NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(All dollar amounts, except share and per share amounts, are stated in thousands)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are unaudited and have been prepared by Metabolix, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements have been condensed or omitted. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The consolidated financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the financial position and results of operations for the interim periods ended
September 30, 2016
and
2015
.
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for any future period or the entire fiscal year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended
December 31, 2015
, which are contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2016.
The accompanying condensed consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. However, with the exception of the three month period ended September 30, 2016, when the Company reported net income of
$4,024
as a result of selling certain of its biopolymer assets, and 2012, when it recognized
$38,885
of deferred revenue from a terminated joint venture, the Company has recorded losses since its inception.
As of
September 30, 2016
, the Company held unrestricted cash and cash equivalents of
$9,782
.
The Company has an agreement with Aspire Capital Fund, LLC ("Aspire"), under which Aspire has committed to purchase up to
$20,000
of Metabolix’s common stock over a
30
month period that began on November 9, 2015. The purchase agreement contains limitations on the number of shares that the Company may sell to Aspire. Additionally, the Company and Aspire may not effect any sales of shares of the Company's common stock under the purchase agreement during the continuance of an event of default or on any trading day that the closing sale price of its common stock is less than $0.50 per share. At September 30, 2016, the full
$20,000
remained available under the purchase agreement with Aspire, although market conditions may limit the extent to which the Company can draw on this facility.
The Company’s present capital resources may not be sufficient to fund its planned operations for a
twelve
month period and, therefore, raise substantial doubt about its ability to continue as a going concern.
The Company has substantially completed a strategic restructuring under which the Company has wound down its biopolymer operations and Yield10 Bioscience ("Yield10") has become its core business, with a focus on developing disruptive technologies for step-change improvements in crop yield to enhance global food security.
The Company completed the sale of its biopolymer intellectual property and certain equipment and inventory to an affiliate of CJ CheilJedang Corporation ("CJ") for a total purchase price of
$10,000
on September 16, 2016. In connection with its announced restructuring, the Company initiated actions during July 2016 to significantly reduce its workforce and cease pilot biopolymer production in an effort to significantly reduce its ongoing cash burn rate. The Company expects to reach a target level of approximately
20
employees during the fourth quarter as activities related to the wind down of its biopolymer operations and transfer of biopolymer assets to CJ are completed.
The Company continues to face significant challenges and uncertainties. The Company’s future revenues, expenses and cash usage will depend on the successful completion of the strategic restructuring and the execution of its strategic plans related to Yield10. Adequate financing to support Yield10 operations may not be available. Available capital resources may be consumed more rapidly than currently expected due to (a) higher restructuring costs than anticipated; (b) lower than expected revenues from grants, licenses, and service fees related to the Yield10 technologies; (c) changes the Company may make to the business that affect ongoing operating expenses; (d) changes the Company may make to its business strategy; (e) changes in the
Company's research and development spending plans; and (f) other items affecting the Company's forecasted level of expenditures and use of cash resources.
If the Company issues equity or debt securities to raise additional funds, (i) the Company may incur fees associated with such issuance, (ii) its existing stockholders may experience dilution from the issuance of new equity securities, (iii) the Company may incur ongoing interest expense and be required to grant a security interest in Company assets in connection with any debt issuance, and (iv) the new equity or debt securities may have rights, preferences and privileges senior to those of the Company’s existing stockholders. In addition, utilization of the Company’s net operating loss and research and development credit carryforwards may be subject to significant annual limitations under Section 382 of the Internal Revenue Code of 1986 due to ownership changes resulting from equity financing transactions. If the Company raises additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to its potential products or proprietary technologies, or grant licenses on terms that are not favorable to the Company.
On June 30, 2016, the Company received a Notice of Delisting from The Nasdaq Stock Market LLC as a result of the Company's bid price for the previous 30 consecutive business closing below the minimum $1.00 per share requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been provided with an initial period of 180 calendar days, or until December 27, 2016, to regain compliance. To regain compliance, the closing bid price of the Company's common stock must be $1.00 per share or more for a minimum of 10 consecutive business days at any time before December 27, 2016. If the Company does not regain compliance by December 27, 2016, it may be eligible for an additional 180 calendar day compliance period. To qualify, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and would need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary, subject to Nasdaq's agreement that such an action by the Company would cure the deficiency.
The condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.
2. ACCOUNTING POLICIES
There have been no material changes in accounting policies since the Company’s fiscal year ended
December 31, 2015
, as described in Note 2 to the consolidated financial statements included in its Annual Report on Form 10-K for the year then ended.
Principles of Consolidation
The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions were eliminated, including transactions with its Canadian subsidiary, Metabolix Oilseeds, Inc. During the third quarter of 2016, the Company undertook a strategic shift and restructured its business to focus on the Yield10 Bioscience business. On September 16, 2016, the Company completed the sale of its biopolymer intellectual property and certain equipment and inventory to an affiliate of CJ CheilJedang Corporation. The condensed consolidated financial statements for each of the three and nine months ended September 30, 2016 and 2015, have been presented to reflect the biopolymer operations as a discontinued operation in accordance with ASU No. 2014-08,
Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity
. See Note 15.
