Amyris
AMYRIS, INC. (Form: 10-Q, Received: 11/07/2014 12:38:23)


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  September 30, 2014
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
x
 
 
 
 
Non-accelerated filer
o
Smaller reporting company
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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Outstanding at October 31, 2014
Common Stock, $0.0001 par value per share
79,075,834






AMYRIS, INC.
QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended September 30, 2014

INDEX
 
 
 
Page
 
PART I - FINANCIAL INFORMATION
 
Item 1.
Item 2.
Item 3.
Item 4.
 
 
 
 
PART II - OTHER INFORMATION
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 
Signatures
 
 
Exhibit Index
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 




PART I
ITEM 1. FINANCIAL STATEMENTS
Amyris, Inc.
Condensed Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)

 
September 30, 2014
 
December 31, 2013
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
67,217

 
$
6,868

Short-term investments
1,386

 
1,428

Accounts receivable, net of allowance of $479 and $479, respectively
10,707

 
7,734

Related party accounts receivable
384

 
484

Inventories, net
16,666

 
10,888

Prepaid expenses and other current assets
6,566

 
9,518

Total current assets
102,926

 
36,920

Property, plant and equipment, net
128,106

 
140,591

Restricted cash
1,659

 
1,648

Loan receivable from affiliate
1,214

 

Other assets
15,622

 
10,585

Goodwill and intangible assets
9,120

 
9,120

Total assets
$
258,647

 
$
198,864

Liabilities and Deficit
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
5,829

 
$
6,512

Deferred revenue
9,366

 
2,222

Accrued and other current liabilities
14,424

 
21,221

Capital lease obligation, current portion
634

 
956

Debt, current portion
13,302

 
6,391

Total current liabilities
43,555

 
37,302

Capital lease obligation, net of current portion
224

 
287

Long-term debt, net of current portion
105,411

 
56,172

Related party debt
110,774

 
89,499

Deferred rent, net of current portion
10,237

 
10,191

Deferred revenue, net of current portion
3,794

 
5,000

Derivative liabilities
156,064

 
134,717

Other liabilities
9,232

 
1,544

Total liabilities
439,291

 
334,712

Commitments and contingencies (Note 6)

 

Stockholders’ deficit:
 
 
 
Preferred stock - $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding

 

Common stock - $0.0001 par value, 300,000,000 and 200,000,000 shares authorized as of September 30, 2014 and December 31, 2013; 79,035,135 and 76,662,812 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively
8

 
8

Additional paid-in capital
721,036

 
706,253

Accumulated other comprehensive loss
(23,877
)
 
(20,087
)
Accumulated deficit
(877,173
)
 
(821,438
)
Total Amyris, Inc. stockholders’ deficit
(180,006
)
 
(135,264
)
Noncontrolling interest
(638
)
 
(584
)
Total stockholders' deficit
(180,644
)
 
(135,848
)
Total liabilities and stockholders' deficit
$
258,647

 
$
198,864


3



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

4



Amyris, Inc.
Condensed Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Revenues
 
 
 
 
 
 
 
Renewable product sales
$
11,112

 
$
3,138

 
$
18,333

 
$
10,130

Related party renewable product sales
368

 
1,006

 
402

 
1,182

Total product sales
11,480

 
4,144

 
18,735

 
11,312

Grants and collaborations revenue
4,861

 
2,860

 
12,954

 
11,763

Related party grants and collaborations revenue

 

 

 
2,647

Total grants and collaborations revenue
4,861

 
2,860

 
12,954

 
14,410

Total revenues
16,341

 
7,004

 
31,689

 
25,722

Cost and operating expenses
 
 
 
 
 
 
 
Cost of products sold
10,146

 
8,328

 
23,893

 
26,141

Loss on purchase commitments and write-off of production assets
193

 

 
352

 
8,423

Research and development
12,940

 
13,370

 
38,101

 
43,116

Sales, general and administrative
14,356

 
13,057

 
41,726

 
42,602

Total cost and operating expenses
37,635

 
34,755

 
104,072

 
120,282

Loss from operations
(21,294
)
 
(27,751
)
 
(72,383
)
 
(94,560
)
Other income (expense):
 
 
 
 
 
 
 
Interest income
100

 
21

 
304

 
114

Interest expense
(8,620
)
 
(2,110
)
 
(20,172
)
 
(5,230
)
Gain (loss) from change in fair value of derivative instruments
(6,000
)
 
4,596

 
48,148

 
5,381

Loss from extinguishment of debt

 

 
(10,512
)
 

Loss from investment in affiliate
(778
)
 

 
(988
)
 

Other income (expense), net
54

 
(419
)
 
147

 
(2,115
)
Total other income (expense)
(15,244
)
 
2,088

 
16,927

 
(1,850
)
Loss before income taxes
(36,538
)
 
(25,663
)
 
(55,456
)
 
(96,410
)
Benefit (provision) for income taxes
(134
)
 
1,435

 
(370
)
 
953

Net loss
(36,672
)
 
(24,228
)
 
(55,826
)
 
(95,457
)
Net income (loss) attributable to noncontrolling interest
31

 
29

 
91

 
(232
)
Net loss attributable to Amyris, Inc. common stockholders
$
(36,641
)
 
$
(24,199
)
 
$
(55,735
)
 
$
(95,689
)
Net income (loss) per share attributable to common stockholders:
 
 
 
 
 
 
 
     Basic
$
(0.46
)
 
$
(0.32
)
 
$
(0.71
)
 
$
(1.27
)
     Diluted
$
(0.46
)
 
$
(0.32
)
 
$
(0.94
)
 
$
(1.27
)
Weighted-average shares of common stock outstanding used in computing net loss per share of common stock:
 
 
 
 
 
 
 
     Basic
78,980,402

 
76,205,853

 
78,146,365

 
75,167,877

     Diluted
78,980,402

 
76,205,853

 
111,114,801

 
75,167,877



5



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

6



Amyris, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In Thousands)
(Unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Comprehensive income (loss):
 
 
 
 
 
 
 
Net loss
$
(36,672
)
 
$
(24,228
)
 
$
(55,826
)
 
$
(95,457
)
Foreign currency translation adjustment, net of tax
(8,164
)
 
(66
)
 
(3,753
)
 
(4,099
)
Total comprehensive loss
(44,836
)
 
(24,294
)
 
(59,579
)
 
(99,556
)
Income (loss) attributable to noncontrolling interest
31

 
29

 
91

 
(232
)
Foreign currency translation adjustment attributable to noncontrolling interest
(79
)
 
(3
)
 
(37
)
 
(55
)
Comprehensive loss attributable to Amyris, Inc.
$
(44,884
)
 
$
(24,268
)
 
$
(59,525
)
 
$
(99,843
)

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


7



Amyris, Inc.
Condensed Consolidated Statements of Stockholders' Deficit
(In Thousands, Except Share Amounts)
(Unaudited)
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Additional Paid-in Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Income (Loss)
 
Noncontrolling Interest
 
Total Deficit
December 31, 2013
76,662,812

 
$
8

 
$
706,253

 
$
(821,438
)
 
$
(20,087
)
 
$
(584
)
 
$
(135,848
)
Issuance of common stock upon exercise of stock options
638,054

 

 
1,804

 

 

 

 
1,804

Shares issued under restricted stock unit settlement
790,873

 

 
(1,790
)
 

 

 

 
(1,790
)
Issuance of common stock in a private placement
943,396

 

 
4,000

 

 

 

 
4,000

Stock-based compensation

 

 
10,769

 

 

 

 
10,769

Foreign currency translation adjustment, net of tax

 

 

 

 
(3,790
)
 
37

 
(3,753
)
Net loss

 

 

 
(55,735
)
 

 
(91
)
 
(55,826
)
September 30, 2014
79,035,135

 
$
8

 
$
721,036

 
$
(877,173
)
 
$
(23,877
)
 
$
(638
)
 
$
(180,644
)
See the accompanying notes to the unaudited condensed consolidated financial statements.


8



Amyris, Inc.
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
 
Nine Months Ended September 30,
 
2014
 
2013
Operating activities
 
 
 
Net loss
$
(55,826
)
 
$
(95,457
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
11,334

 
12,259

Loss on disposal of property, plant and equipment
911

 
81

Stock-based compensation
10,769

 
13,611

Amortization of debt discount
6,794

 
2,135

Loss on extinguishment of debt
10,512

 

Loss on purchase commitments and write-off of production assets
352

 
8,423

Change in fair value of derivative instruments
(48,148
)
 
(5,295
)
Other non-cash expenses (income)
(113
)
 
213

Changes in assets and liabilities:
 
 
 
Accounts receivable
(3,088
)
 
1,390

Related party accounts receivable
(79
)
 
(1,022
)
Inventories, net
(6,148
)
 
(2,590
)
Prepaid expenses and other assets
(1,346
)
 
(1,477
)
Accounts payable
(903
)
 
2,848

Accrued and other liabilities
4,748

 
(10,966
)
Deferred revenue
6,078

 
6,763

Deferred rent
46

 
(340
)
Net cash used in operating activities
(64,107
)
 
(69,424
)
Investing activities
 
 
 
Purchase of investments
(946
)
 
(1,820
)
Maturities of investments
979

 
1,209

Change in restricted cash

 
(1
)
Investment in joint venture
(2,075
)
 

Loan to affiliate
(1,214
)
 

Purchases of property and equipment, net of disposals
(3,616
)
 
(5,901
)
Net cash used in investing activities
(6,872
)
 
(6,513
)
Financing activities
 
 
 
Proceeds from issuance of common stock, net of repurchases
368

 
157

Proceeds from issuance of common stock in private placements, net of issuance costs
4,000

 
19,981

Principal payments on capital leases
(827
)
 
(1,115
)
Proceeds from debt issued, net of issuance costs
83,171

 
2,709

Proceeds from debt issued to related party
49,862

 
30,000

Principal payments on debt
(4,627
)
 
(2,494
)
Net cash provided by financing activities
131,947

 
49,238

Effect of exchange rate changes on cash and cash equivalents
(619
)
 
1,863

Net increase (decrease) in cash and cash equivalents
60,349

 
(24,836
)
Cash and cash equivalents at beginning of period
6,868

 
30,592

Cash and cash equivalents at end of period
$
67,217

 
$
5,756


9



Amyris, Inc.
Condensed Consolidated Statements of Cash Flows—(Continued)
(In Thousands)
 
 
Nine Months Ended September 30,
 
2014
 
2013
Supplemental disclosures of cash flow information:
 
 
 
Cash paid for interest
$
3,504

 
$
1,610

Cash paid for income taxes, net of refunds
$

 
$

Supplemental disclosures of non-cash investing and financing activities:
 
 
 
Acquisitions of property, plant and equipment under accounts payable, accrued liabilities and notes payable
$
(95
)
 
$
1,444

Financing of insurance premium under notes payable
$
(361
)
 
$
43

Receivable of proceeds for options exercised
$
(355
)
 
$

Accrued offering cost of common stock in private placement
$

 
$

Capitalized interest
$
2,812

 
$

Non-cash investment in joint venture
$
(237
)
 
$


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

10



Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
 

1. The Company

Amyris, Inc. (the “Company”) was incorporated in California on July 17, 2003 and reincorporated in Delaware on June 10, 2010 for the purpose of leveraging breakthroughs in industrial bioscience technology to develop and provide renewable compounds for a variety of markets. The Company is currently applying its industrial bioscience technology platform to provide alternatives to select petroleum-sourced products used in consumer care, specialty chemical and transportation fuel markets worldwide. The Company's first commercialization efforts have been focused on a renewable hydrocarbon molecule called farnesene (Biofene®), which forms the basis for a wide range of products including emollients, fragrance oils and diesel fuel. While the Company's platform is able to use a wide variety of feedstocks, the Company is initially focused on Brazilian sugarcane. In addition, the Company is a party to various contract manufacturing agreements to support its commercial production needs. The Company has established two principal operating subsidiaries, Amyris Brasil Ltda. (formerly Amyris Brasil S.A., or "Amyris Brasil") for production in Brazil, and Amyris Fuels, LLC (or "Amyris Fuels").

The Company's renewable products business strategy is to focus on direct commercialization of specialty products while moving established commodity products into joint venture arrangements with leading industry partners. To commercialize its products, the Company must be successful in using its technology to manufacture products at commercial scale and on an economically viable basis (i.e., low per unit production costs) and developing sufficient sales volume for those products to support its operations. The Company's prospects are subject to risks, expenses and uncertainties frequently encountered by companies in this stage of development.

The Company expects to fund its operations for the foreseeable future with cash and cash equivalents and investments currently on hand, with cash inflows from collaboration and grant funding, cash contributions from product sales, and with new debt and equity financings. The Company's planned 2014 and 2015 working capital needs and its planned operating and capital expenditures are dependent on significant inflows of cash from new and existing collaboration partners and from cash contributions from growth in renewable product sales, as well as additional funding from new joint ventures or other collaborations, and may also require additional funding from debt or equity financings. The Company will continue to need to fund its research and development and related activities and to provide working capital to fund production, storage, distribution and other aspects of its business. The Company's operating plan contemplates capital expenditures of approximately $9.0 million in 2014 and the Company expects to continue to incur costs in connection with its existing contract manufacturing arrangements.

Liquidity

The Company has incurred significant losses since its inception and believes that it will continue to incur losses and negative cash flow from operations through at least 2014. As of September 30, 2014 , the Company had an accumulated deficit of $877.2 million and had cash, cash equivalents and short term investments of $68.6 million . The Company has significant outstanding debt and contractual obligations related to purchase commitments, as well as capital and operating leases. As of September 30, 2014 , the Company's debt, net of discount of $83.4 million , totaled $229.5 million , of which $13.3 million matures within the next twelve months. In addition, the Company's debt agreements contain various covenants, including restrictions on the Company's business that could cause the Company to be at risk of defaults. Please refer to Note 5, “Debt” and Note 6, “Commitments and Contingencies” for further details regarding the Company's debt obligations and commitments.
                               
