ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AMYRIS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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
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
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
AMYRIS, INC.
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
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.
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.
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.
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
|
|
2
|
|
|
62,859
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
62,861
|
|
|
—
|
|
|
Issuance of common stock in private placement, net of issuance costs - related party
|
—
|
|
—
|
|
|
10,478,338
|
|
1
|
|
|
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
|
|
1
|
|
|
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
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
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
|
|
3
|
|
|
170,034
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
170,037
|
|
|
—
|
|
|
Issuance of common stock upon exercise of warrants - related party
|
—
|
|
—
|
|
|
29,165,166
|
|
2
|
|
|
83,113
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
83,115
|
|
|
—
|
|
|
Issuance of preferred and common stock in private placements - related party, net of issuance costs
|
30,000
|
|
—
|
|
|
10,505,652
|
|
1
|
|
|
57,188
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,189
|
|
|
—
|
|
|
Issuance of common stock and warrants upon conversion of debt principal and accrued interest
|
—
|
|
—
|
|
|
6,337,594
|
|
1
|
|
|
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
|
|
1
|
|
|
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
|
|
|
(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
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
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
|
|
1
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
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
|
$
|
1
|
|
$
|
—
|
|
|
Lease liabilities recorded upon adoption of ASC 842 (Note 2)
|
$
|
—
|
|
$
|
33,552
|
|
|
Right-of-use assets under operating leases recorded upon adoption of ASC 842 (Note 2)
|
$
|
—
|
|
$
|
29,713
|
|
|
Unpaid property, plant and equipment balances in accounts payable and accrued liabilities at end of period
|
$
|
1,575
|
|
$
|
2,576
|
|
See accompanying notes to consolidated financial statements.
Amyris, Inc.
Notes to Consolidated Financial Statements
1. Basis of Presentation and Summary of Significant Accounting Policies
Business Description
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, Amyris, Inc. and subsidiaries (collectively, Amyris or the Company) apply the Company's proprietary Lab-to-Market biotechnology platform to engineer, manufacture and market high performance, natural and sustainably sourced products. The Company does so with the use of computational tools, strain construction tools, screening and analytics tools, and advanced lab automation and data integration. The Company's biotechnology platform enables the Company to rapidly engineer microbes and use them as catalysts to metabolize renewable, plant-sourced sugars into high-value ingredients that the Company manufactures at industrial scale. Through the combination of our biotechnology platform and our industrial fermentation process, the Company has successfully developed, produced and commercialized many distinct molecules.
Going Concern
The Company has incurred operating losses since its inception and expects to continue to incur losses and negative cash flows from operations for at least the next 12 months following the issuance of its financial statements. As of December 31, 2020, the Company had negative working capital of $16.5 million and an accumulated deficit of $2.1 billion.
As of December 31, 2020, the principal amounts due under the Company's debt instruments (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.
During 2020 the Company failed to meet certain covenants under several credit arrangements (which are discussed in Note 4, "Debt"), including those associated with missed payments, cross-default provisions, minimum liquidity and minimum asset coverage requirements. These lenders provided permanent waivers to the Company 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 the Company’s ability to continue as a going concern within one year after the date these 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 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 the control of the Company. Further, the Company's operating plan for the next 12 months contemplates a significant reduction in its 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. If the Company is unable to complete these actions, it expects to be unable to meet its operating cash flow needs and its obligations under its existing debt facilities. This could result in an acceleration of its obligation to repay all amounts outstanding under those facilities, and 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. In such a scenario, the value received for assets in liquidation or dissolution could be significantly lower than the value reflected in these financial statements.
Basis of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States (U.S. GAAP). The consolidated financial statements include the accounts of Amyris,
Inc. and its wholly-owned and partially-owned subsidiaries in which the Company has a controlling financial interest after elimination of all significant intercompany accounts and transactions.
Investments and joint venture arrangements are assessed to determine whether the terms provide economic or other control over the entity requiring consolidation of the entity. Entities controlled by means other than a majority voting interest are referred to as variable-interest entities (VIEs) and are consolidated when Amyris has both the power to direct the activities of the VIE that most significantly impact its economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the entity. The Company accounts for its equity investments and joint venture using the equity method for any investment or joint venture in which (i) the Company does not have a majority ownership interest, (ii) the Company possesses the ability to exert significant influence and (iii) the entity is not a VIE for which the Company is considered the primary beneficiary.
Use of Estimates and Judgements
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgements and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements. Significant estimates and judgements used in these consolidated financial statements are discussed in the relevant accounting policies below or specifically discussed in the Notes to Consolidated Financial Statements where such transactions are disclosed.
Significant Accounting Policies
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained with various financial institutions.