Restructuring
The Company's policy is to record restructuring charges using estimates of cash expenditures for contract termination costs and employee post-termination benefits. The Company also records a non-cash accelerated depreciation charge for any related equipment and leasehold improvements that are determined to have no further use in the ongoing business.
Reclassification
Certain amounts in prior year financial statements have been reclassified to conform with current year presentation.
Reverse Stock Split
On May 26, 2015, the Company effected a 1-for-6 reverse stock split of its common stock. Unless otherwise indicated, all share amounts, per share data, share prices, exercise prices, and conversion rates set forth in these notes and the accompanying financial statements have, where applicable, been adjusted retroactively to reflect this reverse stock split.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Foreign Currency Translation
Foreign denominated assets and liabilities of the Company's wholly-owned foreign subsidiaries are translated into U.S. dollars at the prevailing exchange rates in effect on the balance sheet date. Revenues and expenses are translated at average exchange rates prevailing during the period. Any resulting translation gains or losses are recorded in accumulated other comprehensive income (loss) in the consolidated balance sheet. When the Company dissolves, sells or substantially sells all of the assets of a consolidated foreign subsidiary, the cumulative translation gain or loss of that subsidiary is released from comprehensive income (loss) and included within its consolidated statement of operations during the fiscal period when the dissolution or sale occurs.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash and cash equivalents. The Company has historically invested its cash equivalents in highly rated money market funds, corporate debt, federal agency notes and U.S. treasury notes. Investments, when purchased, are acquired in accordance with the Company’s investment policy which establishes a concentration limit per issuer. At
September 30, 2016
, the Company’s cash equivalents are invested solely in money market funds.
The Company provides credit to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary. At
September 30, 2016
, the Company’s accounts and unbilled receivables include
$530
or
97%
from U.S. government grants.
3. RECENT ACCOUNTING PRONOUNCEMENTS
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies that we adopt as of the specified effective date.
In August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
. The new standard clarifies certain aspects of the statement of cash flows, including the classification of debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees and beneficial interests in securitization transactions. The new standard also clarifies that an entity should determine each separately identifiable source or use within the cash receipts and cash payments on the basis of the nature of the underlying cash flows. In situations in which cash receipts and payments have aspects of more than one class of cash flows and cannot be separated by source or use, the appropriate classification should depend on the activity that is likely to be the predominant source or use of cash flows for the item. The new standard will be effective for us on January 1, 2018. The Company is in the process of evaluating the impact of this new guidance.
In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
. The new standard changes the impairment model for most financial assets and certain other instruments. Under the new standard, entities holding financial assets and net investment in leases that are not accounted for at fair value through net income are to be presented at the net amount expected to be collected. An allowance for credit losses will be a valuation account that will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. The new standard will be effective for us on
January 1, 2020. The adoption of this standard is not expected to have a material impact on our financial position or results of operations.
In March 2016, the FASB issued ASU No. 2016-06,
Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments
. The new standard simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by removing the requirement to assess whether a contingent event is related to interest rates or credit risks. The new standard will be effective for us on January 1, 2017. The adoption of this standard is not expected to have an impact on our financial position or results of operations. In March 2016, the FASB issued ASU No. 2016-07,
Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting
. The new standard eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an adjustment must be made to the investment, results of operations and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The new standard will be effective for us on January 1, 2017. The adoption of this standard is not expected to have a material impact on our financial position or results of operations.
In March 2016, the FASB issued ASU No. 2016-09,
Compensation - Stock Compensation (Topic 718)
:
Improvements to Employee Share-Based Payment Accounting
. The new standard involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The new standard will be effective for us on January 1, 2017. The Company is in the process of evaluating the impact of this new guidance.
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842).
The new standard requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. The new standard will be effective for us on January 1, 2019. The adoption of this standard is not expected to have a material impact on our net financial position, but will impact the amount of our assets and liabilities. The Company is in the process of evaluating the impact of this new guidance.
In January 2016, the FASB issued ASU No. 2016-01,
Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
. The new standard amends certain aspects of accounting and disclosure requirements of financial instruments, including the requirement that equity investments with readily determinable fair values be measured at fair value with changes in fair value recognized in our results of operations. The new standard does not apply to investments accounted for under the equity method of accounting or those that result in consolidation of the investee. Equity investments that do not have readily determinable fair values may be measured at fair value or at cost minus impairment adjusted for changes in observable prices. A financial liability that is measured at fair value in accordance with the fair value option is required to be presented separately in other comprehensive income for the portion of the total change in the fair value resulting from change in the instrument-specific credit risk. In addition, a valuation allowance should be evaluated on deferred tax assets related to available-for-sale debt securities in combination with other deferred tax assets. The new standard will be effective for us on January 1, 2018. The Company is in the process of evaluating the impact of this new guidance.