The Company’s operating plan for 2014 contemplates significant reduction in the Company’s net cash outflows, resulting from (i) revenue growth from sales of existing and new products, (ii) reduced production costs compared to prior periods as a result of manufacturing and technical developments in 2013, (iii) cash inflows from collaborations consistent with levels achieved in 2013 and (iv) operating expenses maintained at reduced levels. Achieving a reduction in net cash outflows from these factors is subject to risks and uncertainties.

In addition to cash contributions from product sales and debt and equity financings, the Company also depends on collaboration funding to support its operating expenses. While part of this funding is committed based on existing collaboration agreements, in order to maintain collaboration funding levels equivalent to 2013 as noted above, the Company will need to identify and obtain funding under additional collaborations that are not yet subject to any definitive agreement or are not yet identified. In addition, some of the Company’s anticipated collaboration funding under existing agreements is subject to achievement by the Company of milestones or other funding conditions.


11



If the Company is unable to generate sufficient cash contributions from product sales or sufficient additional payments from existing and new collaboration partners, it will need to obtain additional funding from equity financings (which could include issuances of preferred or discounted equity), and may need to obtain credit facilities and loans, agree to burdensome covenants, grant further security interests in its assets, enter into collaboration and licensing arrangements that require it to relinquish commercial rights, or grant licenses on terms that are not favorable. If the Company fails to generate positive gross margins product sales or secure such funding, the Company could be forced to curtail its operations, which would have a material adverse effect on the Company's ability to continue with its business plans.


2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions for Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and notes required for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 2, 2014. The unaudited condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Principles of Consolidation

The Company has interests in joint venture entities that are variable interest entities (“VIEs”). Determining whether to consolidate a variable interest entity requires judgment in assessing (i) whether an entity is a VIE and (ii) if the Company is the entity’s primary beneficiary and thus required to consolidate the entity. To determine if the Company is the primary beneficiary of a VIE, the Company evaluates whether it has (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. The Company’s evaluation includes identification of significant activities and an assessment of its ability to direct those activities based on governance provisions and arrangements to provide or receive product and process technology, product supply, operations services, equity funding and financing and other applicable agreements and circumstances. The Company’s assessment of whether it is the primary beneficiary of its VIEs requires significant assumptions and judgment.

The condensed consolidated financial statements of the Company include the accounts of Amyris, Inc., its subsidiaries and two consolidated VIEs with respect to which the Company is considered the primary beneficiary, after elimination of intercompany accounts and transactions. Disclosure regarding the Company’s participation in the VIEs is included in Note 7, "Joint Ventures and Noncontrolling Interest."

Use of Estimates

In preparing the unaudited condensed consolidated financial statements, management must make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Unaudited Interim Financial Information

The accompanying interim condensed consolidated financial statements and related disclosures are unaudited, have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented.

The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The condensed consolidated results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.

Recent Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board ("FASB") issued an amended accounting standard update on the financial statement presentation of unrecognized tax benefits. The amended guidance provides that a liability related to an

12



unrecognized tax benefit would be presented as a reduction of a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. The new guidance became effective for the Company on January 1, 2014 and will be applied prospectively to unrecognized tax benefits that exist at the effective date with retrospective applications permitted. The Company's current presentation of unrecognized tax benefits conforms with the amended guidance. Accordingly, there was no significant impact to the Company resulting from the guidance.

In May 2014, the FASB issued new guidance related to revenue recognition. This new standard will replace all current GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition update guidance provides a unified model to determine how revenue is recognized. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance will be effective for the Company beginning January 1, 2017 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently assessing the impact of adopting this new accounting standard on its financial statements.

In August 2014, the FASB issued new guidance related to the disclosure around going concern. The new standard provides guidance around management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosure. The new standard is effective for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The adoption standard is not expected to have a material impact on our financial statements.


3. Fair Value of Financial Instruments

The inputs to the valuation techniques used to measure fair value are classified into the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

As of September 30, 2014 , the Company’s financial assets and financial liabilities are presented below at fair value and were classified within the fair value hierarchy as follows (in thousands):
 
Level 1
 
Level 2
 
Level 3
 
Balance as of September 30, 2014
Financial Assets
 
 
 
 
 
 
 
Money market funds
$
57,018

 
$

 
$

 
$
57,018

Certificates of deposit
1,454

 

 

 
1,454

Total financial assets
$
58,472

 
$

 
$

 
$
58,472

Financial Liabilities
 
 
 
 
 
 
 
Loans payable (1)
$

 
$
18,235

 
$

 
$
18,235

Credit facilities  (1)

 
38,199

 

 
38,199

Convertible notes (1)

 

 
235,084

 
235,084

Compound embedded derivative liability

 

 
152,413

 
152,413

Currency interest rate swap derivative liability

 
3,651

 

 
3,651

Total financial liabilities
$

 
$
60,085

 
$
387,497

 
$
447,582

________
(1) These liabilities are carried on the condensed consolidated balance sheet on a historical basis.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The fair values of money market funds are based on fair values of identical assets. The fair values of the loans payable, convertible notes, credit facilities and currency interest rate swaps are based on the present value of expected future cash flows and assumptions about current interest rates and

13



the creditworthiness of the Company. Market risk associated with the fixed and variable rate long-term debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates.

The carrying amounts of certain financial instruments, such as cash equivalents, short term investments, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities and low market interest rates, if applicable. The fair values of the loans payable, convertible notes and credit facilities are based on the present value of expected future cash flows and assumptions about current interest rates and the creditworthiness of the Company.

The following table provides a reconciliation of the beginning and ending balances for the convertible notes measured at fair value using significant unobservable inputs (Level 3) (in thousands):

 
2014
Balance at January 1
$
131,952

Additions to convertible notes
106,957

Change in fair value of convertible notes
(3,825
)
Balance at September 30
$
235,084


The Company’s financial assets and financial liabilities as of December 31, 2013 are presented below at fair value and were classified within the fair value hierarchy as follows (in thousands):
 

 
Level 1
 
Level 2
 
Level 3
 
Balance as of December 31, 2013
Financial Assets
 
 
 
 
 
 
 
Money market funds
$
398

 
$

 
$

 
$
398

Certificates of deposit
1,428

 

 

 
1,428

Total financial assets
$
1,826

 
$

 
$

 
$
1,826

Financial Liabilities
 
 
 
 
 
 
 
Loans payable
$

 
$
18,491

 
$

 
$
18,491

Credit facilities

 
7,571

 

 
7,571

Convertible notes

 

 
131,952

 
131,952

Compound embedded derivative liability

 

 
131,117

 
131,117

Currency interest rate swap derivative liability

 
3,600

 

 
3,600

Total financial liabilities
$

 
$
29,662

 
$
263,069

 
$
292,731


Derivative Instruments

The following table provides a reconciliation of the beginning and ending balances for the compound embedded derivative liability measured at fair value using significant unobservable inputs (Level 3) (in thousands):
    
 
2014
Balance at January 1
$
131,117

    Transfers in to Level 3 net of cancellation  (1)
89,070

    Total income from change in fair value of derivative liability
(67,774
)
Balance at September 30
$
152,413

________
(1) Includes $1.1 million removal of derivative liability related to debt extinguishment.

The compound embedded derivative liability represents the fair value of the bifurcated conversion options that contain "make-whole" provisions or down round conversion price adjustment provisions of outstanding convertible promissory notes issued to Total Energies Nouvelles Activités USA (formerly known as Total Gas & Power USA, SAS, or “Total” and such convertible promissory notes, the "Total Notes"), as well as Tranche I Notes (as defined below), Tranche II Notes (as defined

14



below) and notes issued under the Rule 144A Convertible Note Offering (as defined below) (see Note 5, "Debt"). There is no current observable market for this type of derivative and, as such, the Company determined the fair value of the embedded derivative using a Monte Carlo simulation valuation model for the Total Notes and the binomial lattice model for the Tranche I Notes, Tranche II Notes and the Rule 144A Convertible Note Offering. A Monte Carlo simulation valuation model combines expected cash outflows with market-based assumptions regarding risk-adjusted yields, stock price volatility, probability of a change of control and the trading information of the Company's common stock into which the notes are or may become convertible. A binomial lattice model generates two probable outcomes - one up and another down - arising at each point in time, starting from the date of valuation until the maturity date. A lattice model was used to determine if the convertible notes would be converted, called or held at each decision point. Within the lattice model, the following assumptions are made: (i) the convertible notes will be converted early if the conversion value is greater than the holding value and (ii) the convertible notes will be called if the holding value is greater than both (a) redemption price and (b) the conversion value at the time. If the convertible notes are called, then the holder will maximize their value by finding the optimal decision between (1) redeeming at the redemption price and (2) converting the convertible notes. Using this lattice method, the Company valued the embedded derivative using the "with-and-without method", where the fair value of the convertible notes including the embedded derivative is defined as the "with", and the fair value of the convertible notes excluding the embedded derivative is defined as the "without." This method estimates the fair value of the embedded derivative by looking at the difference in the values between the convertible notes with the embedded derivative and the fair value of the convertible notes without the embedded derivative. The lattice model uses the stock price, conversion price, maturity date, risk-free interest rate, estimated stock volatility and estimated credit spread. The Company marks the compound embedded derivative to market due to the conversion price not being indexed to the Company's own stock. Except for the "make-whole interest" provision included in the conversion option, which is only required to be settled in cash upon a change of control at the noteholder's option, the compound embedded derivative will be settled in either cash or shares. As of September 30, 2014 , the Company had sufficient common stock available to settle the conversion option in shares. As of September 30, 2014 and December 31, 2013 , included in "Derivative liabilities" on the condensed consolidated balance sheet is the Company's compound embedded derivative liability of $152.4 million and $131.1 million , respectively, which represents the fair value of the equity conversion option or a "make-whole" provision relating to the outstanding Total Notes, Tranche I Notes, Tranche II Notes and notes issued under the Rule 144A Convertible Note Offering as described above.

In June 2012, the Company entered into a loan agreement with Banco Pine S.A. (or "Banco Pine") under which Banco Pine provided the Company with a short term loan (referred to as the "Banco Pine Loan"). At the time of the Banco Pine Bridge Loan, the Company also entered into a currency interest rate swap arrangement with Banco Pine with respect to the repayment of R$22.0 million (approximately US$9.0 million based on the exchange rate as of September 30, 2014 ). The swap arrangement exchanges the principal and interest payments under the Banco Pine Bridge Loan of R$22.0 million entered into in July 2012 for alternative principal and interest payments that are subject to adjustment based on fluctuations in the foreign exchange rate between the U.S. dollar and Brazilian real. The swap has a fixed interest rate of 3.94% . Changes in the fair value of the swap are recognized in “Gain (loss) from change in fair value of derivative instruments" in the condensed consolidated statements of operations.

Derivative instruments measured at fair value as of September 30, 2014 and December 31, 2013 , and their classification on the condensed consolidated balance sheets and condensed consolidated statements of operations, are presented in the following tables (in thousands except contract amounts):
 
 
Liability as of
 
 
September 30, 2014
 
December 31, 2013
Type of Derivative Contract
 
Quantity of
Short
Contracts
 
Fair Value
 
Quantity of
Short
Contracts
 
Fair Value
Currency interest rate swap, included as net liability in derivative liability
 
1

 
$
3,651

 
1

 
$
3,600

 
 
 
Income
Statement Classification
Three Months Ended September 30,
 
Nine Months Ended September 30,
Type of Derivative Contract
2014
 
2013
 
2014
 
2013
 
 
 
Gain (Loss) Recognized
 
Gain (Loss) Recognized
Currency interest rate swap  (1)
 
Gain (loss) from change in fair value of derivative instruments
$
(1,139
)
 
$
(135
)
 
$(83)
 
$
(1,787
)
___________ 
(1)  
Certain classifications of prior period amounts have been made to conform to the current period presentation. Such reclassifications did not materially change previously reported consolidated financial statements.

15





4. Balance Sheet Components

Inventories, net

Inventories are stated at the lower of cost or market and consist of the following (in thousands):
 
September 30,
2014
 
December 31,
2013
Raw materials
$
3,792

 
$
1,796

Work-in-process
5,561

 
7,292

Finished goods
7,313

 
1,800

Inventories, net
$
16,666

 
$
10,888


Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are comprised of the following (in thousands):
 
September 30,
2014
 
December 31,
2013
Maintenance (1)
$
411

 
$
258

Prepaid insurance (1)
329

 
894

Manufacturing catalysts
1,562

 
1,536

Recoverable VAT and other taxes
2,634

 
5,125

Other (1)
1,630

 
1,705

Prepaid expenses and other current assets
$
6,566

 
$
9,518

______________ 
(1)  
Certain classifications of prior period amounts have been made to conform to the current period presentation. Such reclassifications did not materially change previously reported consolidated financial statements.

Property, Plant and Equipment, net

Property, plant and equipment, net is comprised of the following (in thousands):  
 
 
 
September 30, 2014
 
December 31, 2013
Leasehold improvements
$
39,298

 
$
39,034

Machinery and equipment
95,396

 
96,585

Computers and software
9,401

 
8,509

Furniture and office equipment
2,511

 
2,535

Buildings
6,835

 
7,148

Vehicles
378

 
488

Construction in progress
40,933

 
41,387

 
194,752

 
195,686

Less: accumulated depreciation and amortization
(66,646
)
 
(55,095
)
Property, plant and equipment, net
$
128,106

 
$
140,591


The Company's first, purpose-built, large-scale Biofene production plant in southeastern Brazil commenced operations in December 2012. This plant is located at Brotas in the state of São Paulo, Brazil and is adjacent to an existing sugar and ethanol mill, Tonon Bioenergia S.A. (formerly Paraíso Bioenergia and referred to herein as "Paraíso"). The Company's construction in progress consists primarily of the upfront plant design and the initial construction of a second large-scale production plant in Brazil, located at the Sao Martinho S.A. (or "SMSA") (formerly Usina São Martinho S.A.) sugar and ethanol mill (also in the state of São Paulo, Brazil).