Inventories
Inventories, which consist of farnesene-derived products, flavors and fragrances ingredients and clean beauty products, are stated at the lower of actual cost or net realizable value and are categorized as finished goods, work in process or raw material inventories. The Company evaluates the recoverability of its inventories based on assumptions about expected demand and net realizable value. If the Company determines that the cost of inventories exceeds their estimated net realizable value, the Company records a write-down equal to the difference between the cost of inventories and the estimated net realizable value. If actual net realizable values are less favorable than those projected by management, additional inventory write-downs may be required that could negatively impact the Company's operating results. If actual net realizable values are more favorable, the Company may have favorable operating results when products that have been previously written down are sold in the normal course of business. The Company also evaluates the terms of its agreements with its suppliers and establishes accruals for estimated losses on adverse purchase commitments as necessary, applying the same lower of cost or net realizable value approach that is used to value inventory. Cost for farnesene-derived products and flavors and fragrances ingredients are computed on a weighted-average basis. Cost for clean beauty products are computed on a standard cost basis.
Property, Plant and Equipment, Net
Property, plant and equipment are recorded at cost. Depreciation and amortization are computed straight-line based on the estimated useful lives of the related assets, ranging from 3 to 15 years for machinery, equipment and fixtures, and 15 years for buildings. Leasehold improvements are amortized over their estimated useful lives or the period of the related lease, whichever is shorter.
The Company expenses costs for maintenance and repairs and capitalizes major replacements, renewals and betterments. For assets retired or otherwise disposed, both cost and accumulated depreciation are eliminated from the asset and accumulated depreciation accounts, and gains or losses related to the disposal are recorded in the statement of operations for the period.
Impairment
Long-lived assets that are held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability of long-lived assets is based on an estimate of the undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the difference between the fair value of the asset and its carrying value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.
Recoverable Taxes from Brazilian Government Entities
Recoverable taxes from Brazilian government entities represent value-added taxes paid on purchases in Brazil, which are reclaimable from the Brazilian tax authorities, net of reserves for amounts estimated not to be recoverable.
Fair Value Measurements
The carrying amounts of certain financial instruments, such as cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities.
The Company measures the following financial assets and liabilities at fair value:
•Warrants to purchase common stock and freestanding and bifurcated derivatives in connection with certain debt and equity financings; and
•Senior Convertible Notes and Foris Convertible Note (see Note 3, "Fair Value Measurement" and Note 4, "Debt", for which the Company elected fair value accounting.
Fair value is based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Where available, fair value is based on or derived from observable market prices or other observable inputs. Where observable prices or inputs are not available, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgement, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity.
Changes to the inputs, including the closing price of the Company common stock at each period end, used in these valuation models can have a significant impact on the estimated fair value of the Senior Convertible Notes, Foris Convertible Note and the Company's embedded and freestanding derivatives. For example, a decrease (increase) in the estimated credit spread for the Company results in an increase (decrease) in estimated fair value. Conversely, a decrease (increase) in the Company’s closing stock price at period end results in a decrease (increase) in estimated fair value of these instruments.
The changes during 2020 and 2019 in the fair values of the warrants and bifurcated compound embedded derivatives are primarily related to the change in price of the Company's common stock and are reflected in the consolidated statements of operations as “Gain (loss) from change in fair value of derivative instruments”.
The fair value of debt instruments for which the Company has not elected fair value accounting, is based on the present value of expected future cash flows and assumptions about the then-current market interest rates as of the reporting period and the creditworthiness of the Company. Most of the Company's debt is carried on the consolidated balance sheet on a historical cost basis net of unamortized discounts and premiums, because the Company has not elected the fair value option of accounting. However, for the Senior Convertible Notes, the Company elected fair value accounting at the issue date in 2018, and for the Foris Convertible Note at the reissue date in June 2020, so the balances reported for those debt instruments represent fair value as of the applicable balance sheet date; see Note 3, "Fair Value Measurement" for additional information. Changes in fair value of the Senior Convertible Notes and the Foris Convertible Note are reflected in the consolidated statements of operations as “Gain (loss) from change in fair value of debt”.
For all debt instruments, including any for which the Company has elected fair value accounting, the Company classifies interest that has been accrued during each period as Interest expense on the consolidated statements of operations.
Derivatives
Embedded derivatives that are required to be bifurcated from the underlying debt instrument (i.e., host) are accounted for and valued as separate financial instruments. The Company has evaluated the terms and features of its notes payable and identified embedded derivatives requiring bifurcation and accounting at fair value, using the valuation techniques mentioned in the Fair Value Measurements section of this Note, because the economic and contractual characteristics of the embedded
derivatives met the criteria for bifurcation and separate accounting due to the instruments containing mandatory redemption features that are not clearly and closely related to the debt host instrument.