In August 2014, the FASB issued ASU 2014-15,
Presentation of Financial Statements-Going Concern (Subtopic 205-40)
. The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern for one year after the date that the financial statements are issued and to provide related footnote disclosures. Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. This guidance should reduce diversity in the timing and content of footnote disclosures. The amendments in this update apply to all entities and are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early adoption is permitted. The Company is currently reviewing the potential impact of adopting the new guidance on its current disclosures.
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
, which supersedes all existing revenue recognition requirements, including most industry specific guidance. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. In August 2015, the FASB issued ASU No. 2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date
, which delayed the effective date of the new standard from January 1, 2017 to January 1, 2018. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued ASU No. 2016-08,
Revenue from Contracts with Customers (Topic 606):
Principal versus Agent Considerations
, which clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU No. 2016-10, R
evenue from Contracts with Customers (Topic 606)
:
Identifying Performance Obligations and Licensing
, which clarifies certain aspects of identifying performance obligations and licensing implementation guidance. In May 2016, the FASB issued
ASU No. 2016-12, Revenue
from Contracts with Customers (Topic 606)
:
Narrow-Scope Improvements and Practical Expedients
related to disclosures of remaining performance obligations, as well as other amendments to guidance on collectibility, non-cash consideration and the presentation of sales and other similar taxes collected from customers. These standards have the same effective date and transition date of January 1, 2018. The Company is currently evaluating the method of adoption and the potential impact that these standards may have on its financial position and results of operations.
4. BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding. Diluted net income (loss) per share is computed by dividing net loss by the weighted-average number of dilutive common shares outstanding during the period. Diluted shares outstanding is calculated by adding to the weighted shares outstanding any potential (unissued) shares of common stock from outstanding stock options and warrants based on the treasury stock method, as well as weighted shares outstanding of any potential (unissued) shares of common stock from restricted stock units. In periods when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods when a loss is reported, there is no difference in basic and dilutive loss per share. Common stock equivalents include stock options, restricted stock awards and warrants.
The Company follows the two-class method when computing net loss per share, when it has issued shares that meet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participating rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based on their respective rights to receive dividends, as if all income for the period has been distributed or losses to be allocated if they are contractually required to fund losses. There were no amounts allocated to participating securities for the three and nine months ended
September 30, 2016
and 2015, as the Company was in a loss position and had no shares that met the definition of participating securities outstanding at
September 30, 2016
and 2015.
On May 26, 2015, the Company effected a 1-for-6 reverse stock split of its common stock. The calculation of basic and diluted net loss per share, as presented in the accompanying condensed consolidated statements of operations, have been determined based on retroactive adjustment of weighted average shares outstanding for all periods presented.
The number of shares of potentially dilutive common stock presented on a weighted average basis, related to options, restricted stock units and warrants (prior to consideration of the treasury stock method) that were excluded from the calculation of dilutive shares since the inclusion of such shares would be anti-dilutive for the
three and nine
months ended
September 30, 2016
and 2015, respectively, are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Options
|
|
926,245
|
|
|
928,090
|
|
|
931,664
|
|
|
956,181
|
|
Restricted stock units
|
|
588,390
|
|
|
1,198,743
|
|
|
827,398
|
|
|
830,530
|
|
Warrants
|
|
3,933,000
|
|
|
3,933,000
|
|
|
3,933,000
|
|
|
1,541,505
|
|
Total
|
|
5,447,635
|
|
|
6,059,833
|
|
|
5,692,062
|
|
|
3,328,216
|
|
5. INVENTORY
The components of biopolymer inventories of the Company at December 31, 2015 are as follows:
|
|
|
|
|
|
|
|
December 31,
2015
|
Raw materials
|
|
$
|
—
|
|
Finished goods
|
|
51
|
|
Total inventory
|
|
$
|
51
|
|
Finished goods at December 31, 2015, of
$51
, represents inventory that the Company had sold and shipped to customers for which the Company had not yet recognized revenue or cost of goods sold under its product revenue recognition policy. At September 30, 2016, the Company no longer carried inventory on its books. In connection with its strategic decision to discontinue and wind down its biopolymer operations, the Company wrote-down its remaining
$199
of inventory during the quarter ended September 30, 2016. The impairment charges are recorded as a charge against income from discontinued operations for the quarter.
6. FAIR VALUE MEASUREMENTS
The Company has certain financial assets recorded at fair value which have been classified as Level 1 within the fair value hierarchy as described in the accounting standards for fair value measurements. Fair value is the price that would be received from the sale of an asset or the price paid to transfer a liability in an orderly transaction between independent market participants at the measurement date. Fair values determined by Level 1 inputs utilize observable data such as quoted prices in active markets for identical instruments. Fair values determined by Level 2 inputs utilize data points other than quoted prices in active markets that are observable either directly or indirectly. Fair values determined by Level 3 inputs utilize unobservable data points in which there is little or no market data, which require the reporting entity to develop its own assumptions. The fair value hierarchy level is determined by the lowest level of significant input. At
September 30, 2016
and December 31, 2015, the Company did not own any Level 2 or Level 3 financial assets or liabilities and there were no transfers of financial assets or liabilities between category levels.
