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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____

Commission File Number: 001-34885
____________________________________________________
AMYRIS, INC.
(Exact name of registrant as specified in its charter)
Delaware
55-0856151
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

5885 Hollis Street, Suite 100, Emeryville, California 94608
(Address of principal executive offices and Zip Code)

(510) 450-0761
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, $0.0001 par value per share
AMRS
The Nasdaq Stock Market LLC
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes ☒  No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ☐   No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒   No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒   No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☒ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐   No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2020, the last business day of the registrant's most recently completed second fiscal quarter, was $516.7 million based upon the closing price of the registrant’s common stock reported for such date on the Nasdaq Global Select Market.
Number of shares of the registrant’s common stock outstanding as of February 28, 2021: 263,920,258

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be filed for its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III hereof. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K.



AMYRIS, INC.

FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2020
TABLE OF CONTENTS

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Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Annual Report on Form 10-K other than statements of historical fact, including any projections of financing needs, revenue, expenses, earnings or losses from operations, or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning product research, development and commercialization plans and timelines; any statements regarding expected production capacities, volumes and costs; any statements regarding anticipated benefits of our products and expectations for commercial relationships; any other statements of expectation or belief; and any statements of assumptions underlying any of the foregoing, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "predict," "intend," "expect," and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item 1A, "Risk Factors" in this Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Annual Report on Form 10-K may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements contained herein.

We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Unless expressly indicated or the context requires otherwise, the terms "Amyris," the "Company," "we," "us," and "our" in this Annual Report on Form 10-K refer to Amyris, Inc., a Delaware corporation, and, where appropriate, its consolidated entities.






PART I

ITEM 1. BUSINESS

Overview

As a leading synthetic biotechnology company active in the Clean Health and Beauty markets through our consumer brands and a top supplier of sustainable and natural ingredients, we apply our proprietary Lab-to-Market biotechnology platform to engineer, manufacture and market high performance, natural and sustainably sourced products. We do so with the use of computational tools, strain construction tools, screening and analytics tools, and advanced lab automation and data integration. Our biotechnology platform enables us to rapidly engineer microbes and use them as catalysts to metabolize renewable, plant-sourced sugars into high-value ingredients that we manufacture at industrial scale. Through the combination of our biotechnology platform and our industrial fermentation process, we have successfully developed, produced and commercialized thirteen distinct molecules used in formulations by thousands of leading global brands.

We believe that synthetic biology represents a third industrial revolution, bringing together biology and engineering to generate new, more sustainable materials to meet the growing global demand for bio-based replacements of petroleum-based and traditional animal- or plant-derived ingredients. We continue to generate demand for our current portfolio of products through an extensive go-to-market network provided by our partners that are the leading companies in our target markets. Via our partnership model, our partners invest in the development of molecules to take it from the lab to commercial scale and use their extensive marketing and sales capabilities to sell our ingredients and formulations to their customers. We capture long-term revenue both through the production and sale of our molecules to our partners and through royalty revenues from our partners' product sales to their customers. We have also successfully formulated our unique, natural and sustainably-sourced ingredients into wholly-owned consumer brands, including Biossance® our clean beauty skincare brand, Pipette®, our baby and mother care brand, and PurecaneTM, our alternative sweetener brand. We are marketing our brands directly to consumers via our ecommerce platforms, in brick-and-mortar stores, and online via various retail partners.

We were founded in 2003 in the San Francisco Bay area by a group of scientists from the University of California, Berkeley. Through a grant in 2005 from the Bill & Melinda Gates Foundation, we developed technology capable of creating microbial strains that produce artemisinic acid, a precursor of artemisinin, an anti-malarial drug.

We produced a renewable farnesene brand, Biofene®, a long-chain, branched hydrocarbon molecule that we manufacture through fermentation using engineered microbes. Our farnesene derivatives are sold in hundreds of products as nutraceuticals, skincare products, fragrances, solvents, polymers, and lubricant ingredients. In 2014, we began manufacturing additional molecules for the Flavor & Fragrance industry; in 2015, we began investing to expand our capabilities to other small molecule chemical classes via our collaboration with the Defense Advanced Research Projects Agency (DARPA); and in 2016, we expanded into proteins. We then made the strategic decision to transition our business model from low margin commodity markets to higher margin specialty ingredients markets. We began the transition by first commercializing and supplying farnesene-derived squalane as a cosmetic ingredient to formulators and distributors. We also entered into collaboration and supply agreements for the development and commercialization of molecules within the Flavor & Fragrance and Clean Beauty markets. We partner with our customers to create sustainable, high performing, low-cost molecules that replace an ingredient in their supply chains. We commercially scale and manufacture those molecules. Our revenue is generated from research and development collaboration programs, grants, renewable product sales, and license and royalty revenues from our renewable product portfolios.

All of our non-government partnerships include commercial terms for the supply of molecules we produce at commercial scale. The first molecule to generate revenue for us outside of farnesene was a fragrance molecule launched in 2015. Since the launch, this and additional fragrance molecules have continued to generate sales year over year. Our partners for these molecules are indicating continued strong growth due to their cost advantaged position, high purity of our molecules and our sustainable production method. In 2019, we commercially produced and shipped our Reb M product that is an alternative sweetener and sugar replacement for food and beverages. In 2020, we added a total of six new ingredients to our portfolio. We have a pipeline that can deliver an estimated two to three new molecules each year over the coming years.

Our time to market for molecules has decreased from seven years to less than a year for our most recent molecule, mainly due to our ability to leverage our biotechnology platform with proprietary computational tools, strain construction tools, screening and analytics tools, and advanced lab automation and data integration. Our state-of-the-art infrastructure includes industry-leading strain engineering and lab automation located in Emeryville, California, pilot-scale production facilities in Emeryville, California and Campinas, Brazil, a demonstration-scale facility in Campinas, Brazil and a commercial scale production facility in Leland, North Carolina (owned and operated by our Aprinnova joint venture). We are able to use a wide
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variety of feedstocks for production but have focused on sourcing Brazilian sugarcane for our large-scale production because of its renewability, low cost and relative price stability. We are constructing a new purpose-built, large-scale specialty ingredients facility in Brazil, which we anticipate will allow for the manufacture of up to five products concurrently, including both our specialty ingredients portfolio and our alternative sweetener product. In September 2019, we obtained the necessary permits and broke ground for this facility, and we expect construction to be completed by the end of 2021. During construction, we continue to manufacture our products at manufacturing sites in Brazil, the U.S. and Europe.

In 2017, we decided to monetize the use of one of our lower margin molecules, farnesene, in certain fields of use while retaining any associated royalties. We began discussions with our partners and ultimately made the decision to license farnesene to Koninklijke DSM N.V. (DSM) for use in these fields. We also sold to DSM our subsidiary Amyris Brasil Ltda. (Amyris Brasil), which owned and operated the purpose-built, large-scale manufacturing facility in Brotas, Brazil that manufactures farnesene, a key, bio-based intermediate ingredient in certain of our products.

The Brotas facility was built to batch manufacture one commodity product at a time (originally for high-volume production of biofuels, a business we have exited), which is not suited for the high margin specialty markets in which we operate today. We are in the process of constructing a new purpose-built, large-scale production facility in Brazil (see the Manufacturing section below). As part of the December 2017 sale of the Brotas facility, we contracted with DSM for the use of the Brotas facility to manufacture products to fulfill our product supply commitments to our customers until our new production facility becomes operational. In September 2019, we obtained the necessary permits and broke ground on our new Brazil plant. We expect facility construction to be completed by the end of 2021. During construction, we continue to manufacture our products at contract manufacturing sites in Brazil, the U.S. and Europe.

In the second quarter of 2018, we successfully demonstrated our industrial process at full-scale to produce a high-purity, zero calorie sweetener derived from sugarcane, and in December 2018, we received notification from the U.S. Food and Drug Administration (the FDA) that we received its "Generally Recognized As Safe" (GRAS) designation concurrence, and began producing commercial quantities of Steviol Glycoside Rebaudioside M (or Reb M) during the fourth quarter of 2018. When derived from the Stevia plant, Reb M is found in very limited quantities. The Reb M we produce from sugarcane is more sustainable and lower cost than other natural sweeteners and has a technical profile that we believe is advantaged in taste and total process economics for blends and formulations.

In the second quarter of 2018, we executed an agreement for a significant project consortium in Europe with the Universidade Católica Portuguesa (UCP) Porto Campus and AICEP Portugal Global (AICEP). UCP is a university system, including the leading biotech school in Portugal, and operates 15 research centers. AICEP is an independent public entity of the Government of Portugal, focused in encouraging foreign companies to invest in Portugal. In conjunction with this agreement, we opened a subsidiary in Porto, Portugal with the primary purpose to conduct a research and development project together with Escola Superior de Biotecnologia o Universidade Católica Portuguese. This subsidiary is the second R&D center of Amyris and responsible for certain areas of research, namely valorization of fermentation residues and wastes and the advancement of the Company's Artificial Intelligence (AI) and Informatics platform. The overall multi-year project is valued up to approximately $50 million including investment funding and incentives allotted across the parties involved. We have sole responsibility for commercialization and majority ownership of all intellectual property (IP) generated. We believe this is the largest biotechnology grant ever awarded in Portugal and one of the largest ever approved by the AICEP for commercial applications.

In the third quarter of 2018, we entered into a license and collaboration agreement with a subsidiary of Yifan Pharmaceutical Co., Ltd. (Yifan), which is one of the leading Chinese pharmaceutical companies. Such license and collaboration agreement was expanded in November 2018 and again in December 2019.

In May 2019, we consummated a research, collaboration and license agreement (the Cannabinoid Agreement) with LAVVAN, Inc., a newly formed investment-backed company (Lavvan), for the development, manufacture and commercialization of cannabinoids. Under the agreement, the Company will perform research and development activities and Lavvan will be responsible for the commercialization of the cannabinoids developed under the agreement. The Cannabinoid Agreement funding is on a milestone basis, with the Company also entitled to receive certain supplementary research and development funding from Lavvan. The agreement provided aggregate funding of up to $300 million over the term of the Cannabinoid Agreement if all of the milestones are achieved. Additionally, the agreement provides for royalties to the Company on Lavvan's gross profit margin once products are commercialized. Consummation of the transactions contemplated by the Cannabinoid Agreement included the formation of a special purpose entity to hold certain intellectual property created during the collaboration (the Cannabinoid Collaboration IP), the licensing of certain Company intellectual property to Lavvan, the licensing of the Cannabinoid Collaboration IP to the Company and Lavvan, and the granting by the Company to Lavvan of a lien on our background intellectual property being licensed to Lavvan under the Cannabinoid Agreement, which would be
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subordinated to the lien on such intellectual property under the Foris LSA debt facility; see Note 4, “Debt” in Part II, Item 8 of this Annual Report on Form 10-K for more information. On September 10, 2020, Lavvan filed a suit against the Company in the United States District Court for the Southern District of New York alleging breach of contract, patent infringement, and trade secret misappropriation in connection with that certain Research, Collaboration and License Agreement between Lavvan and Amyris, dated March 18, 2019, as amended (Cannabinoid Agreement). Amyris filed motions to compel arbitration or to dismiss on October 2, 2020. On October 30, Lavvan filed its opposition to the motions and the Company filed its reply to such opposition on November 13, 2020. The Company believes the suit lacks merit and intends to continue to defend itself vigorously. Given the early stage of these proceedings, it is not yet possible to reliably determine any potential liability that could result therefrom. See Note 9, “Commitments and Contingencies” in Part II, Item 8 of this Annual Report on Form 10-K for more information.

Going Concern

The Company has incurred operating losses since its inception and expects to continue to incur losses and negative cash flows from operations over the course of at least the next 12 months following the issuance of our consolidated financial statements. As of December 31, 2020, the Company had negative working capital of $16.5 million (compared to negative working capital of $87.5 million as of December 31, 2019), and an accumulated deficit of $2.1 billion.

As of December 31, 2020, the Company's outstanding debt principal (including related party debt) totaled $170.5 million, of which $56.5 million is classified as current. The Company's debt agreements contain various covenants, including certain restrictions on the Company's business that could cause the Company to be at risk of defaults, such as restrictions on additional indebtedness, material adverse effect and cross default provisions. A failure to comply with the covenants and other provisions of the Company’s debt instruments, including any failure to make a payment when required, would generally result in events of default under such instruments, which could permit acceleration of a substantial portion of such indebtedness. If such indebtedness is accelerated, it would generally also constitute an event of default under the Company’s other outstanding indebtedness, permitting acceleration of a substantial portion of such other outstanding indebtedness. Throughout the first half of 2020, the Company failed to meet certain covenants under several credit arrangements, including those associated with cross-default provisions, minimum liquidity and minimum asset coverage requirements and certain scheduled payments. Most of these lenders provided waivers to the Company for breaches of all past covenant violations and cross-default payment failures, under the respective credit agreements or extended payment deadlines through May 31, 2020.

Beginning in May 2020 and continuing through June 2020, the Company executed a series of financial transactions for general corporate purposes, including debt servicing payments. On May 1, 2020, the Company amended the Senior Convertible Notes to eliminate the monthly amortization payments and change the interest payment frequency from monthly to quarterly. On June 1, 2020, the Company amended the Foris LSA to eliminate the quarterly principal payments and defer all interest payments until maturity on July 1, 2022, and to provide for the conversion of all outstanding indebtedness under the LSA at a $3.00 per share conversion price, which conversion was approved by the Company’s stockholders on August 14, 2020. Further, on June 1, 2020 and June 4, 2020, the Company entered into securities purchase agreements with investors for the private placement of an aggregate of $200 million of common and preferred stock, resulting in the Company receiving approximately $190 million of net proceeds. A portion of the proceeds from the offering was used to pay down approximately $37.1 million of debt principal and $6.1 million of accrued interest. Also, on June 2, 2020, Total Raffinage Chimie (Total) converted approximately $9.3 million of debt principal and accrued interest into common stock under the terms of the 2014 Rule 144A Convertible Note, further reducing the Company’s outstanding indebtedness. On August 10, 2020, the Company and Ginkgo Bioworks, Inc. (Ginkgo) entered into a Second Amendment to Promissory Note and Partnership Agreement to reduce the frequency of partnership payments from monthly to quarterly, in an aggregate amount of $2.1 million, and to defer an aggregate of $9.8 million in partnership payments to the end of the agreement in October 2022. See Note 4, “Debt” for more information. As a result of closing the equity offering, making past due payments, converting the $9.1 million 2014 Rule 144A Convertible Note principal into equity, and executing amendments to the Foris LSA, the Senior Convertible Notes, and the Ginkgo Note, the Company cured all payment defaults and other events of default, including cross-defaults under the Company’s various debt instruments as of December 31, 2020.

Further, the Company's cash and cash equivalents of $30.2 million as of December 31, 2020 is not expected to be sufficient to fund expected cash flow requirements from operations and cash debt service obligations through March 2022. The Company has previously announced strategic transactions which are expected to generate substantial cash during 2021 and beyond. Solely based on cash from operations, there is doubt about the Company’s ability to continue as a going concern within one year after the date our consolidated financial statements are issued. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company's ability to continue as a going concern will depend, in large part, on its ability to eliminate or minimize the anticipated negative cash flows from operations during the 12 months from the date of this filing and to either raise additional cash proceeds through strategic transactions, financings or
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refinance the debt maturities occurring in June 2021 ($10 million as of the date of this filing), all of which are uncertain and outside the control of the Company. Further, the Company's operating plan for the next 12 months contemplates (i) revenue growth from sales of existing and new products with positive gross margins, (ii) reduced production costs as a result of manufacturing and technical developments, (iii) the monetization of certain assets, (iv) continued cash inflows from collaboration and grants and licenses and royalties and (v) lower debt servicing expense. If the Company is unable to complete these actions, it may be unable to meet its operating cash flow needs and its obligations under its existing debt facilities over the next 12 months. This could result in an acceleration of its obligation to repay all amounts outstanding under those facilities, and the Company may be forced to obtain additional equity or debt financing, which may not occur timely or on reasonable terms, if at all, and/or liquidate its assets.

Technology

We have developed innovative microbial engineering and screening technologies that allow us to transform the way microbes metabolize sugars. Specifically, we engineer microbes, such as yeast, and use them as catalysts to convert sugar, through fermentation, into high-value molecules. In 2015, we were awarded a technology investment agreement with DARPA to expand the capabilities of our technology platform. The investment has resulted in accelerating the integration of our platform with artificial intelligence that will speed up the development and commercialization of small molecules across 15 different chemical classes. We have also developed our technology to be able to produce large molecules, such as proteins.

We devote substantial resources to our research and development efforts. We have invested more than $750 million to date in our research and development capabilities that has resulted in an almost 6x improvement in speed to market and in the scale-up of nine successful molecules. These achievements are due to the leading strain engineering and upscaling and commercialization capabilities we have developed from our investment.

Strain Engineering

Companies and researchers around the world are continuously learning how the complex biological processes in organisms work. Because there is so much that is still unknown, the best method for development of commercially viable strains is to test as many hypotheses as accurately and quickly as possible to accelerate the learning curve.

We have developed a high-throughput strain engineering system that is currently capable of producing and screening more than 600,000 yeast strain candidates per month, which enables us to achieve an approximately 90% lower cost per strain than we achieved in 2009. We generated more than 520,000 unique strains in 2020, and over 8.3 million unique strains since our inception, with each strain testing for improved production of the target molecules. In addition, through our lab-scale and pilot-plant fermentation operations, and our proprietary analytical tools, we are now able to predict, with high reliability, the performance of candidate strains at industrial scale.