16



Property, plant and equipment, net includes $3.8 million and $3.4 million of machinery and equipment under capital leases as of September 30, 2014 and December 31, 2013 , respectively. Accumulated amortization of assets under capital leases totaled $2.1 million and $1.5 million as of September 30, 2014 and December 31, 2013 , respectively.

Depreciation and amortization expense, including amortization of assets under capital leases was $3.8 million and $3.8 million for the three months ended September 30, 2014 and 2013, respectively, and was $11.3 million and $12.2 million for the nine months ended September 30, 2014 and 2013, respectively.

The Company capitalizes interest costs incurred to construct plant and equipment. The capitalized interest is recorded as part of the depreciable cost of the asset to which it relates to and is amortized over the asset's estimated useful life. Interest cost capitalized as of September 30, 2014 and December 31, 2013 was $0.5 million and $0.5 million , respectively.

Other Assets

Other assets are comprised of the following (in thousands):  
 
September 30, 2014
 
December 31, 2013
Deposits on property and equipment, including taxes
$
1,883

 
$
1,970

Recoverable taxes from Brazilian government entities
9,935

 
6,599

Debt issuance cost (2)
918

 
454

Investments in joint venture (1)
1,392

 
68

Other  (2)
1,494

 
1,494

Total other assets
$
15,622

 
$
10,585

______________ 
(1)  
The investments in joint venture represents the Company's investments in the joint venture with Novvi LLC and Total Amyris Biosolutions B.V. of $1.3 million and $0.1 million as of September 30, 2014 , respectively, and zero and $0.1 million as of December 31, 2013 , respectively.
(2)  
Certain classifications of prior period amounts have been made to conform to the current period presentation. Such reclassifications did not materially change previously reported consolidated financial statements.
 
Accrued and Other Current Liabilities

Accrued and other current liabilities are comprised of the following (in thousands):
 
September 30, 2014

December 31, 2013
Professional services
$
1,864

 
$
2,279

Accrued vacation
2,237

 
2,274

Payroll and related expenses
5,348

 
5,066

Tax-related liabilities
231

 
825

Deferred rent, current portion
1,111

 
1,111

Accrued interest
2,117

 
3,176

Contractual obligations to contract manufacturers
643

 
4,241

Other
873

 
2,249

Total accrued and other current liabilities
$
14,424

 
$
21,221



17



Derivative Liabilities

Derivative liabilities are comprised of the following (in thousands):
 
September 30, 2014
 
December 31, 2013
Fair market value of swap obligation
$
3,651

 
$
3,600

Fair value of compound embedded derivative liability (1)
152,413

 
131,117

Total derivative liabilities
$
156,064

 
$
134,717

______________ 
(1)  
The compound embedded derivative liability represents the fair value of the bifurcated conversion options that contain "make-whole" provisions or down round conversion price adjustment provisions included in the outstanding Total Notes, Tranche I Notes, Tranche II Notes and the Rule 144A Convertible Note Offering (see Note 3, "Fair value of financial instruments" and Note 5, "Debt").


5. Debt

Debt is comprised of the following (in thousands):

 
September 30, 2014
 
December 31, 2013
Credit facilities
$
36,670

 
$
8,767

Convertible notes
58,945

 
28,537

Related party convertible notes
110,774

 
89,499

Loans payable
23,098

 
25,259

Total debt
229,487

 
152,062

Less: current portion
(13,302
)
 
(6,391
)
Long-term debt
$
216,185

 
$
145,671


FINEP Credit Facility

In November 2010, the Company entered into a credit facility with Financiadora de Estudos e Projetos (or the “FINEP Credit Facility”). The FINEP Credit Facility was extended to partially fund expenses related to the Company’s research and development project on sugarcane-based biodiesel (“FINEP Project”) and provided for loans of up to an aggregate principal amount of R$6.4 million (approximately US$2.6 million based on the exchange rate as of September 30, 2014 ), which is secured by a chattel mortgage on certain equipment of the Company as well as by bank letters of guarantee. All available credit under this facility is fully drawn.

Interest on loans drawn under the FINEP Credit Facility is fixed at 5%  per annum. In case of default under or non-compliance with the terms of the agreement, the interest on loans will be dependent on the long-term interest rate as published by the Central Bank of Brazil (such rate, the “TJLP”). If the TJLP at the time of default is greater than 6% , then the interest will be 5% plus a TJLP adjustment factor, otherwise the interest will be 11%  per annum. In addition, a fine of up to 10% shall apply to the amount of any obligation in default. Interest on late balances will be 1% per month, levied on the overdue amount. Payment of the outstanding loan balance is being made in 81 monthly installments, which commenced in July 2012 and extends through March 2019. Interest on loans drawn and other charges are paid on a monthly basis and commenced in March 2011. As of September 30, 2014 and December 31, 2013 , the total outstanding loan balance under the FINEP Credit Facility was R$4.5 million (approximately US$1.8 million based on the exchange rate as of September 30, 2014 ) and R$5.2 million (approximately US$2.2 million based on exchange rate as of December 31, 2013 ), respectively.

The FINEP Credit Facility contains the following significant terms and conditions:
the Company was required to share with FINEP the costs associated with the FINEP Project. At a minimum, the Company was required to contribute from its own funds approximately R$14.5 million (approximately US$5.9 million based on the exchange rate as of September 30, 2014 ) of which R$11.1 million was contributed prior to the release of the second disbursement. All four disbursements were completed and the Company has fulfilled all of its cost sharing obligations;
after the release of the first disbursement, prior to any subsequent drawdown from the FINEP Credit Facility, the Company was required to provide bank letters of guarantee of up to R$3.3 million in aggregate (approximately US$1.3 million

18



based on the exchange rate as of September 30, 2014 ). On December 17, 2012 and prior to release of the second disbursement on December 26, 2012, the Company obtained the required bank letter of guarantees from Banco ABC Brasil S.A. (or "ABC"); and
amounts disbursed under the FINEP Credit Facility were required to be used towards the FINEP Project within 30 months after the contract execution.

BNDES Credit Facility

In December 2011, the Company entered into a credit facility with the Brazilian Development Bank (or “BNDES” and such credit facility is the “BNDES Credit Facility”) in the amount of R$22.4 million (approximately US$9.1 million based on the exchange rate as of September 30, 2014 ). This BNDES Credit Facility was extended as project financing for a production site in Brazil. The credit line is divided into an initial tranche of up to approximately R$19.1 million and an additional tranche of approximately R$3.3 million that becomes available upon delivery of additional guarantees. The credit line was available for 12 months from the date of the BNDES Credit Facility, subject to extension by the lender. The credit line was cancelled in 2013.
The principal of the loans under the BNDES Credit Facility is required to be repaid in 60 monthly installments, with the first installment paid in January 2013 and the last due in December 2017. Interest was due initially on a quarterly basis with the first installment due in March 2012. From and after January 2013, interest payments are due on a monthly basis together with principal payments. The loaned amounts carry interest of 7% per annum. Additionally, there is a credit reserve charge of 0.1% on the unused balance from each credit installment from the day immediately after it is made available through its date of use, when it is paid.

The BNDES Credit Facility is collateralized by a first priority security interest in certain of the Company's equipment and other tangible assets totaling R$24.9 million (approximately $10.2 million based on the exchange rate as of September 30, 2014 ). The Company is a parent guarantor for the payment of the outstanding balance under the BNDES Credit Facility. Additionally, the Company was required to provide a bank guarantee equal to 10% of the total approved amount ( R$22.4 million in total debt) available under the BNDES Credit Facility. For advances of the second tranche (above R$19.1 million ), the Company is required to provide additional bank guarantees equal to 90% of each such advance, plus additional Company guarantees equal to at least 130% of such advance. The BNDES Credit Facility contains customary events of default, including payment failures, failure to satisfy other obligations under this credit facility or related documents, defaults in respect of other indebtedness, bankruptcy, insolvency and inability to pay debts when due, material judgments, and changes in control of Amyris Brasil. If any event of default occurs, BNDES may terminate its commitments and declare immediately due all borrowings under the facility. As of September 30, 2014 and December 31, 2013 , the Company had R$12.4 million (approximately US$5.1 million based on the exchange rate as of September 30, 2014 ) and R$15.3 million (approximately US$6.5 million based on the exchange rate as of December 31, 2013 ), respectively, in outstanding advances under the BNDES Credit Facility.

Hercules Loan Facility

In March 2014, the Company entered into a Loan and Security Agreement with Hercules Technology Growth Capital, Inc. (or “Hercules”) to make available to Amyris a loan in the aggregate principal amount of up to $25.0 million (or the "Hercules Loan Facility"). The original Hercules Loan Facility accrues interest at a rate per annum equal to the greater of either the prime rate reported in the Wall Street Journal plus 6.25% or 9.50% . The Company may repay the loaned amounts before the maturity date (generally February 1, 2017) if it pays an additional fee of 3% of the outstanding loans ( 1% if after the initial twelve-month period of the loan). The Company was also required to pay a 1% facility charge at the closing of the transaction, and is required to pay a 10% end of term charge. In connection with the original Hercules Loan Facility, Amyris agreed to certain customary representations and warranties and covenants, as well as certain covenants that were subsequently amended (as described below). The total available credit of $25.0 million under this facility was fully drawn down by the Company.

In June 2014, the Company and Hercules entered into a first amendment (or the “Hercules Amendment”) of the Loan and Security Agreement entered into in March 2014. Pursuant to the Hercules Amendment, the parties agreed to adjust the term loan maturity date from May 31, 2015 to February 1, 2017 and remove (i) a requirement for the Company to pay a forbearance fee of $10.0 million in the event certain covenants were not satisfied, (ii) a covenant that the Company maintain positive cash flow commencing with the fiscal quarter beginning October 1, 2014, (iii) a covenant that, beginning with the fiscal quarter beginning July 1, 2014, the Company and its subsidiaries achieve certain projected cash product revenues and projected cash product gross profits, and (iv) an obligation for the Company to file a registration statement on Form S-3 with the SEC by no later than June 30, 2014 and complete an equity financing of more than $50.0 million by no later than September 30, 2014 . The Company further agreed to include a new covenant requiring the Company to maintain unrestricted, unencumbered cash in an amount equal to at least 50% of the principal amount then outstanding under the Hercules Loan Facility and borrow an additional $5.0 million . The additional $5.0 million borrowing was completed in June 2014, and accrues interest at a rate per annum equal to the greater of either the prime rate reported in the Wall Street Journal plus 5.25% or 8.5% . The Hercules Loan Facility is secured by liens on

19



the Company's assets, including on certain Company intellectual property. The Hercules Loan Facility includes customary events of default, including failure to pay amounts due, breaches of covenants and warranties, certain cross defaults and judgments, and insolvency. If an event of default occurs, Hercules may require immediate repayment of all amounts due.

As of September 30, 2014 , $29.8 million was outstanding under the Hercules Loan Facility, net of discount of $0.2 million , and the Company maintains cash in excess of the approximately $15.0 million current minimum cash covenant described above.

Notes Payable

During the period between May 2008 and October 2008, the Company entered into notes payable agreements with the lessor of its headquarters under which it borrowed a total of $3.3 million for the purchase of tenant improvements, bearing an interest rate of 9.5%  per annum and to be repaid over a period of 55 to 120 months. As of September 30, 2014 and December 31, 2013 , no principal amount was outstanding under these notes payable. In June 2013, as part of the April 30, 2013 Amendment to the Company's operating lease for its headquarters, the Company recorded the elimination of these notes payable as a lease incentive and recorded approximately $1.4 million to deferred rent liability in the condensed consolidated balance sheet. The deferred rent liability is being amortized to expense over the remaining lease term.

Convertible Notes

Fidelity

In February 2012, the Company completed the sale of senior unsecured convertible promissory notes in an aggregate principal amount of $25.0 million pursuant to a securities purchase agreement, between the Company and certain investment funds affiliated with FMR LLC (or the "Fidelity Securities Purchase Agreement"). The offering consisted of the sale of 3% senior unsecured convertible promissory notes with a March 1, 2017 maturity date and an initial conversion price equal to $7.0682 per share of the Company's common stock, subject to proportional adjustment for adjustments to outstanding common stock and anti-dilution provisions in case of dividends and distributions (or the "Fidelity Notes"). As of September 30, 2014 , the Fidelity Notes were convertible into an aggregate of up to 3,536,968 shares of the Company's common stock. Such note holders have a right to require repayment of 101% of the principal amount of the Fidelity Notes in an acquisition of the Company, and the notes provide for payment of unpaid interest on conversion following such an acquisition if the note holders do not require such repayment. The Fidelity Securities Purchase Agreement and Fidelity Notes include covenants regarding payment of interest, maintaining the Company's listing status, limitations on debt, maintenance of corporate existence, and filing of SEC reports. The Fidelity Notes include standard events of default resulting in acceleration of indebtedness, including failure to pay, bankruptcy and insolvency, cross-defaults, material adverse effect clauses and breaches of the covenants in the Fidelity Securities Purchase Agreement and Fidelity Notes, with default interest rates and associated cure periods applicable to the covenant regarding SEC reporting. Furthermore, the Fidelity Notes include restrictions on the amount of debt the Company is permitted to incur. With exceptions for certain existing debt, refinancing of such debt and certain other exclusions and waivers, the Fidelity Notes provide that the Company's total outstanding debt at any time cannot exceed the greater of $200.0 million or 50% of its consolidated total assets and its secured debt cannot exceed the greater of $125.0 million or 30% of its consolidated total assets. In connection with the Company’s closing of a short-term bridge loan for $35.0 million in October 2013, holders of the Fidelity Notes waived compliance with the debt limitations outlined above as to the $35.0 million bridge loan and the August 2013 Financing (defined below). In consideration for such waiver, the Company granted to holders of the Fidelity Notes or their affiliates, the right to purchase up to an aggregate of $7.6 million worth of convertible promissory notes in the first tranche of the August 2013 Financing.

