This prospectus relates to the offer and sale
of up to 42,268,338 shares of our common stock by the selling stockholders identified in the “Selling Stockholders”
section of this prospectus (the “Offering”). The shares of common stock registered hereunder consist of
(i) shares issuable to the selling stockholders upon the exercise of warrants issued to the selling stockholders (the “Warrants”)
pursuant to (a) that certain Securities Purchase Agreement, dated as of May 8, 2017 (the “Initial Purchase Agreement”),
among the Company and the investors named therein or (b) that certain Securities Purchase Agreement, dated as of May 31, 2017 (the
“Subsequent Purchase Agreement” and, together with the Initial Purchase Agreement, the “Purchase Agreements”),
between the Company and the investor named therein, and (ii) shares issued or issuable to certain of the selling stockholders upon
conversion of shares of the Company’s Series B 17.38% Convertible Preferred Stock, par value $0.0001 per share (the “Series
B Preferred Stock”) issued to such selling stockholders pursuant to the Purchase Agreements and the Certificate of Designation
of Preferences, Rights and Limitations of Series B 17.38% Convertible Preferred Stock filed with the Secretary of State of Delaware
on May 8, 2017 (the “Certificate of Designation”).
The selling stockholders may sell the shares
directly to purchasers or through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts,
concessions or commissions. The selling stockholders may sell the shares at any time at market prices prevailing at the time of
sale or at privately negotiated prices. For more information regarding the selling stockholders and the sale of the shares, see
“Selling Stockholders” and “Plan of Distribution” below.
We are not selling any securities under this
prospectus and will not receive any of the proceeds from the sale of these shares by the selling stockholders. We will pay
the expenses incurred in registering the shares, including legal and accounting fees.
Our common stock is traded on the NASDAQ Global
Select Market under the symbol “AMRS.” On October 17, 2017, the closing price of our common stock was $3.23.
RISK FACTORS
Investing in our common stock involves a
high degree of risk. Prior to making a decision about investing in our securities, you should carefully consider the specific
factors discussed below, which may be amended, supplemented, or superseded from time to time by reports we file with the SEC in
the future. These risk factors should be read together with the financial and other information contained or incorporated by reference
in this prospectus before making a decision to buy our common stock. If any of the risks actually occur, our business, financial
condition and results of operations could suffer. In these circumstances, the market price of our common stock could decline and
you may lose all or part of your investment in our common stock.
Additional risks and uncertainties beyond
those set forth in our reports and not presently known to us or that we currently deem immaterial may also affect our operations.
Any risks and uncertainties, whether set forth in our reports or otherwise, could cause our business, financial condition, results
of operations and future prospects to be materially and adversely harmed. The trading price of our common stock could decline due
to any of these risks and uncertainties, and, as a result, you may lose all or part of your investment.
Risks Related to Our Business
We have incurred losses to date, anticipate continuing to
incur losses in the future, and may never achieve or sustain profitability.
We have incurred significant losses in each
year since our inception and believe that we will continue to incur losses and negative cash flow from operations into at least
2018. As of March 31, 2017, we had an accumulated deficit of $1,171.8 million and had cash, cash equivalents and short term investments
of $2.5 million. We have significant outstanding debt, a significant working capital deficit and contractual obligations related
to capital and operating leases, as well as purchase commitments of $3.7 million. As of March 31, 2017, our debt totaled $220.9
million, net of discount and issuance cost of $42.0 million, of which $49.5 million is classified as current. Our debt service
obligations over the next twelve months are significant, including approximately $18.3 million of anticipated interest payments
(excluding interest paid in kind by adding to outstanding principal) and may include potential early conversion payments of up
to approximately $15.8 million (assuming all note holders convert) under our outstanding 9.50% Convertible Senior Notes due 2019
(or the “2015 144A Notes”). Furthermore, our debt agreements contain various financial and operating covenants, including
restrictions on business that could cause us to be at risk of defaults. We expect to incur additional costs and expenses related
to the continued development and expansion of our business, including construction and operation of our manufacturing facilities,
contract manufacturing, research and development operations, and operation of our pilot plants and demonstration facility. There
can be no assurance that we will ever achieve or sustain profitability on a quarterly or annual basis.
Our unaudited condensed consolidated financial
statements as of and for the three months ended March 31, 2017 have been prepared on the basis that we will continue as a going
concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have
incurred significant losses since our inception and we expect that we will continue to incur losses as we aim to successfully execute
our business plan and will be dependent on additional public or private financings, collaborations or licensing arrangements with
strategic partners, or additional credit lines or other debt financing sources to fund continuing operations. Based on our cash
balances, recurring losses since inception and our existing capital resources to fund our planned operations for a twelve month
period, there is substantial doubt about our ability to continue as a going concern within one year after the date that the financial
statements are issued or one year of the effectiveness of this registration statement. Our operating plans for 2017 and 2018 contemplate
a significant reduction in our net cash outflows resulting from (i) growth of sales of existing and new products with positive
gross margins, (ii) reduced production costs as a result of manufacturing and technical developments, (iii) cash inflows from collaborations,
(iv) access to various financing commitments and (v) strategic asset divestments. In addition, as noted below, for our 2017 and
2018 operating plans, we are dependent on funding from sources that are not subject to existing commitments. We will need to obtain
additional funding from equity or debt financings, which may require us to agree to burdensome covenants, grant further security
interests in our assets, enter into collaboration and licensing arrangements that require us to relinquish commercial rights, or
grant licenses on terms that are not favorable. No assurance can be given at this time as to whether we will be able to achieve
our expense reduction or fundraising objectives, regardless of the terms. If we are unable to raise additional financing, or if
other expected sources of funding are delayed or not received, our ability to continue as a going concern would be jeopardized
and we may be forced to delay, scale back or eliminate some of our general and administrative, research and development, or production
activities or other operations and reduce investment in new product and commercial development efforts in an effort to provide
sufficient funds to continue our operations. If any of these events occurs, our ability to achieve our development and commercialization
goals would be adversely affected. In addition, if we are unable to continue as a going concern, we may be unable to meet our obligations
under our existing debt facilities, which could result in an acceleration of our obligation to repay all amounts outstanding under
those facilities, and we may be forced to liquidate our assets. In such a scenario, the value we receive for our assets in liquidation
or dissolution could be significantly lower than the value reflected in our financial statements.
Our unaudited condensed consolidated financial
statements for the period ending March 31, 2017 do not include any adjustments that might result from the outcome of this uncertainty,
which could have a material adverse effect on our financial condition and cause investors to suffer the loss of all or a substantial
portion of their investment.
We have limited experience producing our products at commercial
scale and may not be able to commercialize our products to the extent necessary to sustain and grow our current business.
To commercialize our products, we must be successful
in using our yeast strains to produce target molecules at commercial scale and at a commercially viable cost. If we cannot achieve
commercially-viable production economics for enough products to support our business plan, including through establishing and maintaining
sufficient production scale and volume, we will be unable to achieve a sustainable integrated renewable products business. Virtually
all of our production capacity is through a purpose-built, large-scale production plant in Brotas, Brazil. This plant commenced
operations in 2013, and scaling and running the plant has been, and continues to be, a time-consuming, costly, uncertain and expensive
process. Given our limited experience commissioning and operating our own manufacturing facilities and our limited financial resources,
we cannot be sure that we will be successful in achieving production economics that allow us to meet our plans for commercialization
of various products we intend to offer. In addition, our attempts to scale production of new molecules at the plant are subject
to uncertainty and risk. For example, even to the extent we successfully complete product development in our laboratories and pilot
and demonstration facilities, and at contract manufacturing facilities, we may be unable to translate such success to large-scale,
purpose-built plants. If this occurs, our ability to commercialize our technology will be adversely affected and we may be unable
to produce and sell any significant volumes of our products. Also, with respect to products that we are able to bring to market,
we may not be able to lower the cost of production, which would adversely affect our ability to sell such products profitably.
In addition, we will likely need to identify and secure access to additional production capacity to satisfy anticipated volume
requirements in 2017. There can be no assurance that we will be able obtain such capacity on favorable or acceptable terms, if
at all, and even if we are successful in obtaining such capacity, there can be no assurance that we will be able to scale and operate
any additional plants to allow us to meet our operational goals, which could harm our ability to grow our business.
We will require significant inflows of cash from financings,
product sales and collaborations to fund our anticipated operations and to service our debt obligations and may not be able to
obtain such funding on favorable terms, if at all.
Our planned 2017 and 2018 working capital needs,
our planned operating and capital expenditures for 2017 and 2018, and our ability to service our outstanding debt obligations are
dependent on significant inflows of cash from financings, existing and new collaboration partners and renewable product sales.
We will continue to need to fund our research and development and related activities and to provide working capital to fund production,
storage, distribution and other aspects of our business. Some of our anticipated funding sources, such as research and development
collaborations, are subject to the risk that we cannot meet milestones, that the collaborations may end prematurely for reasons
that may be outside of our control (including technical infeasibility of the project or a collaborator’s right to terminate
without cause), or the collaborations are not yet subject to definitive agreements or mandatory funding commitments and, if needed,
we may not be able to secure additional types of funding in a timely manner or on reasonable terms, if at all. The inability to
generate sufficient cash flow, as described above, could have an adverse effect on our ability to continue with our business plans
and our status as a going concern.
If we are unable to raise additional funding,
or if other expected sources of funding are delayed or not received, our ability to continue as a going concern would be jeopardized
and we would take the following actions as early as the second quarter of 2017 to support our liquidity needs in 2017 and 2018:
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Effect significant headcount reductions, particularly with respect to employees not connected to critical or contracted activities across all functions of the Company, including employees involved in general and administrative, research and development, and production activities.
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Shift focus to existing products and customers with significantly reduced investment in new product and commercial development efforts.
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Reduce production activity at our Brotas manufacturing facility to levels only sufficient to satisfy volumes required for product revenues forecast from existing products and customers.
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Reduce expenditures for third party contractors, including consultants, professional advisors and other vendors.
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Reduce or delay uncommitted capital expenditures, including non-essential facility and lab equipment, and information technology projects.
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Closely monitor the Company's working capital position with customers and suppliers, as well as suspend operations at pilot plants and demonstration facilities.
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Implementing this plan could have a negative impact on
our ability to continue our business as currently contemplated, including, without limitation, delays or failures in our ability
to:
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Achieve planned production levels;
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Develop and commercialize products within planned timelines or at planned scales; and
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Continue other core activities.
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Furthermore, any inability to scale-back operations
as necessary, and any unexpected liquidity needs, could create pressure to implement more severe measures. Such measures could
have an adverse effect on our ability to meet contractual requirements, including obligations to maintain manufacturing operations,
and increase the severity of the consequences described above.
Future revenues are difficult to predict, and our failure
to predict revenue accurately may cause our results to be below our expectations or those of analysts or investors and could result
in our stock price declining.
Our revenues are comprised of product revenues
and grants and collaborations revenues. We generate the substantial majority of our product revenues from sales to collaborators
and distributors and only a small portion from direct sales. Our collaboration, supply and distribution agreements do not usually
include any specific purchase obligations. The sales volume of our products in any given period has been difficult to predict.
A significant portion of our product sales is dependent upon the interest and ability of third party distributors to create demand
for, and generate sales of, such products to end-users. For example, if such distributors are unsuccessful in creating pull-through
demand for our products with their customers, such distributors may purchase less of our products from us than we expect. In addition,
many of our new and novel products are intended to be a component of other companies’ products; therefore, sales of our products
may be contingent on our collaborators’ and/or customers’ timely and successful development and commercialization of
end-use products that incorporate our products, and price volatility in the markets for such end-use products, which may include
commodities, could adversely affect the demand for our products and the margin we receive for our product sales, which could harm
our financial results. Furthermore, we have begun to market and sell some of our products directly to end-consumers, initially
in the cosmetics market. Because we have little experience in marketing and selling directly to consumers, it is difficult to predict
how successful our efforts will be and we may not achieve the product sales we expect to achieve on the timeline we anticipate,
if at all.
In addition, we have in the past entered into,
and expect in the future to enter into, research and development collaboration arrangements pursuant to which we receive payments
from our collaborators. Some of such collaboration arrangements include advance payments in consideration for grants of exclusivity
or research and development activities to be performed by us. It has in the past been difficult for us to know with certainty when
we will sign a new collaboration arrangement and receive payments thereunder. As a result, achievement of our quarterly and annual
financial goals has been difficult to predict with certainty. Once a collaboration agreement has been signed, receipt of cash payments
and/or recognition of related revenues may depend on our achievement of research, development, production or cost milestones, which
may be difficult to predict. In addition, a portion of the advance payments we receive under our collaboration agreements is typically
classified as deferred revenue and recognized over multiple quarters or years. Since our business model depends in part on collaboration
agreements with advance payments that we recognize over time, it may also be difficult for us to rapidly increase our revenues
through additional collaborations in any period, as revenue from such new collaborations will often be recognized over multiple
quarters or years.
These factors have made it difficult to predict
future revenues and have resulted in our revenues being below our previously announced guidance or analysts’ estimates. We
continue to face these risks in the future, which may cause our stock price to decline.
A limited number of customers, collaboration partners and
distributors account for a significant portion of our revenue, and the loss of major customers, collaboration partners or distributors
could harm our operating results.