The Company's assets are measured at fair value on a recurring basis. The balance of Level 1 assets as of
September 30, 2016
and December 31, 2015 were
$1,596
and
$11,203
, respectively, and for both periods the assets were invested in money market funds classified in cash and cash equivalents.
7. ACCRUED EXPENSES
Accrued expenses consisted of the following at:
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
December 31,
2015
|
Employee compensation and benefits
|
|
$
|
497
|
|
|
$
|
2,114
|
|
Commercial manufacturing
|
|
858
|
|
|
465
|
|
Professional services
|
|
503
|
|
|
431
|
|
Other
|
|
891
|
|
|
503
|
|
Total accrued expenses
|
|
$
|
2,749
|
|
|
$
|
3,513
|
|
8. STOCK-BASED COMPENSATION
At
September 30, 2016
, there was approximately
$2,073
of pre-tax stock-based compensation expense, net of estimated forfeitures, related to unvested awards not yet recognized.
Employee, Non-employee and Director Stock Options
The Company recognized stock-based compensation expense related to stock option awards of
$254
and
$1,155
for the
three and nine
months ended
September 30, 2016
, respectively. Of these amounts,
$16
and
$212
are included in discontinued operations within the Company's condensed consolidated statements of operations included within this quarterly report. The Company recognized stock-based compensation expense related to stock option awards of
$588
and
$1,483
for the
three and nine
months ended
September 30, 2015
, respectively. Of these amounts,
$187
and
$478
are included in discontinued operations. The compensation expense related to unvested stock options is expected to be recognized over a remaining weighted average period of
1.31
years.
A summary of option activity for the
nine
months ended
September 30, 2016
is as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted Average
Exercise Price
|
Outstanding at December 31, 2015
|
|
904,133
|
|
|
$
|
26.58
|
|
Granted
|
|
55,000
|
|
|
1.34
|
|
Exercised
|
|
—
|
|
|
—
|
|
Forfeited
|
|
(28,670
|
)
|
|
6.35
|
|
Expired
|
|
(15,943
|
)
|
|
39.67
|
|
Outstanding at September 30, 2016
|
|
914,520
|
|
|
$
|
25.47
|
|
|
|
|
|
|
Options vested and expected to vest at September 30, 2016
|
|
903,129
|
|
|
$
|
25.71
|
|
Options exercisable at September 30, 2016
|
|
683,550
|
|
|
$
|
31.95
|
|
Restricted Stock Units
On January 2, 2014, the Company awarded
100,000
restricted stock units ("RSUs") to its then Chief Executive Officer ("CEO"). These restricted stock units contained both market and performance conditions which were based on the achievement of certain stock price and revenue targets, respectively. The restricted stock units would have vested in various percentages over
three
years (subject to certain accelerated and continued vesting events) once the agreed-upon stock price and/or revenue based targets were achieved. Neither the market nor performance conditions were met by January 2, 2016, resulting in the restricted stock units being forfeited as of that date. In accordance with accounting guidance for stock compensation, the amortization of these restricted stock units will continue through the requisite service period.
During 2015, the Company began using RSUs as a broad-based form of long-term compensation incentive for its officers, directors and employees. On April 1, 2015, the Company awarded
203,967
RSUs under the 2014 Stock Option and Incentive Plan (the "2014 Plan") to members of senior management pursuant to elections previously made by the senior managers to convert a portion of their 2014 performance bonuses from cash to equity. These RSUs vested
one year
from the date of grant, on April 1, 2016. During the year ended December 31, 2015, the Company also awarded a total of
906,806
additional long-term incentive RSUs to senior managers and employees. These RSUs vest in
four
equal annual installments beginning
one
year after the date of grant, subject to service conditions. On September 10, 2015, the Company awarded
81,250
RSUs to its non-employee directors. These RSUs vested on May 28, 2016.
No
RSUs were awarded by the Company during the nine months ending
September 30, 2016
.
The Company records stock compensation expense for RSUs on a straight line basis over their vesting period based on each RSU's award date market value. The Company recognizes compensation expense for only the portion of awards that are expected to vest based on forfeiture estimates. In developing a forfeiture rate estimate, the Company considered its historical experience and actual forfeitures for the year. The Company will continue to evaluate its forfeiture rate as compared to the actual number of forfeitures in future periods to determine if adjustments to compensation expense may be required.
The Company pays required minimum federal, state or provincial income tax withholding associated with RSUs for its U.S. and Canadian employees. As the RSUs vest, the Company withholds a number of shares with an aggregate fair market value equal to the minimum tax withholding amount (unless the employee makes other arrangements for payment of the tax withholding) from the common stock issuable at the vest date. During the nine months ended
September 30, 2016
, the Company paid
$274
for income tax withholdings associated with RSUs that vested during the period.
