Senior Convertible Note (RS-10) dated March 30, 2018 (as amended, the “Note”).

 

WHEREAS, the Company and the Investor desire to further amend the Note as set forth herein.

 

WHEREAS, pursuant to Section 7 of the Note, the Note may be amended with the written consent of the Company and the Investor.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

 

1.Amendment of Section 2(a) of the Note. Section 2(a) of the Note is hereby deleted in its entirety and replaced with the following:

(a)                  Interest. This Note shall bear interest (i) from the Issue Date to May 15, 2017 on the Face Amount at a rate per annum equal to 1.50% (subject to Section 4(k)) and (ii) from May 16, 2017 to the Final Maturity Date on the Face Amount at a rate per annum equal to 12.00% (subject to Section 4(k)). Interest on this Note shall accrue daily and be due and payable in arrears on (i) December 31, 2017, (ii) March 31, 2018, (iii) May 31, 2018 and (iv) the Final Maturity Date, and at such other times as may be specified herein. All computations of interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day year). Notwithstanding the foregoing, if an Event of Default shall have occurred and be continuing this Note shall bear interest on the Face Amount at a rate per annum equal to 13.50% (as may be further adjusted pursuant to Section 4(k)).

2.Amendment of Section 2(b) of the Note. Section 2(b) of the Note is hereby deleted in its entirety and replaced with the following:

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(b)                  Scheduled Payment of Principal. Unless paid, converted or cancelled and extinguished earlier in accordance with the terms hereof, the Company shall deliver to the Investor cash in the amount of the Face Amount, together with all accrued and unpaid interest on this Note, on July 2, 2018 (the “Final Maturity Date”) and this Note shall be retired and canceled.

3.Full Force and Effect. Except as expressly modified by this Amendment, the terms of the Note shall remain in full force and effect.

4.Integration. This Amendment and the Note constitute the entire agreement and understanding of the parties with respect to the subject matter hereof, and supersede all prior understandings and agreements, whether oral or written, between or among the parties hereto with respect to the specific subject matter hereof.

5.Counterparts; Facsimile. This Amendment may be executed in one (1) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Amendment may be executed and delivered by facsimile, or by email in portable document format (.pdf), and delivery of any signature page by such method will be deemed to have the same effect as if the original signature had been delivered to the other party.

 

[Remainder of Page intentionally left blank]

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written.

 

AMYRIS, INC.

By: /s/ Kathleen Valiasek

Name: Kathleen Valiasek

Title: Chief Financial Officer

 

 

 

 

 

 

 

[Signature Page to Fourth Amendment to R&D Note]

 

  

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written.

 

Total Raffinage Chimie S.A.

By: /s/ Nathalie Brunelle

Name: Nathalie Brunelle

Title: Deputy CEO

 

 

 

 

 

 

 

 

[Signature Page to Fourth Amendment to R&D Note]

 

 

EXHIBIT 10.04

 

AMYRIS, INC.

2010 Employee Stock Purchase Plan

As Amended May 22, 2018

 

1.        Establishment of Plan. Amyris, Inc. (the “Company”) proposes to grant options for purchase of the Company’s Common Stock to eligible employees of the Company and its Participating Corporations (as hereinafter defined) pursuant to this Employee Stock Purchase Plan (as amended, this “Plan”). For purposes of this Plan, “Parent” and “Subsidiary” shall have the same meanings as “parent corporation” and “subsidiary corporation” in Sections 424(e) and 424(f), respectively, of the Internal Revenue Code of 1986, as amended (the “Code”), and “Corporate Group” shall refer collectively to the Company and all its Parents and Subsidiaries. “Participating Corporations” are the Company and any Parents or Subsidiaries that the Board of Directors of the Company (the “Board”) designates from time to time as corporations that shall participate in this Plan. The Company intends this Plan to qualify as an “employee stock purchase plan” under Section 423 of the Code (including any amendments to or replacements of such Section), and this Plan shall be so construed. Any term not expressly defined in this Plan but defined for purposes of Section 423 of the Code shall have the same definition herein. Subject to Section 14, a total of 11,241 shares of the Company’s Common Stock is reserved for issuance under this Plan. In addition, on each January 1 for each calendar year after the Effective Date, the aggregate number of shares of the Company’s Common Stock reserved for issuance under the Plan shall be increased automatically by the lesser of one (1%) percent of the number of shares of the Company’s Common Stock issued and outstanding on each December 31 immediately prior to the date of increase or (ii) such number of shares of the Company’s Common determined by the Board or the Committee provided that the aggregate number of shares issued over the term of this Plan shall not exceed 1,666,666 shares of Common Stock.

2.        Purpose. The purpose of this Plan is to provide eligible employees of the Company and Participating Corporations with a means of acquiring an equity interest in the Company through payroll deductions, to enhance such employees’ sense of participation in the affairs of the Company and Participating Corporations, and to provide an incentive for continued employment.

3.        Administration. The Plan will be administered by the Compensation Committee of the Board or by the Board (either referred to herein as the “Committee”). Subject to the provisions of this Plan and the limitations of Section 423 of the Code or any successor provision in the Code, all questions of interpretation or application of this Plan shall be determined by the Committee and its decisions shall be final and binding upon all Participants. The Committee will have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and decide upon any and all claims filed under the Plan. Every finding, decision and determination made by the Committee will, to the full extent permitted by law, be final and binding upon all parties. Notwithstanding any provision to the contrary in this Plan, the Committee may adopt rules and/or procedures relating to the operation and administration of the Plan to accommodate requirements of local law and procedures outside of the United States. Members of the Committee shall receive no compensation for their services in connection with the administration of this Plan, other than standard fees as established from time to time by the Board for services rendered by Board members serving on Board committees. All expenses incurred in connection with the administration of this Plan shall be paid by the Company.

4.        Eligibility. Any employee of the Company or the Participating Corporations is eligible to participate in an Offering Period (as hereinafter defined) under this Plan except the following:

  

 

(a) employees who are not employed by the Company or a Participating Corporation prior to the beginning of such Offering Period or prior to such other time period as specified by the Committee; except that employees who are employed on the Effective Date of the Registration Statement filed by the Company with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”) registering the initial public offering of the Company’s Common Stock shall be eligible to participate in the First Offering Period;

(b) employees who are customarily employed for twenty (20) hours or less per week;

(c) employees who are customarily employed for five (5) months or less in a calendar year;

(d) employees who, together with any other person whose stock would be attributed to such employee pursuant to Section 424(d) of the Code, own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any of its Participating Corporations or who, as a result of being granted an option under this Plan with respect to such Offering Period, would own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any of its Participating Corporations;

(e) employees who do not meet any other eligibility requirements that the Committee may choose to impose (within the limits permitted by the Code);

(f) employees who have been an employee of the Company for less than one (1) month prior to the first day of an Offering Period (except as set forth in (a) above); and

(g) individuals who provide services to the Company or any of its Participating Corporations as independent contractors who are reclassified as common law employees for any reason except for federal income and employment tax purposes.