Our revenues have varied significantly from
quarter to quarter and are dependent on sales to, and collaborations with, a limited number of customers, collaboration partners
and/or distributors. We cannot be certain that customers, collaboration partners and/or distributors that have accounted for significant
revenue in past periods, individually or as a group, will continue to generate similar revenue in any future period. If we fail
to renew with, or if we lose a major customer, collaborator or distributor or group of customers, collaborators or distributors,
our revenue could decline if we are unable to replace the lost revenue with revenue from other sources.
Our existing financing arrangements may cause significant
risks to our stockholders and may impact our ability to pursue certain transactions and operate our business.
As of March 31, 2017, our debt totaled $220.9
million, net of discount and issuance costs of $42.0 million, of which $49.5 million is classified as current. Our cash balance
is substantially less than the principal amount of our outstanding debt, and we will be required to generate cash from operations
or raise additional working capital through future financings or sales of assets to enable us to repay this indebtedness as it
becomes due. There can be no assurance that we will be able to do so.
In addition, we have agreed to significant covenants
in connection with our debt financing transactions, including restrictions on our ability to incur future indebtedness, and customary
events of default, including failure to pay amounts due, breaches of covenants and warranties, material adverse effect events,
certain cross defaults and judgments, and insolvency. A failure to comply with the covenants and other provisions of our debt instruments,
including any failure to make a payment when required would generally result in events of default under such instruments, which
could permit acceleration of such indebtedness and could result in a material adverse effect on us. If such indebtedness is accelerated,
it would generally also constitute an event of default under our other outstanding indebtedness, permitting acceleration of such
other outstanding indebtedness. Any required repayment of our indebtedness as a result of acceleration or otherwise would lower
our current cash on hand such that we would not have those funds available for use in our business or for payment of other outstanding
indebtedness.
If we are at any time unable to generate sufficient
cash flow from operations to service our indebtedness when payment is due, we may be required to attempt to renegotiate the terms
of the instruments relating to the indebtedness, seek to refinance all or a portion of the indebtedness or obtain additional financing.
There can be no assurance that we would be able to successfully renegotiate such terms, that any such refinancing would be possible
or that any additional financing could be obtained on terms that are favorable or acceptable to us. Any debt financing that is
available could cause us to incur substantial costs and subject us to covenants that significantly restrict our ability to conduct
our business. If we seek to complete additional equity financings, the interests of existing equity holders may be diluted.
In addition, the covenants in our debt agreements
materially limit our ability to take certain actions, including our ability to pay dividends, make certain investments and other
payments, undertake certain mergers and consolidations, and encumber and dispose of assets. For example, the purchase agreement
for convertible notes that we sold in separate closings in October 2013 and January 2014, which we refer to as the Tranche Notes,
requires us to obtain the consent of the holders of a majority of these notes before completing any change of control transaction
or purchasing assets in one transaction or a series of related transactions in an amount greater than $20.0 million, in each case
while the Tranche Notes are outstanding. The holders of the Tranche Notes also have pro rata rights to invest in, and under which
they could cancel up to the full amount of their outstanding Tranche Notes to pay for, equity securities that we issue in certain
financings, which could delay or prevent us from completing such financings.
Furthermore, certain of our outstanding securities,
including the Tranche Notes, the 2015 144A Notes, and the Warrants, contain anti-dilution adjustment provisions, which may be triggered
by future issuances of equity or equity-linked instruments in financing transactions. If such adjustment provisions are triggered,
the conversion or exercise price of such securities will decrease and/or the number of shares issuable upon conversion or exercise
of such securities will increase. In such event, existing stockholders will be further diluted and the effective issuance price
of such equity or equity-linked instruments will be reduced, which may harm our ability to engage in future financing transactions
to fund our business.
Our substantial leverage could adversely affect our ability to fulfill our obligations
under our existing indebtedness and may place us at a competitive disadvantage in our industry.
We continue to have substantial debt outstanding
and we may incur additional indebtedness from time to time to finance working capital, product development efforts, strategic acquisitions,
investments and partnerships, or capital expenditures, or for other general corporate purposes, subject to the restrictions contained
in our debt agreements. Our significant indebtedness and debt service requirements could adversely affect our ability to operate
our business and may limit our ability to take advantage of potential business opportunities. For example, our high level of indebtedness
presents the following risks:
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we will be required to use a substantial portion of our cash flow from operations to pay principal and interest on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, product development efforts, acquisitions, investments and strategic alliances and other general corporate requirements;
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our substantial leverage increases our vulnerability to economic downturns and adverse competitive and industry conditions and could place us at a competitive disadvantage compared to those of our competitors that are less leveraged;
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our debt service obligations could limit our flexibility in planning for, or reacting to, changes in our business and our industry and could limit our ability to pursue other business opportunities, borrow more money for operations or capital in the future and implement our business strategies;
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our level of indebtedness and the covenants within our debt instruments may restrict us from raising additional financing on satisfactory terms to fund working capital, capital expenditures, product development efforts, strategic acquisitions, investments and alliances, and other general corporate requirements; and
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our substantial leverage may make it difficult for us to attract additional financing when needed.
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If we are at any time unable to generate sufficient
cash flow from operations to service our indebtedness when payment is due, we may be required to attempt to renegotiate the terms
of the instruments relating to the indebtedness, seek to refinance all or a portion of the indebtedness or obtain additional financing.
There can be no assurance that we will be able to successfully renegotiate such terms, that any such refinancing would be possible
or that any additional financing could be obtained on terms that are favorable or acceptable to us, if at all.
A failure to comply with the covenants and other
provisions of our debt instruments, including any failure to make a payment when required, could result in events of default under
such instruments, which could permit acceleration of such indebtedness. If such indebtedness is accelerated, it could also constitute
an event of default under our other outstanding indebtedness, permitting acceleration of such other outstanding indebtedness. Any
required repayment of our indebtedness as a result of acceleration or otherwise would lower our current cash on hand such that
we would not have those funds available for use in our business or for payment of other outstanding indebtedness.
Our GAAP operating results could fluctuate substantially due to the accounting
for the early conversion payment features of outstanding convertible promissory notes.
Several of our outstanding convertible debt
instruments are accounted for under Accounting Standards Codification 815, Derivatives and Hedging, or ASC 815, as an embedded
derivative. For instance, with respect to the 2015 144A Notes, if the holders elect convert their 2015 144A Notes, such converting
holders will receive an early conversion payment equal to the present value of the remaining scheduled payments of interest that
would have been made on the 2015 144A Notes being converted through April 15, 2019, the maturity date of the 2015 144A Notes. Our
6.50% Convertible Senior Notes due 2019, or the 2014 144A Notes, contain a similar early conversion payment feature, provided that
the last reported sale price of our 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 we receive a notice of such election to convert exceeds
the conversion price in effect on each such trading day. The early conversion payment features of the 2014 144A Notes and the 2015
144A Notes are accounted for under ASC 815 as embedded derivatives. ASC 815 requires companies to bifurcate conversion options
from their host instruments and account for them as free standing derivative financial instruments according to certain criteria.
The fair value of the derivative is remeasured to fair value at each balance sheet date, with a resulting non-cash gain or loss
related to the change in the fair value of the derivative being charged to earnings (loss). We have determined that we must bifurcate
and account for the early conversion payment features of the 2014 144A Notes and the 2015 144A Notes, as well as certain other
features of our other convertible debt instruments, as embedded derivatives in accordance with ASC 815. We have recorded these
embedded derivative liabilities as non-current liabilities on our consolidated balance sheet with a corresponding debt discount
at the date of issuance that is netted against the principal amount of the 2014 144A Notes, the 2015 144A Notes or other convertible
debt instrument, as applicable. The derivative liabilities are remeasured to fair value at each balance sheet date, with a resulting
non-cash gain or loss related to the change in the fair value of the derivative liabilities being recorded in other income or loss.
There is no current observable market for this type of derivative and, as such, we determine the fair value of the embedded derivatives
using the binomial lattice model. The valuation model uses the stock price, conversion price, maturity date, risk-free interest
rate, estimated stock volatility and estimated credit spread. Changes in the inputs for these valuation models may have a significant
impact on the estimated fair value of the embedded derivative liabilities. For example, an increase in our stock price results
in an increase in the estimated fair value of the embedded derivative liabilities. The embedded derivative liabilities may have,
on a GAAP basis, a substantial effect on our balance sheet from quarter to quarter and it is difficult to predict the effect on
our future GAAP financial results, since valuation of these embedded derivative liabilities are based on factors largely outside
of our control and may have a negative impact on our earnings and balance sheet. The effects of these embedded derivatives may
cause our GAAP operating results to be below expectations, which may cause our stock price to decline.
If we are not able to successfully commence, scale up or sustain
operations at our existing and planned manufacturing facilities, our customer relationships, business and results of operations
may be adversely affected.
A substantial component of our planned production
capacity in the near and long term depends on successful operations at our existing and potential large-scale production plants.
We are currently operating our first purpose-built, large-scale production plant in Brotas, Brazil and may complete construction
of certain other facilities in the coming years. Delays or problems in the construction, start-up or operation of these facilities
will cause delays in our ramp-up of production and hamper our ability to reduce our production costs. Delays in construction can
occur due to a variety of factors, including regulatory requirements and our ability to fund construction and commissioning costs.
For example, in 2012 we determined it was necessary to delay further construction of our large-scale manufacturing facility with
São Martinho in order to focus on the construction and commissioning of our Brotas facility. We have since permanently ceased
construction of the São Martinho facility. In 2016 we produced at capacity at our Brotas facility and will likely need to
identify and secure access to additional production capacity in 2017 based on anticipated volume requirements, either by constructing
a new custom-built facility, acquiring an existing facility from a third party, retrofitting an existing facility operated by a
current or potential partner or increasing our use of contract manufacturing facilities. In December 2016, we acquired a production
facility in Leland, North Carolina, which facility had been previously operated by our partner Glycotech to perform chemical conversion
and production of our end-products, and which facility was subsequently transferred to our newly-formed joint venture with Nikko
Chemicals Co., Ltd. and Nippon Surfactant Industries Co., Ltd. (or collectively “Nikko”). In addition, in February
2017 we broke ground on a second custom-built production facility adjacent to our existing Brotas facility. However, there can
be no assurance that we will be able to complete such facility on our expected timeline, if at all.
Once our large-scale production facilities are
built, acquired or retrofitted, we must successfully commission them, if necessary, and they must perform as we expect. If we encounter
significant delays, cost overruns, engineering issues, contamination problems, equipment or raw material supply constraints, unexpected
equipment maintenance requirements, safety issues, work stoppages or other serious challenges in bringing these facilities online
and operating them at commercial scale, we may be unable to produce our renewable products in the time frame and at the cost we
have planned. Industrial scale fermentation is an emerging field and it is difficult to predict the effects of scaling up production
to commercial scale, which involves various risks to the quality and consistency of our molecules. In addition, in order to produce
molecules at our existing and potential future plants, we have been and may in the future be required to perform thorough transition
activities, and modify the design of the plant. Any modifications to the production plant could cause complications in the operations
of the plant, which could result in delays or failures in production. If any of these risks occur, or if we are unable to create
or obtain additional manufacturing capacity necessary to meet existing and potential customer demand, we may need to continue to
use, or increase our use of, contract manufacturing sources, which generally entail greater cost to us to produce our products
and would therefore reduce our anticipated gross margins and may also prevent us from accessing certain markets for our products.
Further, if our efforts to increase (or commence, as the case may be) production at these facilities are not successful, our partners
may decide not to work with us to develop additional production facilities, demand more favorable terms or delay their commitment
to invest capital in our production. If we are unable to create and sustain manufacturing capacity and operations sufficient to
satisfy the existing and potential demand of our customers and partners, our business and results of operations may be adversely
affected.
Our reliance on the large-scale production plant in Brotas, Brazil subjects us
to execution and economic risks.
Our decision to focus our efforts for production
capacity on our manufacturing facility in Brotas, Brazil means that we have limited manufacturing sources for our products in 2017
and beyond. While we have undertaken efforts to identify and obtain additional manufacturing capacity for 2017 and beyond, including
the manufacturing facility in Leland, North Carolina and the proposed second manufacturing facility at the Brotas site discussed
above, there can be no assurance that such efforts will be successful on the timelines or at the cost we require, if at all. Any
production delays could have a significant negative impact on our business, including our ability to achieve commercial viability
for our products and meeting existing and potential customer demand. With the facility in Brotas, Brazil, we are, for the first
time, operating a commercial fermentation and separation facility ourselves. We have in the past faced, and may in the future face,
unexpected difficulties associated with the operation of our plants. For example, we have in the past, at certain contract manufacturing
facilities and at the Brotas facility, encountered delays and difficulties in ramping up production based on contamination in the
production process, problems with plant utilities, lack of automation and related human error, issues arising from process modifications
to reduce costs and adjust product specifications or transition to producing new molecules, and other similar challenges. We cannot
be certain that we will be able to remedy all of such challenges quickly or effectively enough to achieve commercially viable near-term
production costs and volumes.
To the extent we secure collaboration arrangements
with new or existing partners, we may be required to make significant capital investments at our existing or new facilities in
order to produce molecules or other products for such collaborations. Any failure or difficulties in establishing, building up
or retooling our operations for these new collaboration arrangements could have a significant negative impact on our business,
including our ability to achieve commercial viability for our products, lead to the inability to meet our contractual obligations
and could cause us to allocate capital, personnel and other resources from our organization which could adversely affect our business
and reputation.