Pursuant to a Securities Purchase Agreement among the Company, Maxwell (Mauritius) Pte Ltd (or “Temasek”) and Total, dated as of August 8, 2013 (or the “August 2013 SPA”), as amended in October 2013 to include certain entities affiliated with FMR LLC (or the “Fidelity Entities”) the Company sold and issued certain senior convertible promissory notes (or the "Tranche I Notes") pursuant to a financing (or the “August 2013 Financing”) exempt from registration under the Securities Act of 1933, as amended, (the "Securities Act") with an aggregate principal amount of $7.6 million of Tranche I Notes sold to the Fidelity Entities. See "Related Party Convertible Notes" in Note 5, "Debt."

Rule 144A Convertible Note Offering

In May 2014, the Company entered into a Purchase Agreement with Morgan Stanley & Co. LLC, as the initial purchaser (or the “Initial Purchaser”), relating to the sale of $75.0 million aggregate principal amount of its 6.50% Convertible Senior Notes due 2019 (or the "144A Notes") to the Initial Purchaser in a private placement, and for initial resale by the Initial Purchaser to certain qualified institutional buyers (or the "Rule 144A Convertible Note Offering"). In addition, the Company granted the Initial Purchaser an option to purchase up to an additional $15.0 million aggregate principal amount of 144A Notes, which option expired according to its terms. Under the terms of the purchase agreement for the 144A Notes, the Company agreed to customary

20



indemnification of the Initial Purchaser against certain liabilities. The Notes were issued pursuant to an Indenture, dated as of May 29, 2014 (or the “Indenture”), between the Company and Wells Fargo Bank, National Association, as trustee. The net proceeds from the offering of the 144A Notes were approximately $72.0 million after payment of the Initial Purchaser’s discounts and offering expenses. In addition, in connection with obtaining a waiver from Total of its preexisting contractual right to exchange certain senior secured convertible notes previously issued by the Company for new notes issued in the offering, the Company used approximately $9.7 million of the net proceeds to repay previously issued notes (representing the amount of 144A Notes purchased by Total from the Initial Purchaser). Certain of the Company's affiliated entities purchased $24.7 million in aggregate principal amount of 144A Notes from the Initial Purchaser (described further below under "Related Party Convertible Notes"). The 144A Notes will bear interest at a rate of 6.50% per year, payable semiannually in arrears on May 15 and November 15 of each year, beginning November 15, 2014. The 144A Notes will mature on May 15, 2019 unless earlier converted or repurchased. The 144A Notes are convertible into shares of the Company's common stock at any time prior to the close of business day on May 15, 2019. The 144A Notes will have an initial conversion rate of 267.0370 shares of Common Stock per $1,000 principal amount of 144A Notes (subject to adjustment in certain circumstances). This represents an initial effective conversion price of approximately $3.74 per share of common stock. For any conversion on or after May 15, 2015, in the event that the last reported sale price of the Company’s common stock for 20 or more trading days (whether or not consecutive) in a period of 30 consecutive trading days ending within five trading days immediately prior to the date the Company receives a notice of conversion exceeds the conversion price of $3.74 per share on each such trading day, the holders, in addition to the shares deliverable upon conversion, will be entitled to receive a cash payment equal to the present value of the remaining scheduled payments of interest that would have been made on the 144A Notes being converted from the conversion date to the earlier of the date that is three years after the date the Company receives such notice of conversion and maturity (May 15, 2019). In the event of a fundamental change, as defined in the Indenture, holders of the 144A Notes may require the Company to purchase all or a portion of the 144A Notes at a price equal to 100% of the principal amount of the 144A Notes, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. Holders of the 144A Notes who convert their 144A Notes in connection with a make-whole fundamental change will receive additional shares representing the present value of the remaining interest payments which will be computed using a discount rate of 0.75%. If a holder of 144A Notes elects to convert their 144A Notes prior to the effective date of any make-whole fundamental change, such holder will not be entitled to an increased conversion rate in connection with such conversion.

As of September 30, 2014 the convertible notes outstanding under the 144A Notes were $29.5 million , net of discount of $20.8 million .

Related Party Convertible Notes

Total R&D Convertible Notes

In July 2012, the Company entered into an agreement with Total that expanded Total's investment in its Biofene collaboration with the Company, provided new structure for a joint venture (or the "Fuels JV") to commercialize the products encompassed by the diesel and jet fuel research and development program (or the "Program"), and established a convertible debt structure for the collaboration funding from Total (or the "July 2012 Agreements").

The purchase agreement for the notes related to the funding from Total (or the "Total Purchase Agreement") provided for the sale of an aggregate of $105.0 million in notes as follows:

As part of an initial closing under the purchase agreement (which initial closing was completed in two installments), (i) on July 30, 2012 , the Company sold a 1.5% Senior Unsecured Convertible Note due March 2017 to Total in the face amount of $38.3 million , including $15.0 million in new funds and $23.3 million in previously-provided diesel research and development funding by Total, and (ii) on September 14, 2012 , the Company sold another note (in the same form) for $15.0 million in new funds from Total.
At a second closing under the Total Purchase Agreement (also completed in two installments) the Company sold additional notes for an aggregate of $30.0 million in new funds from Total ( $10.0 million in June 2013 and $20.0 million in July 2013).
The Total Purchase Agreement provided that additional notes could be sold in a third closing (for cash proceeds to the Company of $21.7 million , also payable in two installments, the first of which occurred in July 2014 for $10.85 million and the second installment of $10.85 million is payable in January 2015 ).

The notes issued to Total pursuant to the Total Purchase Agreement have a maturity date of March 1, 2017 , an initial conversion price equal to $7.0682 per share for the notes issued under the initial closing, an initial conversion price equal $3.08 per share for the notes issued under the second closing and an initial conversion price equal to $4.11 per share for the notes issued (and that remain to be issued) in the third closing. The notes bear interest of 1.5% per annum (with a default rate of 2.5% ), accruing from

21



the date of funding and payable at maturity or on conversion or a change of control where Total exercises the right to require the Company to repay the notes. Accrued interest is partially or fully cancelled if the notes are cancelled based on a final decision by Total to go forward with the fuels collaboration (either partially with respect to jet fuel or fully with respect to jet fuel and diesel (a "Go" decision). The agreements contemplate that the research and development efforts under the program may extend through 2016, with a series of “Go/No Go” decisions by Total through such date tied to funding by Total. The notes issued and that remain issuable in the third closing are and will be senior secured promissory notes, pursuant to the exchange agreed to by Total and the Company in December 2013.

Such notes become convertible into the Company's common stock (i) within 10 trading days prior to maturity (if they are not cancelled as described above prior to their maturity date), (ii) on a change of control of the Company, (iii) if Total is no longer the largest stockholder of the Company following a “No-Go” decision (subject to a six -month lock-up with respect to any shares of common stock issued upon conversion), and (iv) on a default by the Company. If Total makes a final “Go” decision with respect to the full fuels collaboration, then the notes will be exchanged by Total for equity interests in the Fuels JV, after which the notes will not be convertible and any obligation to pay principal or interest on the notes will be extinguished. In case of a “Go” decision only with respect to jet fuel, the parties would form an operational joint venture only for jet fuel (and the rights associated with diesel would terminate), 70% of the outstanding notes would remain outstanding and become payable by the Company, and 30% of the outstanding notes would be cancelled. If Total makes a “No-Go” decision, all the outstanding notes will remain outstanding and become payable at maturity.

In connection with a December 2012 private placement of the Company’s common stock involving certain existing stockholders of the Company, Total elected to participate in the private placement by exchanging approximately $5.0 million of its $53.3 million in senior unsecured convertible promissory notes into 1,677,852 shares of the Company's common stock at a price of $2.98 per share. As such, $5.0 million of Total's outstanding $53.3 million in senior unsecured convertible promissory notes was cancelled. The cancellation of the debt was treated as an extinguishment of debt in accordance with the guidance outlined in ASC 470-50. As a result of the exchange and cancellation of the $5.0 million debt the Company recorded a loss from extinguishment of debt of $0.9 million .

In March 2013, the Company entered into a letter agreement with Total (or the "March 2013 Letter Agreement") under which Total agreed to waive its right to cease its participation in the parties' fuels collaboration at the July 2013 decision point and committed to proceed with the July 2013 funding tranche of $30.0 million (subject to the Company's satisfaction of the relevant closing conditions for such funding in the Total Purchase Agreement). As consideration for this waiver and commitment, the Company agreed to:

reduce the conversion price for the senior unsecured convertible promissory notes to be issued in connection with such funding from $7.0682 per share to a price per share equal to the greater of (i) the consolidated closing bid price of the Company's common stock on the date of the March 2013 Letter Agreement, plus $0.01 , and (ii) $3.08 per share, provided that the conversion price would not be reduced by more than the maximum possible amount permitted under the rules of NASDAQ such that the new conversion price would require the Company to obtain stockholder consent; and
grant Total a senior security interest in the Company's intellectual property, subject to certain exclusions and subject to release by Total when the Company and Total enter into final documentation regarding the establishment of the Fuels JV.

In addition to the waiver by Total described above, Total also agreed that, at the Company's request and contingent upon the Company meeting its obligations described above, it would pay advance installments of the amounts otherwise payable at the July 2013 closing.

In June 2013, the Company sold and issued a 1.5% Senior Unsecured Convertible Note to Total in the face amount of $10.0 million with a March 1, 2017 maturity date pursuant to the Total Purchase Agreement as discussed above. In accordance with the March 2013 Letter Agreement, this convertible note has an initial conversion price equal to $3.08 per share of the Company's common stock.

In July 2013, the Company sold and issued a 1.5% Senior Unsecured Convertible Note to Total in the face amount of $20.0 million with a March 1, 2017 maturity date pursuant to the Total Purchase Agreement. This purchase and sale completed Total's commitment to purchase $30.0 million of such notes by July 2013. In accordance with the March 2013 Letter Agreement, this convertible note has an initial conversion price equal to $3.08 per share of the Company's common stock.

The conversion prices of the notes issued under the Total Purchase Agreement are subject to adjustment for proportional adjustments to outstanding common stock and under anti-dilution provisions in case of certain dividends and distributions. Total

22



has a right to require repayment of 101% of the principal amount of the notes in the event of a change of control of the Company and the notes provide for payment of unpaid interest on conversion following such a change of control if Total does not require such repayment. The Total Purchase Agreement and notes include covenants regarding payment of interest, maintenance of the Company's listing status, limitations on debt, maintenance of corporate existence, and filing of SEC reports. The notes include standard events of default resulting in acceleration of indebtedness, including failure to pay, bankruptcy and insolvency, cross-defaults, and breaches of the covenants in the purchase agreement and notes, with added default interest rates and associated cure periods applicable to the covenant regarding SEC reporting. Furthermore, the notes include restrictions on the amount of debt the Company is permitted to incur. With exceptions for certain existing debt, refinancing of such debt and certain other exclusions and waivers, the notes provide that the Company's total outstanding debt at any time cannot exceed the greater of $200.0 million or 50% of its consolidated total assets and its secured debt cannot exceed the greater of $125.0 million or 30% of its consolidated total assets. In connection with the Company’s closing of a short-term bridge loan for $35.0 million provided by Temasek in October 2013 and in connection with the Rule 144A Convertible Note Offering in May 2014, Total waived compliance with the debt limitations outlined above as to the $35.0 million bridge loan, the August 2013 Financing and the Rule 144A Convertible Note Offering.

In December 2013, in connection with the Company's entry into a Shareholders Agreement and License Agreement and related documents (or, collectively, the "JV Documents") with Total and Total Amyris BioSolutions B.V. (or "JVCO") relating to the establishment of JVCO (see Note 7, "Joint Venture and Noncontrolling Interest"), the Company (i) exchanged the $69.0 million of the then-outstanding Total unsecured convertible notes issued pursuant to the Total Purchase Agreement for replacement 1.5% senior secured convertible notes, in principal amounts equal to the principal amount of the cancelled notes (or the “Replacement Notes”), (ii) granted to Total a security interest in and lien on all Amyris’s rights, title and interest in and to Amyris’s shares in the capital of JVCO and (iii) agreed that any securities to be purchased and sold at the third closing under the Total Purchase Agreement by Total will be 1.5% , senior secured convertible notes instead of senior unsecured convertible notes. As a consequence of executing the JV Documents and forming JVCO, the security interests in all of the Company’s intellectual property, granted by Amyris in favor of Total, Temasek, and certain Fidelity Entities pursuant the Restated Intellectual Property Security Agreement dated as of October 16, 2013, were automatically terminated effective as of December 2, 2013 upon Total’s and the Company’s joint written notice to Temasek and the Fidelity Entities.

In April 2014, the Company and Total entered into a letter agreement dated as of March 29, 2014 (or the "March 2014 Letter Agreement") to amend the Amended and Restated Master Framework Agreement entered into as of December 2, 2013 (included as part of JV Documents, as defined below) and the Total Purchase Agreement. Under the March 2014 Letter Agreement, the Company agreed to, (i) amend the conversion price of the convertible notes to be issued in the third closing under the Total Purchase Agreement from $7.0682 to $4.11 subject to stockholder approval at the Company's 2014 annual meeting (which was obtained in May 2014), (ii) extend the period during which Total may exchange for other Company securities certain outstanding convertible promissory notes issued under the July 2012 Agreements from June 30, 2014 to the later of December 31, 2014 and the date on which the Company shall have raised $75.0 million of equity and/or convertible debt financing (excluding any convertible promissory notes issued pursuant to the Total Purchase Agreement), (iii) eliminate the Company’s ability to qualify, in a disclosure letter to Total, certain of the representations and warranties that the Company must make at the closing of any third closing sale, and (iv) beginning on March 31, 2014, provide Total with monthly reporting on the Company’s cash, cash equivalents and short-term investments. In consideration of these agreements, Total agreed to waive its right not to consummate the closing of the issuance of the third closing notes if it had decided not to proceed with the collaboration and had made a "No-Go" decision with respect thereto.