5.        Offering Dates.

(a) The offering periods of this Plan (each, an “Offering Period”) may be of up to twelve (12) months duration (except the Initial Offering Period, which may be longer than twelve (12) months as described below) and shall commence and end at the times designated by the Committee. Each Offering Period shall consist of two six month purchase periods (each a “Purchase Period”) during which payroll deductions of Participants are accumulated under this Plan.

(b) The initial Offering Period shall commence on the date on which the Registration Statement covering the initial public offering of shares of the Company’s Common Stock is declared effective by the U.S. Securities and Exchange Commission (the “Effective Date”), and shall end on November 15th of the year following the Effective Date. The initial Offering Period shall consist of a single Purchase Period. Thereafter, a twelve-month Offering Period shall commence on each May 16th and November 16th, with each such Offering Period also consisting of two six-month Purchase Periods.

(c) The first business day of each Offering Period is referred to as the “Offering Date,” however, for the initial Offering Period this shall be the Effective Date. The last business day of each Purchase Period is referred to as the “Purchase Date.” The Committee shall have the power to change the terms of this Section 5 as provided in Section 25 below.

6.        Participation in this Plan.

(a) Any employee who is an eligible employee determined in accordance with Section 4 immediately prior to the initial Offering Period will be automatically enrolled in the initial Offering Period under this Plan. With respect to subsequent Offering Periods, any eligible employee determined in accordance with Section 4 will be eligible to participate in this Plan, subject to the requirement of Section 6(b) hereof and the other terms and provisions of this Plan. Eligible employees who meet the eligibility requirements set forth in Section 4 and who are either automatically enrolled in the initial offering period or who elect to participate in the this Plan pursuant to Section 6(b) are referred to herein as a “Participant” or collectively as “Participants.”

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(b)        Notwithstanding the foregoing, (i) an eligible employee may elect to decrease the number of shares of Common Stock that such employee would otherwise be permitted to purchase for the initial Offering Period under the Plan and/or purchase shares of Common Stock for the initial Offering Period through payroll deductions by delivering a subscription agreement to the Company within thirty (30) days after the filing of an effective registration statement pursuant to Form S-8 and (ii) the Committee may set a later time for filing the subscription agreement authorizing payroll deductions for all eligible employees with respect to a given Offering Period. With respect to Offering Periods after the initial Offering Period, a Participant may elect to participate in this Plan by submitting a subscription agreement prior to the commencement of the Offering Period (or such earlier date as the Committee may determine) to which such agreement relates.

(c)       Once an employee becomes a Participant in an Offering Period, then such Participant will automatically participate in the Offering Period commencing immediately following the last day of such prior Offering Period unless the Participant withdraws or is deemed to withdraw from this Plan or terminates further participation in the Offering Period as set forth in Section 11 below. Such Participant is not required to file any additional subscription agreement in order to continue participation in this Plan.

7.        Grant of Option on Enrollment. Becoming a Participant with respect to an Offering Period will constitute the grant (as of the Offering Date) by the Company to such Participant of an option to purchase on the Purchase Date up to that number of shares of Common Stock of the Company determined by a fraction, the numerator of which is the amount accumulated in such Participant’s payroll deduction account during such Purchase Period and the denominator of which is the lower of (i) eighty-five percent (85%) of the fair market value of a share of the Company’s Common Stock on the Offering Date (but in no event less than the par value of a share of the Company’s Common Stock), or (ii) eighty-five percent (85%) of the fair market value of a share of the Company’s Common Stock on the Purchase Date (but in no event less than the par value of a share of the Company’s Common Stock) provided, however, that for the Purchase Period within the initial Offering Period the numerator shall be fifteen percent (15%) of the Participant’s compensation for such Purchase Period and provided, further, that the number of shares of the Company’s Common Stock subject to any option granted pursuant to this Plan shall not exceed the lesser of (x) the maximum number of shares set by the Committee pursuant to Section 10(b) below with respect to the applicable Purchase Date, or (y) the maximum number of shares which may be purchased pursuant to Section 10(a) below with respect to the applicable Purchase Date. The fair market value of a share of the Company’s Common Stock shall be determined as provided in Section 8 below.

8.        Purchase Price. The purchase price per share at which a share of Common Stock will be sold in any Offering Period shall be eighty-five percent (85%) of the lesser of:

(a) The fair market value on the Offering Date; or

(b) The fair market value on the Purchase Date.

The term “fair market value” means, as of any date, the value of a share of the Company’s Common Stock determined as follows:

(i) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable; or

(ii) if such Common Stock is publicly traded but is neither listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable; or

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(iii) with respect to the initial Offering Period, “fair market value” on the Offering Date shall be the price at which shares of Common Stock are offered to the public pursuant to the Registration Statement covering the initial public offering of shares of the Company’s Common Stock; and

(iv) if none of the foregoing is applicable, by the Board or the Committee in good faith.

9.        Payment of Purchase Price; Payroll Deduction Changes; Share Issuances.

(a) The purchase price of the shares is accumulated by regular payroll deductions made during each Offering Period. The deductions are made as a percentage of the Participant’s compensation in one percent (1%) increments not less than one percent (1%), nor greater than fifteen percent (15%) or such lower limit set by the Committee. Compensation shall mean all compensation categorized by the Company as total compensation including base salary or regular hourly wages, overtime, holiday, vacation and sick pay and shift premiums and excluding, to the extent permitted by Code Section 423, bonuses, salary continuation, relocation assistance payments, geographical hardship pay, noncash prizes and awards, automobile allowances, severance type payments, and nonqualified deferred executive compensation (including amounts attributable to equity compensation), provided, however, that for purposes of determining a Participant’s compensation, any election by such Participant to reduce his or her regular cash remuneration under Sections 125 or 401(k) of the Code shall be treated as if the Participant did not make such election. Payroll deductions shall commence on the first payday following the last Purchase Date (first payday following the effective date of filing with the U.S. Securities and Exchange Commission a securities registration statement for the Plan with respect to the initial Offering Period) and shall continue to the end of the Offering Period unless sooner altered or terminated as provided in this Plan.

(b) A Participant may increase or decrease the rate of payroll deductions during an Offering Period by filing with the Company a new authorization for payroll deductions, with the new rate to become effective for the next payroll period commencing after the Company’s receipt of the authorization and continuing for the remainder of the Offering Period unless changed as described below. Such change in the rate of payroll deductions may be made at any time during an Offering Period, under rules determined by the Committee. A Participant may increase or decrease the rate of payroll deductions for any subsequent Offering Period by filing with the Company a new authorization for payroll deductions prior to the beginning of such Offering Period, or such other time period as specified by the Committee.