As part of our arrangement to build the plant
in Brotas, Brazil we have an agreement with Tonon Bioenergia S.A., or Tonon, to purchase from Tonon sugarcane juice and syrup corresponding
to a certain number of tons of sugarcane per year, along with specified water and vapor volumes. Until this annual volume is reached,
we are restricted from purchasing sugarcane juice or syrup for processing in the facility from any third party, subject to limited
exceptions, unless we pay the premium to Tonon that we would have paid if we bought the sugarcane juice from them. As such, we
will be relying on Tonon to supply such juice and syrup and utilities on a timely basis, in the volumes we need, and at competitive
prices. If a third party can offer superior prices and Tonon does not consent to our purchasing from such third party, we would
be required to pay Tonon the applicable premium, which would have a negative impact on our production cost. Furthermore, we agreed
to pay a price for the juice or syrup that is based on the lower of the cost of two other products produced by Tonon using such
juice, plus a premium. Tonon may not want to sell sugarcane juice or syrup to us if the price of one of the other products is substantially
higher than the one setting the price for the juice or syrup we purchase. While the agreement provides that Tonon would have to
pay a penalty to us if it fails to supply the agreed-upon volume of syrup or juice for a given month, the penalty may not be enough
to compensate us for the increased cost if third-party suppliers do not offer competitive prices. Also, if the prices of the other
products produced by Tonon increase, we could be forced to pay those increased prices for production without a related increase
in the price at which we can sell our products, reducing or eliminating any margins we can otherwise achieve. If in the future
these supply terms no longer provide a viable economic structure for the operation in Brotas, Brazil we may be required to renegotiate
our agreement, which could result in manufacturing disruptions and delays. In December 2015, Tonon filed for bankruptcy protection
in Brazil. If Tonon is unable to supply sugarcane juice or syrup, water and steam in accordance with our agreement, we may not
be able to obtain substitute supplies from third parties in necessary quantities or at favorable prices, or at all. In such event,
our ability to manufacture our products in a timely or cost-effective manner, or at all, would be negatively affected, which would
have a material adverse effect on our business.
Furthermore, as we continue to scale up production
of our products, through contract manufacturers, at our existing and planned production plants in Brotas, Brazil and Leland, North
Carolina and at any future manufacturing facility, we may be required to store increasing amounts of our products for varying periods
of time and under differing temperatures or other conditions that cannot be easily controlled, which may lead to a decrease in
the quality of our products and their utility profiles and could adversely affect their value. If our stored products degrade in
quality, we may suffer losses in inventory and incur additional costs in order to further refine our stored products or we may
need to make new capital investments in shipping, improved storage or sales channels and related logistics.
Loss or termination of contract manufacturing relationships could harm our ability
to meet our production goals.
As we have focused on building and commissioning,
acquiring or retrofitting our own plants or the plants of existing or potential partners, respectively, and improving our production
economics, we have reduced our use of contract manufacturing and have terminated relationships with some of our contract manufacturing
partners. The failure to have multiple available supply options for farnesene or other target molecules could create a risk for
us if a single source or a limited number of sources of manufacturing runs into operational issues. In addition, if we are unable
to secure the services of contract manufacturers when and as needed, we may lose customer opportunities and the growth of our business
may be impaired. We cannot be sure that contract manufacturers will be available when we need their services, that they will be
willing to dedicate a portion of their capacity to our projects, or that we will be able to reach acceptable price and other terms
with them for the provision of their production services. If we shift priorities and adjust anticipated production levels (or cease
production altogether) at contract manufacturing facilities, such adjustments or cessations could also result in disputes or otherwise
harm our business relationships with contract manufacturers. In addition, reducing or stopping production at one facility while
increasing or starting up production at another facility generally results in significant losses of production efficiency, which
can persist for significant periods of time. Also, in order for production to commence under our contract manufacturing arrangements,
we generally must provide equipment for such operations, and we cannot be assured that such equipment can be ordered or installed
on a timely basis, at acceptable costs, or at all. Further, in order to establish new manufacturing facilities, we need to transfer
our yeast strains and production processes from our labs to commercial plants controlled by third parties, which may pose technical
or operational challenges that delay production or increase our costs.
Our use of contract manufacturers exposes us to risks relating
to costs, contractual terms and logistics.
While we have commenced commercial production
at our Brotas, Brazil and Leland, North Carolina plants, we continue to commercially produce, process and manufacture some specialty
molecules through the use of contract manufacturers, and we anticipate that we will continue to use contract manufacturers for
the foreseeable future for chemical conversion and production of end-products and, to mitigate cost and volume risks at our large-scale
production facilities, for production of Biofene and other fermentation target compounds. Establishing and operating contract manufacturing
facilities requires us to make significant capital expenditures, which reduces our cash and places such capital at risk. Also,
contract manufacturing agreements may contain terms that commit us to pay for capital expenditures and other costs incurred or
expected to be earned by the plant operators and owners, which can result in contractual liability and losses for us even if we
terminate a particular contract manufacturing arrangement or decide to reduce or stop production under such an arrangement.
The locations of contract manufacturers can
pose additional cost, logistics and feedstock challenges. If production capacity is available at a plant that is remote from usable
chemical finishing or distribution facilities, or from customers, we will be required to incur additional expenses in shipping
products to other locations. Such costs could include shipping costs, compliance with export and import controls, tariffs and additional
taxes, among others. In addition, we may be required to use feedstock from a particular region for a given production facility.
The feedstock available in such region may not be the least expensive or most effective feedstock for production, which could significantly
raise our overall production cost or reduce our product’s quality until we are able to optimize the supply chain.
Our operations rely on sophisticated information technology
and equipment systems and infrastructure, a disruption of which could harm our operations.
We rely on various information technology and
equipment systems, some of which are dependent on services provided by third parties, to manage our technology platform and operations.
These systems provide critical data and services for internal and external users, including procurement and inventory management,
transaction processing, financial, commercial and operational data, human resources management, legal and tax compliance information
and other information and processes necessary to operate and manage our business. These systems are complex and are frequently
updated as technology improves, and include software and hardware that is licensed, leased or purchased from third parties. If
our information technology and equipment systems experience breaches or other failures or disruptions, our systems and the information
could be compromised. While we have implemented security measures and disaster recovery plans designed to mitigate the effects
of any failures or disruption of these systems, such measures may not adequately prevent adverse events such as breaches or failures
from occurring or mitigate their severity if they do occur. If our information technology or equipment systems are breached, damaged
or fail to function properly due to internal errors or defects, implementation or integration issues, catastrophic events or power
outages, we may experience a material disruption in our ability to manage our business operations. Failure or disruption of these
systems could have an adverse effect on our operating results and financial condition.
If we are unable to reduce our production costs, we may not
be able to produce our products at competitive prices and our ability to grow our business will be limited.
In order to be competitive in the markets we
are targeting, our products must have superior qualities or be competitively priced relative to alternatives available in the market.
Currently, our costs of production are not low enough to allow us to offer some of our planned products at competitive prices relative
to alternatives available in the market. Our production costs depend on many factors that could have a negative effect on our ability
to offer our planned products at competitive prices, including, in particular, our ability to establish and maintain sufficient
production scale and volume, and feedstock cost. For example, see “
We have limited experience producing our products at
commercial scale and may not be able to commercialize our products to the extent necessary to sustain and grow our current business
,”
“
Our manufacturing operations require sugar feedstock, energy and steam, and the inability to obtain such feedstock, energy
and steam in sufficient quantities or in a timely manner, or at reasonable prices, may limit our ability to produce products profitably
or at all
,” and “
The price of sugarcane and other feedstocks can be volatile as a result of changes in industry
policy and may increase the cost of production of our products
.”
We face financial risk associated with scaling
up production to reduce our production costs. To reduce per-unit production costs, we must increase production to achieve economies
of scale and to be able to sell our products with positive margins. However, if we do not sell production output in a timely manner
or in sufficient volumes, our investment in production will harm our cash position and generate losses. Additionally, we may incur
added costs in storage and we may face issues related to the decrease in quality of our stored products, which could adversely
affect the value of such products. Since achieving competitive product prices generally requires increased production volumes and
our manufacturing operations and cash flows from sales are in their early stages, we have had to produce and sell products at a
loss in the past, and may continue to do so as we build our business. If we are unable to achieve adequate revenues from a combination
of product sales and other sources, we may not be able to invest in production and we may not be able to pursue our business plans.
In addition, in order to attract potential collaboration or joint venture partners, or to meet payment milestones under existing
or future collaboration agreements, we have in the past and may in the future be required to guarantee or meet certain levels of
production costs. If we are unable to reduce our production costs to meet such guarantees or milestones, our net cash flow will
be further reduced.
Key factors beyond production scale and feedstock
cost that impact our production costs include yield, productivity, separation efficiency and chemical process efficiency. Yield
refers to the amount of the desired molecule that can be produced from a fixed amount of feedstock. Productivity represents the
rate at which our product is produced by a given yeast strain. Separation efficiency refers to the amount of desired product produced
in the fermentation process that we are able to extract and the time that it takes to do so. Chemical process efficiency refers
to the cost and yield for the chemical finishing steps that convert our target molecule into a desired product. In order to compete
successfully in our target markets, we must produce our products at significantly lower costs, which will require both substantially
higher yields than we have achieved to date and other significant improvements in production efficiency, including in productivity
and in separation and chemical process efficiencies. There can be no assurance that we will be able to make these improvements
or reduce our production costs sufficiently to offer our planned products at competitive prices or to attract and maintain collaboration
partners, and any such failure could have a material adverse impact on our business and prospects.
Our ability to establish substantial commercial sales of our
products is subject to many risks, any of which could prevent or delay revenue growth and adversely impact our customer relationships,
business and results of operations.
There can be no assurance that our products
will be approved or accepted by customers, that customers will choose our products over competing products, or that we will be
able to sell our products profitably at prices and with features sufficient to establish demand. The markets we have entered first
are primarily those for specialty chemical products used by large consumer products or specialty chemical companies. In entering
these markets, we have sold and we intend to sell our products as alternatives to chemicals currently in use, and in some cases
the chemicals that we seek to replace have been used for many years. The potential customers for our molecules generally have well
developed manufacturing processes and arrangements with suppliers of the chemical components of their products and may have a resistance
to changing these processes and components. These potential customers frequently impose lengthy and complex product qualification
procedures on their suppliers, influenced by consumer preference, manufacturing considerations such as process changes and capital
and other costs associated with transitioning to alternative components, supplier operating history, established business relationships
and agreements, regulatory issues, product liability and other factors, many of which are unknown to, or not well understood by,
us. Satisfying these processes may take many months or years. Additionally, we may be subject to product safety testing and may
be required to meet certain regulatory and/or product safety standards. Meeting these standards can be a time consuming and expensive
process, and we may invest substantial time and resources into such qualification efforts without ultimately securing approval.
If we are unable to convince these potential customers (and the consumers who purchase products containing such chemicals) that
our products are comparable to the chemicals that they currently use or that the use of our products is otherwise to their benefit,
we will not be successful in entering these markets and our business will be adversely affected.
We expect to face competition for our products from providers
of petroleum-based products and from other companies seeking to provide alternatives to these products, and if we cannot compete
effectively against these companies or products we may not be successful in bringing our products to market or further growing
our business after we do so.
We expect that our renewable products will compete
with both the traditional, largely petroleum-based products that are currently being used in our target markets and with the alternatives
to these existing products that established enterprises and new companies are seeking to produce.
In the markets that we are initially entering,
and in other markets that we may seek to enter in the future, we will compete primarily with the established providers of ingredients
currently used in products in these markets. Producers of these incumbent products include global oil companies, large international
chemical companies and companies specializing in specific products, such as squalane or essential oils. We may also compete in
one or more of these markets with products that are offered as alternatives to the traditional petroleum-based or other traditional
products being offered in these markets.
With the emergence of many new companies seeking
to produce products from alternative sources, we may face increasing competition from such companies. As they emerge, some of these
companies may be able to establish production capacity and commercial partnerships to compete with us. If we are unable to establish
production and sales channels that allow us to offer comparable products at attractive prices, we may not be able to compete effectively
with these companies.
We believe the primary competitive factors in
our target markets are:
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product performance and other measures of quality;
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infrastructure compatibility of products;
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dependability of supply.
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The oil companies, large chemical companies
and well-established agricultural products companies with whom we compete are much larger than us, have, in many cases, well developed
distribution systems and networks for their products, have valuable historical relationships with the potential customers we are
seeking to serve and have much more extensive sales and marketing programs in place to promote their products. In order to be successful,
we must convince customers that our products are at least as effective as the traditional products they are seeking to replace
and we must provide our products on a cost basis that does not greatly exceed these traditional products and other available alternatives.
Some of our competitors may use their influence to impede the development and acceptance of renewable products of the type that
we are seeking to produce.
We believe that for our chemical products to
succeed in the market, we must demonstrate that our products are comparable alternatives to existing products and to any alternative
products that are being developed for the same markets based on some combination of product cost, availability, performance, and
consumer preference characteristics. With respect to our diesel and other transportation fuels products, we believe that our product
must perform as effectively as petroleum-based fuel, or alternative fuels, and be available on a cost basis that does not greatly
exceed these traditional products and other available alternatives. In addition, with the wide range of renewable fuels products
under development, we must be successful in reaching potential customers and convincing them that ours are effective and reliable
alternatives.