A summary of RSU activity for the
nine
months ended
September 30, 2016
is as follows:
|
|
|
|
|
|
Number of RSUs
|
Weighted Average Remaining Contractual Life (years)
|
Outstanding at December 31, 2015
|
1,286,773
|
|
|
Awarded
|
—
|
|
|
Common stock issued upon vesting
|
(454,131
|
)
|
|
Forfeited
|
(239,963
|
)
|
|
Outstanding at September 30, 2016
|
592,679
|
|
1.50
|
|
|
|
Remaining RSUs expected to vest as of September 30, 2016
|
504,423
|
|
1.46
|
|
|
|
Weighted average remaining recognition period
|
2.50
|
|
|
Stock Compensation Subsequent Events
On October 26, 2016, the Company's Compensation Committee granted stock options for a total of
4,560,000
shares to employees who are expected to remain with the Company in support of Yield10 after completion of the Company's strategic restructuring. Of this amount, options for
1,750,000
shares are contingent upon receiving shareholder approval of certain amendments to the 2014 Plan. Each option has an exercise price per share equal to the fair market value of the Company's common stock on the date of grant, vests in
4
equal semi-annual installments at a rate of
25%
per installment over
two years
, and has a term of
ten years
from the date of grant. The contingent options will be canceled if shareholder approval of the amendments is not received. These new options were granted in connection with changes to the Company's compensation programs to reduce total cash compensation, including suspension of the Company's cash bonus program, and to increase equity-based compensation.
On November 4, 2016, Joseph Shaulson, the Company's former chief executive officer, was granted stock options for
750,000
shares upon the execution of a separation agreement and release agreement relating to the termination of his employment with the Company. These options have an exercise price per share equal to the fair market value of the Company's common stock on the date of grant, are fully vested on the effective date of Mr. Shaulson's release agreement, and will be exercisable through December 19, 2023. Options for
350,000
of the
750,000
shares are contingent upon receiving shareholder approval of certain amendments to the 2014 Plan. The contingent options will be canceled if shareholder approval of the amendments is not received.
Also in connection with the execution of the separation agreement, on November 4, 2016, the vesting of
151,250
previously outstanding RSUs and
191,667
previously outstanding non-qualified stock options held by Mr. Shaulson was accelerated. The Company will record stock compensation expense for the fair value of these RSUs and non-qualified stock options during its fiscal quarter ended December 31, 2016, as a result of the immediate vesting. The new option grants and the accelerated vesting of the RSUs and existing stock options were provided in lieu of any cash severance and 2016 cash bonus payable under Mr. Shaulson’s previous employment agreement.
9. COMMITMENTS AND CONTINGENCIES
Lease Commitments
On January 20, 2016, the Company entered into a lease agreement pursuant to which the Company leases approximately
30,000
square feet of office and research and development space located at 19 Presidential Way, Woburn, Massachusetts. The lease began on June 1, 2016 and will end on November 30, 2026.
The Company provided the landlord with a security deposit in the form of a letter of credit in the amount of
$307
. Pursuant to the lease, the Company will also pay certain taxes and operating costs associated with the premises during the term of the lease. Under the terms of the lease agreement, the landlord paid
$889
for tenant improvements to the facility and an additional
$444
for tenant improvements that result in increased rental payments by the Company. The landlord’s contributions toward the cost of tenant improvements are recorded as short and long-term lease incentive obligation in the Company's condensed consolidated balance sheet contained herein. The lease incentive obligation will be amortized to rent expense over the lease term. As of September 30, 2016, the Company has a remaining lease incentive obligation of
$1,291
.
On October 10, 2016, the Company entered into a sublease agreement with CJ for the sublease of approximately
10,000
square feet of its leased facility at 19 Presidential Way, Woburn, Massachusetts. The sublease space was determined to be in excess of the Company's needs as a result of its recent strategic shift to Yield10 and the related restructuring of its operations. The sublease term is coterminous with the Company's master lease. CJ will pay rent and operating expenses equal to one-third of the amounts payable to the landlord by the Company, as adjusted from time-to-time in accordance with the terms of the master lease. In October 2016, CJ provided the Company with a security deposit of
$103
in the form of an irrevocable letter of credit.
Annual base rental payments remaining due under the Woburn lease, net of sublease payments expected from CJ, are as follows:
|
|
|
|
|
Year ended December 31,
|
Minimum lease payment
|
2016 (October - December)
|
$
|
65
|
|
2017
|
483
|
|
2018
|
523
|
|
2019 and thereafter
|
4,898
|
|
Total
|
$
|
5,969
|
|
Contractual Commitments
In connection with the wind down of biopolymer operations, the Company ceased pilot production of biopolymer material and reached agreements with the owner-operators of its biopolymer pilot production facilities regarding the termination of their services. The Company recorded contract termination costs related to pilot production of
$2,641
during the three months ended September 30, 2016, which is included in discontinued operations. As of September 30, 2016,
$1,662
remains outstanding and will be paid in quarterly installments through May 2018. The short and long-term portions of these contract liabilities are recorded in accrued expenses and other long-term liabilities, respectively, in the Company's condensed consolidated balance sheets contained herein.
Litigation
From time-to-time, the Company may be subject to legal proceedings and claims in the ordinary course of business. The Company is not currently aware of any such proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on the business, financial condition or the results of operations.