(c) A Participant may reduce his or her payroll deduction percentage to zero during an Offering Period by filing with the Company a request for cessation of payroll deductions. Such reduction shall be effective beginning with the next payroll period after the Company’s receipt of the request and no further payroll deductions will be made for the duration of the Offering Period. Payroll deductions credited to the Participant’s account prior to the effective date of the request shall be used to purchase shares of Common Stock of the Company in accordance with Section (e) below. A reduction of the payroll deduction percentage to zero shall be treated as such Participant’s withdrawal from such Offering Period, and the Plan, effective as of the day after the next Purchase Date following the filing date of such request with the Company.

(d) All payroll deductions made for a Participant are credited to his or her account under this Plan and are deposited with the general funds of the Company. No interest accrues on the payroll deductions. All payroll deductions received or held by the Company may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.

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(e) On each Purchase Date, so long as this Plan remains in effect and provided that the Participant has not submitted a signed and completed withdrawal form before that date which notifies the Company that the Participant wishes to withdraw from that Offering Period under this Plan and have all payroll deductions accumulated in the account maintained on behalf of the Participant as of that date returned to the Participant, the Company shall apply the funds then in the Participant’s account to the purchase of whole shares of Common Stock reserved under the option granted to such Participant with respect to the Offering Period to the extent that such option is exercisable on the Purchase Date. The purchase price per share shall be as specified in Section 8 of this Plan. Any amount remaining in a Participant’s account on a Purchase Date which is less than the amount necessary to purchase a full share of the Company’s Common Stock shall be carried forward, without interest, into the next Purchase Period or Offering Period, as the case may be. In the event that this Plan has been oversubscribed, all funds not used to purchase shares on the Purchase Date shall be returned to the Participant, without interest. No Common Stock shall be purchased on a Purchase Date on behalf of any employee whose participation in this Plan has terminated prior to such Purchase Date.

(f) As promptly as practicable after the Purchase Date, the Company shall issue shares for the Participant’s benefit representing the shares purchased upon exercise of his or her option.

(g) During a Participant’s lifetime, his or her option to purchase shares hereunder is exercisable only by him or her. The Participant will have no interest or voting right in shares covered by his or her option until such option has been exercised.

10.        Limitations on Shares to be Purchased.

(a) No Participant shall be entitled to purchase stock under any Offering Period at a rate which, when aggregated with such Participant’s rights to purchase stock, that are also outstanding in the same calendar year(s) (whether under other Offering Periods or other employee stock purchase plans of the Corporate Group), exceeds $25,000 in fair market value, determined as of the Offering Date, (or such other limit as may be imposed by the Code) for each calendar year in which such Offering Period is in effect (hereinafter the “Maximum Share Amount”). The Company shall automatically suspend the payroll deductions of any Participant as necessary to enforce such limit provided that when the Company automatically resumes such payroll deductions, the Company must apply the rate in effect immediately prior to such suspension.

(b) The Committee may, in its sole discretion, set a lower maximum number of shares which may be purchased by any Participant during any Offering Period than that determined under Section 10(a) above, which shall then be the Maximum Share Amount for subsequent Offering Periods; provided, however, in no event shall a Participant be permitted to purchase more than 3,000 Shares during any one Offering Period, irrespective of the Maximum Share Amount set forth in (a) and (b) hereof. If a new Maximum Share Amount is set, then all Participants must be notified of such Maximum Share Amount prior to the commencement of the next Offering Period for which it is to be effective. The Maximum Share Amount shall continue to apply with respect to all succeeding Offering Periods unless revised by the Committee as set forth above.

(c) If the number of shares to be purchased on a Purchase Date by all Participants exceeds the number of shares then available for issuance under this Plan, then the Company will make a pro rata allocation of the remaining shares in as uniform a manner as shall be reasonably practicable and as the Committee shall determine to be equitable. In such event, the Company shall give written notice of such reduction of the number of shares to be purchased under a Participant’s option to each Participant affected.

(d) Any payroll deductions accumulated in a Participant’s account which are not used to purchase stock due to the limitations in this Section 10, and not covered by Section 9(e), returned to the Participant as soon as practicable after the end of the applicable Purchase Period..

11.        Withdrawal.

(a) Each Participant may withdraw from an Offering Period under this Plan by signing and delivering to the Company a written notice to that effect on a form provided for such purpose by the Company. Such withdrawal may be elected at any time prior to the end of an Offering Period, or such other time period as specified by the Committee.

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(b) Upon withdrawal from this Plan, the accumulated payroll deductions shall be returned to the withdrawn Participant, without interest, and his or her interest in this Plan shall terminate. In the event a Participant voluntarily elects to withdraw from this Plan, he or she may not resume his or her participation in this Plan during the same Offering Period, but he or she may participate in any Offering Period under this Plan which commences on a date subsequent to such withdrawal by filing a new authorization for payroll deductions in the same manner as set forth in Section 6 above for initial participation in this Plan.

12.       Termination of Employment. Termination of a Participant’s employment for any reason, including retirement, death, disability, or the failure of a Participant to remain an eligible employee of the Company or of a Participating Corporation, immediately terminates his or her participation in this Plan. In such event, accumulated payroll deductions credited to the Participant’s account will be returned to him or her or, in the case of his or her death, to his or her legal representative, without interest. For purposes of this Section 12, an employee will not be deemed to have terminated employment or failed to remain in the continuous employ of the Company or of a Participating Corporation in the case of sick leave, military leave, or any other leave of absence approved by the Company; provided that such leave is for a period of not more than ninety (90) days or reemployment upon the expiration of such leave is guaranteed by contract or statute.

13.        Return of Payroll Deductions. In the event a Participant’s interest in this Plan is terminated by withdrawal, termination of employment or otherwise, or in the event this Plan is terminated by the Board, the Company shall deliver to the Participant all accumulated payroll deductions credited to such Participant’s account. No interest shall accrue on the payroll deductions of a Participant in this Plan.

14.        Capital Changes. If the number of outstanding Shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, then the Committee shall adjust the number and class of Common Stock that may be delivered under the Plan, the purchase price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised, and the numerical limits of Sections 1 and 10 shall be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities laws; provided that fractions of a Share will not be issued.

15.        Nonassignability. Neither payroll deductions credited to a Participant’s account nor any rights with regard to the exercise of an option or to receive shares under this Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 22 below) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be void and without effect.