Certain rights we have granted to Total, DSM and other existing
stockholders, including in relation to our future securities offerings, could have substantial impacts on our company.
Under certain agreements between us and Total
related to Total’s original investment in our capital stock, for as long as Total owns 10% of our voting securities, it has
rights to an exclusive negotiation period if our board of directors decides to sell our company. In addition, in connection with
Total’s investments in Amyris, our certificate of incorporation includes a provision that excludes Total from prohibitions
on business combinations between Amyris and an “interested stockholder.” These provisions could have the effect of
discouraging potential acquirers from making offers to acquire us, and give Total more access to Amyris than other stockholders
if Total decides to pursue an acquisition.
In addition, Total, DSM, Temasek and certain
other investors have the right to designate one or more directors to serve on our board of directors pursuant to agreements between
us and such investors.
In May 2017, we entered into an agreement with
DSM, pursuant to which we agreed (i) that for as long as there is a DSM-designated director serving on our board of directors,
we will not engage in certain commercial or financial transactions or arrangements without the consent of such director, (ii) to
provide DSM with certain exclusive negotiating rights in connection with certain future commercial projects and arrangements, and
(iii) to use a portion of our manufacturing capacity for toll manufacturing of DSM’s products, subject to certain conditions.
These provisions could discourage other potential partners from approaching us with business opportunities, and could restrict,
delay or prevent us from pursuing or engaging in such opportunities, which could adversely affect our business.
Additionally, in connection with investments
in Amyris, we granted certain investors, including Total and DSM, a right of first investment if we propose to sell securities
in certain financing transactions. With these rights, such investors may subscribe for a portion of any such new financing and
require us to comply with certain notice periods, which could discourage other investors from participating in, or cause delays
in our ability to close, such a financing. Further, such investors in certain cases have the right to pay for any securities purchased
in connection with an exercise of their right of first investment by cancelling all or a portion of our debt held by them. To the
extent such investors exercise these rights, it will reduce the cash proceeds we may realize from the relevant financing.
Our relationship with Ginkgo Bioworks, Inc. exposes us to
financial and commercial risks.
In June 2016, we entered into an initial strategic
partnership agreement with Ginkgo Bioworks, Inc., or Ginkgo, pursuant to which we licensed certain intellectual property to Ginkgo
in exchange for a license fee and royalty, and agreed to pursue the negotiation and execution of a definitive partnership agreement
setting forth the terms of a long-term commercial partnership and collaboration arrangement between us and Ginkgo, and in September
2016 we executed a definitive collaboration agreement with Ginkgo setting forth the terms of a commercial partnership under which
the parties would collaborate to develop, manufacture and sell commercial products and would share in the value of such products.
In connection with the entry into such commercial agreements, we received a waiver under, and subsequently entered into an amendment
of, our senior secured credit facility, the agent and lender under which is an affiliate of Ginkgo, which amendment extended, subject
to certain conditions which were satisfied in January 2017, the maturity of the loans under the senior secured credit facility,
eliminated principal repayments under the facility prior to maturity, subject to the requirement that we apply certain monies received
by us under the collaboration agreement with Ginkgo to repay the outstanding loans under the facility, and waived the covenant
in the senior secured loan facility requiring the Company to maintain unrestricted, unencumbered cash in defined U.S. bank accounts
in an amount equal to at least 50% of the principal amount outstanding under the facility until the maturity date.
There can be no assurance that our partnership
with Ginkgo will be successful, and the partnership may prevent us from pursuing other business opportunities in the future. If
the partnership is unsuccessful, our ability to continue with our business plans would be adversely affected. In addition, negative
developments in our commercial partnership with Ginkgo could negatively affect our relationship with the agent and lender under
our senior secured credit facility, an affiliate of Ginkgo, which could adversely impact our ability to incur additional indebtedness
in the future or take other actions the consent for which would be required from the agent and lender under the facility. In such
event, our financial condition and business operations could be adversely affected.
If we do not meet technical, development and commercial milestones
in our collaboration agreements, our future revenue and financial results will be adversely impacted.
We have entered into a number of agreements
regarding the further development of certain of our products and, in some cases, for ultimate sale of certain products to the customer
under the agreement. None of these agreements affirmatively obligates the other party to purchase specific quantities of any products
at this time, and most contain important conditions that must be satisfied before additional research and development funding or
product purchases would occur. These conditions include research and development milestones and technical specifications that must
be achieved to the satisfaction of our collaborators, which we cannot be certain we will achieve. If we do not achieve these contractual
milestones, our revenues and financial results will be adversely affected.
We are subject to risks related to our reliance on collaboration
arrangements to fund development and commercialization of our products and the success of such products is uncertain.
For most product markets we are seeking to enter,
we either have or are seeking collaboration partners to fund the research and development, commercialization and production efforts
required for the target products. Typically we provide limited exclusive rights and revenue sharing with respect to the production
and sale of particular types of products in specific markets in exchange for such up-front funding. These exclusivity, revenue-sharing
and other similar terms limit our ability to commercialize our products and technology, and may impact the size of our business
or our profitability in ways that we do not currently envision. In addition, revenues from these types of relationships are a key
part of our cash plan for 2017 and beyond. If we fail to collect expected collaboration revenues, or to identify and add sufficient
additional collaborations to fund our planned operations, we may be unable to fund our operations or pursue development and commercialization
of our planned products. To achieve our collaboration revenue targets from year to year, we may be forced to enter into agreements
that contain less favorable terms. As part of our current and future collaboration arrangements, we may be required to make significant
capital investments at our existing or new facilities in order to produce molecules or other products for such collaborations.
Any failure or difficulties in establishing, building up or retooling our operations for these collaboration arrangements could
have a significant negative impact on our business, including our ability to achieve commercial viability for our products, lead
to the inability to meet our contractual obligations and could cause us to allocate capital, personnel and other resources from
our organization which could adversely affect our business and reputation.
With respect to pharmaceutical collaborations,
our experience in this industry is limited, so we may have difficulty identifying and securing collaboration partners and customers
for pharmaceutical applications of our products and services. Furthermore, our success in the pharmaceutical market depends primarily
upon our ability to identify and validate new small molecule compounds of pharmaceutical interest (including through the use of
our discovery platform), and identify, test, develop and commercialize such compounds. Our research efforts may initially show
promise in discovering potential new therapeutic candidates, yet fail to yield viable product candidates for clinical development
for a number of reasons, including:
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because our research methodology, including our screening technology, may not successfully identify medically relevant product candidates;
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we may identify and select from our discovery platform novel untested classes of product candidates for the particular disease indication we are pursuing, which may be challenging to validate because of the novelty of the product candidates or we may fail to validate at all after further research work;
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our product candidates may cause adverse effects in patients or subjects, even after successful initial toxicology studies, which may make the product candidates unmarketable;
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our product candidates may not demonstrate a meaningful benefit to patients or subjects; and
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collaboration partners may change their development profiles or plans for potential product candidates or abandon a therapeutic area or the development of a partnered product.
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Research programs to identify new product targets
and candidates require substantial technical, financial and human resources. We may focus our efforts and resources on potential
discovery efforts, programs or product candidates that ultimately prove to be unsuccessful.
Our collaboration arrangements may restrict or prevent our
future business activity in certain markets or industries, which could harm our ability to grow our business.
As part of our collaboration arrangements in
the ordinary course of business, we may grant to our partners exclusive rights with respect to the development, production and/or
commercialization of particular products or types of products in specific markets in exchange for up-front funding and/or downstream
value sharing arrangements. These rights might inhibit potential collaboration or strategic partners or potential customers from
entering into negotiations with us about further business opportunities, and we may be restricted or prevented from engaging with
other partners or customers in those markets, which may limit our ability to grow our business.
For example, under our Amended and Restated
Jet Fuel Agreement with Total Amyris BioSolutions B.V., or TAB, our joint venture with Total, and our License Agreement regarding
Diesel Fuel in the European Union with Total, we granted TAB and Total, respectively, certain exclusive rights to produce and commercialize
farnesene- or farnesane-based jet and diesel fuel in certain jurisdictions, as well as certain purchase rights. As a result of
these agreements, we generally no longer have an independent right to make or sell farnesene- or farnesane-based jet or diesel
fuels in such jurisdictions without the approval of TAB or Total, as applicable. If, for any reason, we would like to pursue farnesene-
or farnesane-based jet or diesel fuels in such jurisdictions independently or with a third party, these arrangements could impair
our ability to develop, produce or commercialize such jet or diesel fuels, which could have a material adverse effect on our business
and long term prospects.
In the past, we have had to grant concessions
to existing partners in exchange for such partners waiving or modifying their exclusive rights with respect to a particular product,
type of product or market so that we could engage with a third party with respect to such product, product type or market. There
can be no assurance that existing partners will be willing to grant waivers or modify their exclusive rights in the future on favorable
terms, if at all. If we are unable to engage other potential partners with respect to particular products, products types or markets
for which we have previously granted exclusive rights, our ability to grow our business would be harmed and our results of operations
may be adversely effected.
If our collaboration partners are not successful in commercializing
products that incorporate our technology, our business and results of operations may be adversely affected.
We rely on our collaboration partners to create
demand with end-users for products that incorporate our products and technologies. If such collaboration partners are unable to
create such demand, we may not be able to successfully market or sell our products. In addition, while we maintain certain clawback
rights to our technology in the event our collaboration partners are unable or unwilling to commercialize the products we create
for them under the applicable collaboration arrangement, if our collaboration partners do not commercialize the products covered
by our collaboration or supply arrangements, we may be restricted from or unable to market or sell such products or technologies
to other potential collaboration partners, which could hinder the growth of our business. If we allocate resources to collaborations
that do not lead to products that are commercially viable, our revenues, financial condition and results of operations could be
adversely affected.
In addition, certain of our collaboration partners
have the right to terminate their agreements with us if we undergo a change of control or a sale of our business, which could discourage
a potential acquirer from making an offer to acquire us.
We have limited control over our joint ventures.
As a result of the restructuring of our joint
ventures TAB and Novvi LLC during 2016, we do not have the right or power to control the management of such entities, and our joint
venture partners may take action with respect to such joint ventures which is contrary to our interests or objectives. In addition,
with respect to the joint venture we formed in December 2016 with Nikko relating to our Neossance cosmetic ingredients business,
while we hold a 50% equity interest in such joint venture and have a right to appoint one half of its board of directors, our joint
venture partners acting together will have the right to designate the Chief Executive Officer and certain other officers, which
would restrict our ability to control the operations of such joint venture. If our joint venture partners act contrary to our interest,
it could harm our brand, business, results of operations and financial condition. In addition, operating a joint venture often
requires additional organizational formalities as well as time-consuming procedures for sharing information and making decisions,
which can divert management resources, and if a joint venture partner changes or relationships deteriorate, our success in the
joint venture may be materially adversely affected, which could harm our business. Furthermore, with respect to TAB, if we were
to experience a change of control or fail to make any required capital contribution to TAB, Total has a right to buy out our interest
in TAB at fair market value. If Total were to exercise these rights, we would, in effect, relinquish our economic rights to the
intellectual property we have exclusively licensed to TAB, and our ability to seek future revenue from farnesene-based jet fuel
outside of Brazil would be adversely affected (or completely prevented). This could significantly reduce the value of our product
offerings and have a material adverse effect on our ability to grow our business in the future.
Our manufacturing operations require sugar feedstock, energy
and steam, and the inability to obtain such feedstock, energy and steam in sufficient quantities or in a timely manner, or at reasonable
prices, may limit our ability to produce our products profitably, or at all.
We anticipate that the production of our products
will require large volumes of feedstock. We have relied on a mixture of feedstock sources for use at our contract manufacturing
operations, including cane sugar, corn-based dextrose and beet molasses. For our large-scale production facility in Brazil, we
are relying primarily on Brazilian sugarcane. We cannot predict the future availability or price of these various feedstocks, nor
can we be sure that our mill partners, which we expect to supply the sugarcane feedstock necessary to produce our products in Brazil,
will be able to supply it in sufficient quantities or in a timely manner. For example, in December 2015, Tonon, one of our suppliers
of sugarcane juice and syrup, filed for bankruptcy protection in Brazil, which may adversely affect its ability to supply us with
sugarcane juice and syrup in the future. Furthermore, to the extent we are required to rely on sugar feedstock other than Brazilian
sugarcane, the cost of such feedstock may be higher than we expect, increasing our anticipated production costs. Feedstock crop
yields and sugar content depend on weather conditions, such as rainfall and temperature. Weather conditions have historically caused
volatility in the ethanol and sugar industries by causing crop failures or reduced harvests. Excessive rainfall can adversely affect
the supply of sugarcane and other sugar feedstock available for the production of our products by reducing the sucrose content
and limiting growers' ability to harvest. Crop disease and pestilence can also occur from time to time and can adversely affect
feedstock growth, potentially rendering useless or unusable all or a substantial portion of affected harvests. With respect to
sugarcane, our initial primary feedstock, seasonal availability and price, the limited amount of time during which it keeps its
sugar content after harvest, and the fact that sugarcane is not itself a traded commodity, increases these risks and limits our
ability to substitute supply in the event of such an occurrence. If production of sugarcane or any other feedstock we may use to
produce our products is adversely affected by these or other conditions, our production will be impaired, and our business will
be adversely affected.