Prior to the adoption of ASU 2017-11, certain previously issued warrants with a fair value of $41 million issued in conjunction with certain convertible debt and equity financings were freestanding financial instruments and classified as derivative liabilities as of December 31, 2019. Upon adoption of ASU 2017-11 on January 1, 2019, these freestanding instruments met the criteria to be accounted for within equity and the $41 million derivative liability balance was reclassified to stockholders’ equity.
During the third and fourth quarter of 2019, the Company issued warrants in connection with a debt financing that met the criteria of a freestanding instrument but did not qualify for equity accounting treatment. As a result, these warrants are accounted for at fair value until settled and are classified as derivative liabilities at December 31, 2020. See Note 6 “Stockholders’ Deficit” for further information.
Noncontrolling Interest
Noncontrolling interests represent the portion of net income (loss), net assets and comprehensive income (loss) that is not allocable to the Company, in situations where the Company consolidates its equity investment in a joint venture or as the primary beneficiary of a variable-interest entity (VIE) for which there are other owners. The amount of noncontrolling interest is comprised of the amount of such interests at the date of the Company's original acquisition of an equity interest or involvement in a joint venture, plus the other shareholders' share of changes in equity since the date the Company made an investment in the joint venture.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable. The Company places its cash equivalents and investments (if any) with high credit quality financial institutions and, by policy, limits the amount of credit exposure with any one financial institution. Deposits held with banks may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses on its deposits of cash and cash equivalents and short-term investments.
The Company performs ongoing credit evaluation of its customers, does not require collateral, and maintains allowances for potential credit losses on customer accounts when deemed necessary.
Customers representing 10% or greater of accounts receivable were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
2020
|
2019
|
|
Customer A (related party)
|
|
|
27%
|
19%
|
|
Customer B
|
|
|
17%
|
21%
|
|
Customer E
|
|
|
13%
|
**
|
|
Customer D
|
|
|
**
|
10%
|
______________
** Less than 10%
Customers representing 10% or greater of revenue were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
Year First Customer
|
2020
|
2019
|
|
Customer A (related party)
|
|
2017
|
30%
|
35%
|
|
Customer B
|
|
2014
|
10%
|
10%
|
|
Customer C
|
|
2019
|
**
|
12%
|
______________
** Less than 10%
Revenue Recognition
The Company recognizes revenue from the sale of renewable products, licenses and royalties from intellectual property, and grants and collaborative research and development services. Revenue is measured based on the consideration specified in a
contract with a customer, and the transaction price is allocated utilizing stand-alone selling price. Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring control over a product or service to a customer. The Company generally does not incur costs to obtain new contracts. The costs to fulfill a contract are expensed as incurred.
The Company accounts for a contract when it has approval and commitment to perform from both parties, the rights of the parties are identified, payment terms are established, the contract has commercial substance and collectability of the consideration is probable. Changes to contracts are assessed for whether they represent a modification or should be accounted for as a new contract. The Company considers the following indicators, among others, when determining if it is acting as a principal in the transaction and recording revenue on a gross basis: (i) the Company is primarily responsible for fulfilling the promise to provide the specified goods or service, (ii) the Company has inventory risk before the specified good or service has been transferred to a customer or after transfer of control to the customer and (iii) the Company has discretion in establishing the price for the specified good or service. If a transaction does not meet the Company's indicators of being a principal in the transaction, then the Company is acting as an agent in the transaction and the associated revenues are recognized on a net basis.
The Company’s significant contracts and contractual terms with its customers are presented in Note 10, "Revenue Recognition".
The Company recognizes revenue when control of the good or service has passed to the customer. The following indicators are evaluated in determining when control has passed to the customer: (i) the customer has legal title to the product, (ii) the Company has transferred physical possession of the product or service to the customer, (iii) the Company has a right to receive payment for the product or service, (iv) the customer absorbs the significant risks and rewards of ownership of the product and (v) the customer has accepted the product. For most of the Company's renewable products customers, supply agreements between the Company and each customer indicate when transfer of title occurs.
In some cases, the Company may make a payment to a customer. When that occurs, the Company evaluates whether the payment is for a distinct good or service from the customer. If the fair value of the goods or services is greater than or equal to the amount paid to the customer, then the entire payment is treated as a purchase. If, on the other hand, the fair value of goods or services is less than the amount paid, then the difference is treated as a reduction in transaction price of the Company's sales to the customer or a reduction of cumulative to-date revenue recognized from the customer in the period the payment is made or goods or services are received from the customer.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company's contracts may contain multiple performance obligations if a promise to transfer the individual goods or services is separately identifiable from other promises in the contracts and, therefore, is considered distinct. For contracts with multiple performance obligations, the Company determines the standalone selling price of each performance obligation and allocates the total transaction price using the relative selling price basis.