16.        Use of Participant Funds and Reports. The Company may use all payroll deductions received or held by it under the Plan for any corporate purpose, and the Company will not be required to segregate Participant payroll deductions. Until Shares are issued, Participants will only have the rights of an unsecured creditor. Each Participant shall receive promptly after the end of each Purchase Period a report of his or her account setting forth the total payroll deductions accumulated, the number of shares purchased, the per share price thereof and the remaining cash balance, if any, carried forward to the next Purchase Period or Offering Period, as the case may be.

17.        Notice of Disposition. Each Participant shall notify the Company in writing if the Participant disposes of any of the shares purchased in any Offering Period pursuant to this Plan if such disposition occurs within two (2) years from the Offering Date or within one (1) year from the Purchase Date on which such shares were purchased (the “Notice Period”). The Company may, at any time during the Notice Period, place a legend or legends on any certificate representing shares acquired pursuant to this Plan requesting the Company’s transfer agent to notify the Company of any transfer of the shares. The obligation of the Participant to provide such notice shall continue notwithstanding the placement of any such legend on the certificates.

 6 

 

18.        No Rights to Continued Employment. Neither this Plan nor the grant of any option hereunder shall confer any right on any employee to remain in the employ of the Company or any Participating Corporation, or restrict the right of the Company or any Participating Corporation to terminate such employee’s employment.

19.        Equal Rights And Privileges. All eligible employees shall have equal rights and privileges with respect to this Plan so that this Plan qualifies as an “employee stock purchase plan” within the meaning of Section 423 or any successor provision of the Code and the related regulations. Any provision of this Plan which is inconsistent with Section 423 or any successor provision of the Code shall, without further act or amendment by the Company, the Committee or the Board, be reformed to comply with the requirements of Section 423. This Section 19 shall take precedence over all other provisions in this Plan.

20.        Notices. All notices or other communications by a Participant to the Company under or in connection with this Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

21.        Term; Stockholder Approval. This Plan will become effective on the Effective Date. This Plan, as amended, shall be approved by the stockholders of the Company, in any manner permitted by applicable corporate law, within twelve (12) months before or after the date this Plan is adopted by the Board. No purchase of shares that are subject to such stockholder approval before becoming available under this Plan shall occur prior to stockholder approval of such shares and the Board or Committee may delay any Purchase Date and postpone the commencement of any Offering Period subsequent to such Purchase Date as deemed necessary or desirable to obtain such approval. This Plan shall continue until the earlier to occur of (a) termination of this Plan by the Board (which termination may be effected by the Board at any time pursuant to Section 25 below), (b) issuance of all of the shares of Common Stock reserved for issuance under this Plan, or (c) the tenth anniversary of the first Purchase Date under the Plan.

22.        Designation of Beneficiary.

(a) A Participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the Participant’s account under this Plan in the event of such Participant’s death subsequent to the end of a Purchase Period but prior to delivery to him of such shares and cash. In addition, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participant’s account under this Plan in the event of such Participant’s death prior to a Purchase Date.

(b) Such designation of beneficiary may be changed by the Participant at any time by written notice. In the event of the death of a Participant and in the absence of a beneficiary validly designated under this Plan who is living at the time of such Participant’s death, the Company shall deliver such shares or cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

23.        Conditions Upon Issuance of Shares; Limitation on Sale of Shares. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange or automated quotation system upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

24.        Applicable Law. The Plan shall be governed by the substantive laws (excluding the conflict of laws rules) of the State of Delaware.

 7 

 

25.        Amendment or Termination. The Committee, in its sole discretion, may amend, suspend, or terminate the Plan, or any part thereof, at any time and for any reason. If the Plan is terminated, the Committee, in its discretion, may elect to terminate all outstanding Offering Periods either immediately or upon completion of the purchase of shares of Common Stock on the next Purchase Date (which may be sooner than originally scheduled, if determined by the Committee in its discretion), or may elect to permit Offering Periods to expire in accordance with their terms (and subject to any adjustment pursuant to Section 14). If an Offering Period is terminated prior to its previously-scheduled expiration, all amounts then credited to Participants’ accounts for such Offering Period, which have not been used to purchase shares of the Company’s Common Stock, shall be returned to those Participants (without interest thereon, except as otherwise required under local laws) as soon as administratively practicable. Further, the Committee will be entitled to change the Purchase Periods and Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, permit contributions to be increased or decreased, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the administration of the Plan, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of the Company’s Common Stock for each Participant properly correspond with amounts withheld from the Participant’s base salary or regular hourly wages, and establish such other limitations or procedures as the Committee determines in its sole discretion advisable which are consistent with the Plan. Such actions will not require stockholder approval or the consent of any Participants. However, no amendment shall be made without approval of the stockholders of the Company (obtained in accordance with Section 21 above) within twelve (12) months of the adoption of such amendment (or earlier if required by Section 21) if such amendment would: (a) increase the number of shares that may be issued under this Plan; or (b) change the designation of the employees (or class of employees) eligible for participation in this Plan.

26.        Corporate Transactions.

(a) In the event of a Corporate Transaction (as defined below), each outstanding right to purchase Company Common Stock will be assumed or an equivalent option substituted by the successor corporation or a parent or a subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the purchase right, the Offering Period with respect to which such purchase right relates will be shortened by setting a new Purchase Date (the “New Purchase Date”) and will end on the New Purchase Date. The New Purchase Date shall occur on or prior to the consummation of the Corporate Transaction.

(b) “Corporate Transaction” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or (ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; or (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

 

 8 

 

     

Amyris, Inc. (THE “COMPANY”)

2010 EMPLOYEE STOCK PURCHASE PLAN (“ESPP”)

  ENROLLMENT/CHANGE FORM                    

 

                         

 

SECTION 1:

 

ACTIONS

 

 

CHECK DESIRED ACTION:

 

¨           Enroll in the ESPP

¨           Change Contribution Percentage

¨           Discontinue Contributions

 

 

 

AND COMPLETE SECTIONS:

 

2 + 3 + 4 + 6

2 + 4 + 6

2 + 5 + 6

         

 

SECTION 2:

 

 

Name:

 
 
     

 

Department:

 

 

PERSONAL DATA

 

 

Home Address:

 
 
     
 

 

 
   
 
         
   

Social Security No.: ¨ ¨ ¨ - ¨ ¨ - ¨ ¨ ¨ ¨

 

         

 

SECTION 3:

 

ENROLL

 

 

I hereby elect to participate in the ESPP, effective at the beginning of the next Offering Period (or with the first Offering Period). I elect to purchase shares of the Common Stock of the Company pursuant to the ESPP. I understand that the stock certificate(s) for the shares purchased on my behalf will be issued in street name and deposited directly into my brokerage account. I hereby agree to take all steps, and sign all forms, required to establish an account with [                    ] for this purpose.