Upscaling and Commercialization

The most challenging parts of commercializing biotechnology are often the scale up and manufacturing phases due to the unpredictability of biotechnology at different scales. We have built scale-up and manufacturing capabilities to our advantage by heavily investing in prediction models and analytics to quickly ascertain how a strain’s behavior at one scale will translate to another scale. We have successfully scaled-up and commercially manufactured thirteen distinct molecules used by thousands of leading global brands. Our capabilities advantage results in accelerated speed to market, lower overall development costs, and a significantly lower risk profile for any project we undertake.

A strain must be improved to increase the level of efficiency of production and tested for performance in pilot-scale facilities before it is implemented at commercial scale manufacturing facilities. Our unique infrastructure to support this scale-up process includes lab-scale fermentors (0.25 to 2 liter), operating pilot plants in our facilities in Emeryville, California, which operates a 1000-liter and multiple 300-liter fermentors, and Campinas, Brazil, which operates 300- and 2,000-liter fermentors, and five years’ experience owning and operating the 1,200,000-liter production facility in Brotas, Brazil that we sold in late 2017. Each of these stages mimic the conditions found in larger-scale fermentation so that our findings may translate predictably from lab-scale to pilot and ultimately to commercial scale.

We have developed a world-class manufacturing team which has successfully brought online a production facility and scaled up and manufactured molecules at commercial scale that are currently used in thousands of consumer goods products around the world. Our effort also expands into continued strain and process improvements to ensure our manufacturing is robust and cost advantaged.

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Product Markets and Partnerships

There are three market areas that are our primary focus and key to our growth: Health & Wellness, Clean Beauty and Flavor & Fragrance. Each of these markets embodies our core competencies of sustainably providing clean ingredients in markets where we can be the most impactful, not just from a growth and revenue standpoint, but also for healthier living.

We believe that our leadership in biotechnology is demonstrated by collaboration partners, who come to us to access our platform and industrial fermentation expertise. Together we seek to reduce environmental impact, enhance performance, reduce supply and price volatility, and improve product cost. Our partners include Flavor & Fragrance companies such as Firmenich S.A. (Firmenich) and Givaudan International, SA (Givaudan), and nutrition companies such as DSM and Yifan. A portion of our work has also been funded by the U.S. government, including the Department of Energy (DOE) and DARPA, to develop technologies and processes capable of improving the ability to utilize biotechnology for the production of a broader range of molecules.

Health & Wellness

Our Health & Wellness focus includes alternative sweeteners, nutraceuticals, such as vitamins, and food ingredients. As consumers continue to demand higher nutritional performance, healthier ingredients and convenience from their food, the demand will continue to grow for specific ingredients that are often difficult and expensive to procure. Animal farming is also being impacted by the growing demand for protein and the need to change farming practices, such as reducing antibiotic use. Our technology can be employed to provide affordable access to these desired ingredients for both human and animal health. To date, product revenue in this area has been from a derivative made from our Biofene® product by our partner. During 2015, we announced the signings of our first ingredient supply agreement and collaboration agreement for the global nutraceuticals market. Under the supply agreement, we sourced Biofene to our partner, which was then further processed into a nutraceutical product. In 2016, we made the first large-scale shipments of Biofene to our partner, who successfully produced and sold a nutraceutical product to its customers. In 2017 and 2018, we expanded our collaborations in nutraceuticals to four vitamins and a human nutrition ingredient.

In late 2018, we began to produce at commercial scale an alternative, healthier sweetener. We introduced this ingredient, our Reb M product, to the public in December 2018. In 2019, we ran two production campaigns that resulted in feedback that our Reb M product is distinguished by one of the best-tasting profiles in the industry to date. We sold out the production from our campaigns. By the end of 2019 we also introduced our direct-to-consumer sweetener brand: Purecane. We currently offer Purecane for table-top and culinary applications through our own website: www.purecane.com and on Amazon.

Flavor & Fragrance Markets

Our technology enables us to cost-effectively produce natural oils and aroma chemicals that are commonly used in the Flavor & Fragrance market. Many of the natural ingredients used in the Flavor & Fragrance market are expensive due to limited supply and the synthetic alternatives requiring complex chemical conversions. We offer Flavor & Fragrance companies a natural route to procure these high-value ingredients without sacrificing cost or quality. To date, we have successfully brought multiple Flavor & Fragrance ingredients to market with our collaboration partners. We also have several other ingredients under development.

In 2014, we completed the first production campaign for our first Flavor & Fragrance ingredient for a range of applications, from perfumes to laundry detergent, which is marketed by a collaboration partner and global Flavor & Fragrance leader. In late 2015, we commenced production of our second Flavor & Fragrance ingredient to the same collaboration partner. During 2019, we added two new Flavor & Fragrance molecules to our list of successfully scaled products, and we shipped seven compounds destined for the Flavor & Fragrance market (including compounds converted by our partners to Flavor & Fragrance ingredients) to our partners. Finally, in 2020 we introduced our tenth ingredient, a leading natural flavor, and completed successful production campaigns in the third quarter.

We continue to work to develop and commercialize a variety of Flavor & Fragrance ingredients that are either direct fermentation products or derivatives of fermentation products.

Clean Beauty
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Our Clean Beauty focus includes clean skincare and cosmetic ingredients we develop and commercialize with our partners and our branded Biossance skincare and Pipette baby and mother care product lines. We have several cosmetic ingredients currently under development and plan to launch four additional brands in 2021. Our Biossance and Pipette products are discussed further in the Amyris-branded Product Markets section below.

Amyris-branded Product Markets

Through basic chemical finishing steps, we are able to convert our farnesene into squalane, which is used today as a premium emollient in clean skincare products. We believe that our squalane offers performance attributes equal or superior to those of squalane derived from conventional sources. The ingredient traditionally has been manufactured from olive oil or extracted from deep-sea shark liver oil, which requires that the shark be killed in order to harvest its liver oil. The relatively high price and unstable supply of squalane in the past meant that its use was generally limited to luxury products or small quantities in mass-market product formulations. With our ability to produce a reliable supply of low-cost squalane that eliminates the need to harvest shark liver oil, we offer this ingredient at a price that we believe will drive adoption by formulators. In addition to squalane, we offer a second, lower-cost cosmetic ingredient, hemisqualane, for the cosmetics market. Our joint venture with Nikko Chemicals Co., Ltd. (Nikko) currently has supply agreements with several regional distributors, including those with locations in Japan, South Korea, Europe, Brazil and North America, and, in some cases, directly with cosmetics formulators, which we transferred to the joint venture during the formation process. See below under “Joint Venture” for more information regarding our Aprinnova joint venture.

Our consumer clean skincare products, sold under our Biossance brand, feature our Biofene-derived squalane. Under our Biossance brand, we market and sell our products directly to retailers and consumers. Biossance was initially sold solely through our ecommerce branded website. In February 2017, we launched a full squalane-based consumer cosmetic line at participating Sephora stores and Sephora online. All of the products are based on our commitment to No Compromise®. Since the launch of Biossance, sales have grown, and with Sephora’s partnership, we continued to expand to more stores through 2020.

We launched a clean beauty brand, Pipette, in September 2019 with an initial offering of seven products developed for babies and moms to support and nurture the skin. Currently, the brand offers nine unique products.

Pipette is available for purchase at Pipettebaby.com, buybuyBABY.com, Amazon.com, Target.com, Walmart.com, and Dermstore.com, in-store exclusively at buybuy BABY® stores nationwide, and at our own direct website. The brand is seeking further expansion through online and brick-and-mortar retailers.

Manufacturing

Until December 2017, we owned and operated a purpose-built, large-scale production facility located in Brotas, Brazil. In December 2017, we sold the facility to a unit of DSM and entered into a supply agreement with DSM for us to purchase output from the facility.

In September 2019, we obtained the necessary permits and broke ground on a new Brazil plant. We expect facility construction to be completed by the end of 2021 with production commencing during the first quarter of 2022. This facility will allow us to manufacture up to five products concurrently, including both our specialty ingredients portfolio and our alternative sweetener product. During construction, we are manufacturing our products at contract manufacturing sites in Brazil, the U.S. and Europe.

For many of our products, we perform additional distillation or chemical finishing steps to convert initial target molecules into other finished products, such as renewable squalane. We have agreements with several facilities in the U.S. and Brazil to perform these downstream steps for such products. We also have a manufacturing facility in Leland, North Carolina through Aprinnova, our joint venture with Nikko, to convert our Biofene into squalane and other final products. See below under "Joint Venture" for more information regarding our Aprinnova joint venture.

Joint Venture

Aprinnova, LLC

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In December 2016, Amyris, Nikko Chemicals Co., Ltd., an existing commercial partner of the Company, and Nippon Surfactant Industries Co., Ltd., an affiliate of Nikko (collectively, Nikko) entered into a joint venture agreement to focus on the worldwide commercialization of the Neossance cosmetic ingredients business. Amyris formed the joint venture under the name Neossance, LLC, and later changed the name to Aprinnova, LLC (the “Aprinnova JV”), which is jointly owned by Amyris and Nikko. Pursuant to the joint venture agreement, Amyris contributed certain assets to the Aprinnova JV, including certain intellectual property and other commercial assets relating to the Neossance cosmetic ingredients business, as well as the production facility in Leland, North Carolina and related assets purchased by Amyris from Glycotech in December 2016. Amyris also agreed to provide the Aprinnova JV with licenses to certain intellectual property necessary to make and sell products associated with the Neossance business. At the closing of the formation of the joint venture, Nikko purchased a 50% interest in the Aprinnova JV in exchange for an initial payment to Amyris of $10.0 million and payment to Amyris of any profits distributed in cash to Nikko from the Aprinnova JV for the three year period beginning January 1, 2017, up to a maximum of $10.0 million. In addition, as part of the formation of the Aprinnova JV, Amyris and Nikko agreed to make certain working capital loans to the Aprinnova JV and executed a supply agreement to supply farnesene to the Aprinnova JV. Amyris also agreed to purchase product from the Aprinnova JV, to transfer all of Amyris customers buying the Aprinnova JV products to the Aprinnova JV, to guarantee a maximum production cost for certain Aprinnova JV products and take on the cost of production above certain guaranteed costs.

Product Distribution and Sales

We distribute and sell our ingredients products directly to distributors, formulators, collaboration partners, or through joint ventures, depending on the end-market. We also distribute and sell our Amyris-branded consumer products directly to retailers and consumers through on-line ecommerce web-sites. Generally, our collaboration agreements include commercial terms, and sales are contingent upon achievement of technical and commercial milestones.

For the year ended December 31, 2020, revenue from key customers and from all other customers was as follows:

(In thousands) Renewable Products Licenses and Royalties Grants and Collaborations Total Revenue % of Total Revenue
DSM (related party) $ 946  $ 43,750  $ 7,018  $ 51,714  29.9  %
Firmenich 9,967  7,241  594  17,802  10.3  %
All other customers 93,425  —  10,196  103,621  59.8  %
Total revenue $ 104,338  $ 50,991  $ 17,808  $ 173,137  100.0  %

Intellectual Property

Our success depends in large part upon our ability to obtain and maintain proprietary protection for our products and technologies, and to operate without infringing on the proprietary rights of others. We seek to avoid the latter by monitoring patents and publications in our product areas and technologies to be aware of developments that may affect our business, and to the extent we identify such developments, evaluate and take appropriate courses of action. With respect to the former, our policy is to protect our proprietary position by, among other methods, filing for patent applications on inventions that are important to the development and conduct of our business with the U.S. Patent and Trademark Office (the USPTO), and its foreign counterparts.

As of December 31, 2020, we had 695 issued U.S. and foreign patents and 220 pending U.S. and foreign patent applications that are owned or co-owned by or licensed to us. We also use other forms of protection (such as trademark, copyright, and trade secret) to protect our intellectual property, particularly where we do not believe patent protection is appropriate or obtainable. We aim to take advantage of all of the intellectual property rights that are available to us and believe that this comprehensive approach provides us with a strong proprietary position.

Patents extend for varying periods according to the date of patent filing or grant and the legal term of patents in various countries where patent protection is obtained. The actual protection afforded by patents, which can vary from country to country, depends on the type of patent, the scope of its coverage and the availability of legal remedies in the country. See “Risk Factors - Risks Related to Our Business - Our proprietary rights may not adequately protect our technologies and product candidates.”

We also protect our proprietary information by requiring our employees, consultants, contractors and other advisers to execute nondisclosure and assignment of invention agreements upon commencement of their respective employment or engagement. Agreements with our employees also prevent them from bringing the proprietary rights of third parties to us. In
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addition, we also require confidentiality or material transfer agreements from third parties that receive our confidential data or materials.

Trademarks

Amyris, the Amyris logo, Biofene, Biossance, Pipette, Purecane and No Compromise are trademarks or registered trademarks of Amyris, Inc or its subsidiaries. This report also contains trademarks and trade names of other businesses that are the property of their respective holders.

Competition

We expect that our renewable products will compete with products produced from traditional sources as well as from alternative production methods (including the intellectual property underlying such methods) that established enterprises and new companies are seeking to develop and commercialize.

Health & Wellness

Many active ingredients in the nutraceutical market are made via chemical synthesis by suppliers that have a deep chemistry know-how and production facilities, including ingredient suppliers. We may compete directly with these companies with respect to specific ingredients or attempt to provide customers with a natural alternative that is more cost effective or higher performing than those derived from chemistry. For food ingredients, we also compete with companies that produce products from plant- and animal-derived sources as well as with companies that are also developing biotechnology production solutions to produce specific molecules.

Flavor & Fragrance

The main competition in the Flavor & Fragrance and cosmetic actives markets is from products derived from plant and animal sources as well as chemical synthesis. The products derived from plant and animal sources are typically produced at a higher cost, lower purity and create a greater impact on the environment compared to our products. Products derived from chemical synthesis are often produced at a low cost but may have ramifications on sustainability and on non-natural sourcing. There are also companies that are working to develop products using similar technology to us.

Clean Beauty

We develop and sell active cosmetic ingredients and consumer products in the Clean Beauty market, creating a competitive landscape that includes ingredient suppliers as well as consumer goods companies, such as Procter & Gamble and Estee Lauder. Most skincare ingredients are derived from plant and animal sources or created using chemical synthesis. Plant- and animal-sourced ingredients are typically higher in cost, lower in purity and have a greater impact on the environment versus our products. Products derived from chemical synthesis are often produced at a low cost but have ramifications on sustainability as well as non-natural sourcing. There are also companies that are working to develop products using similar technology to us.

Competitive Factors

We believe the primary competitive factors in our target markets are:

product performance and other measures of quality;
product price;
product cost;
sustainability and social responsibility;
dependability of naturally supplied ingredients; and
infrastructure compatibility of products.

We believe that, for our products to succeed in the market, we must demonstrate that our products are comparable or better alternatives to existing products and to any alternative products that are being developed for the same markets based on some combination of product cost, pricing, availability, performance, and consumer preference characteristics.

Regulatory Matters

Environmental Regulations
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Our development and production processes involve the use, generation, handling, storage, transportation and disposal of hazardous chemicals and radioactive and biological materials. We are subject to a variety of federal, state, local and international laws, regulations and permit requirements governing the use, generation, manufacture, transportation, storage, handling and disposal of these materials in the United States, Brazil, Europe, China and other countries where we operate or may operate or sell our products in the future. These laws, regulations and permits can require expensive fees, pollution control equipment or operational changes to limit actual or potential impact of our technology on the environment and violation of these laws could result in significant fines, civil sanctions, permit revocation or costs from environmental remediation. We believe we are currently in substantial compliance with applicable environmental regulations and permitting. However, future developments including the commencement of or changes in the processes relating to commercial manufacturing of one or more of our products, more stringent environmental regulation, policies and enforcement, the implementation of new laws and regulations or the discovery of unknown environmental conditions may require expenditures that could have a material adverse effect on our business, results of operations or financial condition. See “Risk Factors - Risks Relating to Our Business - 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.”

GMM Regulations

The use of genetically modified microorganisms (GMMs), such as our yeast strains, is subject to laws and regulations in many countries. In the United States, the Environmental Protection Agency (EPA) regulates the commercial use of GMMs as well as potential industrial products produced from the GMMs. Various states within the United States could choose to regulate products made with GMMs as well. While the strain of genetically modified yeast that we use, 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. In Brazil, GMMs are regulated by the National Biosafety Technical Commission (CTNBio) under its Biosafety Law No. 11.105-2005. We have obtained commercial approvals from CTNBio to use our GMMs in a contained environment in our Brazil facilities for research and development purposes, in manufacturing and at contract manufacturing facilities in Brazil. In Europe, we are subject to similar regulations and have obtained approvals from the Ministry of Environment, Spain for production activities.

We expect to encounter GMM regulations in most if not all of the countries in which we may seek to make our products; however, the scope and nature of these regulations will likely vary from country to country. In addition, such regulations may change over time. If we cannot meet the applicable requirements in countries in which we intend to produce our products using our yeast strains, then our business will be adversely affected. See “Risk Factors - Risks Related to Our Business - 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.”

Chemical Regulations

Our renewable products may be subject to government regulations in our target markets. In the United States, the EPA administers the requirements of the Toxic Substances Control Act (TSCA), which regulates the commercial registration, distribution and use of many chemicals. Before an entity can manufacture or distribute significant volumes of a chemical, it needs to determine whether that chemical is listed in the TSCA inventory. If the substance is listed, then manufacture or distribution can commence immediately. If not, then in most cases a “Chemical Abstracts Service” number registration and pre-manufacture notice must be filed with the EPA, which has 90 days to review the filing. A similar requirement exists in Europe under the Registration, Evaluation, Authorization and Restriction of Chemical Substances (REACH) regulation. See “Risk Factors - Risks Related to Our Business - We may not be able to obtain regulatory approval for the sale of our renewable products.” In 2013, the EPA registered farnesane as a new chemical substance under the TSCA, which enables us to manufacture and sell Hemisqualane™ (Farnesane) without restriction in the United States.