The following is a description of the principal goods and services from which the Company generates revenue.
Renewable Product Sales
Revenues from renewable product sales are recognized as a distinct performance obligation on a gross basis as the Company is acting as a principal in these transactions, with the selling price to the customer recorded net of discounts and allowances. Revenues are recognized at a point in time when control has passed to the customer, which typically occurs when the renewable products leaves the Company’s facilities with the first transportation carrier. The Company, on occasion, may recognize revenue under a bill and hold arrangement, whereby the customer requests and agrees to purchase product but requests delivery at a later date. Under these arrangements, control transfers to the customer when the product is ready for delivery, which occurs when the product is identified separately as belonging to the customer, the product is ready for shipment to the customer in its current form, and the Company does not have the ability to direct the product to a different customer. It is at this point the Company has the right to receive payment, the customer obtains legal title, and the customer has the significant risks and rewards of ownership. The Company’s renewable product sales do not include rights of return, except for direct-to-consumer products, for which the Company estimates sales returns subsequent to sale and reduces revenue accordingly. For renewable products other than direct-to-consumer, returns are accepted only if the product does not meet product specifications and such nonconformity is communicated to the Company within a set number of days of delivery. The Company offers a two-year assurance-type warranty to replace squalane products that do not meet Company-established criteria as set forth in the
Company’s trade terms. An estimate of the cost to replace the squalane products sold is made based on a historical rate of experience and recognized as a liability and related expense when the renewable product sale is consummated.
Licenses and Royalties
Licensing of Intellectual Property: When the Company’s intellectual property licenses are determined to be distinct from the other performance obligations identified in the arrangement, revenue is recognized from non-refundable, up-front fees allocated to the license at a point in time when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For intellectual property licenses that are combined with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front-fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognized.
Royalties from Licensing of Intellectual Property: The Company earns royalties from the licensing of its intellectual property whereby the licensee uses the intellectual property to produce and sell its products to its customers and the Company shares in the profits.
When the Company’s intellectual property license is the only performance obligation, or it is the predominant performance obligation in arrangements with multiple performance obligations, the Company applies the sales-based royalty exception which requires the Company to estimate the revenue that is recognized at a point in time when the licensee’s product sales occur. Estimates of sales-based royalty revenues are made using the most likely outcome method, which is the single amount in a range of possible amounts, using the best evidence available at the time, derived from the licensee’s historical sales volumes and sales prices of its products and recent commodity market pricing data and trends. Estimates are adjusted to actual or as new information becomes available.
When the Company’s intellectual property license is not the predominant performance obligation in arrangements with multiple performance obligations, the royalty represents variable consideration and is allocated to the transaction price of the predominant performance obligation which generally is the supply of renewable products to the Company's customers. Revenue is estimated and recognized at a point in time when the renewable products are delivered to the customer. Estimates of the amount of variable consideration to include in the transaction price are made using the expected value method, which is the sum of probability-weighted amounts in a range of possible amounts determined based on the cost to produce the renewable product plus a reasonable margin for the profit share. The Company only includes an amount of variable consideration in the transaction price to the extent it is probable that a significant reversal in the cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Also, the transaction price is reduced for estimates of customer incentive payments payable by the Company for certain customer contracts.
Grants and Collaborative Research and Development Services
Collaborative Research and Development Services: The Company earns revenues from collaboration agreements with customers to perform research and development services to develop new molecules using the Company’s technology and to scale production of the molecules for commercialization and use in the collaborator’s products. The collaboration agreements generally include providing the Company's collaboration partners with research and development services and with licenses to the Company’s intellectual property to use the technology underlying the development of the molecules and to sell its products that incorporate the technology. The terms of the Company's collaboration agreements typically include one or more of the following: (i) advance payments for the research and development services that will be performed, (ii) nonrefundable upfront license payments, (iii) milestone payments to be received upon the achievement of the milestone events defined in the agreements, (iv) payments for inventory manufactured under supply agreements upon the commercialization of the molecules, and (v) royalty payments upon the commercialization of the molecules in which the Company shares in the customer’s profits.