In July 2014, the Company sold and issued a 1.5% Senior Secured Convertible Note to Total in the face amount of $10.85 million with a March 1, 2017 maturity date pursuant to the Total Purchase Agreement. This purchase and sale constituted the initial tranche of the $21.7 million third closing described above. In accordance with the March 2014 Letter Agreement, this convertible note has an initial conversion price equal to $4.11 per share of the Company's common stock.

As of September 30, 2014 and December 31, 2013 , $49.7 million and $51.5 million , respectively, of Replacement Notes were outstanding, net of debt discount of $14.4 million and $17.6 million , respectively.

August 2013 Financing Convertible Notes and 2013 Bridge Loans

In connection with the August 2013 Financing, the Company entered into the August 2013 SPA with Total and Temasek to sell up to $73.0 million in convertible promissory notes in private placements, with such notes to be sold and issued over a period of up to 24 months from the date of signing. The August 2013 SPA provided for the August 2013 Financing to be divided into two tranches (the first tranche for $42.6 million and the second tranche for $30.4 million ), each with differing closing conditions. Of the total possible purchase price in the financing, $60.0 million to be paid in the form of cash by Temasek ( $35.0 million in the first tranche and up to $25.0 million in the second tranche) and $13.0 million to be paid by the exchange and cancellation of

23



outstanding convertible promissory notes held by Total in connection with its exercise of pro rata rights ( $7.6 million in the first tranche and $5.4 million in the second tranche). The August 2013 SPA included requirements that the Company meet certain production milestones before the second tranche would become available, obtain stockholder approval prior to completing any closing of the transaction, and issue a warrant to Temasek to purchase 1,000,000 shares of the Company's common stock at an exercise price of $0.01 per share, exercisable only if Total converts notes previously issued to Total in the second closing under the Total Purchase Agreement. In September 2013, prior to the initial closing of the August 2013 Financing, the Company's stockholders approved the issuance in the private placement of up to $110.0 million aggregate principal amount of senior convertible promissory notes, the issuance of a warrant to purchase 1,000,000 shares of the Company's common stock and the issuance of the common stock issuable upon conversion or exercise of such notes and warrant, which approval included the transactions contemplated by the August 2013 Financing.

In September 2013, the Company entered into a bridge loan agreement with an existing investor to provide additional cash availability of up to $5.0 million . The facility expired in October 2013 in accordance with its terms prior to the Company drawing any funds under the agreement.

In October 2013, the Company sold and issued a bridge note to Temasek (or the “Temasek Bridge Note”) in exchange for a bridge loan of $35.0 million . The Temasek Bridge Note was due on February 2, 2014 and accrued interest at a rate of 5.5% quarterly from the October 4, 2013 date of issuance. The Temasek Bridge Note was cancelled on October 16, 2013 as payment for Temasek’s purchase of Tranche I Notes in the first tranche of the August 2013 Financing as further described below.

In October 2013, the Company amended the August 2013 SPA to include the Fidelity Entities in the first tranche of the August 2013 Financing with an investment amount of $7.6 million , and to proportionally increase the amount acquired by exchange and cancellation of outstanding convertible promissory notes held by Total in connection with its exercise of pro rata rights to $14.6 million ( $9.2 million in the first tranche and up to $5.4 million in the second tranche). Also in October 2013, the Company completed the closing of the first tranche of the August 2013 Financing, issuing a total of $51.8 million in Tranche I Notes for cash proceeds of $7.6 million and cancellation of outstanding convertible promissory notes of $44.2 million , of which $35.0 million resulted from cancellation of the Temasek Bridge Note and the remaining $9.2 million from the exchange and cancellation of an outstanding convertible note held by Total. As a result of the exchange and cancellation of the $35.0 million Temasek Bridge Note and the $9.2 million Total convertible note for the Tranche I Notes, the Company recorded a loss from extinguishment of debt of $19.9 million . The Tranche I Notes are due sixty months from the date of issuance and will be convertible into the Company’s common stock at a conversion price equal to $2.44 , which represents a 15% discount to a trailing 60 -day weighted-average closing price of the common stock on The NASDAQ Stock Market (or "NASDAQ") through August 7, 2013, subject to adjustment as described below. The Tranche I Notes are convertible at the option of the holder: (i) at any time after 18 months from the date of the August 2013 SPA, (ii) on a change of control of the Company and (iii) upon the occurrence of an event of default. The conversion price of the Tranche I Notes would be reduced to $2.15 if (a)(i) a specified Company manufacturing plant had failed to achieve a total production of 1.0 million liters within a run period of 45 days prior to June 30, 2014, or (ii) the Company failed to achieve gross margins from product sales of at least 5% prior to June 30, 2014, or (b) the Company reduces the conversion price of certain existing promissory notes held by Total prior to the repayment or conversion of the Tranche I Notes. In 2013, the Company achieved a total production of 1.0 million liters within a run period of 45 days in satisfaction of clause (a)(i) of the preceding sentence and the Company is currently evaluating the achievement of clause (a)(ii) of the preceding sentence. If it is determined that the margin milestones in clause (a)(ii) above were not achieved, and the Company also reduces the conversion price of certain existing promissory notes held by Total prior to the repayment or conversion of the Tranche I Notes as set forth in clause (b) above, the conversion price of the Tranche I Notes will be reduced to $1.87 . Each Tranche I Note accrues interest from the date of issuance until the earlier of the date that such Tranche I Note is converted into the Company’s common stock or is repaid in full. Interest accrues at a rate of 5% per six months, compounded semiannually (with graduated interest rates of 6.5% applicable to the first 180 days and 8% applicable thereafter as the sole remedy should the Company fail to maintain NASDAQ listing status or at 6.5% for all other defaults). Interest for the first 30 months is payable in kind and added to the principal every six -months and thereafter, the Company may continue to pay interest in kind by adding to the principal every six -months or may elect to pay interest in cash. The Tranche I Notes may be prepaid by the Company after 30 months from the issuance date and initial interest payment; thereafter the Company has the option to prepay the Tranche I Notes every six months at the date of payment of the semi-annual coupon.

In January 2014, the Company sold and issued, for face value, approximately $34.0 million of convertible promissory notes in the second tranche of the August 2013 Financing (or the “Tranche II Notes”). At the closing, Temasek purchased $25.0 million of the Tranche II Notes and Wolverine Asset Management, LLC (or “Wolverine”) purchased $3.0 million of the Tranche II Notes, each for cash. Total purchased approximately $6.0 million of the Tranche II Notes through cancellation of the same amount of principal of previously outstanding convertible promissory notes held by Total. As a result of the exchange and cancellation of the $6.0 million Total convertible note for the Tranche II Notes, the Company recorded a loss from extinguishment of debt of $9.4 million . The Tranche II Notes will be due sixty months from the date of issuance and will be convertible into shares of common stock at a conversion price equal to $2.87 , which represents a trailing 60 -day weighted-average closing price of the common stock

24



on NASDAQ through August 7, 2013, subject to adjustment as described below. Specifically, the Tranche II Notes are convertible at the option of the holder (i) at any time 12 months after issuance, (ii) on a change of control of the Company, and (iii) upon the occurrence of an event of default. Each Tranche II Note will accrue interest from the date of issuance until the earlier of the date that such Tranche II Note is converted into common stock or repaid in full. Interest will accrue at a rate per annum equal to 10% , compounded annually (with graduated interest rates of 13% applicable to the first 180 days and 16% applicable thereafter as the sole remedy should the Company fail to maintain NASDAQ listing status or at 12% for all other defaults). Interest for the first 36 months shall be payable in kind and added to principal every year following the issue date and thereafter, the Company may continue to pay interest in kind by adding to principal on every year anniversary of the issue date or may elect to pay interest in cash.

In addition to the conversion price adjustments set forth above, the conversion prices of the Tranche I Notes and Tranche II Notes are subject to further adjustment (i) according to proportional adjustments to outstanding common stock of the Company in case of certain dividends and distributions, (ii) according to anti-dilution provisions, and (iii) with respect to notes held by any purchaser other than Total, in the event that Total exchanges existing convertible notes for new securities of the Company in connection with future financing transactions in excess of its pro rata amount. Notwithstanding the foregoing, holders of a majority of the principal amount of the notes outstanding at the time of conversion may waive any anti-dilution adjustments to the conversion price. The purchasers have a right to require repayment of 101% of the principal amount of the notes in the event of a change of control of the Company and the notes provide for payment of unpaid interest on conversion following such a change of control if the purchasers do not require such repayment. The August 2013 SPA, Tranche I Notes and Tranche II Notes include covenants regarding payment of interest, maintenance of the Company’s listing status, limitations on debt and on certain liens, maintenance of corporate existence, and filing of SEC reports. The notes include standard events of default resulting in acceleration of indebtedness, including failure to pay, bankruptcy and insolvency, cross-defaults, and breaches of the covenants in the August 2013 SPA, Tranche I Notes and Tranche II Notes, with default interest rates and associated cure periods applicable to the covenant.

As of September 30, 2014 and December 31, 2013 , the related party convertible notes outstanding under the Tranche I and Tranche II Notes were $46.5 million and $37.9 million , respectively, net of debt discount of $31.2 million and $6.3 million , respectively. The debt discount is the result of the bifurcation of the conversion options that contain "make-whole" provisions or down round conversion price adjustment provisions associated with the outstanding debt.

Rule 144A Convertible Notes Sold to Related Parties

As discussed above under “Rule 144A Convertible Note Offering”, the Company sold and issued $75.0 million aggregate principal amount of 144A Notes pursuant to Rule 144A of the Securities Act. In connection with obtaining a waiver from one of its existing investors, Total, of its preexisting contractual right to exchange certain senior secured convertible notes previously issued by Amyris pursuant to the Total Purchase Agreement for 144A Notes issued in the transaction, Amyris used approximately $9.7 million of the net proceeds to repay such amount of previously issued notes held by Total, which represented the amount of notes purchased by Total from the Initial Purchaser under the Rule 144A Convertible Note Offering. As a result of the settlement of the $9.7 million Total convertible notes, the Company recorded a loss from extinguishment of debt of $1.1 million .

Additionally, Foris Ventures, LLC (a fund affiliated with John Doerr) and Temasek each participated in the Rule 144A Convertible Note Offering and purchased $5.0 million and $10.0 million , respectively, of the convertible promissory notes sold thereunder.
 
As of September 30, 2014 the related party convertible notes outstanding under the 144A Notes were $14.5 million , net of discount of $10.2 million .

As of September 30, 2014 and December 31, 2013 , the total related party convertible notes outstanding were $110.8 million and $89.5 million , respectively, net of discount of $55.9 million and $23.9 million , respectively. The Company recorded a loss from extinguishment of debt from the settlement, exchange and cancellation of related party convertible notes for the three months ended September 30, 2014 and 2013, of zero and zero , respectively, and $10.5 million and zero for the nine months ended September 30, 2014 and 2013, respectively.

Loans Payable

In December 2009, the Company entered into a loans payable agreement with the lessor of its Emeryville, California pilot plant under which it borrowed a total of $0.3 million , bearing an interest rate of 10.0%  per annum and to be repaid over a period of 96 months. As of September 30, 2014 and December 31, 2013, there was no amount outstanding under the loan. In June 2013, as part of the April 30, 2013 amendment entered into regarding the Company's operating lease for its headquarters, the Company

25



recorded the elimination of this loan payable as a lease incentive and recorded approximately $0.2 million to deferred rent liability in the condensed consolidated balance sheet. The deferred rent liability is being amortized to expense over the remaining lease term.

In July 2012, the Company entered into a Note of Bank Credit and a Fiduciary Conveyance of Movable Goods Agreement (together, the "July 2012 Bank Agreements") with each of Nossa Caixa Desenvolvimento (or “Nossa Caixa”) and Banco Pine S.A. (or “Banco Pine”). Under the July 2012 Bank Agreements, the Company pledged certain farnesene production assets as collateral for the loans of R$52.0 million . The Company's total acquisition cost for such pledged assets was approximately R$68.0 million (approximately US$27.7 million based on the exchange rate as of September 30, 2014 ). The Company is also a parent guarantor for the payment of the outstanding balance under these loan agreements. Under the July 2012 Bank Agreements, the Company could borrow an aggregate of R$52.0 million (approximately US$21.2 million based on the exchange rate as of September 30, 2014 ) as financing for capital expenditures relating to the Company's manufacturing facility located in Brotas, Brazil. Specifically, Banco Pine, agreed to lend R$22.0 million and Nossa Caixa agreed to lend R$30.0 million . The funds for the loans are provided by BNDES, but are guaranteed by the lenders. The loans have a final maturity date of July 15, 2022 and bear a fixed interest rate of 5.5% per year. The loans are also subject to early maturity and delinquency charges upon occurrence of certain events including interruption of manufacturing activities at the Company's manufacturing facility in Brotas, Brazil for more than 30 days, except during sugarcane off-season. For the first two years that the loans are outstanding, the Company is required to pay interest only on a quarterly basis. Since August 15, 2014 , the Company has been required to pay equal monthly installments of both principal and interest for the remainder of the term of the loans. As of September 30, 2014 and December 31, 2013 , a principal amount of $20.8 million and $22.2 million , respectively, was outstanding under these loan agreements.