Other Regulations

Certain of our current or emerging products in the Health & Wellness, Clean Beauty, and Flavor & Fragrance markets, including alternative sweeteners, nutraceuticals, Flavor & Fragrance ingredients, skincare ingredients, cosmetic actives, and our proposed cannabinoid products, are subject to regulation by either the FDA or the Drug Enforcement Administration (DEA) or both, as well as similar agencies of states and foreign jurisdictions where these products are manufactured, sold or proposed to be sold. Pursuant to the Federal Food, Drug, and Cosmetic Act (the FDCA), the FDA regulates the processing, formulation, safety, manufacture, packaging, labeling and distribution of food ingredients, vitamins, and cosmetics. Generally, in order to be marketed and sold in the United States, a relevant product must be generally recognized as safe, approved and not adulterated or misbranded under the FDCA and relevant regulations issued thereunder. The FDA has broad authority to enforce the provisions
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of the FDCA applicable to food ingredients, vitamins, drugs and cosmetics, including powers to issue a public warning letter to a company, to publicize information about illegal products, to request a recall of illegal products from the market, and to request the United States Department of Justice to initiate a seizure action, an injunction action, or a criminal prosecution in the U. S. courts. Failure to obtain requisite approval from, or comply with the laws and regulations of, the FDA or similar agencies of states and applicable foreign jurisdictions could prevent us from fully commercializing certain of our products. See “Risk Factors - Risks Related to Our Business - We may not be able to obtain regulatory approval for the sale of our renewable products.” Our proposed cannabinoid products may also be subject to regulation under various federal, state and foreign-controlled substance laws and regulations. See “Risk Factors - Our cannabinoid initiative is uncertain and may not yield commercial results and is subject to significant regulatory risks.”

In addition, our end-user products such as our Biossance and Pipette brands clean skincare products will be subject to the Natural Cosmetics/Personal Care Products Safety Act, if enacted. Cosmetic products are regulated by or under the FDA’s oversight. Also, our end-user products are subject to the regulations of the United States Federal Trade Commission (FTC) and similar agencies of states and foreign jurisdictions where these products are sold or proposed to be sold regarding the advertising of such products. In recent years, the FTC has instituted numerous enforcement actions against companies for failure to have adequate substantiation for claims made in advertising or for the use of false or misleading advertising claims. The FTC has broad authority to enforce its laws and regulations applicable to cosmetics, including the ability to institute enforcement actions which often result in consent decrees, injunctions, and the payment of civil penalties by the companies involved. Failure to comply with the laws and regulations of the FTC or similar agencies of states and applicable foreign jurisdictions could impair our ability to market our end-user products.

Human Capital

As of December 31, 2020, we had 595 full-time employees, of whom 471 were in the United States, 122 were in Brazil and 2 were in Portugal. Except for labor union representation for Brazil-based employees based on labor code requirements in Brazil, none of our employees is represented by a labor union or is covered by a collective bargaining agreement. We have never experienced any employment-related work stoppages, and we consider relations with our employees to be good. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees. The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards.

Corporate Information

We were originally incorporated in California in 2003 under the name Amyris Biotechnologies, Inc. and then reincorporated in Delaware in 2010 and changed our name to Amyris, Inc. Our principal executive offices are located at 5885 Hollis Street, Suite 100, Emeryville, California 94608, and our telephone number is (510) 450-0761. Our common stock is listed on The Nasdaq Global Select Market under the symbol "AMRS".

Available Information

Our website address is www.amyris.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934 (the Exchange Act), as well as amendments thereto, are filed with the U.S. Securities and Exchange Commission (the SEC) and are available free of charge on our website at investors.amyris.com promptly after such reports are available on the SEC's website. We may use our investors.amyris.com website as a means of disclosing material non-public information and complying with our disclosure obligations under Regulation FD.

The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

The information contained in or accessible through our website or contained on other websites is not incorporated into this filing. Further, any references to URLs contained in this report are intended to be inactive textual references only.

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ITEM 1A. RISK FACTORS

Risk Factors Summary

Our business faces material risks. In addition to this summary below, you should carefully review the risk factors enumerated in the “Risk Factors” section immediately following this "Risk Factors Summary" section. We may be subject to additional risks and uncertainties not presently known to us or that we currently deem immaterial. Our business, financial condition, results of operations and growth prospects could be materially adversely affected by any of these risks, and the trading price of our common stock could decline by virtue of these risks.

Business and Operational Risks

The impact of the COVID-19 pandemic on our business and operations;
Our ability to scale and manage operations;
Our reliance on contract manufacturers to meet our production and delivery goals;
Our ability to manage the expansion of our international operations;
Our ability to generate revenue through existing and future customers, distributors and collaboration partners;
Our reliance on collaboration arrangements to fund development and commercialization of our products; and
Our ability to compete effectively.

Financial Risks

Our ability to design and maintain effective internal controls;
Our ability to generate sufficient cash to fund operations and service our debt;
Our ability to manage current, or our need to incur future, indebtedness which could impair our flexibility to pursue certain transactions and our ability to operate our business, as well as restrict access to additional capital;
Our ability to achieve or sustain profitability given our history of net losses; and
Variability of future financial results.

Regulatory, Intellectual Property, and Legal Risks

Regulatory risks relating to our use of genetically modified feedstocks and yeast strains to produce our products;
New regulation or changes in regulation relating to our existing or future products, as well as any costs incurred to comply with applicable regulations;
Our ability to obtain, maintain, protect and enforce our intellectual property rights; and
Costs and resources required to manage litigation related to the development and commercialization of our products.

Risks Related to the Ownership of Our Common Stock

Volatility of our stock price;
The composition of our capital stock ownership with relevant insiders; and
Changes in government regulation relating to purchases of our common stock.

Risk Factors

Investing in our common stock involves risk. You should carefully consider the risks and uncertainties described below, together with all of the other information set forth in this Annual Report on Form 10-K, including the consolidated financial statements and related notes, which could materially affect our business, financial condition, results of operations, or growth prospects. If any of the following risks actually occurs, our business, financial condition, results of operations, and growth prospects could be materially and adversely harmed. The trading price of our common stock could decline due to any of these risks, and, as a result, you may lose all or part of your investment.

Business and Operational Risks

The COVID-19 pandemic could have a material adverse effect on our business, results of operations and financial condition in the future.

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The COVID-19 pandemic has resulted in authorities worldwide implementing numerous measures to contain or mitigate the outbreak of the virus, such as travel bans and restrictions, border controls, limitations on business activity, social distancing requirements, quarantines, and shelter-in-place orders. These measures have caused, and are continuing to cause, business slowdowns or shutdowns in affected areas, both regionally and worldwide. The impact of the pandemic on our business and operations and our ability to execute our strategic plans remains uncertain and will depend on many unpredictable factors outside our control, including, without limitation, the extent, trajectory and duration of the pandemic, the development, availability and distribution of vaccines and other effective treatments to treat the COVID-19 virus and any new variants thereof, the emergence of new variants that are more contagious, symptomatic or fatal and the time the medical community requires to respond to such variants, the imposition of and compliance with protective public safety measures, and the impact of the pandemic on the global economy, and the related impacts on our development pipeline and on demand for our products.

Since the end of the first quarter of 2020, we have initiated several precautions in accordance with local regulations and guidelines to mitigate the spread of COVID-19 infection across our businesses. These precautions have impacted the way we carry out our business, including additional sanitation and cleaning procedures in our laboratories and other facilities, on-site COVID-19 testing, temperature and symptom confirmations, remote working when possible, and implementation of social distancing and staggered worktime requirements for our employees who must work on-site. If we are required to continue such measures for an extended period of time, particularly in sites with significant headcount such as our Emeryville, California headquarters, it could impact the ability of our employees to collaborate efficiently and advance research and development projects as productively as they could in a typical lab environment or office setting. In addition, the loss or unavailability of our R&D staff or other key employees and executives, as a result of sickness of employees or their families or the responsibility of employees to manage family obligations while working from home, could negatively impact our business and operations and our ability to operate or execute our business strategy. Continued employee telecommuting activity also increases the risk of a security breach of our information technology systems. The changed environment under which we are operating could have an impact on our internal controls over financial reporting.

Moreover, the ongoing impacts of the COVID-19 pandemic could result in interruptions or delays in the operations of regulatory authorities, which may impact review or approval timelines; delays in necessary interactions with other agencies and contractors due to limitations in employee resources or forced furlough of government employees; termination of, or difficulties in procuring or maintaining, arrangements with third parties upon whom we depend such as manufacturers, including contract manufacturing organizations, suppliers and other strategic partners; and disruptions or restrictions on our ability to pursue partnerships and other business transactions. As a result of the COVID-19 pandemic, we have experienced disruption and delays in our global supply chain. For example, during the first half of 2020, we experienced COVID-19-related delays in sourcing alcohol for our Pipette hand sanitizer, and if the COVID-19 pandemic worsens, we may experience supply disruptions due to temporary closures, production slowdowns, staffing shortages, logistics, delays and disruptions in the manufacture and/or shipment of our products, including facilities we rely upon in Brazil, and delays and disruptions with respect to our new business activities in China.

Since the start of the COVID-19 pandemic in early 2020, there has been an overall decline in consumer spending particularly in retail brick-and-mortar channels due to store closures by our retail partners as mandated by local laws. Although we have experienced an increase in digital commerce and online purchasing, the effects of a prolonged pandemic could result in a continued negative impact on consumer spending, customer preferences, and overall demand. In addition, if COVID-19 impacts the financial position of our customers, resale channel partners or any of our collaboration partners, we may have difficulty collecting receivables or milestone and royalty payments, and our business and results of operations could be exposed to risks associated with uncollectible accounts or defaults on contractual payment obligations by our collaboration partners. If we are unable to generate sufficient cash from operations due to impacts of the COVID-19 pandemic or otherwise, we may need to raise additional funds. While the COVID-19 pandemic has not materially impacted our liquidity and capital resources to date. The duration and severity of any further economic or market impact of the COVID-19 pandemic remain uncertain, and there can be no assurance that it will not have an adverse effect on our liquidity and capital resources, including our ability to access capital markets, in the future, on terms that are favorable to us, or at all.

A limited number of customers, distributors and collaboration partners account for a material portion of our revenues, and the loss of major customers, distributors or collaboration partners could harm our operating results.

Our revenues have varied materially from quarter to quarter and are dependent on sales to, and collaborations with, a limited number of customers, distributors and/or collaboration partners. We cannot be certain that customers, distributors and/or collaboration partners that have accounted for material revenues in past periods, individually or as a group, will continue to generate similar revenues in any future period. If we fail to renew with, or if we lose, a major customer, distributor or collaboration partner, our revenues could decline if we are unable to replace the lost revenues with revenues from other sources.
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Further, since our business depends in part on such collaboration agreements, it may be difficult for us to replace any such lost revenues through additional collaborations in any period, as revenue from such new collaborations will often be recognized over multiple quarters or years.

If we do not meet technical, development and commercial milestones in our collaboration agreements, our future revenues and financial results will be adversely impacted.

We have entered into a number of agreements regarding the development of certain of our products and, in some cases, for ultimate sale of certain products to the customer under the agreement. Most of these agreements do not affirmatively obligate the other party to purchase specific quantities of any products, 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 (including technical specifications) that must be achieved to the satisfaction of our collaboration partners, 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 face challenges producing our products at commercial scale or at commercially viable cost and may not be able to commercialize our products to the extent necessary to make a profit or 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 or 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 products business. 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, feedstock costs, exchange rates (primarily the Brazil Real versus the U.S. Dollar) and contract manufacturing costs.

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 lead to higher working capital costs, which harm our cash position and could 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.

If we are not able to successfully commence, scale-up or sustain operations at 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 commenced operations at our first purpose-built, large-scale production facility located in Brotas, Brazil in 2012. In December 2017, we sold that facility to DSM and concurrently entered into a supply agreement with DSM to purchase output from the facility, which represents a significant portion of our expected supply needs (see Note 11, "Related Party Transactions" in Part II, Item 8 of this Annual Report on Form 10-K for more information). We are building a new purpose-built, large-scale ingredients plant in Brazil, which we anticipate will allow for the manufacture of up to five products concurrently and to produce both our specialty ingredients portfolio and our alternative sweetener product. We currently anticipate facility construction to be completed by the end of 2021; however, there can be no assurances that we will be able to complete such facility on our expected timeline, if at all. Delays or problems in the construction, start-up or operation of such facilities could cause delays in our ramp-up of production and hamper our ability to reduce our production and logistics costs. Delays in construction can occur due to a variety of factors, including regulatory requirements, COVID-19-related factors and our ability to fund construction and commissioning costs.

Once our large-scale production facility is built, we must successfully commission it, and it must perform as we expect. If we encounter significant delays in financing, cost overruns, engineering issues, contamination problems, equipment or raw material supply constraints, unexpected equipment maintenance requirements, safety issues, work stoppages or other serious
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challenges in bringing this facility online and operating it at commercial scale, including as a result of the impacts of the COVID-19 pandemic, we may be unable to produce our renewable products in the time frame and at the cost we have planned. It is difficult to predict the effects of scaling up production of industrial fermentation to commercial scale, as it involves various risks to the quality and consistency of our molecules. In addition, in order to produce molecules at 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 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 may not be available on terms acceptable to us, if at all, and generally entail greater cost to us and would therefore reduce our anticipated gross margins. Further, if our efforts to increase (or commence, as the case may be) production at this facility 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.

In addition, the production of our products at our planned purpose-built, large-scale production facility will require large volumes of feedstock. For this facility in Brazil, we plan to rely primarily on Brazilian sugarcane. While in certain cases we have entered into feedstock agreements with suppliers which we expect to supply the sugarcane feedstock necessary to produce our products at our facility in Brazil that specify the pricing, quantity and product specifications, we cannot predict the future availability or price of these various feedstocks, nor can we be sure that our mill partners will be able to supply it in sufficient quantities or in a timely manner. 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 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, its 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, increase supply risks and limit our ability to substitute supply. 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, increasing costs to our operations and adversely affecting our business.

Our use of contract manufacturers exposes us to risks relating to costs, supply and delivery, and logistics, and loss or termination of contract manufacturing relationships could harm our ability to meet our production goals.

In addition to our planned production facility discussed above, we must commercially produce, process and manufacture our products through the use of contract manufacturers and we anticipate that we will continue to use contract manufacturers for the foreseeable future. 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 and amounts 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. Further, 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, delivery and other terms with them for the provision of their production services.

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 materially raise our overall production cost or reduce our product’s quality until we are able to optimize the supply chain.

Moreover, we rely on contract manufacturers to produce and/or provide downstream processing of our products, and we anticipate that we will continue to use contract manufacturers for the foreseeable future. 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. 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
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relationships with contract manufacturers. In addition, reliance on external sources for our 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, creating risk of loss of sales and profitability. 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 operations at new contract 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 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, including customers of our branded products, or that we will be able to sell our products profitably at prices and with features sufficient to establish demand. The potential customers for our products 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. Similarly, customers of our branded products may have a resistance to accept our alternative compositions for such products. 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, the consumers who purchase end-products containing our products and the customers of our direct-to-consumer products 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.

Moreover, in order to successfully market our direct-to-consumer products, we must continue to build our formulation, production, logistics, sales, marketing, digital, managerial, compliance, and related capabilities or make arrangements with third parties to perform these services. If we are unable to establish adequate marketing, sales and distribution capabilities, whether independently or with third parties, we may not be able to appropriately commercialize such products. Additionally, the internet and other new technologies facilitate competitive entry and comparison shopping for our consumer products, and our digital channel competes against numerous websites, mobile applications and catalogs, which may have a greater volume of circulation and web traffic or more effective marketing through online media and social networking sites. There is no assurance that we will be able to continue to successfully maintain or expand our digital sales channels and respond to shifting consumer traffic patterns and digital buying trends. Our inability to adequately respond to these risks and uncertainties or successfully maintain and expand our digital business could have an adverse impact on our results of operations.

The price and availability 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-de-Açúcar, Açúcar e Etanol do Estado de São Paulo (Council of Sugarcane, Sugar and Ethanol Producers in the State of São Paulo, 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. In addition, if the availability of sugarcane juice or syrup or other feedstocks is restricted or limited due to the ongoing impacts of the COVID-19 global pandemic, weather conditions, land conditions or any other reason, we may not be able to manufacture our products in a timely or cost-effective manner, or at all, which would have a material adverse effect on our business.

We expect to face competition for our products from existing suppliers, and if we cannot compete effectively against these companies, products or prices, we may not be successful in bringing our products to market, demand for some of our renewable products may decline, or we may be unable to further grow our business.

We expect that our renewable products will compete with both the traditional 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
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produce. In the markets that we have entered, 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 health and nutrition companies, large international chemical companies and companies specializing in specific products, such as flavor or fragrance ingredients, 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 products being offered in these markets.

With the emergence of many new companies seeking to produce products from renewable 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. Similarly, if we cannot demonstrate that our products are comparable or better 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, our renewable products may not succeed in the market, which would have a material adverse effect on our business, financial condition, results of operations and growth prospects.

We believe the primary competitive factors in our target markets are:
product performance and other measures of quality;
product price;
product cost;
sustainability and social responsibility;
dependability of naturally sourced ingredients; and
infrastructure compatibility of products.

Many of our competitors are much larger than us and have well-developed distribution systems and networks for their products, valuable historical relationships with the potential customers we are seeking to serve and 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, brands, and significant resources to impede the development and acceptance of renewable products of the type that we are seeking to produce.