Guarantees
As of
September 30, 2016
and December 31, 2015, the Company did not have significant liabilities recorded for guarantees. The Company enters into indemnification provisions under various agreements with other companies in the ordinary course of business, typically with business partners, contractors, and customers. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of its activities. These indemnification provisions generally survive termination of the underlying agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is unlimited. However, to date Metabolix has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of the indemnifications under these agreements is believed to be minimal. Accordingly, the Company has no liabilities recorded for these agreements as of
September 30, 2016
and December 31, 2015.
10. GEOGRAPHIC INFORMATION
The geographic distribution of the Company’s operating revenues from continuing operations and long-lived assets are summarized in the tables below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
Canada
|
|
Eliminations
|
|
Total
|
Three Months Ended September 30, 2016:
|
|
|
|
|
|
|
|
|
Net revenues from external customers
|
|
$
|
473
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
473
|
|
Inter-geographic revenues
|
|
—
|
|
|
247
|
|
|
(247
|
)
|
|
—
|
|
Net revenues
|
|
$
|
473
|
|
|
$
|
247
|
|
|
$
|
(247
|
)
|
|
$
|
473
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2015:
|
|
|
|
|
|
|
|
|
Net revenues from external customers
|
|
$
|
327
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
327
|
|
Inter-geographic revenues
|
|
—
|
|
|
192
|
|
|
(192
|
)
|
|
—
|
|
Net revenues
|
|
$
|
327
|
|
|
$
|
192
|
|
|
$
|
(192
|
)
|
|
$
|
327
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2016:
|
|
|
|
|
|
|
|
|
Net revenues from external customers
|
|
$
|
818
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
818
|
|
Inter-geographic revenues
|
|
—
|
|
|
674
|
|
|
(674
|
)
|
|
—
|
|
Net revenues
|
|
$
|
818
|
|
|
$
|
674
|
|
|
$
|
(674
|
)
|
|
$
|
818
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2015:
|
|
|
|
|
|
|
|
|
Net revenues from external customers
|
|
$
|
1,248
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1,249
|
|
Inter-geographic revenues
|
|
—
|
|
|
594
|
|
|
(594
|
)
|
|
—
|
|
Net revenues
|
|
$
|
1,248
|
|
|
$
|
595
|
|
|
$
|
(594
|
)
|
|
$
|
1,249
|
|
|
|
|
|
|
|
|
|
|
Foreign revenue is based on the country in which the Company’s subsidiary that earned the revenue is domiciled. During the
three and nine
months ended
September 30, 2016
, revenue earned from the Company’s Camelina grant with the U.S. Department of Energy totaled
$304
and
$649
, respectively, and represented
64%
and
79%
of total revenue. During the three and nine months ended September 30, 2015, revenue earned from the Company's REFABB grant totaled
$312
and
$990
, and represented
95%
and
79%
of total revenue.
The geographic distribution of the Company’s long-lived assets is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
Canada
|
|
Eliminations
|
|
Total
|
September 30, 2016
|
|
$
|
1,796
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,796
|
|
December 31, 2015
|
|
$
|
103
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
105
|
|
11. INCOME TAXES
Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using future enacted tax rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company follows the accounting guidance related to income taxes including guidance which addresses accounting for uncertainty in income taxes. This guidance prescribes a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. The Company had
no
amounts recorded for any unrecognized tax benefits as of
September 30, 2016
or
December 31, 2015
.
For both the three and nine months ended September 30, 2016, the Company recognized an income tax benefit of
$1,042
and tax expense in discontinued operations for both periods of
$1,259
related to discontinuation of its biopolymer operations. For the three and nine months ended September 30, 2015, the Company did
no
t recognize any tax expense or benefit due to its loss position. As of September 30, 2016, the Company recorded an accrued income tax provision of
$217
related to this tax benefit which is included in accrued expenses within the Company's condensed consolidated balance sheet included herein which will be recognized within continuing operations in the fourth quarter of 2016.
Due to the uncertainty surrounding the realization of favorable tax attributes in future tax returns, the Company has recorded a full valuation allowance against its otherwise recognizable net deferred tax assets.
12. LICENSE AGREEMENTS AND RELATED PARTIES
The Company previously licensed certain technology to Tepha, Inc., a related party, for use in medical applications. During May 2016, the Company entered into an amendment to its license agreement with Tepha, in which the Company received a lump sum payment of
$2,000
in consideration for an early buyout of all future royalties under the agreement and the licensing of two additional production strains and related intellectual property. The Company completed delivery of the technology to Tepha during the quarter ended September 30, 2016. The Company recorded
$494
and
$2,272
of license and royalty revenue related to Tepha during the three and nine months ended
September 30, 2016
, respectively. During September 2016, the Company also received
$11
from Tepha in connection with their purchase of certain laboratory equipment previously used in the Company's biopolymer operations. During the three and nine months ended September 30, 2015, the Company recorded license and royalty revenue from Tepha of
$172
and
$407
, respectively. As of
September 30, 2016
and December 31, 2015, the Company had
$1
and
$146
, respectively, of outstanding receivables due from Tepha for royalties.
During June, 2016, the Company entered into a purchase and licensing agreement with a third party in which the Company received a lump sum payment of
$1,000
in consideration for certain biopolymer inventory and a non-exclusive license to certain patents owned or controlled by the Company related to biopolymers. Included in the Company's reported license fee and royalty revenue for the nine months ended
September 30, 2016
is
$850
in licensing revenue related to this agreement.