In March 2013, the Company entered into a one -year-term export financing agreement with ABC for approximately $2.5 million to fund exports through March 2014. This loan is collateralized by future exports from the Company's subsidiary in Brazil. As of September 30, 2014 , the loan was fully paid.

In October 2013, the Company had a financing arrangement with a third party for the monthly payment of its current insurance premiums of $0.6 million , payable in nine monthly installments of principal and interest. Interest accrues at a rate of 3.24% per annum. As of September 30, 2014 and December 31, 2013 , the outstanding balance on the insurance premium was zero and $0.4 million , respectively.

In February 2014, the Company borrowed $0.2 million from a third party lender to pay for the Company's consolidated VIE's current insurance premiums. The loan is payable in ten monthly installments of principal and interest. Interest accrues at a rate of 5.95% per annum. As of September 30, 2014 and December 31, 2013 , the outstanding unpaid loan balance was $43,000 and zero , respectively.

In March 2014, the Company entered into an additional one -year-term export financing agreement with ABC for approximately $2.2 million to fund exports through March 2015. This loan is collateralized by future exports from the Company's subsidiary in Brazil. As of September 30, 2014 , the principal amount outstanding under this agreement was $2.2 million . The Company is also a parent guarantor for the payment of the outstanding balance under these loan agreements. 

Letters of Credit

In June 2012, the Company entered into a letter of credit agreement for $1.0 million under which it provided a letter of credit to the landlord of its headquarters in Emeryville, California, in order to cover the security deposit on the lease. This letter of credit is secured by a certificate of deposit. Accordingly, the Company has $1.0 million and $0.9 million as restricted cash as of September 30, 2014 and December 31, 2013 .


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Future minimum payments under the debt agreements as of September 30, 2014 are as follows (in thousands):

Years ending December 31:
Related Party Convertible Debt
 
Convertible Debt
 
Loans Payable
 
Credit Facility
2014 (remaining three months)
$
745

 
$
1,517

 
$
1,110

 
$
1,305

2015
1,606

 
4,020

 
5,882

 
15,165

2016
1,606

 
4,020

 
3,536

 
20,054

2017
70,126

 
28,715

 
3,390

 
5,090

2018
74,485

 
15,685

 
3,246

 
424

Thereafter
75,825

 
56,798

 
10,449

 
117

Total future minimum payments
224,393

 
110,755

 
27,613

 
42,155

Less: amount representing interest (1)
(113,619
)
 
(51,810
)
 
(4,515
)
 
(5,485
)
Present value of minimum debt payments
110,774

 
58,945

 
23,098

 
36,670

Less: current portion

 

 
(4,977
)
 
(8,325
)
Noncurrent portion of debt
$
110,774

 
$
58,945

 
$
18,121

 
$
28,345

______________ 
(1) Including debt discount of $83.4 million related to the embedded derivative associated with the related party and non-related party convertible debt which will be accreted to interest expense under the effective interest method over the term of the convertible debt.


6. Commitments and Contingencies

Lease Obligations

The Company leases certain facilities and finances certain equipment under operating and capital leases, respectively. Operating leases include leased facilities and capital leases include leased equipment (see Note 4, "Balance Sheet Components"). The Company recognizes rent expense on a straight-line basis over the non-cancellable lease term and records the difference between rent payments and the recognition of rent expense as a deferred rent liability. Where leases contain escalation clauses, rent abatements, and/or concessions, such as rent holidays and landlord or tenant incentives or allowances, the Company applies them as a straight-line rent expense over the lease term. The Company has non-cancellable operating lease agreements for office, research and development, and manufacturing space that expire at various dates, with the latest expiration in February 2031 . Rent expense under operating leases was $1.3 million and $1.4 million for the three months ended September 30, 2014 and 2013, respectively, and was $4.0 million and $3.5 million for the nine months ended September 30, 2014 and 2013, respectively.

Future minimum payments under the Company's lease obligations as of September 30, 2014 , are as follows (in thousands):

Years ending December 31:
Capital
Leases
 
Operating
Leases
 
Total Lease Obligations
2014 (remaining three months)
$
233

 
$
1,600

 
$
1,833

2015
489

 
6,760

 
7,249

2016
186

 
6,612

 
6,798

2017
2

 
6,584

 
6,586

2018

 
6,671

 
6,671

Thereafter

 
32,296

 
32,296

Total future minimum lease payments
910

 
$
60,523

 
$
61,433

Less: amount representing interest
(52
)
 
 
 
 
Present value of minimum lease payments
858

 
 
 
 
Less: current portion
(634
)
 
 
 
 
Long-term portion
$
224

 
 
 
 


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Guarantor Arrangements

The Company has agreements to indemnify its officers and directors for certain events or occurrences while the officers or directors are serving in their official capacities. The indemnification period remains enforceable for the officer's or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and enables the Company to recover a portion of any future payments. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. Accordingly, the Company had no liabilities recorded for these agreements as of September 30, 2014 and December 31, 2013 .
 
The Company entered into the FINEP Credit Facility to finance a research and development project on sugarcane-based biodiesel (see Note 5, "Debt"). 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 is approximately R$6.0 million (approximately US$2.4 million based on the exchange rate as of September 30, 2014 ).

The Company entered into the BNDES Credit Facility to finance a production site in Brazil (see Note 5, "Debt").The BNDES Credit Facility is collateralized by a first priority security interest in certain of the Company's equipment and other tangible assets with a total acquisition cost of R$24.9 million (approximately US$10.2 million based on the exchange rate as of September 30, 2014 ). The Company is a parent guarantor for the payment of the outstanding balance under the BNDES Credit Facility. Additionally, the Company is required to provide certain bank guarantees under the BNDES Credit Facility. Accordingly, the Company has a $0.7 million and $0.7 million as restricted cash as of September 30, 2014 and December 31, 2013 , respectively.

The Company entered into loan agreements and security agreements where the Company pledged certain farnesene production assets as collateral (the fiduciary conveyance of movable goods) with each of Nossa Caixa and Banco Pine (see Note 5, "Debt"). The Company's total acquisition cost for the farnesene production assets pledged as collateral under these agreements is approximately R$68.0 million (approximately US$27.7 million based on the exchange rate as of September 30, 2014 ). The Company is also a parent guarantor for the payment of the outstanding balance under these loan agreements. 

The Company had an export financing agreement with ABC for approximately $2.5 million for a one year term to fund exports through March 2014. As of September 30, 2014 , the loan was fully paid. The Company has entered into another export financing agreement with the same bank for approximately $2.2 million for a one year term to fund exports through March 2015 . This loan is collateralized by future exports from Amyris Brasil. The Company is also a parent guarantor for the payment of the outstanding balance under these loan agreements. 

Under an operating lease agreement for its office facilities in Brazil, which commenced on November 15, 2011, the Company is required to maintain restricted cash or letters of credit equal to 3 months of rent of approximately R$0.2 million (approximately US$0.1 million based on the exchange rate as of September 30, 2014 ) in the aggregate as a guarantee that the Company will meet its performance obligations under such operating lease agreement.

In October 2013, the Company entered into a letter agreement with Total relating to the Temasek Bridge Note and to the closing of the August 2013 Financing (or the "Amendment Agreement") (see Note 5, "Debt"). In the August 2013 Financing, the Company was required to provide the purchasers under the August 2013 SPA with a security interest in the Company’s intellectual property if Total still held such security interest as of the initial closing of the August 2013 Financing. Under the terms of a previous Intellectual Property Security Agreement by and between the Company and Total (or the "Security Agreement"), the Company had previously granted a security interest in favor of Total to secure the obligations of the Company under certain convertible promissory notes issued and issuable to Total under the Total Purchase Agreement. The Security Agreement provided that such security interest would terminate if Total and the Company entered into certain agreements relating to the formation of the Fuels JV. In connection with Total’s agreement to (i) permit the Company to grant the security interest under the Temasek Bridge Note and the August 2013 Financing and (ii) waive a secured debt limitation contained in the outstanding convertible promissory notes issued pursuant to the Total Purchase Agreement and held by Total (or the “Total Securities”), the Company entered into the Amendment Agreement. Under the Amendment Agreement, the Company agreed to reduce, effective December 2, 2013, the conversion price for the Total Securities issued in 2012 (approximately $48.3 million of which are outstanding as of the date hereof) from $7.0682 per share to $2.20 , the market price per share of the Company’s common stock as of the signing of the Amendment Agreement, as determined in accordance with applicable NASDAQ rules, unless the Company and Total entered into the JV Documents on or prior to December 2, 2013. The Company and Total entered into the JV agreements on December 2, 2013 and the Amendment Agreement and all security interests thereunder were automatically terminated and the conversion price of the Total Securities remained at $7.0682 per share.


28



In December 2013, in connection with the execution of JV Documents entered into by and among Amyris, Total and JVCO relating to the establishment of the JVCO (see Note 5, "Debt" and Note 7, "Joint Venture and Noncontrolling Interest"), Amyris agreed to exchange the $69.0 million outstanding Total unsecured convertible notes issued pursuant to the Total Purchase Agreement and issue replacement 1.5% senior secured convertible notes, in principal amounts equal to the principal amount of each Replacement Notes and grant a security interest to Total in and lien on all Amyris’s rights, title and interest in and to Amyris’s shares in the capital of the JVCO. Following execution of the JV Documents, all notes that have been issued became senior secured convertible notes. Further, the $10.85 million in principal amount of such notes issued in the initial tranche of the third closing under the Total Purchase Agreement in July 2014 and the notes that remain to be issued in connection with the second tranche of the third closing (up to $10.85 million in principal amount to be issued by January 31, 2015) are senior secured convertible notes instead of senior unsecured convertible notes.

In March 2014, the Company and Hercules entered into a loan and security agreement to make available to the Company a loan in the aggregate principal amount of up to $25.0 million (see Note 5, "Debt"). Loans under the facility are secured by various liens, including a lien on certain Company intellectual property. In connection with the Hercules loan, the Company agreed to certain customary representations and warranties and covenants, as well as certain covenants with respect to obtaining additional financing as described above and performance covenants related to revenues and cash flows starting with the third quarter of 2014. If the Company had not satisfied the equity financing covenant, a forbearance fee of $10.0 million would have become due and payable at the end of the initial term of the loan. The Company borrowed the full amount available under the facility and received the funds on March 31, 2014. In June 2014, the Company and Hercules entered into the Hercules Amendment of the Loan and Security Agreement entered into on March 29, 2014 . Pursuant to the Hercules Amendment, the parties agreed to remove (i) a requirement for the Company to pay a forbearance fee of $10.0 million in the event certain covenants were not satisfied, (ii) a covenant that the Company maintain positive cash flow commencing with the fiscal quarter beginning October 1, 2014, (iii) a covenant that, beginning with the fiscal quarter beginning July 1, 2014, the Company and its subsidiaries achieve certain projected cash product revenues and projected cash product gross profits, and (iv) an obligation for the Company to file a registration statement on Form S-3 with the SEC by no later than June 30, 2014 and complete an equity financing of more than $50.0 million by no later than September 30, 2014 . Under the Hercules Amendment, in connection with the amendments and modification or removal of the covenants described above, the Company agreed to include a new covenant requiring the Company to maintain unrestricted, unencumbered cash in an amount equal to at least 50% of the remaining principal amount then outstanding under the Hercules Loan Facility and borrow an additional tranche of $5.0 million , subject to obtaining specified third party consents under outstanding convertible promissory notes. The Hercules Loan Facility is collateralized by liens on the Company's assets, including on certain Company intellectual property.

Purchase Obligations

As of September 30, 2014 , the Company had $3.6 million in purchase obligations which included $3.0 million in non-cancellable contractual obligations and construction commitments, of which zero have been accrued as loss on purchase commitments.

Other Matters

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but will only be recorded when one or more future events occur or fail to occur. The Company's management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against and by the Company or unasserted claims that may result in such proceedings, the Company's management evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.

In May 2013, a securities class action complaint was filed against the Company and its CEO, John G. Melo, in the U.S. District Court for the Northern District of California. In October 2013, the lead plaintiffs filed a consolidated amended complaint. The complaint, as amended, sought unspecified damages on behalf of a purported class that would comprise all individuals who acquired the Company's common stock between April 29, 2011 and February 8, 2012. The complaint alleged securities law

29



violations based on the Company's commercial projections during that period. In December 2013, the Company filed a motion to dismiss the complaint. In March 2014, the court issued an order granting the Company's motion to dismiss with leave to amend the complaint. The plaintiffs declined to amend their complaint further and, on June 12, 2014, the court issued an order (based on stipulation of the parties) dismissing the action with prejudice.

In August 2013, a complaint entitled Steve Shannon, derivatively on behalf of Amyris, Inc. v. John G. Melo et al and Amyris, Inc., was filed against the Company as nominal defendant in the United States District Court for the Northern District of California. The lawsuit sought unspecified damages on behalf of the Company from certain of its current and former officers, directors and employees and alleges these defendants breached their fiduciary duties to the Company and unjustly enriched themselves by making allegedly false and misleading statements and omitting certain material facts in the Company's securities filings. Because this purported stockholder derivative action is based on substantially the same facts as the securities class action described above, the two actions were related and were heard by the same judge. On June 23, 2014, following the dismissal of the related class action (discussed above), the court issued an order (based on stipulation of the parties) dismissing the action with prejudice.

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 assurance. 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.


7. Joint Ventures and Noncontrolling Interest

Novvi S.A.

In June 2011, the Company entered into joint venture agreements with Cosan Combustíveis e Lubrificantes S.A. and Cosan S.A. Industria e Comércio (such Cosan entities, collectively or individually, “Cosan”), related to the formation of a joint venture to focus on the worldwide development, production and commercialization of base oils made from Biofene for the automotive, commercial and industrial lubricants markets (or the "Original JV Agreement"). The parties originally envisioned operating their joint venture through Novvi S.A., a Brazilian entity jointly owned by Cosan and Amyris Brasil.