Collaboration agreements are evaluated at inception to determine whether the intellectual property licenses represent distinct performance obligations separate from the research and development services. If the licenses are determined to be distinct, the non-refundable upfront license fee is recognized as revenue at a point in time when the license is transferred to the licensee and the licensee is able to use and benefit from the license while the research and development service fees are recognized over time as the performance obligations are satisfied. The research and development service fees represent variable consideration. Estimates of the amount of variable consideration to include in the transaction price are made using the expected value method, which is the sum of probability-weighted amounts in a range of possible amounts. The Company only includes an amount of variable consideration in the transaction price to the extent it is probable that a significant reversal in the
cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Revenue is recognized over time using either an input-based measure of labor hours expended or a time-based measure of progress towards the satisfaction of the performance obligations. The measure of progress is evaluated each reporting period and, if necessary, adjustments are made to the measure of progress and the related revenue recognized.
Collaboration agreements that include milestone payments are evaluated at inception to determine whether the milestone events are considered probable of achievement, and estimates are made of the amount of the milestone payments to include in the transaction price using the most likely amount method which is the single amount in a range of possible amounts. If it is probable that a significant revenue reversal will not occur, the estimated milestone payment amount is included in the transaction price. Each reporting period, the Company re-evaluates the probability of achievement of the milestone events and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative basis, which would affect collaboration revenues in the period of adjustment. Generally, revenue is recognized using an input-based measure of progress towards the satisfaction of the performance obligations which can be labor hours expended or time-based in proportion to the estimated total project effort or total projected time to complete. The measure of progress is evaluated each reporting period and, if necessary, adjustments are made to the measure of progress and the related revenue recognized. Certain performance obligations are associated with milestones agreed between the Company and its customer. Revenue generated from the performance of services in accordance with these types of milestones is recognized upon confirmation from the customer that the milestone has been achieved. In these cases, amounts recognized are constrained to the amount of consideration received upon achievement of the milestone.
The Company generally invoices its collaboration partners on a monthly or quarterly basis, or upon the completion of the effort or achievement of a milestone, based on the terms of each agreement. Contract liabilities arise from amounts received in advance of performing the research and development activities and are recognized as revenue in future periods as the performance obligations are satisfied.
Grants: The Company earns revenues from grants with government agencies to, among other things, provide research and development services to develop molecules using the Company’s technology, and create research and development tools to improve the timeline and predictability for scaling molecules from proof of concept to market by reducing time and costs. Grants typically consist of research and development milestone payments to be received upon the achievement of the milestone events defined in the agreements.
The milestone payments are evaluated at inception to determine whether the milestone events are considered probable of achievement and estimates are made of the amount of the milestone payments to include in the transaction price using the most likely amount method which is the single amount in a range of possible amounts. If it is probable that a significant revenue reversal will not occur, the estimated milestone payment amount is included in the transaction price. Each reporting period, the Company re-evaluates the probability of achievement of the milestone events and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative basis, which would affect grant revenues in the period of adjustment. Revenue is recognized over time using a time-based measure of progress towards the satisfaction of the performance obligations. The measure of progress is evaluated each reporting period and, if necessary, adjustments are made to the measure of progress and the related revenue recognized.
The Company receives certain consideration from AICEP Portugal Global (AICEP), an entity funded by the government of Portugal, under the Consortium Internal Regulatory Agreement and an AICEP Investment Contract (the “Agreements”) entered into by Amyris (the “Company”) with Universidade Católica Portuguesa (UCP) Porto Campus. The Company considered this arrangement to be a government grant and accounts for the arrangement under International Accounting Standard 20 “Accounting for Government Grants and Disclosure of Government Assistance”. Grant revenue is recognized when there is reasonable assurance that monies will be received and that conditions attached to the grant have been met.
Cost of Products Sold
Cost of products sold reflects the production costs of renewable products, and includes the cost of raw materials, in-house manufacturing labor and overhead, amounts paid to contract manufacturers, including amortization of tolling fees, and period costs including inventory write-downs resulting from applying lower of cost or net realizable value inventory adjustments. Cost of products sold also includes certain costs related to the scale-up of production. Shipping and handling costs charged to customers are recorded as revenues. Outbound shipping costs incurred are included in cost of products sold. Such charges were not material for any of the periods presented.
The Company recognizes deferred cost of products sold as an asset on the balance sheet when a cost is incurred in connection with a revenue performance obligation that will not be fulfilled until a future period. The Company also recorded a
deferred cost of products asset for the fair value of amounts paid to DSM under a supply agreement for manufacturing capacity to produce its sweetener product at the Brotas facility in Brazil. The deferred cost of products sold asset is expensed to cost of products sold on a units of production basis over the five-year term of the supply agreement. On a quarterly basis, the Company evaluates its future production volumes for its sweetener product and adjusts the unit cost to be expensed over the remaining estimated production volume. The Company also periodically evaluates the asset for recoverability based on changes in business strategy and product demand trends over the term of the supply agreement.
Research and Development
Research and development costs are expensed as incurred and include costs associated with research performed pursuant to collaborative agreements and government grants, including internal research. Research and development costs consist of direct and indirect internal costs related to specific projects, as well as fees paid to others that conduct certain research activities on the Company’s behalf.