We are subject to risks related to our reliance on collaboration arrangements to fund development and commercialization of our products, and our financial results may be adversely impacted if we fail to meet technical, development, or commercial milestones in such agreements.

For most product markets where we are seeking to enter and grow, we have 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 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, most of these agreements do not affirmatively obligate the other party to purchase specific quantities of any products, 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 programs and milestones, including technical specifications that must be achieved to the satisfaction of our collaboration partners. We may focus our efforts and resources on potential discovery efforts, product targets or candidates that require substantial technical, financial, and human resources which we cannot be certain we will achieve.

In addition, we may encounter numerous uncertainties and difficulties in developing, manufacturing, and commercializing any new products subject to these collaboration arrangements that may delay or prevent us from realizing their expected benefits or enhancing our business, including uncertainties on the feasibility of taking new molecules to commercial scale. Any failure to successfully develop, produce, and commercialize products under our existing and future collaboration arrangements could have a material adverse effect on our business, financial condition, results of operation and growth prospects.

Revenues from these types of relationships are a key part of our cash plan for 2021 and beyond. If we fail to collect expected collaboration revenues, 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 obliged to source new partners or enter into agreements that contain less favorable terms. Historically, the process of negotiating and finalizing collaboration
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arrangements with our partners has at times been lengthy and unpredictable. Furthermore, as part of our current and future collaboration arrangements, we may be required to make significant capital investments at our existing or planned production facilities in order to develop, produce, and commercialize molecules or other products. Any failure or difficulties in maintaining existing collaboration arrangements or establishing new collaboration arrangements, or building up or retooling our operations to meet the demands of our collaboration partners could have a material 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 or divert capital, personnel, and other resources from our organization, which could adversely affect our business and reputation.

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 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 royalty arrangements. These rights may 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 or influence our strategic focus, and may lead to an inefficient allocation of capital resources.

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 in order to engage with a third party with respect to such product, product type, or market. Such concessions are often costly or further limit our ability to conduct future business with respect to a certain product or market. There can be no assurance that existing partners will be willing to grant waivers of 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, product 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 affected.

Our relationship with DSM exposes us to financial and commercial risks.

In May 2017, DSM made an investment in the Company and, in connection therewith, we entered into a stockholder agreement with DSM (subsequently amended) which provides DSM with certain rights, including the right to designate up to two members of our board of directors as well as exclusive negotiating rights in connection with certain future commercial projects and arrangements. Subsequently, in July and September 2017, we entered into collaboration agreements (and related license agreements) with DSM to jointly develop several new molecules in the Health and Nutrition field using our technology, which we would produce and DSM would commercialize. In December 2017, we completed the sale of our Brotas, Brazil production facility to DSM and, in connection therewith, entered into several commercial agreements with DSM, including a supply agreement to procure a substantial portion of our product supply requirements, and borrowed $25 million from DSM. In December 2020, we entered into a Farnesene Framework Agreement with DSM, under which we assigned to DSM the supply of Farnesene to Givaudan International SA (Givaudan) for the production and sale of a single specialty ingredient and, in consideration thereof, DSM will pay the Company up to $50 million in the aggregate, of which $30 million was paid in December 2020, $10 million is due in the first quarter of 2021, and the remainder in milestone payments thereafter. For more information regarding these and other transactions and arrangements with DSM, please see Note 4, “Debt,” Note 6, “Stockholders’ Deficit,” Note 10, “Revenue Recognition” and Note 11, “Related Party Transactions” in Part II, Item 8 of this Annual Report on Form 10-K.

DSM, due to its presence on our board of directors, equity ownership in the Company, and commercial relationships with the Company, may be able to control or influence our management, operations and affairs, as well as matters requiring stockholder approval, including the approval of significant corporate transactions, such as the disposition of our intellectual property, mergers, consolidations or the sale of all or substantially all of our assets. Due to its various relationships with the Company, DSM may have interests different from, and may not act in the best interests of, our other stockholders. Consequently, our relationship with DSM may have the effect of delaying or preventing a change of control, 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 the Company, even if such actions would benefit our other stockholders.

A significant portion of our operations are centered in Brazil, and our business could be adversely affected if we do not operate effectively in that country.

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We may 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, export, and other policies to influence the course of Brazil's economy. For example, the government's actions to control inflation have involved interest rate adjustments. 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:
delays or failures in securing licenses, permits, or other governmental approvals necessary to build and operate facilities, use our yeast strains to produce products, and export such products for sale outside Brazil;
rapid consolidation in the sugar and ethanol industries in Brazil, which could result in a decrease in competition;
political, economic, diplomatic, or social instability in, or in the region surrounding, Brazil;
changing interest rates;
tax burden and policies;
effects of changes in currency exchange rates;
any changes in currency exchange policy that lead to the imposition of exchange controls or restrictions on remittances abroad;
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;
changes in, or interpretations of, foreign regulations that may adversely affect our ability to sell our products or repatriate profits to the United States;
tariffs, trade protection measures, and other regulatory requirements;
compliance with U.S. and foreign laws that regulate the conduct of business abroad;
compliance with privacy, anti-corruption, and anti-bribery laws, including certain anti-corruption and privacy laws recently enacted in Brazil;
an inability, or reduced ability, to protect our intellectual property in Brazil including any effect of compulsory licensing imposed by government action; and
difficulties and costs of staffing and managing foreign operations.

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.

We continue to expand our international footprint and operations, and we may expand further in the future, which subjects us to a variety of risks and complexities which, if not effectively managed, could negatively affect our business.

We maintain operations in foreign jurisdictions other than Brazil, and may in the future expand, or seek to expand, our operations to additional foreign jurisdictions. For example, in 2018, we announced plans to increase our commercial activities in China. Operating in China exposes us to political, legal and economic risks. In particular, the political, legal and economic climate in China, both nationally and regionally, is fluid and unpredictable. Our ability to operate in China may be adversely affected by changes in U.S. and Chinese laws and regulations such as those related to taxation, import and export tariffs, environmental regulations, genetically modified microorganisms (GMM), land use rights, product testing requirements, intellectual property, currency controls, network security, and other matters. In addition, we may not obtain or retain the requisite permits to operate in China, and costs or operational limitations may be imposed in connection with obtaining and complying with such permits. In addition, Chinese trade regulations are in a state of flux, and we may become subject to other forms of taxation, tariffs and duties in China. Furthermore, our counterparties in China may use or disclose our confidential information or intellectual property to competitors or third parties, which could result in the illegal distribution and sale of counterfeit versions of our products. If any of these events occur, our business, financial condition and results of operations could be materially and adversely affected.

In addition, a significant percentage of the production, downstream processing and sales of our products occurs outside the United States or with vendors, suppliers or customers located outside the United States. If tariffs or other restrictions are placed by the United States on foreign imports from Brazil, European or other countries where we operate or seek to operate, or any related counter-measures are taken, our business, financial condition, results of operations and growth prospects may be harmed. Tariffs may increase our cost of goods, which could result in lower gross margin on certain of our products. If we raise prices to account for any such increase in costs of goods, the competitiveness of the affected products could potentially be reduced. In either case, increased tariffs on imports from Brazil, European or other countries where we operate or seek to operate could materially and adversely affect our business, financial condition and results of operations. Furthermore, in retaliation for any tariffs imposed by the United States, other countries may implement tariffs on a wide range of American products, which could increase the cost of our products for non-U.S. customers located in such countries. Any increase in the cost of our products for non-U.S. customers, which represent a substantial portion of our sales, could result in a decrease in
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demand for our products by such customers. Trade restrictions implemented by the United States or other countries could materially and adversely affect our business, financial condition and results of operations.
Financial Risks

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.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. In addition, Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404) and related SEC rules require management to assess the effectiveness of our internal control over financial reporting. Effective internal controls are necessary for us to provide reliable financial reports and help us to prevent fraud. The process of implementing our internal controls and complying with Section 404 is expensive and time consuming and requires significant continuous 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.

Control deficiencies in 2017 and 2018 resulted in the restatement of our audited consolidated financial statements for the year ended December 31, 2017 and our interim condensed consolidated financial statements for March 31, 2018, June 30, 2018 and September 30, 2018. Also, a control deficiency in 2019 identified prior to issuing our condensed consolidated financial statements as of and for the three and nine months ended September 30, 2019 resulted in us concluding this control deficiency was a material weakness and that our internal control over financial reporting was not effective as of December 31, 2019, and created a reasonable possibility that a further material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis.

Our management has remediated this material weakness. We cannot, however, guarantee that additional material weaknesses or significant deficiencies in our internal controls will not be discovered or occur in the future. If these events occur, we may be unable to report our financial results accurately or on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence and adversely affect the market price of our common stock and our ability to access the capital markets, and we could be subject to sanctions or investigations by the Nasdaq Stock Market (Nasdaq), the SEC or other regulatory authorities. See Part II, Item 9A “Controls and Procedures” of this Annual Report on Form 10-K for additional information.

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 to those operations and increase the difficulty of implementing and maintaining adequate internal control over our financial processes and reporting in the future, which could lead to delays in our external reporting. In particular, this may occur in instances in which 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 in the future, and our independent registered public accounting firm concurs, 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, which 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, 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 could further reduce our stock price and could harm our business.

We have a history of net losses to date, anticipate continuing to incur losses in the future, and may not be able to achieve or sustain profitability.

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We have incurred operating losses since our inception, and we expect to continue to incur losses and negative cash flows from operations for at least the next 12 months following the issuance of this Annual Report on Form 10-K. As of December 31, 2020, we had negative working capital of $16.5 million and an accumulated deficit of $2.1 billion.

Our cash and cash equivalents of $30.2 million as of December 31, 2020 is not expected to be sufficient to fund expected cash flow requirements from operations and cash debt service obligations through March 31, 2022. The Company has previously announced strategic transactions which are expected to generate substantial cash during 2021 and beyond. Solely based on cash from operations, there is doubt about our ability to continue as a going concern within one year after the date that these financial statements are issued. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our ability to continue as a going concern will depend, in large part, on our ability to minimize the anticipated negative cash flows from operations during the 12 months from the date of this filing and to raise additional cash proceeds through strategic transactions, financings, and refinance or extend debt maturities occurring later in 2021, all of which is uncertain and outside our control. Further, our operating plan for 2021 contemplates a significant reduction in our net operating cash outflows as compared to the year ended December 31, 2020, resulting from (i) revenue growth from sales of existing and new products with positive gross margins, (ii) reduced production costs as a result of manufacturing and technical developments, (iii) continued cash inflows from collaboration and grants and licenses and royalties, (iv) the monetization of certain assets, and (v) lower debt servicing expense. If we are unable to complete these actions, we may be unable to meet our operating cash flow needs and our obligations under our existing debt facilities. This could result in an acceleration of our obligation to repay all amounts outstanding under those facilities, and we may be forced to obtain additional equity or debt financing, which may not occur timely or on reasonable terms, if at all, and/or liquidate our assets.

Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty, which could have a material adverse effect on our financial condition and cause investors to suffer the loss of all or a substantial portion of their investment.

We may not be able to generate sufficient cash inflows from the sales of renewable products, licenses and royalties, and grants and collaborations to fund our anticipated operations and to service our debt obligations.

Our planned working capital needs and operating and capital expenditures for 2021, and our ability to service our outstanding debt obligations, are dependent on significant inflows of cash from product sales, licenses, and royalties, and grants and collaborations and, if needed, additional financing arrangements. We will continue to need to fund our research and development and related activities and to provide working capital to fund production, procurement, storage, distribution, and other aspects of our business. Some of our anticipated funding sources, such as research and development collaborations, are subject to the risks that we may not be able to meet milestones, or that 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). The inability to generate sufficient cash flow, as described above, could have a material effect on our ability to continue with our business plans and our status as a going concern.

If we have insufficient cash, our ability to continue as a going concern would be jeopardized, and we would take the following actions:
Shift focus to existing products and customers with significantly reduced investment in new product and commercial development efforts;
Reduce or delay uncommitted capital expenditures, nonessential facilities and lab equipment, and information technology projects;
Closely monitor our working capital position with contract manufacturers and other suppliers, as well as suspend operations at pilot plants and demonstration facilities; and
Reduce expenditures for third party contractors, including consultants, professional advisors, and other vendors.

Implementing this plan could have a negative impact on our ability to continue our business as currently contemplated, including, without limitation, delays or failures in our ability to:
Achieve planned production levels;
Develop and commercialize products within planned timelines or at planned scales;
Introduce new consumer brands; and
Continue other core activities.

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 materially affect our ability to meet contractual requirements and increase the severity of the consequences described above.

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We have incurred substantial debt, which could impair our flexibility and access to capital and adversely affect our financial position, and our business would be materially adversely affected if we are unable to service our debt obligations.

As of December 31, 2020, the principal amounts due under our debt instruments (including related party debt) totaled $170.5 million, of which $56.5 million is classified as current. We expect to incur additional indebtedness from time to time to finance working capital, product development efforts, strategic acquisitions, investments and partnerships, capital expenditures, including financing our new manufacturing facility in Brazil, or other general corporate purposes, subject to the restrictions contained in our debt agreements.

Our substantial indebtedness may:
limit our ability to use our cash flow or obtain additional financing (on satisfactory terms or at all) to fund working capital, capital expenditures, product development efforts, acquisitions, investments and strategic alliances, and for other general corporate requirements;
require us to use a substantial portion of our cash flow from operations to make debt service payments;
increase our vulnerability to economic downturns and adverse competitive and industry conditions and place us at a competitive disadvantage compared to those of our competitors that are less leveraged;
limit our flexibility in planning for, or reacting to, changes in our business and our industry and limit our ability to pursue other business opportunities, borrow more money for operations or capital in the future, and implement our business strategies;
result in dilution to our existing stockholders in the event exchanges of our convertible notes are settled in common stock; and
restrict our ability to grant additional liens on our assets, which may make it more difficult to secure additional financing in the future.

In addition, our cash balance is substantially less than the principal amount of our outstanding debt, and we will be required to generate cash from operations and 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 generate cash or raise additional capital. 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, if at all. 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 stockholders may be diluted. If we are unable to make payment on our secured debt instruments when due, the lenders under such instruments may foreclose on and sell the assets securing such indebtedness to satisfy our payment obligations, which could prevent us from accessing those assets for our business and conducting our business as planned, which could materially harm our financial condition and results of operations.

Our existing financing arrangements provide our secured lenders with liens on substantially all of our assets, including our intellectual property, and contain financial covenants and other restrictions on our actions, which may restrict our ability to pursue certain transactions and operate our business.

We have granted liens on substantially all of our assets, including our intellectual property, as collateral in connection with certain financing arrangements with an aggregate principal amount outstanding as of December 31, 2020 of $76.6 million and have agreed to significant covenants in connection with such transactions (see Note 4, “Debt” in Part II, Item 8 of this Annual Report on Form 10-K), including covenants that materially limit our ability to take certain actions, including our ability to pay dividends, make certain investments and other payments, incur additional indebtedness, undertake certain mergers and consolidations, and encumber and dispose of assets, and customary events of default, including failure to pay amounts due, breaches of covenants and warranties, material adverse effect events, certain cross defaults and judgements, 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 payment penalties or events of default under such instruments, the latter triggering acceleration of such indebtedness which could result in a material adverse effect on our business. If such indebtedness were to be accelerated, it could trigger an event of default under our other outstanding indebtedness, permitting acceleration of a substantial portion of our indebtedness. We have in the past had certain of our debt instruments accelerated for failure to make a payment when due. While we have been able to cure these defaults to avoid additional cross-acceleration, we may not be able to similarly cure such a default in the future. 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.

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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, licenses and royalties revenues, and grants and collaborations revenues. We generate our consumer and ingredients product revenues from sales to partners and distributors and 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. Also, under revenue recognition rules, we are required to estimate royalties. These estimates could be subject to material adjustment in subsequent periods.

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 collaboration partners’ 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 could adversely affect the demand for our products and the margin we receive for our product sales, which could harm our financial results. In addition, certain of our 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 the Company.

Further, 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 collaboration partners. Certain 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. In addition, a portion of the advance payments we receive under our collaboration agreements is typically classified as contract liabilities and recognized over multiple quarters or years. As a result, achievement of our quarterly and annual financial goals has been difficult to forecast 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. Our collaboration arrangements may also include future royalty payments upon commercialization of the products subject to the collaboration arrangements, which is uncertain and depends in part on the success of the counterparty in commercializing the relevant product. As a result, our receipt of royalty revenues and the timing thereof is difficult to predict with certainty.

Furthermore, in recent years, we have started to market and sell our consumer products directly to end-consumers in the clean beauty and personal care market. We only have a few years of experience in marketing through digital channels and selling directly to consumers. It is therefore 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. 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.

Our financial results could vary materially from quarter to quarter and are difficult to predict.