Additionally, our facility in Brotas, Brazil
depends on large quantities of energy and steam to operate. We have a supply agreement with Cogeração de Energia
Elétrica Rhodia Brotas S.A. pursuant to which we receive energy and steam in sufficient amounts to meet our current needs.
However, we cannot predict the future availability or price of energy and steam. If, for whatever reason, we must purchase energy
or steam from a different supplier, the cost of such energy and steam may be higher than we expect, increasing our anticipated
production costs. Droughts or other weather conditions or natural disasters in Brazil may also affect energy and steam production,
cost and availability and, therefore, may adversely affect our production. If our supply and access to energy or steam is adversely
affected by these or other conditions, our production will be impaired, and our business will be adversely affected.
The price of sugarcane and other feedstocks can be volatile
as a result of changes in industry policy and may increase the cost of production of our products.
In Brazil, Conselho dos Produtores de Cana,
Açúcar e Álcool (Council of Sugarcane, Sugar and Ethanol Producers or Consecana), an industry association
of producers of sugarcane, sugar and ethanol, sets market terms and prices for general supply, lease and partnership agreements
for sugarcane. If Consecana makes changes to such terms and prices, it could result in higher sugarcane prices and/or a significant
decrease in the volume of sugarcane available for the production of our products. Furthermore, if Consecana were to cease to be
involved in this process, such prices and terms could become more volatile. Similar principles apply to the pricing of other feedstocks
as well. Any of these events could adversely affect our business and results of operations.
Our large-scale commercial production capacity is centered
in Brazil, and our business will be adversely affected if we do not operate effectively in that country.
For the foreseeable future, we will be subject
to risks associated with the concentration of essential product sourcing and operations in Brazil. The Brazilian government has
changed in the past, and may change in the future, monetary, taxation, credit, tariff, labor and other policies to influence the
course of Brazil's economy. For example, the government's actions to control inflation have at times involved setting wage and
price controls, adjusting interest rates, imposing taxes and exchange controls and limiting imports into Brazil. We have no control
over, and cannot predict what policies or actions the Brazilian government may take in the future. Our business, financial performance
and prospects may be adversely affected by, among others, the following factors:
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delays or failures in securing licenses, permits or other governmental approvals necessary to build and operate facilities and use our yeast strains to produce products;
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rapid consolidation in the sugar and ethanol industries in Brazil, which could result in a decrease in competition;
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political, economic, diplomatic or social instability in or affecting Brazil;
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changing interest rates;
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tax burden and policies;
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effects of changes in currency exchange rates;
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any changes in currency exchange policy that lead to the imposition of exchange controls or restrictions on remittances abroad;
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land reform or nationalization movements;
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changes in labor related policies;
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export or import restrictions that limit our ability to move our products out of Brazil or interfere with the import of essential materials into Brazil;
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changes in, or interpretations of foreign regulations that may adversely affect our ability to sell our products or repatriate profits to the United States;
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tariffs, trade protection measures and other regulatory requirements;
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compliance with United States and foreign laws that regulate the conduct of business abroad;
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compliance with anti-corruption laws recently enacted in Brazil;
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an inability, or reduced ability, to protect our intellectual property in Brazil including any effect of compulsory licensing imposed by government action; and
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difficulties and costs of staffing and managing foreign operations.
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We cannot predict whether the current or future
Brazilian government will implement changes to existing policies on taxation, exchange controls, monetary strategy, labor relations,
social security and the like, nor can we estimate the impact of any such changes on the Brazilian economy or our operations.
Brazil’s economy has recently experienced
quarters of slow or negative gross domestic product growth and has experienced high inflation and a growing fiscal deficit of its
federal government accounts. In addition, major corruption scandals involving members of the executive, state-controlled enterprises
and large private sector companies have been disclosed and are the subject of ongoing investigation by federal authorities. The
final outcome of these investigations and their impact on the Brazilian economy is not yet known and cannot be predicted with certainty.
In addition, during the 2016 U.S. presidential
election campaign, President Trump made comments suggesting that he was not supportive of certain existing international trade
agreements as well as that he might take action to restrict or tax products imported into the U.S. from foreign jurisdictions.
At this time, it remains unclear what President Trump will or will not do with respect to these international trade agreements
or U.S. trade policy. If President Trump takes action to withdraw from or materially modify international trade agreements or place
restrictions or tariffs on products imported from Brazil, our business, financial condition and results of operations could be
adversely affected.
We maintain operations in foreign jurisdictions
other than Brazil, and may in the future expand our operations to additional foreign jurisdictions. Many, if not all of the above-mentioned
risks also apply to our operations in such jurisdictions. If any of these risks were to occur, our operations and business would
be adversely affected.
Our international operations expose us to the risk of fluctuation
in currency exchange rates and rates of foreign inflation, which could adversely affect our results of operations.
We currently incur significant costs and expenses
in Brazilian real and may in the future incur additional expenses in foreign currencies and derive a portion of our revenues in
the local currencies of customers throughout the world. As a result, our revenues and results of operations are subject to foreign
exchange fluctuations, which we may not be able to manage successfully. During the past few decades, the Brazilian currency in
particular has faced frequent and substantial exchange rate fluctuations in relation to the United States dollar and other foreign
currencies. There can be no assurance that the Brazilian real will not significantly appreciate or depreciate against the United
States dollar in the future. We also bear the risk that the rate of inflation in the foreign countries where we incur costs and
expenses or the decline in value of the United States dollar compared to those foreign currencies will increase our costs as expressed
in United States dollars. For example, future measures by the Central Bank of Brazil to control inflation, including interest rate
adjustments, intervention in the foreign exchange market and actions to fix the value of the real, may weaken the United States
dollar in Brazil. Whether in Brazil or elsewhere, we may not be able to adjust the prices of our products to offset the effects
of inflation or foreign currency appreciation on our cost structure, which could increase our costs and reduce our net operating
margins. If we do not successfully manage these risks through hedging or other mechanisms, our revenues and results of operations
could be adversely affected.
Ethical, legal and social concerns about products using genetically modified microorganisms
could limit or prevent the use of our products and technologies and could harm our business.
Our technologies and products involve the use
of genetically modified microorganisms, or GMMs. Public perception about the safety of, and ethical, legal or social concerns over,
genetically engineered products, including GMMs, could affect public acceptance of our products. If we are not able to overcome
any such concerns relating to our products, our technologies may not be accepted by our customers or end-users. In addition, the
use of GMMs has in the past received negative publicity, which could lead to greater regulation or restrictions on imports of our
products. Further, there is a risk that products produced using our technologies could cause adverse health effects or other adverse
events, which could also lead to negative publicity. If our technologies and products are not accepted by our customers or their
end-users due to negative publicity or lack of public acceptance, our business could be significantly harmed.
Our use of genetically-modified feedstocks and yeast strains
to produce our products subjects us to risks of regulatory limitations and rejection of our products.
The use of GMMs, such as our yeast strains,
is subject to laws and regulations in many countries, some of which are new and some of which are still evolving. In the United
States, the Environmental Protection Agency (EPA), regulates the commercial use of GMMs as well as potential products produced
from GMMs. Various states or local governments within the United States could choose to regulate products made with GMMs as well.
While the strain of genetically modified yeast that we currently use for the development and commercial production of our target
molecules,
S. cerevisiae
, is eligible for exemption from EPA review because it is generally recognized as safe, we
must satisfy certain criteria to achieve this exemption, including but not limited to use of compliant containment structures and
safety procedures, and we cannot be sure that we will meet such criteria in a timely manner, or at all. If exemption of
S.
cerevisiae
is not obtained, our business may be substantially harmed. In addition to
S. cerevisiae
, we may
seek to use different GMMs in the future that will require EPA approval. If approval of different GMMs is not secured, our ability
to grow our business could be adversely affected.
In Brazil, GMMs are regulated by the National
Biosafety Technical Commission, or CTNBio. We have obtained approvals from CTNBio to use GMMs in a contained environment in our
Brazil facilities for research and development purposes as well as at contract manufacturing facilities in Brazil. In addition,
we have obtained initial commercial approvals from CTNBio for two of our yeast strains. As we continue to develop new yeast strains
and deploy our technology at new production facilities in Brazil, we will be required to obtain further approvals from CTNBio in
order to use these strains in commercial production in Brazil. We may not be able to obtain approvals from relevant Brazilian authorities
on a timely basis, or at all, and if we do not, our ability to produce our products in Brazil would be impaired, which would adversely
affect our results of operations and financial condition.
In addition to our production operations in
the United States and Brazil, we have been party to contract manufacturing agreements with parties in other production locations
around the world, including Europe. The use of GMM technology is strictly regulated in the European Union, which has established
various directives for member states regarding regulation of the use of such technology, including notification processes for contained
use of such technology. We expect to encounter GMM regulations in most, if not all, of the countries in which we may seek to establish
production capabilities and/or conduct sales to customers or end-use consumers, and the scope and nature of these regulations will
likely be different from country to country. If we cannot meet the applicable requirements in other countries in which we intend
to produce or sell products using our yeast strains, or if it takes longer than anticipated to obtain such approvals, our business
could be adversely affected. Furthermore, there are various non-governmental and quasi-governmental organizations that review and
certify products with respect to the determination of whether products can be classified as “natural” or other similar
classifications. While the certification from such non-governmental and quasi-governmental organizations is generally not mandatory,
some of our current or prospective customers, collaborators or distributors may require that we meet the standards set by such
organizations as a condition precedent to purchasing or distributing our products. We cannot be certain that we will be able to
satisfy the standards of such organizations, and any delay or failure to do so could harm our ability to sell or distribute some
or all of our products to certain customers and prospective customers, which could have a negative impact on our business.
We may not be able to obtain regulatory approval for the sale
of our renewable products.
Our renewable chemical products may be subject
to government regulation in our target markets. In the United States, the EPA administers the Toxic Substances Control Act, or
the TSCA, which regulates the commercial registration, distribution, and use of many chemicals. Before an entity can manufacture
or distribute a new chemical subject to the TSCA, it must file a Pre-Manufacture Notice, or PMN, to add the chemical to a product.
The EPA has 90 days to review the filing but may request additional data, which could significantly extend the timeline for approval.
As a result, we may not receive EPA approval to list future molecules on the TSCA registry as expeditiously as we would like, resulting
in delays or significant increases in testing requirements. A similar program exists in the European Union, called REACH. Under
this program, chemicals imported or manufactured in the European Union in certain quantities must be registered with the European
Chemicals Agency, and this process could cause delays or entail significant costs. To the extent that other countries in which
we are producing or selling (or seeking to produce or sell) our products, such as Brazil and various countries in Asia, rely on
TSCA or REACH (or similar laws and programs) for chemical registration or regulation in their jurisdictions, delays with the United
States or European authorities, or any relevant authorities in such other countries, may delay entry into these markets as well.
In addition, some of our Biofene-derived products are sold for the cosmetics market, and some countries may impose additional regulatory
requirements or permits for such uses, which could impair, delay or prevent sales of our products in those markets.
We expect to encounter regulations in most,
if not all, of the countries in which we may seek to produce, import or sell our products (and our customers may encounter similar
regulations in selling end-use products to consumers), and we cannot assure you that we (or our customers) will be able to obtain
necessary approvals in a timely manner or at all. If our products do not meet applicable regulatory requirements in a particular
country, then we (or our customers) may not be able to commercialize our products in such country and our business will be adversely
affected.
In addition, many of our products are intended
to be a component of our collaborators’ and/or customers’ (or their customers’) end-use products. Such end-use
products may be subject to various regulations, including regulations promulgated by the EPA or the United States Food and Drug
Administration. If our collaborators and customers (or their customers) are not successful in obtaining any required regulatory
approval for their end-use products that incorporate our products, or fail to comply with any applicable regulations for such end-use
products, whether due to our products or otherwise, demand for our products may decline and our revenues will be adversely affected.
Changes in government regulations, including subsidies and
economic incentives, could have a material adverse effect on our business.
The market for renewable chemical products is
heavily influenced by foreign, federal, state and local government regulations and policies. Changes to existing or adoption of
new domestic or foreign federal, state and local legislative initiatives that impact the production, distribution or sale of renewable
chemical products may harm our business. The uncertainty regarding future standards and policies may also affect our ability to
develop new renewable products or to license our technologies to third parties and to sell products to our end customers. Any inability
to address these requirements and any regulatory or policy changes could have a material adverse effect on our business, financial
condition and results of operations.
Furthermore, the production of our products
will depend on the availability of feedstock, especially sugarcane. Agricultural production and trade flows are subject to government
policies and regulations. Governmental policies affecting the agricultural industry, such as taxes, tariffs, duties, subsidies,
incentives and import and export restrictions on agricultural commodities and commodity products can influence the planting of
certain crops, the location and size of crop production, whether unprocessed or processed commodity products are traded, the volume
and types of imports and exports, and the availability and competitiveness of feedstocks as raw materials. Future government
policies may adversely affect the supply of feedstocks, restrict our ability to use sugarcane or other feedstocks to produce our
products, or encourage the use of feedstocks more advantageous to our competitors, which would put us at a commercial disadvantage
and could negatively impact our future revenues and results of operations.