 

My participation will continue as long as I remain eligible, unless I withdraw from the ESPP by filing a new Enrollment/Change Form with the Company. I understand that I must notify the Company of any disposition of shares purchased under the ESPP.

 

 

 

SECTION 4:

 

ELECT

CONTRIBUTION

PERCENTAGE

 

 

I hereby authorize the Company to withhold from each of my paychecks such amount as is necessary to equal at the end of the applicable Offering Period     % of my compensation (as defined in the ESPP) paid during such Offering Period as long as I continue to participate in the ESPP. That amount will be applied to the purchase of shares of the Company’s Common Stock pursuant to the ESPP. The percentage must be a whole number (from 1%, up to a maximum of 15%).

 

Please ¨ -increase ¨ -decrease my contribution percentage.

 

Note:  You may change your contribution percentage only once within an Offering Period to be effective during such Offering Period and such change can only be to decrease your contribution percentage. An increase in your contribution percentage can only take effect with the next Offering Period. Each change will become effective as soon as reasonably practicable after the form is received by the Company.

 

 

 

SECTION 5:

 

DISCONTINUE

CONTRIBUTIONS

 

 

¨      I hereby elect to stop my contributions under the ESPP, effective as soon as reasonably practicable after this form is received by the Company. Please ¨ -refund all contributions to me in cash, without interest OR ¨ -use my contributions to purchase shares on the next Purchase Date. I understand that I cannot resume participation until the start of the next Offering Period and must timely file a new enrollment form to do so.

 

 

 

SECTION 6:

 

ACKNOWLEDGMENT  AND SIGNATURE

 

 

I acknowledge that I have received a copy of the ESPP and of the Prospectus (which summarizes the major features of the ESPP). I have read the Prospectus and my signature below (or my clicking on the Accept box if this is an electronic form) indicates that I hereby agree to be bound by the terms of the ESPP.

 
   

Signature:                                                               

 

         

Date:                      

 

 

 

 

EXHIBIT 10.05

 

AMYRIS, INC.
2010 EQUITY INCENTIVE PLAN
NOTICE OF PERFORMANCE STOCK OPTION GRANT


Unless otherwise defined herein, the terms defined in the 2010 Amyris, Inc. (the “Company”) Equity Incentive Plan (the “Plan”) shall have the same meanings in this Notice of Performance Stock Option Grant (the “Notice”).

 

Name: __John Melo_______________________________________________________

 

You (the “Participant”) have been granted an option to purchase shares of Common Stock of the Company (the “Option”) under the Plan subject to the terms and conditions of the Plan, this Notice and the Performance Stock Option Award Agreement (the Notice and Performance Stock Option Award Agreement together, the “Agreement”).

 

Date of Grant: _May 29, 2018_________________________________

Exercise Price per Share: _$5.08__________________________________

Total Number of Shares: 3,250,000

Type of Option: Non-Qualified Stock Option

Expiration Date: _May 29, 2028_________________________________

Vesting Schedule: As set forth below

 

I.Vesting Requirements

This Option is a performance-based stock option award and, subject to Participant continuing as the Chief Executive Officer of the Company (the “Chief Executive Officer”) through each vesting event, shall vest and be exercisable upon the vesting dates set forth below subject to the satisfaction of both EBITDA Milestones and Stock Price Milestones as described in more detail below.

Vesting. The Option is divided into four (4) vesting tranches (each a “Tranche”), with each Tranche representing a portion of the Option covering that number of Shares specified next to the applicable Tranche in the Milestone Table below. Each Tranche shall vest upon the vesting date specified as applicable to the Tranche in the Milestone Table (each, an “Earliest Vesting Date”) subject to all of the following: (a) the achievement of the EBITDA Milestone applicable to the Tranche in the Milestone Table during the EBITDA Measurement Period (as defined below) (each, an “EBITDA Milestone”), (b) the achievement of the Stock Price Milestone applicable to the Tranche in the Milestone Table during the Stock Price Measurement Period (as defined below) (each, a “Stock Price Milestone”) (the EBITDA Milestones and the Stock Price Milestones, collectively, the “Milestones”), (c) Participant continuing as the Chief Executive Officer through the Earliest Vesting Date applicable to the Tranche in the Milestone Table and (d) the Certification (as defined below) of the Milestones by the Board of Directors of the Company (the “Board”) or the Board’s Compensation Committee (the “Compensation Committee”). Any Milestone may be met before, at or after the applicable Earliest Vesting Date for that Tranche provided that the Milestone is met during its applicable Measurement Period.

 1 

 

Milestone Table

Tranche Number of Shares

EBITDA Milestone

($M)

Stock Price Milestone Earliest Vesting Date

1

Tranche One

750,000

Tranche One Shares

 

$10

 

$15

July 1, 2019

Tranche One Earliest Vesting Date

2

Tranche Two

750,000

Tranche Two Shares


$60

 

$20

July 1, 2020

Tranche Two Earliest Vesting Date

3

Tranche Three

750,000

Tranche Three Shares

 

$80

 

$25

July 1, 2021

Tranche Three Earliest Vesting Date

4

Tranche Four

1,000,000

Tranche Four Shares

 

$100

 

$30

July 1, 2022

Tranche Four Earliest Vesting Date

In the event that either the EBITDA Milestone or the Stock Price Milestone is not yet achieved for a Tranche, no Shares attributable to such Tranche will be eligible to vest on such Tranche’s Earliest Vesting Date; provided, however, the EBITDA Milestones will remain eligible to be achieved during the remaining EBITDA Measurement Period and the Stock Price Milestones will remain eligible to be achieved during the remaining Stock Price Measurement Period (both as defined below).

Any portion of the Option that does not vest (i) on or prior to the end of the EBITDA Measurement Period and the Stock Price Measurement Period, as applicable, or (ii) prior to Participant’s termination as Chief Executive Officer (except in connection with a Change of Control (as defined below) as set forth in Section IV below) shall immediately terminate.

For clarity, as set forth above, upon the achievement of both the applicable EBITDA Milestone and Stock Price Milestone for a Tranche, the Shares attributable to such Tranche (the “Unvested Achieved Options”) may vest only if Participant remains the Chief Executive Officer on the applicable Earliest Vesting Date for such Tranche (except in connection with a Change of Control as set forth in Section IV below).