Our revenues and results of operations could vary materially 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:
ongoing impacts of the COVID-19 pandemic on our business operations;
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 or obtain milestone-related payments from collaboration partners;
delays or greater than anticipated expenses associated with the completion, commissioning, acquisition or retrofitting of new production facilities, or the time to ramp up and stabilize production at a new production facility or the transition (including ramp up) to producing new molecules at existing facilities or with a new contract manufacturer;
depreciation of technology assets or the cost of conducting research and development activities on outdated equipment;
impairment of assets based on shifting business priorities and working capital limitations;
disruptions in the production process at any manufacturing facility, including disruptions due to seasonal or unexpected downtime as a result of feedstock availability, contamination, safety or other technical difficulties, or scheduled downtime as a result of transitioning equipment to the production of different molecules;
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losses of, or the inability to secure new, major customers, collaboration partners, contract manufacturers, suppliers or distributors;
losses associated with producing our products as we ramp to commercial production levels;
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);
the timing, size and mix of product sales to customers;
increases in price or decreases in availability of feedstock;
the unavailability of contract manufacturing capacity altogether or at reasonable cost;
exit costs associated with terminating contract manufacturing relationships;
fluctuations in foreign currency exchange rates;
change in the fair value of derivative instruments;
fluctuations in the price of and demand for sugar, ethanol, petroleum-based and other products for which our products are alternatives;
seasonal variability in production and sales of our products;
competitive pricing pressures, including decreases in average selling prices of our products;
unanticipated expenses or delays associated with changes in governmental regulations and environmental, health, labor and safety requirements;
departure of executives or other key management employees resulting in transition and severance costs;
our ability to use our net operating loss carryforwards to offset future taxable income;
business interruptions such as pandemics or natural disasters like earthquakes and tsunamis;
our ability to integrate businesses that we may acquire;
our ability to successfully collaborate with joint venture partners;
risks associated with the international aspects of our business; and
changes in general economic, industry and market conditions, both domestically and in our foreign markets.

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.

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 material 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 foreign currencies mostly because of political and economic conditions. There can be no assurance that the Brazilian real will not materially appreciate or depreciate against the U.S. 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 U.S. dollar compared to those foreign currencies will increase our costs as expressed in U.S. 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 U.S. 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.

Our U.S. GAAP operating results could fluctuate substantially due to the accounting for derivative liabilities and debt that we measure at fair value.

Our outstanding convertible debt instruments are accounted for under Accounting Standards Codification 815, Derivatives and Hedging (ASC 815), as embedded derivatives. ASC 815 requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The current 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) in the statement of operations. We have determined that we must bifurcate and account for certain features of our 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 discount at the date of issuance that is netted against the principal amount of the applicable instrument. 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 expenses. There is no current observable market for this type of derivative and, as such, we determine the fair value of the embedded derivatives
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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 material impact on the estimated fair value of the embedded derivative liabilities. For example, an increase in our stock price would result in an increase in the estimated fair value of the embedded derivative liabilities, if in this example, each of the other elements of the valuation model remained substantially unchanged from the last measurement date. The embedded derivative liabilities may have, on a U.S. GAAP basis, a substantial effect on our balance sheet from quarter to quarter and it is difficult to predict the effect on our future U.S. 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 statement of operations and balance sheet. The effects of these embedded derivatives may cause our U.S. GAAP operating results to be below expectations, which may cause our stock price to decline. See Note 3, “Fair Value Measurement” in Part II, Item 8 of this Annual Report on Form 10-K for more information regarding the valuation of embedded derivatives in certain of our outstanding debt instruments.

In addition, we account for one of our outstanding debt instruments at fair value. That instrument is remeasured to fair value at each balance sheet date, with a resulting non-cash gain or loss from change in fair value of debt recorded in other income or expense.

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 (the Code), a corporation that undergoes an “ownership change,” as defined in the Code, is subject to limitations on its ability to utilize its pre-ownership change net operating loss carryforwards (NOLs) to offset future taxable income. During the three years ended December 31, 2017, and the two years ended December 31, 2019, changes in our share ownership resulted in significant reductions in our NOLs pursuant to 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; if that occurs, our ability to utilize NOLs could be further limited. 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 reported NOLs as of December 31, 2020, even if we attain profitability, which could adversely affect our results of operations.

The restatement of our previously issued financial statements was time-consuming and expensive and could expose us to additional risks that could materially adversely affect our financial position, results of operations and cash flows.

On April 5, 2019, our Audit Committee, after consultation with management and our independent registered public accounting firm at the time, determined that we would restate our interim condensed consolidated financial statements for the quarterly and year-to-date periods ended March 31, 2018, June 30, 2018 and September 30, 2018, included in our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2018, June 30, 2018 and September 30, 2018, respectively. In addition, on May 14, 2019, our Board of Directors, upon the recommendation of the Audit Committee, determined that we would restate our audited consolidated financial statements for the year ended December 31, 2017. The consolidated financial statements and related information included in our previously filed Annual Report on Form 10-K for the year ended December 31, 2017 and Quarterly Reports on Form 10-Q for the periods ended March 31, 2018, June 30, 2018 and September 30, 2018 and all earnings press releases and similar communications issued by the Company for such periods should not be relied upon and are superseded in their entirety by the Annual Report on Form 10-K/A for the year ended December 31, 2018.

As a result of the restatement and associated non-reliance on previously issued financial information, we became subject to a number of additional expenses and risks, including unanticipated expenses for accounting and legal fees in connection with or related to the restatement. Likewise, the attention of our management team was diverted by these efforts. In addition, we could also be subject to additional shareholder, governmental, regulatory or other actions or demands in connection with the restatement or other matters. Any such proceedings will, regardless of the outcome, consume a significant amount of management’s time and attention and may result in additional legal, accounting, insurance and other expenses. If we do not prevail in any such proceeding, we could be required to pay damages or settlement costs. In addition, the restatement and related matters could impair our reputation or could cause our customers, shareholders, or other counterparties to lose confidence in us. Any of these occurrences could have a material adverse effect on our business, financial condition, results of operations, and stock price.

Regulatory, Intellectual Property, and Legal Risks

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.

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Our technologies and products involve the use of genetically modified microorganisms (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. 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 materially 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, waste disposal 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 (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 for industrial-scale production of target products. 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 industrial-scale commercial production in Brazil. We may not be able to obtain such approvals on a timely basis, or at all, and if we do not, our ability to produce our products in Brazil could 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 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 regulatory requirements in the countries in which we produce or sell, or intend to produce or sell, products using our yeast strains, or if it takes longer than anticipated to obtain the necessary regulatory approvals, our business could be materially affected. Furthermore, there are various governmental, 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 governmental organizations, and verification from non-governmental and quasi-governmental organizations are generally not mandatory, some of our current or prospective customers, collaboration partners 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 (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 180 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
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seeking to produce or sell) our products, such as Brazil and various countries in Asia, rely on TSCA or REACH (or are implementing similar laws and programs) for chemical registration or regulation in their jurisdictions, delays with the U.S. 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. Also, certain of our current or proposed products in the Flavor & Fragrance, Clean Beauty and Health & Wellness markets, including Flavor & Fragrance ingredients, skincare ingredients and cosmetic actives, alternative sweeteners and nutraceuticals, may be subject to the approval of and regulation by the FDA, the European Food Safety Authority, as well as similar agencies of states and foreign jurisdictions where these products are sold or proposed to be sold.

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 and third-party verifications 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, any enforcement action taken by regulators against us or our products could cause us to suffer adverse publicity, which could harm our reputation and our relationship with our customers and vendors.

In addition, many of our products are intended to be a component of our collaboration partners’ 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, the FDA, or the European Food Safety Authority. If we or our collaboration partners and customers (or their customers) are not successful in obtaining any required regulatory approval or third-party verifications 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 could be materially adversely affected.

Changes in government regulations, including subsidies and economic incentives, could have a material adverse effect on our business.

The markets where we sell our products are heavily influenced by foreign, federal, state and local government regulations and policies. Changes to existing or adoption of new foreign or domestic federal, state and local legislative initiatives that impact the production, distribution or sale of products may harm our business. The uncertainty regarding future standards and policies, including developing legislation in the Clean Beauty industry, may also affect our ability to develop our 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, results of operations and growth prospects.

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 business, financial condition, and results of operations.

Our cannabinoid initiative is uncertain and may not yield commercial results and is subject to material regulatory risks.

In 2019, we announced a new collaboration arrangement with LAVVAN, Inc. (Lavvan) aimed at developing, producing and commercializing fermentation-derived cannabinoids. While we believe there are substantial business opportunities for us in this field, there can be no assurance that our activities will be successful, or that any research and development and product testing efforts will result in commercially saleable products, or that the market will accept or respond positively to our products. In September 2020, Lavvan filed a suit against us in the United States District Court for the Southern District of New York alleging certain breach of contract claims. If we fail in defending this claim, it could negatively impact our business, financial condition, results of operations and growth prospects.

In addition, the market for cannabinoids is heavily regulated. Synthetic cannabinoids may be viewed as controlled substances under the federal Controlled Substances Act of 1970 (CSA), and may be subject to a high degree of regulation including, among other things, certain registration, licensing, manufacturing, security, record keeping, reporting, import, export,
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clinical and non-clinical studies, insurance and other requirements administered by the U.S. Drug Enforcement Administration (DEA) and/or the FDA.

Individual states and countries have also established controlled substance laws and regulations, which may differ from U.S. federal law. We or our partners may be required to obtain separate state or country registrations, permits or licenses in order to be able to develop produce, sell, store and transport cannabinoids.

Complying with laws and regulations relating to cannabinoids is evolving, complex and expensive, and may divert management’s attention and resources from other aspects of our business. Failure to maintain compliance with such laws and regulations may result in regulatory action that could have a material adverse effect on our business, financial condition, results of operations and growth prospects. The DEA, FDA or state agencies may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to revoke those registrations. In certain circumstances, violations could lead to criminal proceedings.

We may incur material costs to comply with environmental laws and regulations, and failure to comply with these laws and regulations could expose us to material liabilities.

We use intermediate substances, 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, Brazil and the European Union. 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 and those of our contractors 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.

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 December 31, 2020, we had 695 issued U.S. and foreign patents and 220 pending U.S. 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. 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 also difficult to predict. As a result, the validity and enforceability of patents cannot be predicted with certainty. Moreover, we cannot be certain whether:
we (or our licensors) were the first to make the inventions covered by each of our issued patents and pending patent applications;
we (or our licensors) were the first to file patent applications for these inventions;
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;
any patents issued to us (or our licensors) will provide us with any competitive advantages, or will be challenged by third parties;
we will be able to identify when others are infringing our (or our licensed) valid patent claims;
others will claim we are infringing on their patent claims;
we will develop additional proprietary products or technologies that are patentable; or
the patents of others will have a material adverse effect on our business.

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. Accordingly, even if issued, we cannot predict the breadth, validity and enforceability of the claims upheld in our and other companies' patents. 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.

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.

Moreover, we have granted certain of our lenders liens on substantially all of our assets, including our intellectual property, as collateral. If we default on our payment obligations under these secured loans, such lenders have the right to foreclose upon and control the disposition of our assets, including our intellectual property assets, to satisfy our payment obligations under such instruments. If such default occurs, and our intellectual property assets are sold or licensed, our business could be materially adversely affected.

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. Moreover, in some cases our ability to determine if our intellectual property is being unlawfully used by a competitor may be limited. 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 Givaudan, Firmenich, DSM and Yifan, require us to share certain confidential information. 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 U.S. courts to protect trade secrets. If our competitors lawfully obtain or independently develop equivalent knowledge, methods, and know-how, we would not be able to assert our trade secrets against them.

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We require new employees and consultants to execute proprietary information and inventions agreements upon the commencement of an employment or consulting arrangement with us. We additionally require contractors, advisors, corporate collaboration partners, outside scientific collaboration partners, and other third parties that may receive trade secret information to execute such agreements or 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 be 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 materially adversely affect our competitive business position.

Third parties and former employees may misappropriate our trade secrets including those embodied in our yeast strains.

Third parties, including collaboration partners, contract manufacturers, other contractors, and shipping agents, as well as exiting employees, often have access to our trade secrets and custody or control of our yeast strains. If our trade secrets or 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 are, or one of our collaboration partners is, 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 collaboration partners' 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 molecules, and is characterized by the existence of a significant number of patents and disputes regarding patent and other intellectual property rights. Because patent applications remain unpublished and confidential for eighteen months and 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. There may be 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 collaboration partners 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 may need to obtain a license from the owner, develop or obtain alternative technologies, 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 collaboration partners 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 materially harm our competitive position, including:
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 prevent or delay getting our products to market and divert management time and attention from our business;
substantial damages for past infringement, which we may have to pay if a court determines that our products or technologies infringe a third party's patent or other proprietary rights;
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;
the International Trade Commission (ITC) prohibiting us from importing our products into the United States; and
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 and patent agency procedures 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. In addition, third parties may be able to challenge the validity of one or more of our patents using available post-grant procedures including oppositions and inter partes reviews. These proceedings could result in substantial cost to us even if the outcome is favorable. Even if successful, an interference or post-grant proceeding may result in loss of certain of our patent 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 and attention to 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 companies, including our competitors or potential competitors. We may be subject to claims that these employees 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, especially to our competitors or potential competitors, could hamper or prevent our ability to commercialize our product candidates, which could materially harm our business. Even if we are successful in prosecuting or 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.

Our commercial success depends in part on obtaining, maintaining and defending intellectual property protection for our products and assets. Enforcement of our intellectual property rights may require us to bring claims against third parties that are using our proprietary rights without permission, and such process 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.

Patent enforcement generally must be sought on a country-by-country basis, and 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 by foreign holders 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 DOE, 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 DOE. 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 the U.S. government determines 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 United States without the U.S. government’s prior approval. Additionally, we may be
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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 United States). 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 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 the Company, 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, 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 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. 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, financial condition, results of operations and growth prospects. In addition, payments of significant amounts, even if reserved, could adversely affect our liquidity position. For more information regarding our current legal proceedings, please refer to the section entitled “Legal Proceedings” in Part I, Item 3 of this Annual Report on Form 10-K.

Risks Related to Ownership of Our Common Stock

Our stock price has been, and may continue to be, volatile.

The market price of our common stock has been, and may continue to be, subject to material volatility. 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:
the ongoing impacts of the COVID-19 pandemic and resulting impact on stock market performance;
fluctuations in our financial results or outlook or those of companies perceived to be similar to us;
changes in estimates of our financial results or recommendations by securities analysts;
changes in the prices of commodities associated with our business such as sugar and petroleum or changes in the prices of commodities that some of our products may replace, such as oil and other petroleum sourced products;
changes in our capital structure, such as future issuances of securities or the incurrence of debt;
announcements by us or our competitors of significant contracts, acquisitions or strategic partnerships;
regulatory developments in the United States, Brazil, and/or other foreign countries;
litigation involving us, our general industry or both;
additions or departures of key personnel;
investors’ general perception of us; and
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 have been involved in four such lawsuits that were dismissed in September 2017, July 2018 and September 2018, and were involved in one such lawsuit that was resolved in December 2020. We are currently defending two such lawsuits, as described in more detail below under “Legal Proceedings,” 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 materially harm our business. Any insurance we maintain may not provide adequate coverage against potential losses such securities litigation, 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.

The concentration of our capital stock ownership and certain rights we have granted to insiders will limit the ability of other stockholders to influence corporate matters and presents risks related to our future securities offerings, which could substantially impact our business.

As of December 31, 2020, over 50% of our capital stock was beneficially owned by five significant stockholders, including Foris Ventures, LLC (Foris), FMR LLC, DSM, Vivo Capital LLC (Vivo), and Farallon Capital. Furthermore, most of these parties and other insider stockholders holds some or a combination of convertible preferred stock, warrants and purchase rights, pursuant to which they may acquire additional shares of our common stock and thereby increase their ownership interest in the Company. Additionally, Foris is indirectly owned by John Doerr, one of our current directors, and each of DSM and Vivo have one or more directors on our Board of Directors pursuant to designation rights under their respective agreements with the Company. 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 materially 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, 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 the Company, even if such actions would benefit our other stockholders.

In May 2017, we entered into an agreement with DSM, which was amended and restated in August 2017, 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, and (ii) to provide DSM with certain exclusive negotiating rights in connection with certain future commercial projects and arrangements. 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 their investments in the Company, we granted certain investors, including DSM and Vivo, 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.

While we have a related-party transactions policy that requires certain approvals of any transaction between the 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.

Future sales and issuances of our common stock, convertible securities, warrants or rights to purchase common stock could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to decline.

From time to time, we have sold a substantial number of warrants and rights to acquire our common stock as well as convertible securities, which, if exercised, purchased or converted, result in dilution to our stockholders. In the future, we may sell additional warrants, rights, convertible or exchangeable securities or other equity securities in one or more transactions at
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prices and in a manner we determine from time to time, to finance our business operations and investments. To the extent we raise capital by issuing equity securities, our stockholders may experience substantial dilution.

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 materially. 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 our common stock held by, or issuable to, certain of our largest stockholders. All of our common stock sold pursuant to an offering covered by such registration statements will be freely transferable. In addition, shares of our common stock issued or issuable under our equity incentive plans to employees and directors 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.

We are subject to new U.S. foreign investment regulations which may impose additional burdens on or may limit certain investors' ability to purchase our common stock, potentially making our common stock less attractive to investors.

The U.S. Department of Treasury implemented part of the Foreign Investment Risk Review Modernization Act (FIRRMA) on November 10, 2018. The FIRRMA program expands the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS), to include certain direct or indirect foreign investments in a defined category of U.S. companies, including companies involved in critical infrastructure and critical technologies. Among other things, FIRRMA empowers CFIUS to require certain mandatory filings in connection with certain foreign investments in U.S. companies and permits CFIUS to charge filing fees related to such filings. Such filings are subject to review by CFIUS, which will have the authority to recommend that the U.S. President block or impose conditions on certain foreign investments in companies subject to CFIUS’s oversight. Any such restrictions on the ability of foreign investors to invest in the Company could limit our ability to engage in strategic transactions that may benefit our stockholders, including a change of control, and may prevent our stockholders from receiving a premium for their shares of our common stock in connection with a change of control, and could also affect the price that some investors are willing to pay for 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 the Company 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 the Company were to cease coverage of our stock or fail to regularly publish reports on the Company, 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 cash 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 shares of our 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. These provisions could also make it more difficult for stockholders to nominate directors and take other corporate actions. These provisions include:
a staggered Board of Directors;
authorizing the Board of Directors to issue, without stockholder approval, preferred stock with rights senior to those of our common stock;
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;
limiting the liability of, and providing indemnification to, our directors and officers;
eliminating the ability of our stockholders to call special meetings; and
requiring advance notification of stockholder nominations and proposals.