We may incur significant costs to comply with environmental
laws and regulations, and failure to comply with these laws and regulations could expose us to significant liabilities.
We use hazardous chemicals and radioactive and
biological materials in our business, and such materials are subject to a variety of federal, state and local laws and regulations
governing the use, generation, manufacture, storage, handling and disposal of these materials in the United States and in Brazil.
Although we have implemented safety procedures for handling and disposing of these materials and related waste products in an effort
to comply with these laws and regulations, we cannot be sure that our safety measures will prevent accidental injury or contamination
from the use, storage, handling or disposal of hazardous materials. In the event of contamination or injury, we could be held liable
for any resulting damages, and any liability could exceed our insurance coverage. There can be no assurance that violations of
environmental, health and safety laws will not occur in the future as a result of human error, accident, equipment failure or other
causes. Compliance with applicable environmental laws and regulations may be expensive, and the failure to comply with past, present,
or future laws could result in the imposition of fines, third party property damage, product liability and personal injury claims,
investigation and remediation costs, the suspension of production, or a cessation of operations, and our liability may exceed our
total assets. Liability under environmental laws can be joint and several, without regard to comparative fault, and may be punitive
in nature. Furthermore, environmental laws could become more stringent over time, imposing greater compliance costs and increasing
risks and penalties associated with violations, which could impair our research, development or production efforts and otherwise
harm our business.
A decline in the price of petroleum and petroleum-based products
has in the past and may in the future reduce demand for some of our renewable products and may otherwise adversely affect our business.
While many of our products do not compete with,
and do not serve as alternatives to, petroleum-based products, we anticipate that some of our renewable products, and in particular
our fuels, will be marketed as alternatives to corresponding petroleum-based products. The price of oil has fallen significantly
in recent years, and accordingly, we may be unable to produce certain of our products as cost-effective alternatives to petroleum-based
products. Declining oil prices, or the perception of a sustained or future decline in oil prices, has adversely affected the prices
or demand for such products in the past and may do so in the future. During sustained periods of lower oil prices we may be unable
to sell such products at anticipated levels, which could negatively impact our operating results.
Our financial results could vary significantly from quarter
to quarter and are difficult to predict.
Our revenues and results of operations could
vary significantly from quarter to quarter because of a variety of factors, many of which are outside of our control. As a result,
comparing our results of operations on a period-to-period basis may not be meaningful. Factors that could cause our quarterly results
of operations to fluctuate include:
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achievement, or failure, with respect to technology, product development or manufacturing milestones needed to allow us to enter identified markets on a cost effective basis;
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delays or greater than anticipated expenses associated with the completion, commissioning, acquisition or retrofittting of new production facilities, or the time to ramp up and stabilize production following completion, acquisition or retrofittting of a new production facility or the transition to, and ramp up of, producing new molecules at our existing facilities;
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impairment of assets based on shifting business priorities and working capital limitations;
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disruptions in the production process at any manufacturing facility, including disruptions due to seasonal or unexpected downtime at our facilities as a result of feedstock availability, contamination, safety or other issues or other technical difficulties or the scheduled downtime at our facilities as a result of transitioning our equipment to the production of different molecules;
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losses of, or the inability to secure new, major customers, collaboration partners, suppliers or distributors;
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losses associated with producing our products as we ramp to commercial production levels;
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failure to recover value added tax (VAT) that we currently reflect as recoverable in our financial statements (e.g., due to failure to meet conditions for reimbursement of VAT under local law);
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the timing, size and mix of product sales to customers;
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increases in price or decreases in availability of feedstock;
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the unavailability of contract manufacturing capacity altogether or at reasonable cost;
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exit costs associated with terminating contract manufacturing relationships;
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fluctuations in foreign currency exchange rates;
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gains or losses associated with our hedging activities;
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change in the fair value of derivative instruments;
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fluctuations in the price of and demand for sugar, ethanol, and petroleum-based and other products for which our products are alternatives;
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seasonal variability in production and sales of our products;
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competitive pricing pressures, including decreases in average selling prices of our products;
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unanticipated expenses or delays associated with changes in governmental regulations and environmental, health, labor and safety requirements;
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reductions or changes to existing fuel and chemical regulations and policies;
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departure of executives or other key management employees resulting in transition and severance costs;
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our ability to use our net operating loss carryforwards to offset future taxable income;
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business interruptions such as earthquakes, tsunamis and other natural disasters;
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our ability to integrate businesses that we may acquire;
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our ability to successfully collaborate with business venture partners;
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risks associated with the international aspects of our business; and
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changes in general economic, industry and market conditions, both domestically and in our foreign markets.
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Due to the factors described above, among others,
the results of any quarterly or annual period may not meet our expectations or the expectations of our investors and may not be
meaningful indications of our future performance.
Loss of key personnel, including key management personnel,
and/or failure to attract and retain additional personnel could delay our product development programs and harm our research and
development efforts and our ability to meet our business objectives.
Our business involves complex, global operations
across a variety of markets and requires a management team and employee workforce that is knowledgeable in the many areas in which
we operate. As we continue to build our business, we will need to hire and retain qualified research and development, management
and other personnel to succeed. The process of hiring, training and successfully integrating qualified personnel into our operations,
in the United States, Brazil and other countries in which we may seek to operate, is a lengthy and expensive one. The market for
qualified personnel is very competitive because of the limited number of people available who have the necessary technical skills
and understanding of our technology and products, particularly in Brazil. Our failure to hire and retain qualified personnel could
impair our ability to meet our research and development and business objectives and adversely affect our results of operations
and financial condition.
The loss of any key member of our management
or key technical and operational employees, or the failure to attract or retain such employees, could prevent us from developing
and commercializing our products for our target markets and executing our business strategy. In addition, we may not be able to
attract or retain qualified employees in the future due to the intense competition for qualified personnel among biotechnology
and other technology-based businesses, particularly in the renewable chemicals and fuels area. Furthermore, reductions to our workforce
as part of cost-saving measures, such as those discussed above with respect to our 2017 operating plan, may make it more difficult
for us to attract and retain key employees. If we do not maintain the necessary personnel to accomplish our business objectives,
we may experience staffing constraints that will adversely affect our ability to meet the demands of our collaborators and customers
in a timely fashion or to support our internal research and development programs and operations. In particular, our product and
process development programs depend on our ability to attract and retain highly skilled technical and operational personnel. Competition
for such personnel from numerous companies and academic and other research institutions may limit our ability to do so on acceptable
terms. All of our employees are “at-will” employees, which means that either the employee or we may terminate their
employment at any time.
Growth may place significant demands on our management and
our infrastructure.
We have experienced, and expect to continue
to experience, expansion of our business as we continue to make efforts to develop and bring our products to market. We have grown
from 18 employees at the end of 2005 to 456 full-time employees at March 31, 2017. Our growth and diversified operations have placed,
and may continue to place, significant demands on our management and our operational and financial infrastructure. In particular,
continued growth could strain our ability to:
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manage multiple research and development programs;
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operate multiple manufacturing facilities around the world;
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develop and improve our operational, financial and management controls;
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enhance our reporting systems and procedures;
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recruit, train and retain highly skilled personnel;
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develop and maintain our relationships with existing and potential business partners;
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maintain our quality standards; and
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maintain customer satisfaction.
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Managing our growth will require significant
expenditures and allocation of valuable management resources. If we fail to achieve the necessary level of efficiency in our organization
as it grows, our business, results of operations and financial condition would be adversely impacted.
Our proprietary rights may not adequately protect our technologies
and product candidates.
Our commercial success will depend substantially
on our ability to obtain patents and maintain adequate legal protection for our technologies and product candidates in the United
States and other countries. As of March 31, 2017, we had approximately 510 issued United States and foreign patents and approximately
340 pending United States and foreign patent applications that were owned or co-owned by or licensed to us. We will be able to
protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies and
future products are covered by valid and enforceable patents or are effectively maintained as trade secrets.
We apply for patents covering both our technologies
and product candidates, as we deem appropriate. However, filing, prosecuting, maintaining and defending patents on product candidates
in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries
outside the United States are less extensive than those in the United States. We may also fail to apply for patents on important
technologies or product candidates in a timely fashion, or at all. Our existing and future patents may not be sufficiently broad
to prevent others from practicing our technologies or from designing products around our patents or otherwise developing competing
products or technologies. In addition, the patent positions of companies like ours are highly uncertain and involve complex legal
and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of patent
claims has emerged to date in the United States and the landscape is expected to become even more uncertain in view of recent rule
changes by the United States Patent Office, or USPTO. Additional uncertainty may result from legal decisions by the United States
Federal Circuit and Supreme Court as they determine legal issues concerning the scope and construction of patent claims and inconsistent
interpretation of patent laws or from legislation enacted by the U.S. Congress. The patent situation outside of the United States
is even less predictable. As a result, the validity and enforceability of patents cannot be predicted with certainty. Moreover,
we cannot be certain whether:
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we (or our licensors) were the first to make the inventions covered by each of our issued patents and pending patent applications;
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we (or our licensors) were the first to file patent applications for these inventions;
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others will independently develop similar or alternative technologies or duplicate any of our technologies;
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any of our or our licensors' patents will be valid or enforceable;
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any patents issued to us (or our licensors) will provide us with any competitive advantages, or will be challenged by third parties;
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we will develop additional proprietary products or technologies that are patentable; or
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the patents of others will have an adverse effect on our business.
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We do not know whether any of our pending patent
applications or those pending patent applications that we license will result in the issuance of any patents. Even if patents are
issued, they may not be sufficient to protect our technology or product candidates. The patents we own or license and those that
may be issued in the future may be challenged, invalidated, rendered unenforceable, or circumvented, and the rights granted under
any issued patents may not provide us with proprietary protection or competitive advantages. Moreover, third parties could practice
our inventions in territories where we do not have patent protection or in territories where they could obtain a compulsory license
to our technology where patented. Such third parties may then try to import products made using our inventions into the United
States or other territories. Accordingly, we cannot ensure that any of our pending patent applications will result in issued patents,
or even if issued, predict the breadth, validity and enforceability of the claims upheld in our and other companies' patents.
Many companies have encountered significant
problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries
do not favor the enforcement of patents or other intellectual property rights, which could hinder us from preventing the infringement
of our patents or other intellectual property rights. Proceedings to enforce our patent rights in the United States or foreign
jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could
put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could
provoke third parties to assert patent infringement or other claims against us. We may not prevail in any lawsuits that we initiate
and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our
intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual
property that we develop or license from third parties.
Unauthorized parties may attempt to copy or
otherwise obtain and use our products or technology. Monitoring unauthorized use of our intellectual property is difficult, and
we cannot be certain that the steps we have taken will prevent unauthorized use of our technology, particularly in certain foreign
countries where the local laws may not protect our proprietary rights as fully as in the United States or may provide, today or
in the future, for compulsory licenses. If competitors are able to use our technology, our ability to compete effectively could
be harmed. Moreover, others may independently develop and obtain patents for technologies that are similar to, or superior to,
our technologies. If that happens, we may need to license these technologies, and we may not be able to obtain licenses on reasonable
terms, if at all, which could cause harm to our business.
We rely in part on trade secrets to protect our technology,
and our failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
We rely on trade secrets to protect some of
our technology, particularly where we do not believe patent protection is appropriate or obtainable. However, trade secrets are
difficult to maintain and protect. Our strategy for contract manufacturing and scale-up of commercial production requires us to
share confidential information with our international business partners and other parties. Our product development collaborations
with third parties, including with Total and Ginkgo, require us to share confidential information, including with employees of
Total and Ginkgo who are seconded to Amyris during the term of the collaboration. While we use reasonable efforts to protect our
trade secrets, our or our business partners’ employees, consultants, contractors or scientific and other advisors may unintentionally
or willfully disclose our proprietary information to competitors. Enforcement of claims that a third party has illegally obtained
and is using trade secrets is expensive, time consuming and uncertain. In addition, foreign courts are sometimes less willing than
United States courts to protect trade secrets. If our competitors independently develop equivalent knowledge, methods and know-how,
we would not be able to assert our trade secrets against them.
We require new employees and consultants to
execute confidentiality agreements upon the commencement of an employment or consulting arrangement with us. We additionally require
consultants, contractors, advisors, corporate collaborators, outside scientific collaborators and other third parties that may
receive trade secret information to execute confidentiality agreements. These agreements generally require that all confidential
information developed by the individual or made known to the individual by us during the course of the individual's relationship
with us be kept confidential and not disclosed to third parties. These agreements also generally provide that inventions conceived
by the individual in the course of rendering services to us shall be our exclusive property. Nevertheless, our proprietary information
may be disclosed, or these agreements may be unenforceable or difficult to enforce. If any of our trade secrets were to be lawfully
obtained or independently developed by a competitor, we would have no right to prevent such third party, or those to whom they
communicate such technology or information, from using that technology or information to compete with us. Additionally, trade secret
law in Brazil differs from that in the United States, which requires us to take a different approach to protecting our trade secrets
in Brazil. Some of these approaches to trade secret protection may be novel and untested under Brazilian law and we cannot guarantee
that we would prevail if our trade secrets are contested in Brazil. If any of the above risks materializes, our failure to obtain
or maintain trade secret protection could adversely affect our competitive business position.