More than one Tranche may vest simultaneously provided that: the Earliest Vesting Date for each applicable Tranche has occurred, the requisite EBITDA Milestone and Stock Price Milestone for each applicable Tranche have been met and Participant continued as the Chief Executive Officer through the applicable date of vesting. For example, assume that (i) either or both of the Milestones for the First Tranche were not achieved on or prior to the Tranche One Earliest Vesting Date, (ii) all of the Milestones for Tranche One, Tranche Two and Tranche Three were achieved on or prior to the Tranche Two Earliest Vesting Date, then, (x) subject to Participant remaining the Chief Executive Officer through the Tranche Two Earliest Vesting Date, both Tranche One and Tranche Two will become vested on the Tranche Two Earliest Vesting Date and (y) subject to Participant remaining the Chief Executive Officer through the Tranche Three Earliest Vesting Date, Tranche Three will become vested on the Tranche Three Earliest Vesting Date.

 2 

 

Certification. Achievement of the Milestones for each Tranche shall be determined, approved and certified by the Board or the Compensation Committee, in its sole, good faith discretion (a “Certification” and the date of such Certification, the “Certification Date”). Separate Certifications may occur on separate dates with respect to the achievement of each of EBITDA Milestone and Stock Price Milestone that are required for the vesting of any particular Tranche.

Term; Expiration. The maximum term of the Option shall be ten (10) years unless earlier terminated as set forth herein, and the Option shall expire automatically on the Expiration Date specified above (without regard to whether any or all of the Option vested or whether Participant exercised any vested part of the Option).

II.Determination of EBITDA Milestone

The EBITDA Milestone for a Tranche is achieved if the Company’s EBITDA (as defined below) equals or exceeds the EBITDA threshold amount set forth in the Milestone Table for such Tranche for any fiscal year during the EBITDA Measurement Period. The Committee will measure and certify the level of achievement of the EBITDA Milestones as of the end of each fiscal year within the EBITDA Measurement Period.

A.For purposes of this Option, “EBITDA” shall mean the Company’s net (loss) income attributable to common stockholders for the relevant year as determined in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and as reported by the Company in its audited financial statements on the Form 10-K filed with the SEC, for the applicable fiscal year during the EBITDA Measurement Period plus interest expense (benefit), provision for income taxes, depreciation and amortization for the same year as reflected in the audited financial statements. For the avoidance of doubt, there will be no adjustment to the reported net (loss) for stock based compensation in determining EBITDA.

B.For purposes of this Option, “EBITDA Measurement Period” shall mean the period starting January 1, 2018 and ending December 31, 2021.

C.In the event of unusual non-recurring events such as acquisition activities or divestitures of significant assets or changes in applicable accounting rules, as a result of which the calculation of the Company’s EBITDA for any EBITDA Measurement Period is increased or decreased by 10% or more in determining the Company’s financial statements on Form 10-K filed with the SEC for the most recently completed fiscal year, the Board or, if the Board delegates authority to the Compensation Committee, the Compensation Committee may provide for one or more equitable adjustments to the EBITDA Milestones to preserve the original intent regarding the EBITDA Milestones at the time of the initial award grant.

III.Determination of Stock Price Milestone

The Stock Price Milestone for a Tranche is achieved if the both the 180-Day Average Stock Price (as defined below) and the 30-Day Average Stock Price (as defined below) equal or exceed the price set forth in the Milestone Table for such Tranche during the Stock Price Measurement Period. The Committee will measure and certify the level of achievement of the Stock Price Milestone during the Stock Price Measurement Period as described below.

 3 

 

A.For purposes of this Option, “180-Day Average Stock Price” shall mean for each applicable Tranche, the average of the daily closing prices of the Company’s common stock on the Nasdaq Global Select Market for any one hundred and eighty (180)-consecutive day period (x) starting at any time after the last day of the fiscal year in which the applicable EBITDA Milestone was achieved and (y) ending on or prior to the final day of the Stock Price Measurement Period.

B.For purposes of this Option, “30-Day Average Stock Price” shall mean for each applicable Tranche, the average of the daily closing prices of the Company’s common stock on the Nasdaq Global Select Market for a thirty (30)-consecutive day period ending on the date on which the 180-Day Average Stock Price is achieved for the applicable Tranche, but in any event on or prior to final day of the Stock Price Measurement Period.

C.For purposes of this Option, “Stock Price Measurement Period” shall mean the period starting January 1, 2018 and ending December 31, 2022.

D.If the event of a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, the Board or the Compensation Committee, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Option (and in a manner that will not provide Participant with any greater benefit or potential benefits than intended to be made available under the Option, other than as may be necessary solely to reflect changes resulting from any such aforementioned event), will adjust the Stock Price Milestones.

IV.Vesting Determination upon Change of Control of the Company

Calculation of Milestones upon Change of Control. Notwithstanding Sections I, II and III above, in the event of a Change of Control (as defined in the Company’s Executive Severance Plan, adopted November 6, 2013, and Participant’s related Participation Agreement thereunder (together, the “Severance Plan”)), for purposes of determining whether any Tranches are eligible to vest on or after the Change of Control, the EBITDA Milestones shall be disregarded and only the Stock Price Milestones shall be required to be met as determined pursuant to this Section IV.

In the event of a Change of Control, a Stock Price Milestone relating to any Tranche that has not yet vested pursuant to Section I above as of immediately before the closing of the Change of Control, shall be achieved if the per Share price (plus the per Share value of any other consideration) received by the Company’s stockholders in the Change of Control equals or exceeds the price set forth in the Milestone Table for the relevant Stock Price Milestone, and the Shares specified for any such Tranche will be eligible to vest pursuant to the time-based vesting schedule set forth below (the “COC Time-Based Options”). To the extent a Stock Price Milestone is not achieved as a result of the Change of Control pursuant to the preceding sentence, the corresponding Tranche of Shares will be forfeited automatically as of the immediately prior to closing of the Change of Control and never shall become vested.

 4 

 

Vesting Requirements Upon Change of Control. Subject to Participant’s remaining the Chief Executive Officer, (i) the COC Time-Based Options for Tranche One, if any, will vest on the later of the Tranche One Earliest Vesting Date and the closing date of the Change of Control (the “Closing Date”); (ii) the COC Time-Based Options for Tranche Two, if any, will vest on the later of the Tranche Two Earliest Vesting Date and the Closing Date; (iii) the COC Time-Based Options for Tranche Three, if any, will vest on the later of the Tranche Three Earliest Vesting Date and the Closing Date and (iv) the COC Time-Based Options for Tranche Four, if any, will vest on the later of the Tranche Four Earliest Vesting Date and the Closing Date. Notwithstanding the foregoing, in the event the Participant’s employment as Chief Executive Officer terminates as a result of an Involuntary Termination (as defined in Participant’s Severance Plan) at any time within the period beginning three (3) months before a Change of Control and ending twelve (12) months after a Change of Control, the unvested Achieved Options and COC Time-Based Options shall be eligible for accelerated vesting as provided in the Participant’s Severance Plan subject to Participant’s satisfaction of all terms and conditions in the Severance Plan, including, but not limited to delivery of a release of claims. If the Participant’s employment as Chief Executive Officer terminates as a result of an Involuntary Termination prior to a Change of Control, any then-unvested portion of the Option that would otherwise forfeit upon such termination shall remain outstanding, but cease to continue vesting, for three (3) months following such termination (provided that in no event will the Option remain outstanding beyond the expiration of its maximum term) to permit the acceleration described above. In the event that a Change in Control is not completed during such three (3) month period, any unvested portion of the Option will be automatically and permanently forfeited without having vested effective three (3) months following such termination. For the avoidance of doubt, the accelerated vesting provisions of the Severance Plan apply only upon a Change of Control and apply only to the Unvested Achieved Options and COC Time-Based Options.