Section 203 of the Delaware General Corporation Law (the "DGCL") 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. While we have agreed to opt out of Section 203 through our Certificate of Incorporation, our Certificate of Incorporation contains substantially similar protections to the Company and stockholders as those afforded under Section 203.

These and other provisions in our Certificate of Incorporation and our Bylaws could discourage potential takeover attempts, reduce the price that investors are 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.

The exclusive forum provisions in our restated Bylaws may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims.

In November 2020, we amended our restated Bylaws to provide that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware will be the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our certificate of incorporation, or our restated Bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. Our restated bylaws further provide that the U.S. federal district courts will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or a Federal Forum Provision. Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court.

These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provisions contained in our Certificate of Incorporation or restated Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition and results of operations. In addition, Section 203 of the DGCL may discourage, delay or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations and other transactions between us and holders of 15% or more of our common stock.

General Risks

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 or indirectly soliciting our employees or consultants to leave us 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.

Loss of key personnel, including key management personnel and key members of our research and development programs, 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.
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Our business involves complex, global operations across a variety of markets and requires a management team and employee workforce that are 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, can be lengthy and expensive. 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. 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 any key technical and operational employee, 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. Furthermore, any reductions to our workforce as part of potential cost-saving measures, such as those discussed above with respect to our planned actions to continue as a going concern, 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 collaboration partners 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 U.S. employees are “at-will” employees, which means that either the employee or the Company may terminate the employee's employment at any time.

Our operations rely on sophisticated information technology and equipment systems, 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 research and development activities, procurement and inventory management, transaction processing, financial, commercial and operational data, partner and joint venture activities, human resources management, legal and tax compliance and other 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 contained therein 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 a material adverse effect on our results of operations and financial condition.

Increased information systems security threats and more sophisticated, targeted computer invasions could pose a risk to our technology platform and operations.

Increased information systems security threats, cyber- or phishing-attacks and more sophisticated, targeted computer invasions pose a risk to the security of our systems and networks, and the confidentiality, availability, and integrity of our data, operations, and communications, and our exposure to such risks is enhanced in our remote work environment as a result of the COVID-19 pandemic. Cyber-attacks against our technology platform and infrastructure could result in exposure of confidential information, the modification of critical data, and/or the failure of critical operations. Likewise, improper or inadvertent employee behavior, including data privacy breaches by employees and others with permitted access to our systems may pose a risk that sensitive data may be exposed to unauthorized persons or to the public. While we attempt to mitigate these risks by employing a number of measures, including security measures, employee training, comprehensive monitoring of our networks and systems, maintenance of backup and protective systems, and incident response procedures, if these measures prove inadequate, we could be adversely affected by, among other things, loss or damage of intellectual property, proprietary and confidential information, data integrity, and communications or customer data, increased costs to prevent, respond to, or mitigate these cyber security threats and interruptions of our business operations.

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Growth may place material demands on our management, our infrastructure, and our contract manufacturing relationships.

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 approximately 300 employees at the time of our initial public offering in 2010 to 595 full-time employees at December 31, 2020. Our growth and diversified operations have placed, and may continue to place, material demands on our management and our operational and financial infrastructure. In particular, continued growth could strain our ability to:
manage multiple research and development programs;
operate multiple manufacturing facilities around the world;
develop and improve our operational, financial and management controls;
enhance our reporting systems and procedures;
recruit, train and retain highly skilled personnel;
develop and maintain our relationships with existing and potential business partners including contract manufacturers;
maintain our quality standards; and
maintain customer satisfaction.

Managing our growth will require material 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, financial condition, and results of operations would be adversely impacted.

Our headquarters and other facilities are located in active earthquake and tsunami or in active hurricane zones, and an earthquake, hurricane 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 hurricane or associated flooding in the Wilmington, North Carolina area could cause damage to our facility located in Leland or result in localized extended outages of utilities or transportation systems. The occurrence of a natural disaster, such as an earthquake, hurricane, 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 material interruption in our business, damage or destroy our facilities, production equipment or inventory or those of our suppliers and cause us to incur material 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. Our facilities undergo annual loss control audits and both our Emeryville and Leland facilities have emergency actions plans outlining emergency response practices for these and other emergency scenarios. Training on emergency response is provided to all employees at hire and annually thereafter as a refresh.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.
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ITEM 2. PROPERTIES

The following is a summary of our principal facilities as of December 31, 2020. We lease our principal office and research and development facilities located in Emeryville, California. We hold a 50% ownership interest in a manufacturing facility and related land located in Leland, North Carolina and lease a pilot plant and demonstration facility and related office and laboratory space located in Campinas, Brazil. Our lease agreements expire at various dates through the year 2031.
Location Approximate Square Feet Operations
U.S.
Emeryville, California 136,000 Executive offices; research and development, administrative and pilot plant
Leland, North Carolina 19,400 Manufacturing (joint venture with Nikko)
BRAZIL
Campinas, Brazil 44,000 Pilot plant, research and development and administrative

We believe that our current facilities are suitable and adequate to meet our needs and that suitable additional space will be available to accommodate the foreseeable expansion of our operations. Based on our anticipated volume requirements for 2021 and beyond, we will likely need to identify and secure access to additional production capacity in 2021 and beyond, which we plan to obtain by constructing a new facility in Brazil and by increasing our use of contract manufacturers, including our collaboration partner, DSM. We are currently making plans to secure such additional capacity.

ITEM 3. LEGAL PROCEEDINGS

For a description of our significant pending legal proceedings, please see Note 9, Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.


ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.
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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information for Common Stock

Our common stock is traded on the Nasdaq Global Select Market under the symbol AMRS.

At February 28, 2021, there were 84 holders of record (not including beneficial holders of stock held in street names) of our common stock.

Dividend Policy

We have never declared or paid any cash dividend on our common stock. We intend to retain any future earnings and do not expect to pay cash dividends in the foreseeable future.

Recent Sales of Unregistered Equity Securities and Use of Proceeds

For information regarding unregistered sales of our equity securities during the two years ended December 31, 2020, see the financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

See Note 15, “Subsequent Events” in Part II, Item 8 of this Annual Report on Form 10-K for information regarding unregistered sales of our equity securities subsequent to December 31, 2020.

Securities Authorized for Issuance under Equity Compensation Plans

The following table shows certain information concerning our common stock reserved for issuance in connection with our 2005 Stock Option/Stock Issuance Plan, our 2010 Equity Incentive Plan, our 2020 Equity Incentive Plan and our 2010 Employee Stock Purchase Plan, all as of December 31, 2020:
Plan category Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
Weighted-average
exercise price of
outstanding
options
Number of
securities to be
issued upon vesting
of outstanding
restricted stock
units
Number of securities remaining available for future issuance under equity compensation plans(1)(2)
Equity compensation plans approved by security holders 6,502,096  $ 7.64  7,043,909  5,782,707 
Equity compensation plans not approved by security holders —  —  —  — 
Total 6,502,096  $ 7.64  7,043,909  5,782,707 

(1)    Includes 5,287,852 shares reserved for future issuance under our 2020 Equity Incentive Plan and 494,855 shares reserved for future issuance under our 2010 Employee Stock Purchase Plan. No shares are reserved for future issuance under our 2005 Stock Option/Stock Issuance Plan other than shares issuable upon exercise of equity awards outstanding under such plan.

(2)    Effective January 1, 2021, the number of shares available for future issuance under our 2020 Equity Incentive Plan is expected to be increased by up to 12,247,572 shares pursuant to the automatic increase provision contained in the 2020 Equity Incentive Plan and the number of shares available for future issuance under our 2010 Employee Stock Purchase Plan is expected to be increased by up to 40,527 shares, in each case pursuant to automatic increase provisions contained in the respective plans, as discussed in more detail below.

Our 2020 Equity Incentive Plan includes all shares of our common stock previously reserved but unissued under the 2010 Equity Incentive Plan and all shares of our common stock reserved for issuance under our 2005 Stock Option/Stock Issuance Plan immediately prior to our initial public offering that were not subject to outstanding grants as of the completion of such offering. In addition, any shares of our common stock (i) issuable upon exercise of stock options granted under our 2005 Stock Option/Stock Issuance Plan or under our 2010 Equity Incentive Plan that cease to be subject to such options and (ii) issued under our 2005 Stock Option/Stock Issuance Plan or under our 2010 Equity Incentive Plan that are forfeited or repurchased by us at the original issue price, will become part of our 2020 Equity Incentive Plan reserve.

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The number of shares available for grant and issuance under our 2020 Equity Incentive Plan is increased on January 1 of each year during the term of the plan by an amount equal to the lesser of (1) five percent (5%) of our shares outstanding on the immediately preceding December 31 and (2) a number of shares as may be determined by our Board of Directors or the Leadership, Development, Inclusion, and Compensation Committee in their discretion. In addition, shares will again be available for grant and issuance under our 2020 Equity Incentive Plan that are:

subject to issuance upon exercise of an option or stock appreciation right granted under our 2020 Equity Incentive Plan and that cease to be subject to such award for any reason other than the award’s exercise;

subject to an award granted under our 2020 Equity Incentive Plan and that are subsequently forfeited or repurchased by us at the original issue price;

surrendered pursuant to an exchange program; or

subject to an award granted under our 2020 Equity Incentive Plan that otherwise terminates without shares being issued.

The number of shares reserved for issuance under our 2010 Employee Stock Purchase Plan is increased on January 1 of each year during the term of the plan by an amount equal to the lesser of (1) one percent (1%) of our shares outstanding on the immediately preceding December 31 and (2) a number of shares as may be determined by our Board of Directors or the Leadership, Development, Inclusion, and Compensation Committee of the Board in their discretion, provided that the aggregate number of shares issued over the term of our 2010 Employee Stock Purchase Plan shall not exceed 1,666,666 shares.

For more information regarding our 2020 Equity Incentive Plan and 2010 Employee Stock Purchase Plan, see Note 12, “Stock-based Compensation” in Part II, Item 8 of this Annual Report on Form 10-K.


ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

As a leading synthetic biotechnology company active in the Clean Health and Beauty markets through our consumer brands and a top supplier of sustainable and natural ingredients, we apply our proprietary Lab-to-Market biotechnology platform to engineer, manufacture and market high performance, natural and sustainably sourced products. We do so with the use of computational tools, strain construction tools, screening and analytics tools, and advanced lab automation and data integration. Our biotechnology platform enables us to rapidly engineer microbes and use them as catalysts to metabolize renewable, plant-sourced sugars into high-value ingredients that we manufacture at industrial scale. Through the combination of our biotechnology platform and our industrial fermentation process, we have successfully developed, produced and commercialized thirteen distinct molecules used in formulations by thousands of leading global brands.

We believe that synthetic biology represents a third industrial revolution, bringing together biology and engineering to generate new, more sustainable materials to meet the growing global demand for bio-based replacements of petroleum-based and traditional animal- or plant-derived ingredients. We continue to generate demand for our current portfolio of products through an extensive go-to-market network provided by our partners that are the leading companies in our target markets. Via our partnership model, our partners invest in the development of molecules to take it from the lab to commercial scale and use their extensive marketing and sales capabilities to sell our ingredients and formulations to their customers. We capture long-term revenue both through the production and sale of our molecules to our partners and through royalty revenues from our partners' product sales to their customers. We have also successfully formulated our unique, natural and sustainably-sourced ingredients into wholly-owned consumer brands, including Biossance® our clean beauty skincare brand, Pipette®, our baby and mother care brand, and PurecaneTM, our alternative sweetener brand. We are marketing our brands directly to consumers via our ecommerce platforms, in brick-and-mortar stores, and online via various retail partners.

We were founded in 2003 in the San Francisco Bay area by a group of scientists from the University of California, Berkeley. Through a grant in 2005 from the Bill & Melinda Gates Foundation, we developed technology capable of creating microbial strains that produce artemisinic acid, a precursor of artemisinin, an anti-malarial drug.
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We produced a renewable farnesene brand, Biofene®, a long-chain, branched hydrocarbon molecule that we manufacture through fermentation using engineered microbes. Our farnesene derivatives are sold in hundreds of products as nutraceuticals, skincare products, fragrances, solvents, polymers, and lubricant ingredients. In 2014, we began manufacturing additional molecules for the Flavor & Fragrance industry; in 2015, we began investing to expand our capabilities to other small molecule chemical classes via our collaboration with the Defense Advanced Research Projects Agency (DARPA); and in 2016, we expanded into proteins. We then made the strategic decision to transition our business model from low margin commodity markets to higher margin specialty ingredients markets. We began the transition by first commercializing and supplying farnesene-derived squalane as a cosmetic ingredient to formulators and distributors. We also entered into collaboration and supply agreements for the development and commercialization of molecules within the Flavor & Fragrance and Clean Beauty markets. We partner with our customers to create sustainable, high performing, low-cost molecules that replace an ingredient in their supply chains. We commercially scale and manufacture those molecules. Our revenue is generated from research and development collaboration programs, grants, renewable product sales, and license and royalty revenues from our renewable product portfolios.

All of our non-government partnerships include commercial terms for the supply of molecules we produce at commercial scale. The first molecule to generate revenue for us outside of farnesene was a fragrance molecule launched in 2015. Since the launch, this and additional fragrance molecules have continued to generate sales year over year. Our partners for these molecules are indicating continued strong growth due to their cost advantaged position, high purity of our molecules and our sustainable production method. In 2019, we commercially produced and shipped our Reb M product that is an alternative sweetener and sugar replacement for food and beverages. In 2020, we added a total of six new ingredients to our portfolio. We have a pipeline that can deliver an estimated two to three new molecules each year over the coming years.

Our time to market for molecules has decreased from seven years to less than a year for our most recent molecule, mainly due to our ability to leverage our biotechnology platform with proprietary computational tools, strain construction tools, screening and analytics tools, and advanced lab automation and data integration. Our state-of-the-art infrastructure includes industry-leading strain engineering and lab automation located in Emeryville, California, pilot-scale production facilities in Emeryville, California and Campinas, Brazil, a demonstration-scale facility in Campinas, Brazil and a commercial scale production facility in Leland, North Carolina (owned and operated by our Aprinnova joint venture). We are able to use a wide variety of feedstocks for production but have focused on sourcing Brazilian sugarcane for our large-scale production because of its renewability, low cost and relative price stability. We are constructing a new purpose-built, large-scale specialty ingredients facility in Brazil, which we anticipate will allow for the manufacture of up to five products concurrently, including both our specialty ingredients portfolio and our alternative sweetener product. In September 2019, we obtained the necessary permits and broke ground for this facility and we expect construction to be completed by the end of 2021. During construction, we continue to manufacture our products at manufacturing sites in Brazil, the U.S. and Europe.

Sales and Revenue

We recognize revenue from product sales, license fees and royalties, and grants and collaborations.

We have research and development collaboration arrangements for which we receive payments from our collaboration partners, which include DARPA, Koninklijke DSM N.V. (DSM), Firmenich SA (Firmenich), Givaudan International SA (Givaudan), Yifan Pharmaceutical Co. Ltd. (Yifan) and others. Some of our collaboration arrangements provide for advance payments to us in consideration for grants of exclusivity or research efforts that we will perform. Our collaboration agreements, which may require us to achieve milestones prior to receiving payments, are expected to contribute revenues from product sales and royalties if and when they are commercialized. See Note 10, “Revenue Recognition” in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

We have several other collaboration molecules in our development pipeline with partners including DSM, Givaudan, Firmenich and Yifan that we expect will contribute revenues from product sales and royalties if and when they are commercialized.

COVID-19 Business Update

We have been closely monitoring the impact of the global COVID-19 pandemic on all aspects of our business, including how it has and will impact our employees, partners, supply chain, and distribution network. Since the start of the pandemic in early 2020, we developed a comprehensive response strategy including establishing a cross-functional COVID-19 task force and implementing business continuity plans to manage the impact of the COVID-19 pandemic on our employees and our business. We have applied recommended public health strategies designed to prevent the spread of COVID-19 and have been
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focused on the health and welfare of our employees. We have successfully managed to sustain ongoing critical production campaigns and infrastructure while staying in compliance with State and County public health orders.

Accordingly, since the end of the first quarter of 2020, we have initiated several precautions in accordance with local regulations and guidelines to mitigate the spread of COVID-19 infection across our businesses, which has impacted the way we carry out our business, including additional sanitation and cleaning procedures in our laboratories and other facilities, on-site COVID-19 testing, temperature and symptom confirmations, instituting remote working when possible, and implementing social distancing and staggered worktime requirements for our employees who must work on-site. Our plans to reopen our sites and enable a broad return to work in our offices, laboratories and production facilities will continue to follow local public health plans and guidelines. As the effects of the COVID-19 pandemic and the availability of vaccines continue to rapidly evolve, even if our employees more broadly return to work in our offices, laboratories and production facilities, we have the flexibility to resume more restrictive on-site and remote work models, if needed, as a result of spikes or surges in COVID-19 infection, hospitalization rates or otherwise. See “Risk Factors – Business and Operational Risks - The COVID-19 pandemic has impacted our business and results of operations and could have a material adverse effect on our business, results of operations and financial condition in the future.

Critical Accounting Policies and Estimates

Management's discussion and analysis of results of operations and financial condition are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). We believe that the critical accounting policies described in this section are those that significantly impact our financial condition and results of operations and require the most difficult, subjective or complex judgements, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. Because of this uncertainty, actual results may vary from these estimates.