We may not be able to fully enforce covenants not to compete
with and not to solicit our employees, and therefore we may be unable to prevent our competitors from benefiting from the expertise
of such employees.
Our proprietary information and inventions agreements
with our employees contain non-compete and non-solicitation provisions. These provisions prohibit our employees from competing
directly with our business or proposed business or working for our competitors during their term of employment, and from directly
and indirectly soliciting our employees and consultants to leave our company for any purpose. Under applicable U.S. and Brazilian
law, we may be unable to enforce these provisions. If we cannot enforce these provisions with our employees, we may be unable to
prevent our competitors from benefiting from the expertise of such employees. Even if these provisions are enforceable, they may
not adequately protect our interests. The defection of one or more of our employees to a competitor could materially adversely
affect our business, results of operations and ability to capitalize on our proprietary information.
Third parties may misappropriate our yeast strains.
Third parties, including collaborators, contract
manufacturers, sugar and ethanol mill owners, other contractors and shipping agents, often have custody or control of our yeast
strains. If our yeast strains were stolen, misappropriated or reverse engineered, they could be used by other parties who may be
able to reproduce the yeast strains for their own commercial gain. If this were to occur, it would be difficult for us to challenge
and prevent this type of use, especially in countries where we have limited intellectual property protection or that do not have
robust intellectual property law regimes.
If we or one of our collaborators are sued for infringing
intellectual property rights or other proprietary rights of third parties, litigation could be costly and time consuming and could
prevent us from developing or commercializing our future products.
Our commercial success depends on our and our
collaborators’ ability to operate without infringing the patents and proprietary rights of other parties and without breaching
any agreements we have entered into with regard to our technologies and product candidates. We cannot determine with certainty
whether patents or patent applications of other parties may materially affect our ability to conduct our business. Our industry
spans several sectors, including biotechnology, renewable fuels, renewable specialty chemicals and other renewable compounds, and
is characterized by the existence of a significant number of patents and disputes regarding patent and other intellectual property
rights. Because patent applications can take several years to issue, there may currently be pending applications, unknown to us,
that may result in issued patents that cover our technologies or product candidates. We are aware of a significant number of patents
and patent applications relating to aspects of our technologies filed by, and issued to, third parties. The existence of third-party
patent applications and patents could significantly reduce the coverage of patents owned by or licensed to us and our collaborators
and limit our ability to obtain meaningful patent protection. If we wish to make, use, sell, offer to sell, or import the technology
or compound claimed in issued and unexpired patents owned by others, we will need to obtain a license from the owner, enter into
litigation to challenge the validity of the patents or incur the risk of litigation in the event that the owner asserts that we
infringe its patents. If patents containing competitive or conflicting claims are issued to third parties and these claims are
ultimately determined to be valid, we and our collaborators may be enjoined from pursing research, development, or commercialization
of products, or be required to obtain licenses to these patents, or to develop or obtain alternative technologies.
If a third party asserts that we infringe upon
its patents or other proprietary rights, we could face a number of issues that could seriously harm our competitive position, including:
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infringement and other intellectual property claims, which could be costly and time consuming to litigate, whether or not the claims have merit, and which could delay getting our products to market and divert management attention from our business;
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substantial damages for past infringement, which we may have to pay if a court determines that our product candidates or technologies infringe a third party's patent or other proprietary rights;
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a court prohibiting us from selling or licensing our technologies or future products unless the holder licenses the patent or other proprietary rights to us, which it is not required to do; and
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if a license is available from a third party, such third party may require us to pay substantial royalties or grant cross licenses to our patents or proprietary rights.
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The industries in which we operate, and the
biotechnology industry in particular, are characterized by frequent and extensive litigation regarding patents and other intellectual
property rights. Many biotechnology companies have employed intellectual property litigation as a way to gain a competitive advantage.
If any of our competitors have filed patent applications or obtained patents that claim inventions also claimed by us, we may have
to participate in interference proceedings declared by the relevant patent regulatory agency to determine priority of invention
and, thus, the right to the patents for these inventions in the United States. These proceedings could result in substantial cost
to us even if the outcome is favorable. Even if successful, an interference proceeding may result in loss of certain claims. Our
involvement in litigation, interferences, opposition proceedings or other intellectual property proceedings inside and outside
of the United States, to defend our intellectual property rights, or as a result of alleged infringement of the rights of others,
may divert management time from focusing on business operations and could cause us to spend significant resources, all of which
could harm our business and results of operations.
Many of our employees were previously employed
at universities, biotechnology, specialty chemical or oil companies, including our competitors or potential competitors. We may
be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary
information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending such
claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel and be enjoined
from certain activities. A loss of key research personnel or their work product could hamper or prevent our ability to commercialize
our product candidates, which could severely harm our business. Even if we are successful in defending against these claims, litigation
could result in substantial costs and demand on management resources.
We may need to commence litigation to enforce our intellectual
property rights, which would divert resources and management's time and attention and the results of which would be uncertain.
Enforcement of claims that a third party is
using our proprietary rights without permission is expensive, time consuming and uncertain. Significant litigation would result
in substantial costs, even if the eventual outcome is favorable to us and would divert management's attention from our business
objectives. In addition, an adverse outcome in litigation could result in a substantial loss of our proprietary rights and we may
lose our ability to exclude others from practicing our technology or producing our product candidates.
The laws of some foreign countries do not protect
intellectual property rights to the same extent as do the laws of the United States. Many companies have encountered significant
problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of certain
countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection,
particularly those relating to biotechnology and/or bioindustrial technologies. This could make it difficult for us to stop the
infringement of our patents or misappropriation of our other intellectual property rights. Proceedings to enforce our patent rights
in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business.
Moreover, our efforts to protect our intellectual property rights in such countries may be inadequate.
We do not have exclusive rights to intellectual property we
develop under U.S. federally funded research grants and contracts, including with DARPA and the Department of Energy, and we could
ultimately share or lose the rights we do have under certain circumstances.
Some of our intellectual property rights have
been or may be developed in the course of research funded by the U.S. government, including under our agreements with DARPA and
the Department of Energy. As a result, the U.S. government may have certain rights to intellectual property embodied in our current
or future products pursuant to the Bayh-Dole Act of 1980. Government rights in certain inventions developed under a government-funded
program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose.
In addition, the U.S. government has the right to require us, or an assignee or exclusive licensee to such inventions, to grant
licenses to any of these inventions to a third party if they determine that: (i) adequate steps have not been taken to commercialize
the invention; (ii) government action is necessary to meet public health or safety needs; (iii) government action is necessary
to meet requirements for public use under federal regulations; or (iv) the right to use or sell such inventions is exclusively
licensed to an entity within the U.S. and substantially manufactured outside the U.S. without the U.S. government’s prior
approval. Additionally, we may be restricted from granting exclusive licenses for the right to use or sell our inventions created
pursuant to such agreements unless the licensee agrees to additional restrictions (e.g., manufacturing substantially all of the
invention in the U.S.). The U.S. government also has the right to take title to these inventions if we fail to disclose the invention
to the government and fail to file an application to register the intellectual property within specified time limits. In addition,
the U.S. government may acquire title in any country in which a patent application is not filed within specified time limits. Additionally,
certain inventions are subject to transfer restrictions during the term of these agreements and for a period thereafter, including
sales of products or components, transfers to foreign subsidiaries for the purpose of the relevant agreements, and transfers to
certain foreign third parties. If any of our intellectual property becomes subject to any of the rights or remedies available to
the U.S. government or third parties pursuant to the Bayh-Dole Act of 1980, this could impair the value of our intellectual property
and could adversely affect our business.
Our products subject us to product-safety risks, and we may
be sued for product liability.
The design, development, production and sale
of our products involve an inherent risk of product liability claims and the associated adverse publicity. Our potential products
could be used by a wide variety of consumers with varying levels of sophistication. Although safety is a priority for us, we are
not always in control of the final uses and formulations of the products we supply or their use as ingredients. Our products could
have detrimental impacts or adverse impacts we cannot anticipate. Despite our efforts, negative publicity about Amyris, including
product safety or similar concerns, whether real or perceived, could occur, and our products could face withdrawal, recall or other
quality issues. In addition, we may be named directly in product liability suits relating to our products, even for defects resulting
from errors of our commercial partners, contract manufacturers, chemical finishers or customers or end users of our products. These
claims could be brought by various parties, including customers who are purchasing products directly from us or other users who
purchase products from our customers. We could also be named as co-parties in product liability suits that are brought against
the contract manufacturers or Brazilian sugar and ethanol mills with whom we partner to produce our products. Insurance coverage
is expensive, may be difficult to obtain and may not be available in the future on acceptable terms. We cannot be certain that
our contract manufacturers or the sugar and ethanol producers who partner with us to produce our products will have adequate insurance
coverage to cover against potential claims. Any insurance we do maintain may not provide adequate coverage against potential losses,
and if claims or losses exceed our liability insurance coverage, our business would be adversely impacted. In addition, insurance
coverage may become more expensive, which would harm our results of operations.
We may become subject to lawsuits or indemnity claims in the
ordinary course of business, which could materially and adversely affect our business and results of operations.
From time to time, we may in the ordinary course
of business be named as a defendant in lawsuits, indemnity claims and other legal proceedings. These actions may seek, among other
things, compensation for alleged personal injury, employment discrimination, breach of contract, property damage and other losses
or injunctive or declaratory relief. In the event that such actions, claims or proceedings are ultimately resolved unfavorably
to us at amounts exceeding our accrued liability, or at material amounts, the outcome could materially and adversely affect our
reputation, business and results of operations. In addition, payments of significant amounts, even if reserved, could adversely
affect our liquidity position.
If we fail to maintain an effective system of internal controls,
we may not be able to report our financial results accurately or in a timely manner or prevent fraud; in that case, our stockholders
could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our stock.
Effective internal controls are necessary for
us to provide reliable financial reports and prevent fraud. In addition, Section 404 of the Sarbanes-Oxley Act of 2002, or Section
404, requires us to evaluate and report on our internal control over financial reporting. The process of implementing our internal
controls and complying with Section 404 is expensive and time consuming, and requires significant attention of management. We cannot
be certain that these measures will ensure that we maintain adequate controls over our financial processes and reporting in the
future. In addition, to the extent we create joint ventures or have any variable interest entities and the financial statements
of such entities are not prepared by us, we will not have direct control over their financial statement preparation. As a result,
we will, for our financial reporting, depend on what these entities report to us, which could result in us adding monitoring and
audit processes and increase the difficulty of implementing and maintaining adequate controls over our financial processes and
reporting in the future and could lead to delays in our external reporting. In particular, this may occur where we are establishing
such entities with commercial partners that do not have sophisticated financial accounting processes in place, or where we are
entering into new relationships at a rapid pace, straining our integration capacity. Additionally, if we do not receive the information
from the joint venture or variable interest entity on a timely basis, it could cause delays in our external reporting. Even if
we conclude that our internal control over financial reporting provides reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles,
because of its inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements.
Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our results
of operations or cause us to fail to meet our reporting obligations. If we or our independent registered public accounting firm
discover a material weakness in our internal control over financial reporting, the disclosure of that fact, even if quickly remedied,
could reduce the market’s confidence in our financial statements and harm our stock price. In addition, failure to comply
with Section 404 could subject us to a variety of administrative sanctions, including SEC action, ineligibility for short form
resale registration, the suspension or delisting of our common stock from the stock exchange on which it is listed, and the inability
of registered broker-dealers to make a market in our common stock, which would further reduce our stock price and could harm our
business.
If we fail to comply with our obligations as a public company, our business may
be adversely affected.
As a public company, we incur significant legal,
accounting and other expenses in connection with our obligations under applicable securities laws, including the internal and external
costs of maintaining the system of internal controls discussed above as well as the costs of preparing and distributing periodic
public reports, including financial statements and footnotes. In addition, changing laws, rules and regulations relating to corporate
governance and public disclosure, including regulations implemented by the SEC and NASDAQ, increase our legal and financial costs,
including costs relating to monitoring, evaluating and complying with such laws, rules and regulations. These laws, rules and regulations
are subject to varying interpretations and may evolve over time as new guidance is provided by regulatory and governing bodies,
which may result in increased compliance and governance costs and the diversion of management resources. If our efforts to comply
with such laws, rules and regulations are not successful, we could be subject to fines, penalties or regulatory proceedings, which
can be time consuming and costly to litigate and could lead to negative publicity about our company. These events could also make
it more difficult for us to attract and retain qualified members of our board of directors, executive officers and other employees.
If any of these risks occur, or if these requirements divert our management’s attention from other business concerns, they
could have a material adverse effect on our business, financial condition and results of operations.
Our ability to use our net operating loss carryforwards to
offset future taxable income may be subject to certain limitations.
In general, under Section 382 of the Internal
Revenue Code, or the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability
to utilize its pre-change net operating loss carryforwards, or NOLs, to offset future taxable income. If the Internal Revenue Service
challenges our analysis that our existing NOLs are not subject to limitations arising from previous ownership changes, or if we
undergo an ownership change in the future, our ability to utilize NOLs could be limited by Section 382 of the Code. Future changes
in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the
Code. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations under
Section 382 of the Code. For these reasons, we may not be able to utilize a material portion of our NOLs as of March 31, 2017,
even if we attain profitability, which could adversely affect our results of operations.