Non-Assumption upon Change of Control. Notwithstanding anything to the contrary, if the successor or acquiring corporation (if any) of the Company refuses to assume, convert, replace or substitute the Option in connection with a Change of Control, then notwithstanding any other provision in this Agreement, the Plan or the Severance Plan to the contrary, 100% of Participant’s COC Time-Based Options shall accelerate and become vested effective immediately prior to the Change of Control.

V.Termination as Chief Executive Officer

Notwithstanding anything to the contrary in this Agreement, the Severance Agreement Plan or any other agreement, upon Participant’s termination as the Chief Executive Officer (except in connection with a Change of Control as set forth in Section IV above), any then-unvested portion of the Option will automatically terminate.

If, upon Participant’s termination as the Chief Executive Officer, Participant continues as an Employee of the Company, and so long as Participant continues as an Employee of the Company, any vested and unexercised portion of the Option may be exercised until the Expiration Date of the Option.

If Participant ceases to be an Employee for any reason, this Option may, to the extent vested as of the date of Participant’s cessation as an Employee, be exercised during the time periods set forth in the Agreement, but in no event later than the Expiration Date of the Option.

VI.Award Subject to Company Clawback or Recoupment

In the event that the Company determines at any time between the Date of Grant set forth in the Notice and December 31, 2025 that it is required to prepare a material accounting restatement resulting from material noncompliance with financial reporting requirements under applicable law (a “financial restatement”), and any of the Milestones that were previously Certified as achieved are subsequently determined to have not been achieved as a result of a financial restatement, the Tranches of the Option that vested as a result of the Certification will be subject to recoupment. In such case, Participant will be required to forfeit, reimburse or repay any portion of the Option that vested based on the original financial statement as compared to the Option that would have vested based on the financial restatement. For purposes of this compensation recovery by the Company: (a) if the Option, or a portion of the Option, is held at the time of recovery, the recoverable amount shall be the number Shares subject to the Option that vested in in excess of the number that should have been vested based on the financial restatement; (b) if the Option, or a portion of the Option, has been exercised, but the underlying Shares have not been sold, the recoverable amount shall be the number of Shares underlying the Option in excess of the number of Shares that should have been vested and exercisable based on the financial restatement; and (c) if Shares have been sold, the recoverable amount shall be the sale proceeds received by Participant in respect of the excess number of Shares underlying the Option in excess of the number of Shares that should have been vested and exercisable based on the financial restatement. In all cases, the determination of amounts to be recovered shall be calculated net of any taxes paid.

 5 

 

In addition to the Company’s right to repayment pursuant to the preceding paragraph, the Option shall also be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board as required by law during the term of Participant’s employment or other Service that is applicable to Participant. In addition to any other remedies available under such policy, applicable law may require the cancellation of Participant’s Option (whether vested or unvested) and the recoupment of any gains realized with respect to Participant’s Option.

VII.Exercise Method; Holding Period

Notwithstanding anything to the contrary in this Notice, the Agreement or the Plan, payment of the aggregate exercise price and any tax withholding obligations, may be paid only by any of the following, or a combination thereof, unless the Board or the Compensation Committee determines otherwise: (i) cash; (ii) check or (iii) a “broker-assisted” or “same-day sale” (as described in Section 11(d) of the Plan).

Participant must retain and may not sell, transfer or dispose at least fifty percent (50%) of the Shares acquired upon exercise of the Option net of any shares sold in a same-day sale to pay the exercise price and any tax withholding obligations as described above until after the second (2nd) year anniversary of the applicable date of exercise of such Shares; provided, however, that the Participant may conduct transactions that involve merely a change in the form in which Participant owns such Shares (e.g., transfer Shares to a revocable inter vivos trust for which Participant is the trustee and sole beneficiary during Participant’s lifetime) as permitted by the Board or the Compensation Committee consistent with the Company’s internal policies.

VIII.Acceptance of Option

By Participant’s acceptance of this Agreement either electronically through the electronic acceptance procedure established by the Company or through a written acceptance delivered to the Company in a form satisfactory to the Company, Participant agrees that this Option is granted under and governed by the terms and conditions of this Notice, Agreement and the Plan, all of which are made a part of this document. Participant confirms that he has reviewed this Agreement in its entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of the Agreement. Participant understand that his employment or service with the Company is for an unspecified duration, can be terminated at any time (i.e., is “at-will”), and that nothing in this Notice, the Agreement or the Plan changes the at-will nature of that relationship. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board or the Compensation Committee upon any questions relating to the Agreement. Participant further agrees to notify the Company upon any change in the residence address indicated on the Notice.

 

Amyris, INC.

By: /s/ Christine Ofori

Name: Christine Ofori

Title: Chief People Officer

 6 

 

Agreed and Accepted By PARTICIPANT:

By: /s/ John Melo

Name: John Melo

Title: President and Chief Executive Officer

 

 

 

 

 

 7 

 

AMYRIS, INC.

2010 EQUITY INCENTIVE PLAN

PERFORMANCE STOCK OPTION AWARD AGREEMENT

Unless otherwise defined in this Performance Stock Option Award Agreement (the “Agreement”), any capitalized terms used herein shall have the meaning ascribed to them in the Amyris, Inc. (the “Company”) 2010 Equity Incentive Plan (the “Plan”).

Participant has been granted an option to purchase Shares (the “Option”), subject to the terms and conditions of the Plan, the Notice of Stock Option Grant (the “Notice”) and this Agreement. The Agreement incorporates the terms of the Notice and any reference to Agreement will be deemed to also include the terms of the Notice. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan shall prevail.

1.       Vesting Rights. Subject to the applicable provisions of the Plan and this Agreement, this Option may be exercised, in whole or in part, in accordance with the schedule set forth in the Notice.

2.       Termination Period.

(a)       General Rule. Except as provided below, and subject to the Plan, this Option may be exercised for 3 months after termination of Participant’s employment with the Company. In no event shall this Option be exercised later than the Expiration Date set forth in the Notice.