Debt Extinguishment
The Company accounts for the income or loss from extinguishment of debt in accordance with ASC 470, Debt, which indicates that for all extinguishments of debt, including instances where the terms of a debt instrument are modified in a manner that significantly changes the underlying cash flows, the difference between the reacquisition consideration and the net carrying amount of the debt being extinguished should be recognized as gain or loss when the debt is extinguished. Losses from debt extinguishment are shown in the consolidated statements of operations under "Other income (expense)" as "Loss upon extinguishment of debt".
Stock-based Compensation
The Company accounts for stock-based employee compensation plans under the fair value recognition and measurement provisions of U.S. GAAP. Those provisions require all stock-based payments to employees, including grants of stock options and restricted stock units (RSUs), to be measured using the grant-date fair value of each award. The Company recognizes stock-based compensation expense net of expected forfeitures over each award's requisite service period, which is generally the vesting term. Expected forfeiture rates are estimated based on the Company's historical experience. Stock-based compensation plans are described more fully in Note 12, "Stock-based Compensation".
Income Taxes
The Company is subject to income taxes in the United States and foreign jurisdictions and uses estimates to determine its provisions for income taxes. The Company uses the asset and liability method of accounting for income taxes, whereby deferred tax asset or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income.
Recognition of deferred tax assets is appropriate when realization of such assets is more likely than not. The Company recognizes a valuation allowance against its net deferred tax assets unless it is more likely than not that such deferred tax assets will be realized. This assessment requires judgement as to the likelihood and amounts of future taxable income by tax jurisdiction.
The Company applies the provisions of Financial Accounting Standards Board (FASB) guidance on accounting for uncertainty in income taxes. The Company assesses all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability, and the tax benefit to be recognized is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and the Company will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgement, and such judgements may change as new information becomes available.
Foreign Currency Translation
The assets and liabilities of foreign subsidiaries, where the local currency is the functional currency, are translated from their respective functional currencies into U.S. dollars at the rates in effect at each balance sheet date, and revenue and expense amounts are translated at average rates during each period, with resulting foreign currency translation adjustments recorded in
other comprehensive loss, net of tax, in the consolidated statements of stockholders’ deficit. As of December 31, 2020 and 2019, cumulative translation adjustment, net of tax, were $47.4 million and $43.8 million, respectively.
Where the U.S. dollar is the functional currency, remeasurement adjustments are recorded in other income (expense), net in the accompanying consolidated statements of operations. Net losses resulting from foreign exchange transactions were $0.7 million and $0.2 million for the years ended December 31, 2020 and 2019, respectively and are recorded in other income (expense), net in the consolidated statements of operations.
New Accounting Standards or Updates Recently Adopted
During the year ended December 31, 2020 the Company adopted the following Accounting Standards Updates (ASUs):
Fair Value Measurement In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which amends ASC 820, Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. ASU 2018-13 became effective in the first quarter of fiscal 2020, with removed and modified disclosures to be adopted on a retrospective basis, and new disclosures to be adopted on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
Collaborative Revenue Arrangements In November 2018, the FASB issued ASU 2018-18, Clarifying the Interaction between Topic 808 and Topic 606, that clarifies the interaction between the guidance for certain collaborative arrangements and Topic 606, the new revenue recognition standard. A collaborative arrangement is a contractual arrangement under which two or more parties actively participate in a joint operating activity and are exposed to significant risks and rewards that depend on the activity’s commercial success. The ASU provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard. ASU 2018-18 became effective in the first quarter of fiscal year 2020 retrospectively. The adoption of this standard did not have any impact on the Company’s consolidated financial statements.
Recent Accounting Standards or Updates Not Yet Effective
Credit Losses In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. ASU 2016-13 also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity's portfolio. ASU 2016-13 will be effective for the Company in the first quarter of 2023. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
Accounting for Income Taxes In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, Income Taxes. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC Topic 740 by clarifying and amending existing guidance. ASU 2019-12 will be effective for the Company in the first quarter of fiscal year 2021. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively. The Company is currently evaluating the amended guidance and the impact on its consolidated financial statements and related disclosures.
Equity Securities, Equity-method Investments and Certain Derivatives In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The guidance provides clarification of the interaction of rules for equity securities, the equity method of accounting and forward contracts and purchase options on certain types of securities. ASU 2020-01 will be effective for the Company in the first quarter of 2021. While the Company is currently assessing the impact of the new guidance, it is not expected to have a material impact on the Company’s financial statements.