The patents underlying these license agreements are now owned by CJ. As a consequence of this sale and the Company's discontinuation of its biopolymer operations, license fee and royalty revenue is included within income from discontinued operations within the Company's condensed consolidated statements of operations contained in this quarterly report.
13.
CAPITAL STOCK
Common Stock Issuances
In connection with the wind down of biopolymer operations, the Company ceased pilot production of biopolymer material at its
two
third-party biopolymer pilot production facilities. On September 19, 2016, the Company entered into an early termination agreement with the owner-operator of one of the biopolymer production facilities. As part of the consideration for the early termination, the Company issued
275,000
unregistered shares of Metabolix common stock.
On October 7, 2015, the Company entered into a common stock purchase agreement with Aspire Capital. Under terms of the agreement, Aspire committed to purchase up to an aggregate of
$20,000
of the Company's common stock over a
30
month period that began on November 9, 2015. Common stock may be sold from time-to-time at the Company’s direction under pricing formulas based on prevailing market prices around the time of each sale. The purchase agreement contains limitations on the number of shares that the Company may sell to Aspire. Additionally, the Company and Aspire may not effect any sales of shares of the Company's common stock under the purchase agreement during the continuance of an event of default or on any trading day that the closing sale price of its common stock is less than
$0.50
per share. Upon execution of the purchase agreement, the Company issued
300,000
shares of its common stock to Aspire with a fair value of
$450
, as a commitment fee. In addition, the Company incurred
$169
of additional costs in connection with the Aspire facility, which along with the fair value of the common stock has been recorded as deferred equity costs and is included within other assets in the accompanying consolidated balance sheet at
September 30, 2016
. These costs will be proratably charged to additional paid-in-capital as shares are sold to Aspire. In the event it is determined no additional shares will be sold under the purchase agreement, any deferred equity offering costs will be expensed at such time. At
September 30, 2016
, the full
$20,000
under the purchase agreement remains available for sale to Aspire.
On June 19, 2015, the Company completed a private placement of its securities. Proceeds received from the transaction were
$14,703
, net of issuance costs of
$297
. Investors participating in the transaction purchased a total of
4,370,000
shares of common stock at a price of
$3.32
per share and warrants with a purchase price of
$0.125
per warrant to purchase up to an aggregate of
3,933,000
additional shares of common stock. The warrants have a
four
-year term and are immediately exercisable at a price of
$3.98
per share. The Company reviewed the accounting guidance for warrants and has determined that the warrants should be recorded as equity within additional paid-in capital.
On May 26, 2015, the Company effected a 1-for-6 reverse split of its common stock. The reverse stock split reduced the number of shares of the Company's common stock currently outstanding at the time the reverse split was made effective from approximately
136 million
shares to approximately
23 million
shares. Proportional adjustments were made to the Company's outstanding stock options and restricted stock units and to the number of shares issued and issuable under the Company's equity compensation plans. The number of authorized shares of the Company's common stock remained at
250 million
shares.
14. RESTRUCTURING
In July 2016, the Company announced a strategic restructuring under which Yield10 Bioscience has become its core business. Yield10 Bioscience is focused on the unmet need for enhanced global food security and is developing proprietary technologies to enable step-change improvements in yield for major food and feed crops. In connection with its shift in focus, the Company is rebranding itself as Yield10 Bioscience. See Note 15, Discontinued Operations.
As part of its strategic restructuring, the Company announced a plan to reduce staffing levels to approximately
twenty
employees, a target level the Company is on track to meet in the fourth quarter of 2016.
In connection with the wind down of biopolymer operations, the Company also ceased pilot production of biopolymer materials and reached agreements with the owner-operators of its biopolymer production facilities regarding the termination of these services. The Company made cash payments of
$783
, issued
275,000
shares of company common stock, and transferred biopolymer-related production equipment in the third quarter related to these agreements and other restructuring activities. Remaining cash restructuring costs are estimated to be approximately
$2,400
, including amounts expected to be added during the Company's fourth quarter and the $
1,872
accrued as of September 30, 2016, and are expected to be paid out through May 2018.
|
|
|
|
|
|
|
|
|
|
|
|
Biopolymer Production Agreements
|
Employee Severance and Related Costs
|
Total
|
Original Charges and Amounts Accrued
|
$
|
2,641
|
|
$
|
322
|
|
$
|
2,963
|
|
Paid in Cash
|
(783
|
)
|
(112
|
)
|
(895
|
)
|
Paid through Stock and Equipment
|
(196
|
)
|
—
|
|
(196
|
)
|
Ending Balance Accrued at September 30, 2016
|
$
|
1,662
|
|
$
|
210
|
|
$
|
1,872
|
|
With the exception of approximately
$16
of employee severance and related costs incurred for non-biopolymer employees, total restructuring costs shown in the table above have been classified within discontinued operations in the Company's condensed consolidated statement of operations for the three and nine months ended September 30, 2016. Amounts related to the biopolymer production agreements are included within research and development expenses as shown in Note 15.