Our most critical accounting estimates include:
Recognition of revenue including arrangements with multiple performance obligations;
Valuation and allocation of fair value to various elements of complex related party transactions;
The valuation of freestanding and embedded derivatives, which impacts gains or losses on such derivatives, the carrying value of debt, interest expense and deemed dividends; and
The valuation of debt for which we have elected fair value accounting.

For a more detailed discussion of our critical accounting estimates and policies, see Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" in Part II, Item 8 of this 2020 Form 10-K.

Results of Operations

Revenue
Years Ended December 31,
(In thousands)
2020 2019 Change
Revenue:
Renewable products $ 104,338  $ 59,872  74  %
Licenses and royalties 50,991  54,043  (6) %
Grants and collaborations 17,808  38,642  (54) %
Total revenue $ 173,137  $ 152,557  13  %

Total revenue increased by 13% to $173.1 million in 2020. Renewable products revenue increased by 74% to $104.3 million in 2020, due to a 197% increase in consumer products revenue and a 26% increase in ingredients revenue.

Licenses and royalties revenue decreased by 6% to $51.0 million in 2020, due to a reduction from DSM, partly offset by an increase from Firmenich.

Grants and collaborations revenue decreased by 54% to $17.8 million in 2020, primarily due to no collaboration revenue generated under our cannabinoid agreement in 2020 as compared to $18.3 million in 2019.

Our revenues are dependent on the timing and nature of arrangements entered into with our customers, which may include multiple performance obligations for which revenue accounting requires significant judgement and estimates. Based on the nature of our customer arrangements, our revenues may vary significantly from one period to the next.

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Cost and Operating Expenses
Years Ended December 31,
(In thousands)
2020 2019 Change
Cost of products sold $ 87,812  $ 76,185  15  %
Research and development 71,676  71,460  —  %
Sales, general and administrative 137,071  126,586  %
Impairment of other assets —  216  (100) %
Total cost and operating expenses $ 296,559  $ 274,447  %

Cost of Products Sold

Cost of products sold includes the costs of raw materials, labor and overhead, amounts paid to contract manufacturers, inventory write-downs resulting from applying lower of cost or net realizable value inventory adjustments, and costs related to production scale-up. Because of our product mix, our cost of products sold does not change proportionately with changes in renewable product revenue.

Cost of products sold increased by 15% to $87.8 million in 2020, primarily due to a 74% increase in renewable products revenue, mostly offset by significant improvements in unit costs and manufacturing efficiencies.

Research and Development Expenses

Research and development expenses increased by 0.3% to $71.7 million in 2020, primarily due to increases in professional services and employee compensation, mostly offset by a net decrease in equipment-related expense. Equipment-related expense, including depreciation, decreased as the result of our replacing equipment rentals with financing leases, which replaced monthly rental expense with depreciation expense over a 3- to 5-year useful life for capitalized equipment.

Sales, General and Administrative Expenses

Sales, general and administrative expenses increased by 8% to $137.1 million in 2020, primarily due to an $11.5 million increase in sales and marketing expense related to our consumer brands.

Impairment of Other Assets

In 2019, we impaired $0.2 million of contingent consideration that had been recorded in 2017 in connection with the December 2017 sale of our factory in Brasil. There was no such impairment in 2020.

Other Income (Expense), Net
Years Ended December 31,
(In thousands)
2020 2019 Change
Interest expense $ (47,951) $ (58,665) (18) %
(Loss) gain from change in fair value of derivative instruments (11,362) 2,777  (509) %
Loss from change in fair value of debt (89,827) (19,369) 364  %
Loss upon extinguishment of debt (51,954) (44,208) 18  %
Other income (expense), net 666  (783) (185) %
Total other expense, net $ (200,428) $ (120,248) 67  %
______________
nm = not meaningful

Total other expense, net was $200.4 million in 2020, compared to $120.2 million in 2019. The $80.2 million increase was primarily comprised of a $70.5 million increase in loss from change in fair value of debt, a $14.1 million swing from a gain to a loss in change in fair value of derivative instruments, and a $7.7 million increase in loss upon extinguishment of debt, partly offset by a $10.7 million decrease in interest expense.

The increase in loss from change in fair value of debt was due to a 95% increase in our stock price during 2020, combined with the addition of a second debt instrument (the Foris Convertible Note) for which we elected to account for at fair value during 2020; see Note 4, "Debt" in Part II, Item 8 of this Annual Report on Form 10-K for details regarding the Foris Convertible Note.

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The swing from a gain to a loss in change in fair value of derivative instruments was primarily due to a 95% increase in our stock price during 2020; see Note 3, "Fair Value Measurement" in Part II, Item 8 of this Annual Report on Form 10-K for details regarding our outstanding derivative instruments.

The loss upon extinguishment of debt for the year ended December 31, 2020 was the result of debt modifications and restructuring which required the write-off of significant unamortized debt discount balances and expensing of the fair value of equity instruments granted or modified in connection with the debt settlement or modification.

The reduction in interest expense was primarily due to a decrease in debt discount accretion, along with lower average debt principal balances during 2020 as compared to the prior year.

Income Taxes

For the years ended December 31, 2020 and 2019, we recorded income tax expense of $0.3 million and $0.6 million related to accrued interest on uncertain tax positions.

See Note 13, "Income Taxes" in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Liquidity and Capital Resources

Years Ended December 31,
(In thousands)
2020 2019
Net cash (used in) provided by:
Operating activities $ (175,753) $ (156,933)
Investing activities (12,781) (13,080)
Financing activities 222,525  124,910 
Effect of exchange rate changes on cash, cash equivalents and restricted cash (4,268) (252)
Net increase (decrease) in cash, cash equivalents and restricted cash $ 29,723  $ (45,355)

Liquidity

We have incurred operating losses since our inception, and we expect to continue to incur losses and negative cash flows from operations through at least the next 12 months following the issuance of this Annual Report on Form 10-K. As of December 31, 2020, we had negative working capital of $16.5 million, an accumulated deficit of $2.1 billion, and cash and cash equivalents of $30.2 million.

As of December 31, 2020, the principal amounts due under our debt instruments (including related party debt) totaled $170.5 million, of which $56.5 million is classified as current. Our debt agreements contain various covenants, including certain restrictions on our business — including restrictions on additional indebtedness, material adverse effect and cross default provisions — that could cause us to be at risk of default. A failure to comply with the covenants and other provisions of our debt instruments, including any failure to make payments when required, would generally result in events of default under such instruments, which could result in the acceleration of a substantial portion of such indebtedness. Acceleration would generally also constitute an event of default under our other outstanding debt instruments, which could result in the acceleration of a substantial portion of our debt repayment obligations.

During 2020 we failed to meet certain covenants under several credit arrangements, including those associated with missed payments, cross-default provisions, minimum liquidity and minimum asset coverage requirements. These lenders provided permanent waivers to us for breaches of all past covenant violations and cross-default payment failures under the respective credit agreements, and significantly reduced the minimum liquidity requirement and substantially increased the base of eligible assets to calculate the asset coverage requirement.

Cash and cash equivalents of $30.2 million as of December 31, 2020 are not sufficient to fund expected future negative cash flows from operations and cash debt service obligations through March 2022. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements in this Annual Report on Form 10-K are issued. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our ability to continue as a going concern will depend, in large part, on our ability to minimize the anticipated negative cash flows from operations during the 12 months from the date of this filing and to raise additional proceeds through strategic transactions, financings, and refinance or extend other existing debt maturities that will occur in June 2021 ($10 million as of the date of this filing), all of which are uncertain and outside of our control.
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Our operating plan for 2021 contemplates a significant reduction in net operating cash outflows as compared to the year ended December 31, 2020, resulting from (i) revenue growth from sales of existing and new products with positive gross margins, (ii) reduced production costs as a result of manufacturing and technical developments, (iii) the monetization of certain assets, (iv) an increase in cash inflows from collaboration and grants and licenses and royalties, and (v) lower debt servicing expense. Our operating plan for 2021 also contemplates funding the construction and launch of our new specialty ingredients fermentation facility in Brazil, which will most likely require financing that is significantly above any potential to generate excess cash flows from operations. If we are unable to generate sufficient cash inflows from product sales, licenses and collaboration arrangements, we will need to obtain additional funding from new equity or debt financings, which may not occur timely or on reasonable terms, if at all, and agree to burdensome covenants, grant further security interests in our assets, enter into collaboration and licensing arrangements that require us to relinquish commercial rights, or grant licenses on terms that are not favorable.

If we do not achieve our planned operating results, we may need to take the following actions to support our liquidity needs in 2021:
shift focus to existing products and customers with significantly reduced investment in new product and commercial development efforts;
reduce expenditures for employees and third-party contractors, including consultants, professional advisors and other vendors;
reduce or delay uncommitted capital expenditures, including expenditures related the construction and commissioning of the new production facility in Brazil, nonessential facilities and lab equipment, and information technology projects; and
closely monitor our working capital position with customers and suppliers, as well as suspend operations at pilot plants and demonstration facilities.

Implementing this plan could negatively impact our ability to continue our business as currently contemplated, including, without limitation, delays or failures in our ability to:
achieve planned production levels;
develop and commercialize products within planned timelines or at planned scales; and
continue other core activities.

We will need to fund operations for the foreseeable future with cash currently on hand, cash inflows from product sales, licenses and royalties, grants and collaborations, and equity and debt financings, to the extent necessary. Some of our research and development collaborations are subject to the risk that we may not meet milestones. Future equity and debt financings, if needed, are subject to the risk that we may not be able to secure financing in a timely manner or on reasonable terms, if at all.

For details, see the following Notes in Part II, Item 8 of this Annual Report on Form 10-K:
Note 4, "Debt"
Note 5, "Mezzanine Equity"
Note 6, "Stockholders' Deficit"

Cash Flows during the Years Ended December 31, 2020 and 2019

Cash Flows from Operating Activities

Our primary uses of cash from operating activities are for personnel costs and costs related to the production and sales of our products, offset by cash received from sales to customers.

For the year ended December 31, 2020, net cash used in operating activities was $175.8 million, which was primarily comprised of our $326.9 million net loss and a decrease of $54.4 million in working capital, partly offset by $205.5 million of non-cash charges. Non-cash charges were primarily comprised of an $89.8 million loss from change in fair value of debt, a $52.0 million loss upon extinguishment of debt, $13.7 million of stock-based compensation expense, an $11.4 million loss from change in fair value of derivative instruments and $10.5 million of non-cash interest expense in connection with the release of pre-delivery shares to a debt holder in connection with a previous debt issuance. The decrease in working capital was primarily comprised of a $24.2 million increase in accounts receivable, a $16.2 million increase in inventories and a $4.0 million increase in contract assets.
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For the year ended December 31, 2019, net cash used in operating activities was $156.9 million, which was comprised of our $242.8 million net loss and a $23.8 million decrease in working capital, partly offset by $109.6 million of non-cash charges. The decrease in working capital was primarily comprised of an $18.0 million increase in inventories, a $17.1 million decrease in lease liabilities, a $13.2 million increase in deferred cost of products sold, an $8.1 million increase in prepaid expenses and other assets, and a $6.9 million decrease in contract liabilities, mostly offset by a $42.7 million combined increase in accounts payable and accrued and other liabilities. Non-cash charges were primarily comprised of a $44.2 million loss upon extinguishment of debt, a $19.4 million loss from change in fair value of debt, $12.6 million of amortization of right-of-use assets under operating leases, $12.6 million of stock-based compensation expense and $11.7 million of debt discount accretion.

Cash Flows from Investing Activities

For the year ended December 31, 2020, net cash used in investing activities was $12.8 million and was comprised of property, plant and equipment purchases.

For the year ended December 31, 2019, net cash provided by investing activities was $13.1 million and was comprised of property, plant and equipment purchases.

Cash Flows from Financing Activities

For the year ended December 31, 2020, net cash provided by financing activities was $222.5 million, primarily comprised of $262.3 million of proceeds from the issuance of common stock and $15.6 million from the issuance of debt, partly offset by $52.0 million of principal payments on debt and $3.5 million of principal payments on financing leases.

For the year ended December 31, 2019, net cash provided by financing activities was $124.9 million, primarily comprised of $53.7 million of proceeds from the issuance of common stock and $189.2 million from the issuance of debt, partly offset by $112.4 million of principal payments on debt and $5.3 million of principal payments on financing leases.

Off-Balance Sheet Arrangements

None.

Contractual Obligations

The following is a summary of our contractual obligations as of December 31, 2020:

Payable by Year Ended December 31,
(In thousands)
Total 2021 2022 2023 2024 2025 Thereafter
Principal payments on debt $ 170,504  $ 56,515  $ 99,236  $ 12,793  $ 307  $ 321  $ 1,332 
Interest payments on debt 29,917  13,454  16,051  106  91  75  140 
Operating leases
18,686  7,503  7,680  3,340  163  —  — 
Partnership payment obligation 11,286  878  10,408  —  —  —  — 
Construction costs in connection with new production facility 5,448  5,448  —  —  —  —  — 
Financing leases 4,570  4,570  —  —  —  —  — 
Contract termination fees 4,344  4,344  —  —  —  —  — 
Total $ 244,755  $ 92,712  $ 133,375  $ 16,239  $ 561  $ 396  $ 1,472 


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable for smaller reporting companies.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

AMYRIS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


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AMRS-20201231_G1.JPG

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders of Amyris, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Amyris, Inc. and subsidiaries (the "Company") as of December 31, 2020 and 2019, and the related statements of operations, comprehensive loss, stockholders’ deficit and mezzanine equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 5, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations, has an accumulated deficit of $2.1 billion and current debt service requirements that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Changes in Accounting Principles

As discussed in Note 1 to the consolidated financial statements, the Company has changed its accounting method of accounting for leases on January 1, 2019, due to the adoption of Financial Accounting Standard Board’s Accounting Standards Codification 842, Leases. The Company also amended the classification of certain equity-linked financial instruments with down round features and the respective disclosure requirements in fiscal year 2019 due to adoption of Accounting Standards Update No. 2017-11.

Basis for Opinion

These consolidated financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters
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The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation and allocation of fair value to various elements of complex related party transactions with DSM Nutritional Products, Ltd.

Critical Audit Matter Description

The strategic alliance between the Company and DSM Nutritional Products, Ltd. and its affiliates (collectively, DSM) started in May 2017 with an equity investment by DSM in Amyris, and has since been expanded with several significant product development collaborations. The Company’s relationships and transactions with DSM, including the nature of, terms of, and business purposes, are complex and evolving.

Amyris is licensing to DSM rights to assume the supply of Farnesene to Givaudan for the production and sale of a single specialty ingredient. The transaction is valued at $50 million, with $30 million payable by December 30, 2020, $10 million payable in the first quarter of 2021, and the remainder in milestone payments thereafter.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s conclusion on amount, timing and presentation of transactions with DSM, include the following, among others:
We tested the effectiveness of controls over the Company’s process for identifying, authorizing and approving, and accounting for and disclosing related party transactions.
Evaluated whether Company management has properly identified, authorized and approved, accounted for, and disclosed its related parties and relationships and transactions with the Company’s related parties.
Inquired of the Audit Committee regarding their understanding of the Company’s relationships and transactions with related parties that are significant to the Company and whether there are any concerns and the substance of such concerns regarding relationships or transactions with related parties.
For each transaction that is required to either be accounted for and disclosed in the Company’s consolidated financial statements, performed specific procedures, including, but not limited, to the following:
Inspected the executed contract to test that the facts on which management’s conclusions were reached were consistent with the actual terms and conditions of the contract.
Evaluated the contract within the context of the five-step model prescribed by ASC 606, Revenue from Contracts with Customers, and evaluating whether management’s conclusions were appropriate.
Compared the transaction price to the consideration expected to be received from a third party based on current rights and obligations under the contracts and any modifications that were agreed upon with DSM.
Tested the accuracy and completeness of the costs incurred to date for the performance obligation.
Tested the mathematical accuracy of management’s calculation of revenue for the performance obligation.

Valuation of freestanding and embedded derivatives and debt for which fair value accounting is elected

Critical Audit Matter Description

The Company measures the following financial assets and liabilities at fair value:
Freestanding and bifurcated derivatives in connection with certain debt and equity financings; and
Debt for which the Company elected fair value accounting.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgements and consider factors specific to the asset or liability. The methods of determining the fair value of embedded derivative liabilities and debt liabilities is based on a binomial model.

There is no current observable market for these types of derivatives and, as such, the Company determined the fair value of the freestanding instruments or embedded derivatives using the Black-Scholes-Merton option pricing model or a probability
48


weighted discounted cash flow analysis measuring the fair value of the debt instrument both with and without the embedded feature.

A binomial lattice model was also used to determine if the convertible debt would be converted, called or held at each decision point. Within the lattice model, the following assumptions are made: (i) the convertible note will be converted early if the conversion value is greater than the holding value and (ii) the convertible note will be called if the holding value is greater than both (a) redemption price and (b) the conversion value at the time. If the convertible note is called, the holder will maximize their value by finding the optimal decision between (1) redeeming at the redemption price and (2) converting the convertible note. The fair value models also include inputs related to stock price, discount yield, risk free rates, equity volatility, probability of principal repayment in cash or stock and probability and timing of change in control.