Convertible Debt, and Derivatives and Hedging In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to improve financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity. ASU 2020-06 will be effective
for the Company in the first quarter of 2022. The Company is currently evaluating the amended guidance and the impact on its consolidated financial statements and related disclosures.
2. Balance Sheet Details
Allowance for Doubtful Accounts
Allowance for doubtful accounts activity and balances were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Balance at Beginning of Year
|
Provisions
|
Write-offs, Net
|
Balance at End of Year
|
|
Allowance for doubtful accounts:
|
|
|
|
|
|
Year Ended December 31, 2020
|
$
|
45
|
|
$
|
92
|
|
$
|
—
|
|
$
|
137
|
|
|
Year Ended December 31, 2019
|
$
|
642
|
|
$
|
110
|
|
$
|
(707)
|
|
$
|
45
|
|
Inventories
|
|
|
|
|
|
|
|
|
|
December 31,
(In thousands)
|
2020
|
2019
|
|
Raw materials
|
$
|
11,800
|
|
$
|
3,255
|
|
|
Work in process
|
10,760
|
|
7,204
|
|
|
Finished goods
|
20,302
|
|
17,311
|
|
|
Total inventories
|
$
|
42,862
|
|
$
|
27,770
|
|
Deferred cost of products sold — related party
|
|
|
|
|
|
|
|
|
|
December 31,
(In thousands)
|
2020
|
2019
|
|
Deferred cost of products sold - related party
|
$
|
9,801
|
|
$
|
3,677
|
|
|
Deferred cost of products sold, noncurrent - related party
|
9,939
|
|
12,815
|
|
|
Total
|
$
|
19,740
|
|
$
|
16,492
|
|
In November 2018, the Company amended the supply agreement with DSM to secure manufacturing capacity at the Brotas facility for sweetener production through 2022. See Note 10, “Revenue Recognition” for information regarding the November 2018 Supply Agreement Amendment. The supply agreement was included as an element of a combined transaction with DSM, which resulted in a fair value allocation of $24.4 million to the manufacturing capacity. See Note 3, “Fair Value Measurement” for information related to this fair value allocation. Of the $24.4 million fair value allocated to the manufacturing capacity, $3.3 million was recorded as deferred cost of products sold during 2018. Also, the Company paid an additional $7.0 million and $14.1 million in manufacturing capacity fees during 2020 and 2019, respectively, which were recorded as deferred cost of products sold. The capitalized deferred cost of products sold asset is expensed to cost of products sold on a units of production basis as the Company's sweetener product is sold over the five-year term of the supply agreement. Each quarter, the Company evaluates its estimated future production volumes through the end of the agreement and adjusts the unit cost to be expensed over the remaining estimated production volume. During the years ended December 31, 2020 and
2019, the Company expensed $2.3 million and $0.9 million, respectively, of the deferred cost of products sold asset. Inception-to-date amortization expense to cost of products sold through December 31, 2020 totaled $3.3 million.
Prepaid expenses and other current assets
|
|
|
|
|
|
|
|
|
|
December 31,
(In thousands)
|
2020
|
2019
|
|
Prepayments, advances and deposits
|
$
|
6,637
|
|
$
|
4,726
|
|
|
Non-inventory production supplies
|
3,989
|
|
5,376
|
|
|
Recoverable taxes from Brazilian government entities
|
1,063
|
|
79
|
|
|
Other
|
1,414
|
|
2,569
|
|
|
Total prepaid expenses and other current assets
|
$
|
13,103
|
|
$
|
12,750
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
|
|
|
December 31,
(In thousands)
|
2020
|
2019
|
|
Machinery and equipment
|
$
|
50,415
|
|
$
|
48,041
|
|
|
Leasehold improvements
|
45,197
|
|
41,478
|
|
|
Computers and software
|
6,741
|
|
9,822
|
|
|
Furniture and office equipment, vehicles and land
|
3,507
|
|
3,510
|
|
|
Construction in progress
|
7,250
|
|
9,752
|
|
|
Total property, plant and equipment, gross
|
113,110
|
|
112,603
|
|
|
Less: accumulated depreciation and amortization
|
(80,235)
|
|
(83,673)
|
|
|
Total property, plant and equipment, net
|
$
|
32,875
|
|
$
|
28,930
|
|
During the years ended December 31, 2020 and 2019, depreciation and amortization expense, which includes amortization of financing lease assets, was as follows:
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
(In thousands)
|
2020
|
2019
|
|
Depreciation and amortization
|
$
|
8,508
|
|
$
|
4,581
|
|
Losses on disposal of property, plant and equipment were $0.1 and $0.9 million for the years ended December 31, 2020 and 2019, respectively. Such losses or gains were included in the lines captioned "Research and development expense" and "Sales, general and administrative expense" in the consolidated statements of operations.