Loss of, or inability to secure government contract revenues
could impair our business.
We have contracts or subcontracts with certain
governmental agencies or their contractors. Generally, these agreements, as they may be amended or modified from time to time,
have fixed terms and may be terminated, modified or be subject to recovery of payments by the government agency under certain conditions
(such as failure to comply with detailed reporting and governance processes or failure to achieve milestones). Under these agreements,
we are also subject to audits, which can result in corrective action plans and penalties up to and including termination. If these
governmental agencies terminate these agreements with us, it could reduce our revenues which could harm our business. Additionally,
we anticipate securing additional government contracts as part of our business plan for 2017 and beyond. If we are unable to secure
such government contracts, it could harm our business.
Our headquarters and other facilities are located in an active
earthquake and tsunami zone, and an earthquake or other type of natural disaster affecting us or our suppliers could cause resource
shortages, disrupt our business and harm our results of operations.
We conduct our primary research and development
operations in the San Francisco Bay Area in an active earthquake and tsunami zone, and certain of our suppliers conduct their operations
in the same region or in other locations that are susceptible to natural disasters. In addition, California and some of the locations
where certain of our suppliers are located have experienced shortages of water, electric power and natural gas from time to time.
The occurrence of a natural disaster, such as an earthquake, drought or flood, or localized extended outages of critical utilities
or transportation systems, or any critical resource shortages, affecting us or our suppliers could cause a significant interruption
in our business, damage or destroy our facilities, production equipment or inventory or those of our suppliers and cause us to
incur significant costs or result in limitations on the availability of our raw materials, any of which could harm our business,
financial condition and results of operations. The insurance we maintain against fires, earthquakes and other natural disasters
may not be adequate to cover our losses in any particular case.
Risks Related to Ownership of Our Common Stock
Our stock price may be volatile.
The market price of our common stock has been,
and we expect it to continue to be, subject to significant volatility, and it has declined significantly from our initial public
offering price. As of October 17, 2017, the reported closing price of our common stock on The NASDAQ Stock Market was $3.23 per
share. Market prices for securities of early stage companies have historically been particularly volatile. Such fluctuations could
be in response to, among other things, the factors described in this “Risk Factors” section, or other factors, some
of which are beyond our control, such as:
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fluctuations in our financial results or outlook or those of companies perceived to be similar to us;
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changes in estimates of our financial results or recommendations by securities analysts;
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changes in market valuations of similar companies;
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changes in the prices of commodities associated with our business such as sugar, ethanol and petroleum or changes in the prices of commodities that some of our products may replace, such as oil and other petroleum sourced products;
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changes in our capital structure, such as future issuances of securities or the incurrence of debt;
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announcements by us or our competitors of significant contracts, acquisitions or strategic alliances;
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regulatory developments in the United States, Brazil, and/or other foreign countries;
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litigation involving us, our general industry or both;
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additions or departures of key personnel;
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investors' general perception of us; and
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changes in general economic, industry and market conditions.
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Furthermore, stock markets have experienced
price and volume fluctuations that have affected, and continue to affect, the market prices of equity securities of many companies.
These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market
fluctuations, as well as general economic, political and market conditions, such as recessions, interest rate changes and international
currency fluctuations, may negatively affect the market price of our common stock.
In the past, many companies that have experienced
volatility and sustained declines in the market price of their stock have become subject to securities class action and derivative
action litigation. We were involved in two such lawsuits which were dismissed in 2014, are currently involved in two such lawsuits,
and we may be the target of this type of litigation in the future. Securities litigation against us could result in substantial
costs and divert our management’s attention from other business concerns, which could seriously harm our business.
If our common stock is delisted from The NASDAQ Stock Market,
our business, financial condition, results of operations and stock price could be adversely affected, and the liquidity of our
stock and our ability to obtain financing could be impaired.
On June 14, 2016, we received a notice from
The NASDAQ Stock Market LLC, or NASDAQ, notifying us that we were not in compliance with the requirement of NASDAQ Listing Rule
5450(a)(1) for continued listing on The NASDAQ Global Market, or the Minimum Bid Price Listing Rule, as a result of the closing
bid price of our common stock being below $1.00 per share for 30 consecutive business days. In accordance with NASDAQ Listing Rule
5810(c)(3)(A), we had 180 calendar days, or until December 12, 2016, to regain compliance with the Minimum Bid Price Listing Rule.
To regain compliance, the closing bid price of our common stock had to be at least $1.00 per share for a minimum of 10 consecutive
business days. On November 1, 2016, we received a notice from NASDAQ that we had regained compliance with the Minimum Bid Price
Listing Rule. Subsequently, on December 19, 2016, we received a notice from NASDAQ notifying us that we were again not in compliance
with the Minimum Bid Price Listing Rule as a result of the closing bid price of our common stock being below $1.00 per share for
30 consecutive business days. In accordance with NASDAQ Listing Rule 5810(c)(3)(A), we had 180 calendar days, or until June 19,
2017, to regain compliance with the Minimum Bid Price Listing Rule. On June 5, 2017, after receiving board and stockholder approval,
we amended our certificate of incorporation to implement a 1-for-15 reverse stock split of our common stock as well as a reduction
of the total number of authorized shares of our common stock from 500,000,000 to 250,000,000. On June 20, 2017, we received a letter
from NASDAQ notifying us that we had regained compliance with the Minimum Bid Price Listing Rule as a result of the closing bid
price of our common stock being at $1.00 per share or greater for the 10 consecutive business days from June 6, 2017 to June 19,
2017. There can be no assurance that we will maintain compliance with the Minimum Bid Price Listing Rule in the future or that
our common stock will remain listed on The NASDAQ Stock Market.
Any delisting of our common stock from The NASDAQ
Stock Market could adversely affect our ability to attract new investors, decrease the liquidity of our outstanding shares of common
stock, reduce our flexibility to raise additional capital, reduce the price at which our common stock trades, and increase the
transaction costs inherent in trading such shares with overall negative effects for our stockholders. In addition, the delisting
of our common stock could deter broker-dealers from making a market in or otherwise seeking or generating interest in our common
stock, and might deter certain institutions and persons from investing in our securities at all. Furthermore, the delisting of
our common stock from The NASDAQ Stock Market would constitute a breach under certain of our financing agreements, including agreements
governing our outstanding convertible indebtedness, which could result in an acceleration of such indebtedness. If such indebtedness
is accelerated, it would generally also constitute an event of default under our other outstanding indebtedness, permitting acceleration
of such other outstanding indebtedness as well. For these reasons and others, the delisting of our common stock from The NASDAQ
Stock Market could materially adversely affect our business, financial condition and results of operations.
The concentration of our capital stock ownership with insiders will limit the ability
of other stockholders to influence corporate matters and presents risks related to the operations of our significant stockholders.
As of July 31, 2017:
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our executive officers and directors together held approximately 7% of our outstanding common stock;
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Temasek (which has a designee on our Board of Directors) held approximately 13% of our outstanding common stock; and
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Total (which has a designee on our Board of Directors) held approximately 17% of our outstanding common stock.
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Furthermore, Total and Temasek each hold certain
of our convertible promissory notes, which are convertible into approximately 3,102,120 and 178,073 shares of our common stock,
respectively, as of July 31, 2017. Total and Temasek also hold certain warrants pursuant to which they may purchase shares of our
common stock. This significant concentration of share ownership may adversely affect the trading price of our common stock because
investors often perceive disadvantages in owning stock in companies with stockholders with significant interests. Also, these stockholders,
acting together, may be able to control or significantly influence our management and affairs and matters requiring stockholder
approval, including the election of directors and the approval of significant corporate transactions, such as mergers, consolidations
or the sale of all or substantially all of our assets, and may not act in the best interests of our other stockholders. Consequently,
this concentration of ownership may have the effect of delaying or preventing a change of control, including a merger, consolidation
or other business combination involving us, or a change in our management or board of directors, or discouraging a potential acquirer
from making a tender offer or otherwise attempting to obtain control of our company, even if such actions would benefit our other
stockholders.
In addition, certain of our commercial partners,
including Total and DSM, hold a significant portion of our capital stock and have various rights in connection with their security
ownership in us. These stockholders may have interests that are different from those of our other stockholders, including with
respect to commercial transactions between our company and such commercial partners or their affiliates. While we have a related-party
transactions policy that requires certain approvals of any transaction between our company and a significant stockholder or its
affiliates, there can be no assurance that our significant stockholders will act in the best interests of our other stockholders,
which could harm our results of operations and cause our stock price to decline.
The market price of our common stock could be negatively affected by future sales
of our common stock.
If our existing stockholders, particularly our
largest stockholders, our directors, their affiliates, or our executive officers, sell a substantial number of shares of our common
stock in the public market, the market price of our common stock could decrease significantly. The perception in the public market
that these stockholders might sell our common stock could also depress the market price of our common stock and could impair our
future ability to obtain capital, especially through an offering of equity securities.
We have in place, or have agreed to file, registration
statements for the resale of certain shares of common stock held by, or issuable to, certain of our largest stockholders. All common
stock sold pursuant to an offering covered by such registration statement will be freely transferable.
In addition, shares issued or issuable under
our equity incentive plans have been registered on Form S-8 registration statements and may be freely sold in the public market
upon issuance, except for shares held by affiliates who have certain restrictions on their ability to sell.
Conversion of our outstanding convertible promissory notes
or convertible preferred stock or the exercise of outstanding warrants to purchase our common stock may dilute the ownership interest
of existing stockholders and may depress the market price of our common stock.
The conversion of some or all of our outstanding
convertible promissory notes or shares of convertible preferred stock or the exercise of some or all of outstanding warrants to
purchase our common stock may dilute the ownership interests of existing stockholders. In particular, the exercise of certain warrants
which have a $0.15 per share exercise price may significantly dilute the economic ownership interest of our existing stockholders.
In addition, any sales in the public market of the shares of our common stock issuable upon such conversion or exercise could adversely
affect prevailing market prices of our common stock. Furthermore, the existence of our outstanding convertible promissory notes,
shares of convertible preferred stock and warrants (including anti-dilution adjustment provisions contained therein which could
lead to a reduction in the conversion or exercise price and/or additional shares of common stock being issuable upon conversion
or exercise) may encourage short selling by market participants because the anticipated conversion of such notes or shares of preferred
stock into, or exercise of such warrants for, shares of our common stock could depress the market price of our common stock.
If securities or industry analysts do not publish or cease
publishing research or reports about us, our business or our market, or if they change their recommendations regarding our stock
adversely, our stock price and trading volume could decline.
The trading market for our common stock will
be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or
our competitors. If any of the analysts who cover us change their recommendation regarding our stock adversely, or provide more
favorable relative recommendations about our competitors, our stock price would likely decline. If any analyst who may cover us
were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets,
which in turn could cause our stock price or trading volume to decline.
We do not expect to declare any dividends in the foreseeable
future.
We do not anticipate declaring any cash dividends
to holders of our common stock in the foreseeable future. In addition, certain of our equipment leases and credit facilities currently
restrict our ability to pay dividends. Consequently, investors may need to rely on sales of their common stock after price appreciation,
which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should
not purchase our common stock.
Anti-takeover provisions contained in our certificate of incorporation
and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Our certificate of incorporation and bylaws
contain provisions that could delay or prevent a change in control of our company. These provisions could also make it more difficult
for stockholders to elect directors and take other corporate actions. These provisions include:
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a staggered board of directors;
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authorizing the board of directors to issue, without stockholder approval, preferred stock with rights senior to those of our common stock;
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authorizing the board of directors to amend our bylaws, to increase the number of directors and to fill board vacancies until the end of the term of the applicable class of directors;
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prohibiting stockholder action by written consent;
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limiting the liability of, and providing indemnification to, our directors and officers;
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eliminating the ability of our stockholders to call special meetings; and
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requiring advance notification of stockholder nominations and proposals.
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Section 203 of the Delaware General Corporation
Law prohibits, subject to some exceptions, “business combinations” between a Delaware corporation and an “interested
stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporation's
voting stock, for a three-year period following the date that the stockholder became an interested stockholder. We have agreed
to opt out of Section 203 through our certificate of incorporation, but our certificate of incorporation contains substantially
similar protections to our company and stockholders as those afforded under Section 203, except that we have agreed with Total
that it and its affiliates will not be deemed to be “interested stockholders” under such protections.
In addition, we have an agreement with Total
which provides that, so long as Total holds at least 10% of our voting securities, we must inform Total of any offer to acquire
us or any decision of our Board of Directors to sell our company, and we must provide Total with information about the contemplated
transaction. In such events, Total will have an exclusive negotiating period of fifteen business days in the event the Board of
Directors authorizes us to solicit offers to buy Amyris, or five business days in the event that we receive an unsolicited offer
to purchase us. This exclusive negotiation period will be followed by an additional restricted negotiation period of ten business
days, during which we are obligated to continue to negotiate with Total and will be prohibited from entering into an agreement
with any other potential acquirer.
These and other provisions in our certificate of incorporation and
our bylaws that became effective upon the completion of our initial public offering under Delaware law and in our agreements with
Total could discourage potential takeover attempts, reduce the price that investors might be willing to pay in the future for shares
of our common stock and result in the market price of our common stock being lower than it would be without these provisions.