(b)       Death; Disability. Unless provided otherwise in the Notice, upon the termination of Participant’s service to the Company by reason of his or her Disability or death, or if a Participant dies within three months of the Termination Date, this Option may be exercised for twelve months, provided that in no event shall this Option be exercised later than the Expiration Date set forth in the Notice.

(c)       Cause. Upon the termination of Participant’s employment by the Company for Cause, the Option shall expire on such date of Participant’s Termination Date. For purposes of this Agreement, “Cause” shall be defined in the Plan.

3.       Grant of Option. The Participant named in the Notice has been granted an Option for the number of Shares set forth in the Notice at the exercise price per Share set forth in the Notice (the “Exercise Price”). This Option shall be treated as a Nonqualified Stock Option (“NSO”).

4.       Exercise of Option.

(a)       Right to Exercise. This Option is exercisable during its term in accordance with the Vesting Schedule set forth in the Notice and the applicable provisions of the Plan and this Agreement. In the event of Participant’s death, Disability, Termination for Cause or other Termination, the exercisability of the Option is governed by the applicable provisions of the Plan, the Notice and this Agreement.

(b)       Method of Exercise. This Option is exercisable by delivery of an exercise notice (the “Exercise Notice”), which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be delivered in person, by mail, via electronic mail or facsimile or by other authorized method to the Secretary of the Company or other person designated by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price.

(c)       No Shares shall be issued pursuant to the exercise of this Option unless such issuance and exercise complies with all relevant provisions of law and the requirements of any stock exchange or quotation service upon which the Shares are then listed. Assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Participant on the date the Option is exercised with respect to such Exercised Shares.

 8 

 

5.       Method of Payment. Payment of the aggregate Exercise Price and any tax liability (as described in Section 8 below) shall be by the methods set forth in the Notice.

6.       Non-Transferability of Option. This Option may not be transferred in any manner other than by will or by the laws of descent or distribution or court order and may be exercised during the lifetime of Participant only by the Participant unless otherwise permitted by the Board or the Compensation Committee on a case-by-case basis. The terms of the Plan and this Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Participant.

7.       Term of Option. This Option shall in any event expire on the expiration date set forth in the Notice, which date is 10 years after the Date of Grant.

8.       U.S. Tax Consequences. For Participants subject to U.S. income tax, some of the federal tax consequences relating to this Option, as of the date of this Option, are set forth below. All other Participants should consult a tax advisor for tax consequences relating to this Option in their respective jurisdiction. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

(a)       Exercising the Option.

(i)       Nonqualified Stock Option. The Participant may incur federal ordinary income tax liability upon exercise of a NSO. The Participant will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price. If the Participant is an Employee or a former Employee, the Company will be required to withhold from his or her compensation an amount equal to the minimum amount the Company is required to withhold for income and employment taxes or collect from Participant and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.

(b)       Disposition of Shares.

(i)       NSO. If the Participant holds NSO Shares for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes.

9.       Acknowledgement. The Company and Participant agree that the Option is granted under and governed by the Notice, this Agreement and by the provisions of the Plan (incorporated herein by reference). Participant: (i) acknowledges receipt of a copy of the Plan and the Plan prospectus, (ii) represents that Participant has carefully read and is familiar with their provisions, and (iii) hereby accepts the Option subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice.

10.       Entire Agreement; Enforcement of Rights. This Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

 9 

 

11.       Compliance with Laws and Regulations. The issuance of Shares will be subject to and conditioned upon compliance by the Company and Participant with all applicable state and federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Common Stock may be listed or quoted at the time of such issuance or transfer.

12.       Governing Law; Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

13.       No Rights as Employee, Director or Consultant. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent or Subsidiary of the Company, to terminate Participant’s service, for any reason, with or without cause.

 

 

 

 

10

EXHIBIT 10.06

 

Amendment #1 to Participation Agreement

 

 

This Amendment #1 to Participation Agreement (this “Amendment”) is made as of May 30, 2018 by and between Amyris, Inc., a Delaware corporation (the “Company”), and John Melo (the “Employee”).

WHEREAS, the Company has selected the Employee to participate in the Amyris, Inc. Executive Severance Plan (the “Plan”; capitalized terms not otherwise defined herein shall have the meanings given to them in the Plan) and has previously executed a Participation Agreement, dated as of December 18, 2013 (the “Participation Agreement”), with the Employee setting forth the terms and conditions of such participation.

WHEREAS, the Company and the Employee desire to amend the Participation Agreement as set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1.       Amendment. Section 2 of the Participation Agreement (“Waiver of Other Severance and Benefits”) is hereby deleted in its entirety and replaced with the following:

 

“2. Waiver of Other Severance and Benefits. By signing below, the Employee agrees to waive any rights the Employee may have in connection with any change of control or severance benefits that may be contained in the Company’s employment offer letter to the Employee, any equity agreement by and between the Company and the Employee and any other agreement that specifically relates to accelerated vesting of any Stock Awards, other than any such rights contained in that certain Performance Stock Option Award Agreement between the Company and the Employee relating to that certain stock option award granted to the Employee on May 29, 2018 (the “Option Award Agreement”). In the event of any conflict between this Participation Agreement or the Plan and the Option Award Agreement relating to accelerated vesting of Stock Awards, the terms of the Option Award Agreement shall govern and control.”

2.       Full Force and Effect. Except as expressly modified by this Amendment, the terms of the Participation Agreement shall remain in full force and effect.

3.       Entire Agreement. This Amendment, the Participation Agreement and the Plan constitute the entire agreement between the Employee and the Company with respect to the subject matter hereof and thereof and supersede all prior agreements, written or oral, relating hereto or thereto.

4.       Counterparts; Facsimile. This Amendment may be executed in one (1) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Amendment may be executed and delivered by facsimile, or by email in portable document format (.pdf), and delivery of any signature page by such method will be deemed to have the same effect as if the original signature had been delivered to the other party.

 

 

[remainder of this page intentionally left blank]

 

 1 

 

Amyris, Inc.

By: /s/ Christine Ofori

Title: Chief People Officer

Employee

 

Signature /s/ John Melo

John Melo

Printed Name

 

 

 

[signature page to Amendment #1 to Participation Agreement]

 

 

2

 

 

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: August 14, 2018 /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, Kathleen Valiasek, 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: August 14, 2018 /s/ Kathleen Valiasek  
  Kathleen Valiasek  
  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 June 30, 2018, 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 June 30, 2018 (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: August 14, 2018 /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 June 30, 2018, as filed with the Securities and Exchange Commission on the date hereof, I, Kathleen Valiasek, 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 June 30, 2018 (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: August 14, 2018 /s/ Kathleen Valiasek  
  Kathleen Valiasek  
  Chief Financial Officer  
  (Principal Financial Officer)