15. DISCONTINUED OPERATION
In July 2016, the Board of Directors of the Company approved a strategic restructuring plan under which Yield10 Bioscience would become its core business with a focus on developing disruptive technologies for step-change improvements in crop yield to enhance global food security. As part of the restructuring, Metabolix discontinued its biopolymer operations and announced its intention to eliminate approximately
45
positions in its biopolymer operations and corporate organization.
As a result of this strategic shift, the Company completed the sale of its biopolymer intellectual property and certain equipment and inventory to an affiliate of CJ during September 2016. The
$10,000
purchase price paid by CJ was primarily for the acquisition of intangible assets, including the Company’s PHA strains, patent rights, know-how and its rights, title and interest in certain license agreements. None of these intangible assets were previously capitalized to the Company’s balance sheet, resulting in a gain on the sale of approximately
$9,868
, net of the book value of the equipment sold. In addition to the CJ purchase, other parties acquired various capital equipment of the biopolymer operation for a total purchase price of approximately
$428
, resulting in a net loss on sale of this equipment of approximately
$35
.
The Company will not have further significant involvement in the operations of the discontinued biopolymer business.
The following are the major items comprising income or loss from discontinued operations for the three and nine months ended September 30, 2016 and September 30, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
Total revenue
|
$
|
1,818
|
|
|
$
|
382
|
|
|
$
|
4,940
|
|
|
$
|
848
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
Cost of product revenue
|
464
|
|
|
347
|
|
|
702
|
|
|
521
|
|
Research and development
|
3,793
|
|
|
2,424
|
|
|
9,438
|
|
|
7,299
|
|
Selling, general and administrative
|
510
|
|
|
387
|
|
|
1,429
|
|
|
1,502
|
|
Net gain on sale of biopolymer assets
|
(9,833
|
)
|
|
—
|
|
|
(9,833
|
)
|
|
—
|
|
Total costs and expenses
|
(5,066
|
)
|
|
3,158
|
|
|
1,736
|
|
|
9,322
|
|
Other (income) or expense
|
31
|
|
|
(33
|
)
|
|
—
|
|
|
(33
|
)
|
Income (loss) from discontinued operations
|
$
|
6,853
|
|
|
$
|
(2,743
|
)
|
|
$
|
3,204
|
|
|
$
|
(8,441
|
)
|
Income tax expense
|
(1,259
|
)
|
|
—
|
|
|
(1,259
|
)
|
|
—
|
|
Total income (loss) from discontinued operations
|
$
|
5,594
|
|
|
$
|
(2,743
|
)
|
|
$
|
1,945
|
|
|
$
|
(8,441
|
)
|
At December 31, 2015, current assets and other assets of disposal group classified as held for sale of
$328
and
$800
, respectively, shown on the Company's condensed consolidated balance sheet, represent biopolymer inventory and biopolymer production and laboratory equipment. All of this inventory and equipment was located in the U.S. At September 30, 2016, the sale of assets to CJ was completed and are no longer carried within the Company's balance sheet.
The following are the non-cash operating items and investing items related to discontinued operations for the nine months ended September 30, 2016 and September 30, 2015.
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2016
|
|
2015
|
Non-cash operating items:
|
|
|
|
Depreciation
|
$
|
327
|
|
|
$
|
73
|
|
Charge for 401(k) company common stock match
|
$
|
125
|
|
|
$
|
150
|
|
Stock-based compensation
|
$
|
214
|
|
|
$
|
479
|
|
Inventory impairment
|
$
|
199
|
|
|
$
|
202
|
|
Non-cash income tax expense
|
$
|
1,259
|
|
|
$
|
—
|
|
Non-cash restructuring expense paid through stock and equipment
|
$
|
196
|
|
|
$
|
—
|
|
Gain on sale of discontinued operation and property and equipment
|
$
|
(9,833
|
)
|
|
$
|
(33
|
)
|
|
|
|
|
Investing item:
|
|
|
|
Purchase of property and equipment
|
$
|
(193
|
)
|
|
$
|
(477
|
)
|
|
|
|
|
The following are the proforma results of the ongoing operations of Metabolix as though the discontinuation of the biopolymer operations and sale of biopolymer assets had occurred at the beginning of the periods shown. The proforma information is not necessarily indicative of the actual results that would have been achieved had the discontinuation of the biopolymer operations occurred at the beginning of the periods presented, nor is it necessarily indicative of future results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
Total revenue
|
$
|
473
|
|
|
$
|
327
|
|
|
$
|
818
|
|
|
$
|
1,249
|
|
Net loss from continuing operations before income tax benefit
|
$
|
(2,612
|
)
|
|
$
|
(3,105
|
)
|
|
$
|
(8,659
|
)
|
|
$
|
(9,323
|
)
|
Net loss from continuing operations
|
$
|
(1,570
|
)
|
|
$
|
(3,105
|
)
|
|
$
|
(7,617
|
)
|
|
$
|
(9,323
|
)
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share from continuing operations
|
$
|
(0.06
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.38
|
)
|