Changes in valuation assumptions can have a significant impact on the valuation of the embedded and freestanding derivative liabilities and debt that the Company elects to account for at fair value. For example, all other things being equal, generally, an increase in the Company’s stock price, change of control probability, risk-adjusted yields term to maturity/conversion or stock price volatility increases the value of the derivative liability.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s conclusion on the valuation of freestanding and embedded derivatives and debt for which fair value accounting is elected, included the following, among others:
Assessed the Company’s internal control over accounting for financial instruments and derivatives.
A high degree of subjective auditor judgment was involved in evaluating certain inputs to the model used to determine the fair value of the various liabilities. We assessed methodologies and tested the significant assumptions and underlying data used by the Company.
Considered management’s policy of reviewing valuation methodologies, inputs and assumptions utilized by third-party pricing services.
Assessed the historical accuracy of management’s estimates by performing a sensitivity analyses of the significant assumptions to evaluate the changes in the fair value models resulting from changes in the assumptions. There is limited observable market information and the calculated fair value of such assets was sensitive to possible changes in these key inputs.
We also used a valuation specialist to assist us in evaluating the Company’s models, valuation methodology, and significant assumptions used in the fair value estimates.

/s/ Macias Gini & O’Connell LLP

We have served as the Company's auditor since 2019.

San Francisco, California
March 5, 2021
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AMYRIS, INC.
CONSOLIDATED BALANCE SHEETS

50


December 31,
(In thousands, except shares and per share amounts)
2020 2019
Assets
Current assets:
Cash and cash equivalents $ 30,152  $ 270 
Restricted cash 309  469 
Accounts receivable, net of allowance of $137 and $45, respectively
32,846  16,322 
Accounts receivable - related party, net of allowance of $0 and $0, respectively
12,110  3,868 
Contract assets 4,178  8,485 
Contract assets - related party 1,203  — 
Inventories 42,862  27,770 
Deferred cost of products sold - related party 9,801  3,677 
Prepaid expenses and other current assets 13,103  12,750 
Total current assets 146,564  73,611 
Property, plant and equipment, net 32,875  28,930 
Contract assets, noncurrent - related party —  1,203 
Deferred cost of products sold, noncurrent - related party 9,939  12,815 
Restricted cash, noncurrent 961  960 
Recoverable taxes from Brazilian government entities 8,641  7,676 
Right-of-use assets under financing leases, net (Note 2) 9,994  12,863 
Right-of-use assets under operating leases, net (Note 2) 10,136  13,203 
Other assets 3,704  9,705 
Total assets $ 222,814  $ 160,966 
Liabilities, Mezzanine Equity and Stockholders' Deficit
Current liabilities:
Accounts payable $ 41,045  $ 51,234 
Accrued and other current liabilities 30,707  36,655 
Financing lease liabilities (Note 2) 4,170  3,465 
Operating lease liabilities (Note 2) 5,226  4,625 
Contract liabilities 4,468  1,353 
Debt, current portion (includes instrument measured at fair value of $53,387 and $24,392, respectively)
54,748  45,313 
Related party debt, current portion (includes instrument measured at fair value of $0 and $0, respectively)
22,689  18,492 
Total current liabilities 163,053  161,137 
Long-term debt, net of current portion (includes instrument measured at fair value of $0 and $26,232, respectively)
26,170  48,452 
Related party debt, net of current portion (includes instrument measured at fair value of $123,164 and $0, respectively)
159,452  149,515 
Financing lease liabilities, net of current portion (Note 2) —  4,166 
Operating lease liabilities, net of current portion (Note 2) 9,732  15,037 
Derivative liabilities 8,698  9,803 
Other noncurrent liabilities 22,754  23,024 
Total liabilities 389,859  411,134 
Commitments and contingencies (Note 9)
Mezzanine equity:
Contingently redeemable common stock (Note 5) 5,000  5,000 
Stockholders’ deficit:
Preferred stock - $0.0001 par value, 5,000,000 shares authorized as of December 31, 2020 and 2019; 8,280 shares issued and outstanding as of December 31, 2020 and 2019
—  — 
Common stock - $0.0001 par value, 350,000,000 and 250,000,000 shares authorized as of December 31, 2020 and 2019, respectively; 244,951,446 and 117,742,677 shares issued and outstanding as of December 31, 2020 and 2019, respectively
24  12 
Additional paid-in capital 1,957,224  1,543,668 
Accumulated other comprehensive loss (47,375) (43,804)
Accumulated deficit (2,086,692) (1,755,653)
Total Amyris, Inc. stockholders’ deficit (176,819) (255,777)
Noncontrolling interest 4,774  609 
Total stockholders' deficit (172,045) (255,168)
Total liabilities, mezzanine equity and stockholders' deficit $ 222,814  $ 160,966 

See accompanying notes to consolidated financial statements.
51


AMYRIS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,
(In thousands, except shares and per share amounts)
2020 2019
Revenue:
Renewable products (includes related party revenue of $986 and $56, respectively)
$ 104,338  $ 59,872 
Licenses and royalties, net (includes related party revenue of $43,750 and $49,051, respectively)
50,991  54,043 
Grants and collaborations (includes related party revenue of $7,018 and $4,120 respectively)
17,808  38,642 
Total revenue (includes related party revenue of $51,754 and $53,227, respectively)
173,137  152,557 
Cost and operating expenses:
Cost of products sold 87,812  76,185 
Research and development 71,676  71,460 
Sales, general and administrative 137,071  126,586 
Impairment of other assets —  216 
Total cost and operating expenses 296,559  274,447 
Loss from operations (123,422) (121,890)
Other income (expense):
Interest expense (47,951) (58,665)
(Loss) gain from change in fair value of derivative instruments (11,362) 2,777 
Loss from change in fair value of debt (89,827) (19,369)
Loss upon extinguishment of debt (51,954) (44,208)
Other income (expense), net 666  (783)
Total other expense, net (200,428) (120,248)
Loss before income taxes and loss from investment in affiliate (323,850) (242,138)
Provision for income taxes (293) (629)
Loss from investment in affiliate (2,731) — 
Net loss (326,874) (242,767)
Income attributable to noncontrolling interest (4,165) — 
Net loss attributable to Amyris, Inc. (331,039) (242,767)
Less: deemed dividend to preferred stockholders upon conversion of Series E preferred stock     (67,151) — 
Less: deemed dividend to preferred stockholder on issuance and modification of common stock warrants —  (34,964)
Add: loss allocated to participating securities 15,879  7,380 
Net loss attributable to Amyris, Inc. common stockholders $ (382,311) $ (270,351)
Denominator:
Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, basic 203,598,673  101,370,632 
Basic loss per share $ (1.88) $ (2.67)
Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, diluted 203,598,673  101,296,575 
Diluted loss per share $ (1.88) $ (2.72)

See accompanying notes to consolidated financial statements.
52


AMYRIS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


Years Ended December 31,
(In thousands)
2020 2019
Comprehensive loss:
Net loss $ (326,874) $ (242,767)
Foreign currency translation adjustment (3,571) (461)
Total comprehensive loss $ (330,445) $ (243,228)
Income attributable to noncontrolling interest (4,165) — 
Comprehensive loss attributable to Amyris, Inc. $ (334,610) $ (243,228)


See accompanying notes to consolidated financial statements.
53


AMYRIS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT AND MEZZANINE EQUITY
Preferred Stock Common Stock
(In thousands, except number of shares) Shares Amount Shares Amount Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Noncontrolling Interest Total Stockholders' Deficit Mezzanine Equity - Common Stock
Balance as of December 31, 2018 14,656  $   76,564,829  $ 8  $ 1,346,996  $ (43,343) $ (1,521,417) $ 937  $ (216,819) $ 5,000 
Cumulative effect of change in accounting principle for ASU 2017-11 (see "Significant Accounting Policies" in Note 1) —  —  —  —  32,512  —  8,531  —  41,043  — 
Issuance of common stock and warrants upon conversion of debt principal and accrued interest —  —  14,107,637  62,859  —  —  —  62,861  — 
Issuance of common stock in private placement, net of issuance costs - related party —  —  10,478,338  39,499  —  —  —  39,500  — 
Issuance and modification of common stock warrants —  —  —  —  34,964  —  —  —  34,964  — 
Deemed dividend to preferred shareholder on issuance and modification of common stock warrants —  —  —  —  (34,964) —  —  —  (34,964) — 
Issuance of common stock in private placement —  —  3,610,944  —  14,221  —  —  —  14,221  — 
Issuance of warrants in connection with related party debt issuance —  —  —  —  20,121  —  —  —  20,121  — 
Issuance of warrants in connection with related party debt modification —  —  —  —  4,932  —  —  —  4,932  — 
Issuance of warrants in connection with debt accounted for at fair value —  —  —  —  5,358  —  —  —  5,358  — 
Stock-based compensation —  —  —  —  12,554  —  —  —  12,554  — 
Fair value of pre-delivery shares issued to lenders —  —  7,500,000  4,214  —  —  —  4,215  — 
Issuance of common stock upon ESPP purchase —  —  318,490  —  1,078  —  —  —  1,078  — 
Fair value of bifurcated embedded conversion feature in connection with debt modification —  —  —  —  398  —  —  —  398  — 
Issuance of common stock upon exercise of stock options —  —  3,612  —  27  —  —  —  27  — 
Issuance of common stock upon exercise of warrants —  —  2,515,174  —  —  —  —  — 
Conversion of Series B preferred shares into common shares (6,376) —  1,012,071  —  —  —  —  —  —  — 
Distribution to non-controlling interests —  —  —  —  —  —  —  (328) (328) — 
Foreign currency translation adjustment —  —  —  —  —  (461) —  —  (461) — 
Issuance of common stock and payment of minimum employee taxes withheld upon net share settlement of restricted stock —  —  1,631,582  —  (1,102) —  —  —  (1,102) — 
Net loss attributable to Amyris, Inc. —  —  —  —  —  —  (242,767) —  (242,767) — 
Balance as of December 31, 2019 8,280    117,742,677  12  1,543,668  (43,804) (1,755,653) 609  (255,168) 5,000 
Issuance of preferred and common stock in private placements, net of issuance costs 72,156  —  36,098,894  170,034  —  —  —  170,037  — 
Issuance of common stock upon exercise of warrants - related party —  —  29,165,166  83,113  —  —  —  83,115  — 
Issuance of preferred and common stock in private placements - related party, net of issuance costs 30,000  —  10,505,652  57,188  —  —  —  57,189  — 
Issuance of common stock and warrants upon conversion of debt principal and accrued interest —  —  6,337,594  21,259  —  —  —  21,260  — 
Issuance of common stock upon conversion of debt principal and accrued interest, and extinguishment of related derivative liability —  —  3,246,489  —  15,778  —  —  —  15,778  — 
Issuance of common stock right warrant - related party —  —  5,226,481  8,903  —  —  —  8,904  — 
Issuance of common stock upon exercise of warrants —  —  1,343,675  —  3,476  —  —  —  3,476  — 
Issuance of common stock upon ESPP purchase —  —  357,655  —  843  —  —  —  843  — 
Issuance of common stock upon exercise of stock options —  —  11,061  —  46  —  —  —  46  — 
Issuance of common stock upon automatic conversion of Series E preferred stock (102,156) —  34,052,084  (4) —  —  —  —  — 
Issuance of common stock and payment of minimum employee taxes withheld upon net share settlement of restricted stock —  —  2,227,654  —  (404) —  —  —  (404) — 
Beneficial conversion feature related to issuance of Series E preferred stock —  —  —  —  67,151  —  —  —  67,151  — 
Deemed dividend upon conversion of Series E preferred stock into common stock —  —  —  —  (67,151) —  —  —  (67,151) — 
Exercise of common stock rights warrant - related party —  —  —  —  15,000  —  —  —  15,000  — 
Extinguishment of liability warrants to equity —  —  —  —  11,750  —  —  —  11,750  — 
Fair value of pre-delivery shares released to holder in connection with previous debt issuance —  —  —  —  10,478  —  —  —  10,478  — 
54


Preferred Stock Common Stock
(In thousands, except number of shares) Shares Amount Shares Amount Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Noncontrolling Interest Total Stockholders' Deficit Mezzanine Equity - Common Stock
Modification of previously issued common stock warrants —  —  —  —  2,353  —  —  —  2,353  — 
Stock-based compensation —  —  —  —  13,743  —  —  —  13,743  — 
Return of pre-delivery shares previously issued to lenders —  —  (1,363,636) —  —  —  —  —  —  — 
Net loss attributable to Amyris, Inc. —  —  —  —  —  —  (331,039) 4,165  (326,874) — 
Foreign currency translation adjustment —  —  —  —  —  (3,571) —  —  (3,571) — 
Balance as of December 31, 2020 8,280  $   244,951,446  $ 24  $ 1,957,224  $ (47,375)   $ (2,086,692) $ 4,774  $ (172,045) $ 5,000 

See accompanying notes to consolidated financial statements.
55


AMYRIS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,
(In thousands)
2020 2019
Operating activities:
Net loss $ (326,874) $ (242,767)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss from change in fair value of debt 89,827  19,369 
Loss upon conversion or extinguishment of debt 51,954  44,208 
Stock-based compensation 13,743  12,554 
Loss (gain) from change in fair value of derivative instruments 11,362  (2,777)
Non-cash interest expense in connection with release of pre-delivery shares to holder in connection with previous debt issuance 10,478  — 
Depreciation and amortization 9,371  4,581 
Contract asset credit loss reserve 8,342  — 
Accretion of debt discount 3,829  11,665 
Amortization of right-of-use assets under operating leases 2,755  12,597 
Loss in equity-method investee 2,731  297 
Non-cash interest expense in connection with modification of warrants 1,066  — 
Loss on disposal of property, plant and equipment 61  212 
Non-cash interest expense recorded as increase to debt principal 100  — 
Impairment of property, plant and equipment 13  1,354 
Expense for warrants issued for covenant waivers —  5,358 
Loss on impairment of other assets —  216 
Gain on foreign currency exchange rates (119) (22)
Changes in assets and liabilities:
Accounts receivable (24,161) (2,818)
Contract assets (4,035) (8,485)
Contract assets - related party —  8,021 
Inventories (16,249) (17,989)
Deferred cost of products sold - related party (3,248) (13,175)
Prepaid expenses and other assets (443) (8,064)
Accounts payable (10,081) 23,748 
Accrued and other liabilities 5,148  18,981 
Lease liabilities (4,438) (17,125)
Contract liabilities 3,115  (6,872)
Net cash used in operating activities (175,753) (156,933)
Investing activities:
Purchases of property, plant and equipment (12,781) (13,080)
Net cash used in investing activities (12,781) (13,080)
Financing activities:
Proceeds from issuance of preferred and common stock in private placements, net of issuance costs 170,037  14,221 
Proceeds from issuance of preferred and common stock in private placements, net of issuance costs - related party 45,000  39,500 
Proceeds from exercise of warrants - related party 28,348  — 
Proceeds from issuance of debt, net of issuance costs 15,599  189,175 
Proceeds from exercise of common stock rights warrant - related party 15,000  — 
Proceeds from exercise of warrants 3,476 
Proceeds from ESPP purchases 843  1,078 
Proceeds from exercises of common stock options 46  27 
Capital distribution to noncontrolling interest —  (328)
Payment of minimum employee taxes withheld upon net share settlement of restricted stock units (404) (1,103)
Principal payments on financing leases (3,461) (5,268)
Principal payments on debt (51,959) (112,393)
Net cash provided by financing activities 222,525  124,910 
Effect of exchange rate changes on cash, cash equivalents and restricted cash (4,268) (252)
Net increase (decrease) in cash, cash equivalents and restricted cash 29,723  (45,355)
Cash, cash equivalents and restricted cash at beginning of year 1,699  47,054 
Cash, cash equivalents and restricted cash at end of year $ 31,422  $ 1,699 
56


Years Ended December 31,
(In thousands)
2020 2019
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets
Cash and cash equivalents $ 30,152  $ 270 
Restricted cash, current 309  469 
Restricted cash, noncurrent 961  960 
Total cash, cash equivalents and restricted cash $ 31,422  $ 1,699 
57


Amyris, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued


Years Ended December 31,
(In thousands)
2020 2019
Supplemental disclosures of cash flow information:
Cash paid for interest $ 16,609  $ 20,780 
Supplemental disclosures of non-cash investing and financing activities:
Accrued interest added to debt principal $ 2,056  $ 7,292 
Acquisition of additional interest in equity-method investee in exchange for payment obligation $ —  $ 5,031 
Acquisition of right-of-use assets under operating leases $ —  $ 3,551 
Cumulative effect of change in accounting principle for ASU 2017-11 (Note 2) $ —  $ 41,043 
Debt fair value adjustment in connection with debt issuance $ —  $ 11,575 
Derecognition of derivative liabilities to equity upon extinguishment of debt $ 6,461  $ — 
Derecognition of derivative liabilities upon authorization of shares $ 6,550  $ — 
Derecognition of derivative liabilities upon exercise of warrants $ 5,200  $ — 
Exercise of common stock warrants in exchange for debt principal and interest reduction $ 69,918  $ — 
Fair value of warrants and embedded features recorded as debt discount in connection with debt issuances $ 188  $ 237 
Fair value of warrants and embedded features recorded as debt discount in connection with debt issuances - related party $ 747  $ 1,954 
Fair value of embedded features in connection with private placement $ 2,962  $ — 
Fair value of pre-delivery shares in connection with debt issuance $ —  $ 4,215 
Fair value of warrants recorded as debt discount in connection with debt issuances $ —  $ 8,965 
Fair value of warrants recorded as debt discount in connection with debt issuances - related party $ —  $ 16,155 
Fair value of warrants recorded as debt discount in connection with debt modification $ —  $ 398 
Fair value of warrants recorded as debt discount in connection with debt modification - related party $ —  $ 2,050 
Financing of equipment under financing leases $ —  $ 7,436 
Financing of insurance premium under note payable $ —  $ 253 
Issuance of common stock upon conversion of convertible notes and accrued interest $ 27,650  $ 62,860 
Issuance of common stock upon exercise of common stock rights warrant in previous period - related party $ $ — 
Lease liabilities recorded upon adoption of ASC 842 (Note 2) $