Under the Original JV Agreement and related agreements, the Company and Cosan each owned 50% of the Novvi S.A. and each party would share equally in any costs and any profits ultimately realized by Novvi S.A. The joint venture agreement had an initial term of 20 years from the date of the Original JV Agreement, subject to earlier termination by mutual written consent or by a non-defaulting party in the event of specified defaults by the other party. The shareholders' agreement had an initial term of 10 years from the date of the agreement, subject to earlier termination if either the Company or Cosan ceases to own at least 10% of the voting stock of Novvi S.A. Since its formation, Novvi S.A. had minimal operating activities while the Company and Cosan continued to determine and finalize the strategy and operating activities for the joint venture. Upon determination by the Company and Cosan that the joint venture should be operated out of a U.S. entity, the operating activities of Novvi S.A. ceased. The Company has identified that Novvi S.A. was a VIE and determined that the power to direct activities, which most significantly impact the economic success of the joint venture, was equally shared between the Company and Cosan. Accordingly, the Company was not the primary beneficiary of the joint venture and therefore accounts for its investment in Novvi S.A. under the equity method of accounting.

In March 2013, the Company, Amyris Brasil and Cosan entered into a termination agreement to terminate the Original JV Agreement. In addition, Amyris Brasil agreed to sell, its 50% ownership in Novvi S.A. to Cosan for approximately R$22,000 (approximately US$10,925 based on the exchange rate as of March 31, 2013), which represented the then-current value of its 50% equity ownership in Novvi S.A. Upon the consummation of the transaction with the shares transferring from Amyris Brasil to Cosan, the Novvi S.A. shareholders agreement automatically terminated.

Novvi LLC

In September 2011, the Company and Cosan US, Inc. (or "Cosan U.S.") formed Novvi LLC, a U.S. entity that is jointly owned by the Company and Cosan U.S. (or "Novvi"). In March 2013, the Company and Cosan U.S. entered into agreements to (i) expand their base oils joint venture to also include additives and lubricants and (ii) operate their joint venture exclusively through Novvi. Specifically, the parties entered into an Amended and Restated Operating Agreement for Novvi (referred to as the "Operating Agreement"), which sets forth the governance procedures for Novvi and the joint venture and the parties' initial

30



contribution. The Company also entered into an IP License Agreement with Novvi (or the "IP License Agreement") under which the Company granted Novvi (i) an exclusive (subject to certain limited exceptions for the Company), worldwide, royalty-free license to develop, produce and commercialize base oils, additives, and lubricants derived from Biofene for use in automotive and industrial lubricants markets and (ii) a non-exclusive, royalty-free license, subject to certain conditions, to manufacture Biofene solely for its own products. In addition, both the Company and Cosan U.S. granted Novvi certain rights of first refusal with respect to alternative base oil and additive technologies that may be acquired by the Company or Cosan U.S. during the term of the IP License Agreement. Under these agreements, the Company and Cosan U.S. will each own 50% of Novvi and each party will share equally in any costs and any profits ultimately realized by the joint venture. Novvi is governed by a six member Board of Managers (or the "Board of Managers"), with three managers represented by each investor. The Board of Managers appoints the officers of Novvi, who are responsible for carrying out the daily operating activities of Novvi as directed by the Board of Managers. The IP License Agreement has an initial term of 20 years from the date of the agreement, subject to standard early termination provisions such as uncured material breach or a party's insolvency. Under the terms of the Operating Agreement, Cosan U.S. was obligated to fund its 50% ownership share of Novvi in cash in the amount of $10.0 million and the Company was obligated to fund its 50% ownership share of Novvi through the granting of an IP License to develop, produce and commercialize base oils, additives, and lubricants derived from Biofene for use in the automotive, commercial and industrial lubricants markets, which Cosan U.S. and Amyris agreed was valued at $10.0 million . In March 2013, the Company measured its initial contribution of intellectual property to Novvi at the Company's carrying value of the licenses granted under the IP License Agreement, which was zero. Additional funding requirements to finance the ongoing operations of Novvi are expected to happen through revolving credit or other loan facilities provided by unrelated parties (i.e. such as financial institutions); cash advances or other credit or loan facilities provided by the Company and Cosan U.S. or their affiliates; or additional capital contributions by the Company and Cosan U.S.

In April 2014, the Company purchased additional Membership Units of Novvi for an aggregate purchase price of $0.2 million . Also in April 2014, the Company contributed $2.1 million in cash in exchange of receiving additional Membership Units in Novvi. Each member owns 50% of Novvi's issued and outstanding Membership Units. The Company recorded its investment in Novvi of $2.1 million under "Other Assets" in the condensed consolidated balance sheet.

In September 2014, the Company and Cosan U.S. entered into a member senior loan agreement to grant Novvi a loan amounting to approximately $3.7 million. The loan is due on September 1, 2017 and bear interest at a rate of 0.36% per annum. Interest accrues daily and will be due and payable in arrears on September 1, 2017. The Company and Cosan U.S. each agreed to provide 50% of the loan. The Company's share of approximately $1.8 million was disbursed in two installments. The first installment of $1.2 million was made in September 2014 and the second installment of $0.6 million was made in October 2014.

The Company has identified Novvi as a VIE and determined that the power to direct activities, which most significantly impact the economic success of the joint venture (i.e. continuing research and development, marketing, sales, distribution and manufacturing of Novvi products), is equally shared between the Company and Cosan U.S. Accordingly, the Company is not the primary beneficiary and therefore accounts for its investment in Novvi under the equity method of accounting. The Company will continue to reassess its primary beneficiary analysis of Novvi if there are changes in events and circumstances impacting the power to direct activities that most significantly affect Novvi's economic success. Under the equity method, the Company's share of profits and losses are included in the "Loss from investment in affiliate" the condensed consolidated statements of operations. For the three and nine months ended September 30, 2014 , the Company recorded $0.8 million and $1.0 million , respectively, of its share of Novvi's net loss. The Company recognized related party revenue from product sales to Novvi of $0.1 million and $1.0 million for the three months ended September 30, 2014 and 2013, respectively, and $0.1 million and $1.1 million for the nine months ended September 30, 2014 and 2013, respectively. The Company recognized related party revenue from the research and development activities that it has performed on behalf of Novvi of zero and zero for the three months ended September 30, 2014 and 2013, respectively, and zero and $2.6 million for the nine months ended September 30, 2014 and 2013, respectively. Related party accounts receivable from Novvi as of September 30, 2014 and December 31, 2013 were $0.2 million and $0.3 million , respectively.

Total Amyris BioSolutions B.V.

In November 2013, the Company and Total formed JVCO. The common equity of JVCO is jointly owned (50%/50%) by the Company and Total, and the preferred equity of JVCO is 100% owned by the Company. The Parties have agreed that JVCO’s purpose is limited to executing the License Agreement and maintaining such licenses under it, unless and until (i) Total elects to go forward with either the full (diesel and jet fuel) JVCO commercialization program or the jet fuel component of the JVCO commercialization program (or a “Go Decision”), (ii) Total elects to not continue its participation in the R&D Program and JVCO (or a “No-Go Decision”), or (iii) Total exercises any of its rights to buy out the Company’s interest in JVCO. Following a Go Decision, the articles and shareholders’ agreement would be amended and restated to be consistent with the shareholders’ agreement contemplated by the July 2012 Agreements (see Note 5, "Debt").


31



The JVCO has an initial capitalization of €0.1 million (approximately US$0.1 million based on the exchange rate as of September 30, 2014 ). The Company has identified JVCO as a VIE and determined that the Company is not the primary beneficiary and therefore accounts for its investment in JVCO under the equity method of accounting. Under the equity method, the Company's share of profits and losses are included in "Other income (expense), net" in the condensed consolidated statements of operations. Following a "Go" decision, no later than six months prior to July 31, 2016, the Company and Total are required to amend the July 2012 Agreements to reflect the corporate structure of JVCO, amend and restate the articles of association of JVCO, finalize and agree on a five-year plan and an initial budget, maximize economic viability and value of JVCO and enter into the Total license agreement. The Company will reevaluate its assessment in 2016 based on the specific terms of the final shareholders' agreement.

SMA Indústria Química S.A.

In April 2010, the Company established SMA Indústria Química (or "SMA"), a joint venture with Sao Martinho S.A. (or "SMSA") (formerly Usina São Martinho S.A.), to build a production facility in Brazil. SMA is located at the SMSA mill in Pradópolis, São Paulo state. The joint venture agreements establishing SMA have a 20 year initial term.

 SMA is managed by a three member executive committee, of which the Company appoints two members, one of whom is the plant manager who is the most senior executive responsible for managing the construction and operation of the facility. SMA is governed by a four member board of directors, of which the Company and SMSA each appoint two members. The board of directors has certain protective rights which include final approval of the engineering designs and project work plan developed and recommended by the executive committee.

The joint venture agreements require the Company to fund the construction costs of the new facility and SMSA would reimburse the Company up to R$61.8 million (approximately US$25.2 million based on the exchange rate as of September 30, 2014 ) of the construction costs after SMA commences production. After commercialization, the Company would market and distribute Amyris renewable products produced by SMA and SMSA would sell feedstock and provide certain other services to SMA. The cost of the feedstock to SMA would be a price that is based on the average return that SMSA could receive from the production of its current products, sugar and ethanol. The Company would be required to purchase the output of SMA for the first four years at a price that guarantees the return of SMSA’s investment plus a fixed interest rate. After this four year period, the price would be set to guarantee a break-even price to SMA plus an agreed upon return.

Under the terms of the joint venture agreements, if the Company becomes controlled, directly or indirectly, by a competitor of SMSA, then SMSA has the right to acquire the Company’s interest in SMA. If SMSA becomes controlled, directly or indirectly, by a competitor of the Company, then the Company has the right to sell its interest in SMA to SMSA. In either case, the purchase price shall be determined in accordance with the joint venture agreements, and the Company would continue to have the obligation to acquire products produced by SMA for the remainder of the term of the supply agreement then in effect even though the Company would no longer be involved in SMA’s management.

The Company has a 50% ownership interest in SMA. The Company has identified SMA as a VIE pursuant to the accounting guidance for consolidating VIEs because the amount of total equity investment at risk is not sufficient to permit SMA to finance its activities without additional subordinated financial support, as well as because the related commercialization agreement provides a substantive minimum price guarantee. Under the terms of the joint venture agreement, the Company directs the design and construction activities, as well as production and distribution. In addition, the Company has the obligation to fund the design and construction activities until commercialization is achieved. Subsequent to the construction phase, both parties equally fund SMA for the term of the joint venture. Based on those factors, the Company was determined to have the power to direct the activities that most significantly impact SMA’s economic performance and the obligation to absorb losses and the right to receive benefits. Accordingly, the financial results of SMA are included in the Company’s consolidated financial statements and amounts pertaining to SMSA’s interest in SMA are reported as noncontrolling interests in subsidiaries.

The Company completed a significant portion of the construction of the new facility in 2012. The Company suspended construction of the facility in order to focus on completing and operating the Company's smaller production facility in Brotas, Brazil. In February 2014, the Company entered into an amendment to the joint venture agreement with SMSA which updated and documented certain preexisting business plan requirements related to the start-up of construction at the joint venture operated plant and set forth, among other things, (i) the extension of the deadline for the commencement of operations at the joint venture operated plant to no later than 18 months following the construction of the plant and no later than March 31, 2017, and (ii) the extension of an option held by SMSA to build a second large-scale farnesene production facility to no later than December 31, 2018 with the commencement of operations at such second facility to occur no later than April 1, 2019.


32



Glycotech

In January 2011, the Company entered into a production service agreement (or the "Glycotech Agreement") with Glycotech, Inc. (or "Glycotech"), under which Glycotech provides process development and production services for the manufacturing of various Company products at its leased facility in Leland, North Carolina. The Company products manufactured by Glycotech are owned and distributed by the Company. Pursuant to the terms of the Glycotech Agreement, the Company is required to pay the manufacturing and operating costs of the Glycotech facility, which is dedicated solely to the manufacture of Amyris products. The initial term of the Glycotech Agreement was for a two year period commencing on February 1, 2011 and the Glycotech Agreement renews automatically for successive one -year terms, unless terminated by the Company. Concurrent with the Glycotech Agreement, the Company also entered into a Right of First Refusal Agreement with the lessor of the facility and site leased by Glycotech (or the "ROFR Agreement"). Per conditions of the ROFR Agreement, the lessor agreed not to sell the facility and site leased by Glycotech during the term of the Glycotech Agreement. In the event that the lessor is presented with an offer to sell or decides to sell an adjacent parcel, the Company has the right of first refusal to acquire it.

The Company has determined that the arrangement with Glycotech qualifies as a VIE. The Company determined that it is the primary beneficiary of this arrangement since it has the power through the management committee over which it has majority control to direct the activities that most significantly impact Glycotech's economic performance. In addition, the Company is required to fund 100% of Glycotech's actual operating costs for providing services each month while the facility is in operation under the Glycotech Agreement. Accordingly, the Company consolidates the financial results of Glycotech. As of September 30, 2014 , the carrying amounts of the consolidated VIE's assets and liabilities were not material to the Company's condensed consolidated financial statements.

The table below reflects the carrying amount of the assets and liabilities of the two consolidated VIEs for which the Company is the primary beneficiary. As of September 30, 2014 , the assets include $20.6 million in property, plant and equipment, $3.7 million in other assets and $0.4 million in current assets. The liabilities include $0.2 million in accounts payable and accrued current liabilities and $0.1 million in loan obligations by Glycotech to its shareholders that are non-recourse to the Company. The creditors of each consolidated VIE have recourse only to the assets of that VIE.

 
September 30,
 
December 31,
(In thousands)
2014
 
2013
Assets
$
24,729

 
$
25,730

Liabilities
357

 
229


The change in noncontrolling interest for the nine months ended September 30, 2014 and 2013, is summarized below (in thousands):

 
2014
 
2013
Balance at January 1
$
(584
)
 
$
(877
)
Foreign currency translation adjustment
37

 
55

Gain (loss) attributable to noncontrolling interest
(91
)
 
232

Balance at September 30
$
(638
)
 
$
(590
)


8. Significant Agreements

Collaboration Agreement with Michelin and Braskem

In September 2011, the Company entered into a collaboration agreement with Manufacture Francaise des Pneumatiques Michelin (or “Michelin”). Under the terms of the September 2011 collaboration agreement, the Company and Michelin agreed to collaborate on the development, production and worldwide commercialization of isoprene or isoprenol, generally for tire applications, using the Company's technology. Under the agreement, Michelin agreed to pay an upfront payment to the Company of $5.0 million .

In June 2014, the Company entered into a collaboration agreement with Braskem S.A. and Braskem America, Inc. (or “Braskem”) and Michelin to collaborate to develop the technology to produce and possibly commercialize renewable isoprene. The term of the collaboration agreement commenced on June 30, 2014 and will continue, unless earlier terminated in accordance

33



with the agreement, until the first to occur of (i) the date that is three (3) years following the actual date on which a work plan is completed, which date is estimated to occur on or about December 30, 2020 or (ii) the date of the commencement of commissioning of a production plant for the production of renewable isoprene. The June 2014 collaboration agreement terminated and supersedes the September 2011 collaboration agreement with Michelin, and as a result of the signing of the June 2014 collaboration agreement, the upfront payment by Michelin of $5.0 million is being rolled into the new collaboration agreement between Michelin, Braskem and the Company as Michelin's collaboration funding towards the research and development activities to be performed. In July 2014, the Company received the first contribution from Braskem to the collaboration of $2.0 million .

The Company recognized collaboration revenue for the three and nine months ended September 30, 2014 , of $0.1 million under this agreement. As of September 30, 2014 , $6.9 million of the total payment was recorded as "Deferred revenue" in the condensed consolidated balance sheet.

Collaboration Partner Joint Development and License Agreement

In April 2013, the Company entered into a joint development and license agreement with a collaboration partner. Under the terms of the multi-year agreement, the collaboration partner and the Company will jointly develop certain fragrance ingredients. The collaboration partner will have exclusive rights to these fragrance ingredients for applications in the flavors and fragrances field, and the Company will have exclusive rights in other fields. The collaboration partner and the Company will share in the economic value derived from these ingredients. The joint development and license agreement provided for up to $6.0 million in funding based upon the achievement of certain technical milestones which are considered substantive by the Company during the first phase of the collaboration.

In February 2014, the Company entered into an amendment to the joint development and license agreement with the collaboration partner noted in the preceding paragraph to proceed with the second phase of the collaboration and the development of a certain fragrance ingredient.

The Company recognized collaboration revenue for the three and nine months ended September 30, 2014 , of $0.7 million and $1.7 million , respectively, and zero for the three and nine months ended September 30, 2013, respectively, under this agreement.

Collaboration Partner Master Collaboration and Joint Development Agreement

In March 2013, the Company entered into a Master Collaboration Agreement with the collaboration partner to establish a collaboration arrangement for the development and commercialization of multiple renewable flavors and fragrances (or "F&F") compounds. Under this agreement, except for rights granted under preexisting collaboration relationships, the Company granted the collaboration partner exclusive access for such compounds to specified Company intellectual property for the development and commercialization of F&F products in exchange for research and development funding and a profit sharing arrangement. The agreement superseded and expanded the prior collaboration agreement between the Company and the collaboration partner.

The agreement provides annual, up-front funding to the Company by the collaboration partner of $10.0 million for each of the first three years of the collaboration. The initial payment of $10.0 million was received by the Company in March 2013 and the second payment was received in March 2014 . The Company recognized revenue under this agreement for the three months ended September 30, 2014 and 2013, of $2.5 million and $2.5 million , respectively, and for the nine months ended September 30, 2014 and 2013, of $7.5 million and $5.4 million , respectively. The agreement contemplates additional funding by the collaboration partner of up to $5.0 million under three potential milestone payments, as well as additional funding by the collaboration partner on a discretionary basis.

In September 2014, the Company entered into a supply agreement with the collaboration partner to provide product ingredients to make the finished ingredient and market and sell the finished ingredient and /or products to the flavors and fragrances market. The Company recognized revenue from product sales under this agreement of $6.6 million and $7.6 million for the three and nine months ended September 30, 2014, respectively.

Kuraray Collaboration Agreement and Securities Purchase Agreement

In March 2014 , the Company entered into the Second Amended and Restated Collaboration Agreement with Kuraray Co., Ltd. (or “Kuraray”) in order to extend the term of the original agreement dated July 21, 2011 for an additional two years and add additional fields and products to the scope of development. In consideration for the Company’s agreement to extend the term of the original collaboration agreement and add additional fields and products, Kuraray will pay the Company $4.0 million in two (2) equal installments of $2.0 million . The first installment was paid on April 30, 2014 and the second installment is due on April 30, 2015 . In connection with the collaboration agreement Kuraray signed a Securities Purchase Agreement in March 2014 to purchase

34



943,396 shares of the Company's common stock at a price per share of $4.24 per share. The Company issued 943,396 shares of its common stock at a price per share of $4.24 in April 2014 for aggregate cash proceeds of $4.0 million .

The Company recognized collaboration revenue for the three and nine months ended September 30, 2014 , of $0.4 million under this agreement.


9. Goodwill and Intangible Assets

The following table presents the components of the Company's intangible assets (in thousands):

 
 
 
September 30, 2014
 
December 31, 2013
 
Useful Life in Years
 
Gross Carrying Amount
Accumulated Amortization
Net Carrying Value
 
Gross Carrying Amount
Accumulated Amortization
Net Carrying Value
In-process research and development
Indefinite
 
$
8,560

$

$
8,560

 
$
8,560

$

$
8,560

Acquired licenses and permits
2
 
772

(772
)

 
772

(772
)

Goodwill
Indefinite
 
560


560

 
560


560

 
 
 
$
9,892

$
(772
)
$
9,120

 
$
9,892

$
(772
)
$
9,120


The following table presents the activity of intangible assets for the nine months ended September 30, 2014 (in thousands):

 
 
December 31, 2013
 
 
 
 
 
 
 
September 30, 2014
 
 
Net Carrying Value
 
Additions
 
Adjustments
 
Amortization
 
Net Carrying Value
In-process research and development
 
$
8,560

 
$

 
$

 
$

 
$
8,560

Acquired licenses and permits
 

 

 

 

 

Goodwill
 
560

 

 

 

 
560

 
 
$
9,120

 
$

 
$

 
$

 
$
9,120


The intangible assets acquired through the Draths Corporation acquisition in October 2011 of in-process research and development of $8.6 million and goodwill of $0.6 million are treated as indefinite lived intangible assets until completion or abandonment of the projects, at which time the assets will be amortized over the remaining useful life or written-off, as appropriate. If the carrying amount of the assets is greater than the measures of fair value, impairment is considered to have occurred and a write-down of the asset is recorded. Any finding that the value of its intangible assets has been impaired would require the Company to write-down the impaired portion, which could reduce the value of its assets and reduce (increase) its net income (loss) for the year in which the related impairment charges occur. As of September 30, 2014 and December 31, 2013 , no impairment of the goodwill and intangible assets was recorded.    

Acquired licenses and permits are amortized using a straight-line method over its estimated useful life. Amortization expense for this intangible was zero and $32,000 for the nine months ended September 30, 2014 and 2013, respectively. As of September 30, 2014 , acquired licenses and permits were fully amortized.


10. Stockholders’ Deficit

Private Placement

In April 2014, the Company completed a private placement of 943,396 shares of its common stock at a price of $4.24 per share for aggregate proceeds of $4.0 million (see Note 8, "Significant Agreements").


35



Evergreen Shares for 2010 Equity Plan and 2010 ESPP

In January 2014, the Company's Board of Directors (or "Board") approved an increase to the number of shares available for issuance under the Company's 2010 Equity Incentive Plan (or "Equity Plan") and the 2010 Employee Stock Purchase Plan (or "ESPP"). These shares represent an automatic annual increase in the number of shares available for issuance under the Equity Plan and the ESPP of 3,833,141 and 766,628 , respectively. These increases equal 5% and 1% , respectively, of 76,662,812 shares, the total outstanding shares of the Company’s common stock as of December 31, 2013. This automatic increase was effective as of January 1, 2014. Shares available for issuance under the Equity Plan and ESPP were initially registered on a registration statement on Form S-8 filed with the Securities and Exchange Commission on October 1, 2010 (Registration No. 333-169715). The Company filed registration statements on Form S-8 on April 14, 2014 (Registration No. 333-195259) with respect to the shares added by the automatic increase on January 1, 2014.

Common Stock

As of September 30, 2014 the Company was authorized to issue 300,000,000 shares of common stock pursuant to the Company’s amended and restated certificate of incorporation. Holders of the Company’s common stock are entitled to dividends as and when declared by the Board, subject to the rights of holders of all classes of stock outstanding having priority rights as to dividends. There have been no dividends declared to date. The holder of each share of common stock is entitled to one vote.

Preferred Stock

Pursuant to the Company’s amended and restated certificate of incorporation, the Company is authorized to issue 5,000,000 shares of preferred stock. The Board has the authority, without action by its stockholders, to designate and issue shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. As of September 30, 2014 and December 31, 2013, the Company had no convertible preferred stock outstanding.

Common Stock Warrants

In December 2011, in connection with a capital lease agreement, the Company issued warrants to purchase 21,087 shares of the Company's common stock at an exercise price of $10.67 per share. The Company estimated the fair value of these warrants as of the issuance date to be $0.2 million and recorded these warrants as other assets, amortizing them subsequently over the term of the lease. The fair value was based on the contractual term of the warrants of 10 years, risk free interest rate of 2% , expected volatility of 86% and zero expected dividend yield. These warrants remain unexercised and outstanding as of September 30, 2014 .

In October 2013, in connection with the issuance of the Tranche I Notes (see Note 5, "Debt"), the Company issued to Temasek contingently exercisable warrants to purchase 1,000,000 shares of the Company's common stock at an exercise price of $0.01 per share. The Company estimated the fair value of these warrants as of the issuance date at $1.3 million and recorded these warrants as debt issuance cost to be amortized over the term of the note. The fair-value was calculated using a Monte Carlo simulation valuation model based on the contractual term of the warrants of 3.4 years, risk free interest rate of 0.77% , expected volatility of 45% and zero expected dividend yield. These warrants remain unexercised and outstanding as of September 30, 2014 .

Each of these warrants includes a cashless exercise provision which permits the holder of the warrant to elect to exercise the warrant without paying the cash exercise price, and receive a number of shares determined by multiplying (i) the number of shares for which the warrant is being exercised by (ii) the difference between the fair market value of the stock on the date of exercise and the warrant exercise price, and dividing such by (iii) the fair market value of the stock on the date of exercise. During nine months ended September 30, 2014 and 2013, no warrants were exercised through the cashless exercise provision.


36




11. Stock-Based Compensation

The Company’s stock option activity and related information for the nine months ended September 30, 2014 was as follows:
 
 
 
 
Number
Outstanding
 
Weighted-
Average
Exercise
Price
 
Weighted-Average
Remaining
Contractual
Life (Years)
 
Aggregate
Intrinsic
Value
 
 
 
 
 
 
 
 
 
(in thousands)
Outstanding - December 31, 2013
 
8,409,605

 
$
7.39

 
7.40
 
$
12,393

 
Options granted
 
3,275,471

 
$
3.55

 
 
 
 
 
Options exercised
 
(423,457
)
 
$
3.14

 
 
 
 
 
Options cancelled
 
(921,244
)
 
$
8.76

 
 
 
 
Outstanding - September 30, 2014
 
10,340,375

 
$
6.23

 
7.60
 
$
3,948

Vested and Expected to vest after September 30, 2014
 
9,539,256

 
$
6.44

 
7.47
 
$
3,598

Exercisable at September 30, 2014
 
4,765,036

 
$
8.66

 
6.07
 
$
1,425


The aggregate intrinsic value of options exercised under all option plans was $52,000 and $0.1 million for the three months ended September 30, 2014 and 2013, respectively, and was $0.6 million and $0.4 million for the nine months ended September 30, 2014 and 2013, respectively, determined as of the date of option exercise.

The Company’s restricted stock units (or "RSUs") and restricted stock activity and related information for the nine months ended September 30, 2014 was as follows:

  
 
RSUs
 
Weighted-Average Grant-Date Fair Value
 
Weighted Average Remaining Contractual Life (Years)
Outstanding - December 31, 2013
2,316,437

 
$
4.30

 
0.88

 Awarded
 
1,078,300

 
$
3.52

 

 Vested
 
(1,192,922
)
 
$
4.62

 

 Forfeited
 
(111,563
)
 
$
3.19

 

Outstanding - September 30, 2014
2,090,252

 
$
3.77

 
1.18

Expected to vest after September 30, 2014
1,832,689

 
$
3.77

 
1.09



37



The following table summarizes information about stock options outstanding as of September 30, 2014 :
 
 
Options Outstanding
 
Options Exercisable
Exercise Price
Number of Options
 
Weighted-
Average
Remaining
Contractual Life
(Years)
 
Weighted-Average Exercise Price
 
Number of Options
 
Weighted-Average Exercise Price
$0.10—$2.79
1,503,784

 
7.90
 
$
2.65

 
707,154

 
$
2.57

$2.81—$2.94
1,056,280

 
8.68
 
$
2.88

 
338,539

 
$
2.87

$2.96—$3.44
912,930

 
8.36
 
$
3.14