Leases
Operating Leases
The Company has operating leases primarily for administrative offices, laboratory equipment and other facilities. The operating leases have remaining terms that range from 1 year to 5 years, and often include one or more options to renew. These renewal terms can extend the lease term from 1 to 5 years and are included in the lease term when it is reasonably certain that the Company will exercise the option. The operating leases are classified as ROU assets under operating leases on the Company's consolidated balance sheets and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make operating lease payments is included in "Lease liabilities" and "Lease liabilities, net of current portion" on the Company's consolidated balance sheets. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company had $10.1 million and $13.2 million of right-of-use assets as of December 31, 2020 and 2019, respectively. Operating lease liabilities were $15.0 million and $19.7 million as of December 31, 2020 and 2019, respectively. For the years ended December 31, 2020 and 2019, the Company recorded $7.7 million and $12.6 million, respectively of expense in connection with operating leases, of which $1.2 million and $7.0 million, respectively, was recorded to cost of products sold.
Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. The Company has certain contracts for real estate and marketing that may contain lease and non-lease components, which the Company has elected to treat as a single lease component.
Information related to the Company's right-of-use assets and related lease liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
(In thousands)
|
2020
|
2019
|
|
Cash paid for operating lease liabilities, in thousands
|
$7,717
|
$17,809
|
|
Right-of-use assets obtained in exchange for new operating lease obligations(1)
|
$—
|
$33,264
|
|
Weighted-average remaining lease term in years
|
2.49
|
3.35
|
|
Weighted-average discount rate
|
18.0%
|
18.0%
|
(1) 2019 amount includes $29.7 million for operating leases existing on January 1, 2019 and $3.6 million for operating leases that commenced during the year ended December 31, 2019. Also, the Company renegotiated one of its operating leases during 2019, which resulted in a new financing lease. Approximately $7.7 million of Right-of-use assets under operating leases, net was reclassified to Right-of-use assets under financing leases, net related to this operating lease modification.
Financing Leases
The Company has entered into financing leases primarily for laboratory and computer equipment. Assets purchased under financing leases are included in "Right-of-use assets under financing leases, net" on the consolidated balance sheets. For financing leases, the associated assets are depreciated or amortized over the shorter of the relevant useful life of each asset or the lease term. Accumulated amortization of assets under financing leases totaled $4.6 million and $1.7 million as of December 31, 2020 and 2019, respectively.
Maturities of Financing and Operating Leases
Maturities of lease liabilities as of December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31
(In thousands)
|
Financing Leases
|
Operating Leases
|
Total Lease Obligations
|
|
2021
|
$
|
4,570
|
|
$
|
7,503
|
|
$
|
12,073
|
|
|
2022
|
—
|
|
7,680
|
|
7,680
|
|
|
2023
|
—
|
|
3,340
|
|
3,340
|
|
|
2024
|
—
|
|
163
|
|
163
|
|
|
2025
|
—
|
|
—
|
|
—
|
|
|
Thereafter
|
—
|
|
—
|
|
—
|
|
|
Total future minimum payments
|
4,570
|
|
18,686
|
|
23,256
|
|
|
Less: amount representing interest
|
(400)
|
|
(3,728)
|
|
(4,128)
|
|
|
Present value of minimum lease payments
|
4,170
|
|
14,958
|
|
19,128
|
|
|
Less: current portion
|
(4,170)
|
|
(5,226)
|
|
(9,396)
|
|
|
Long-term portion
|
$
|
—
|
|
$
|
9,732
|
|
$
|
9,732
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
December 31,
(In thousands)
|
2020
|
2019
|
|
Equity-method investment
|
$
|
2,380
|
|
$
|
4,734
|
|
|
Deposits
|
128
|
|
295
|
|
|
Contingent consideration
|
—
|
|
3,303
|
|
|
Other
|
1,196
|
|
1,373
|
|
|
Total other assets
|
$
|
3,704
|
|
$
|
9,705
|
|
In connection with the December 2017 sale of its subsidiary Amyris Brasil Ltda. (Amyris Brasil), the Company recorded a long-term receivable related to certain contingent consideration to be received from DSM upon DSM’s realization of certain Brazilian value-added tax benefits it acquired with its purchase of Amyris Brasil. In the second quarter of 2020, the Company received the $3.3 million remaining balance of contingent consideration due under the December 2017 asset purchase agreement.
In October 2019, the Company agreed to purchase the ownership interest previously held by Cosan in Novvi LLC, a joint venture among the Company, Cosan and certain other members, for $10.8 million. The Company is obligated to make payment in full by October 31, 2022. The Company measured and recorded the fair value of the investment based on the present value of the unsecured $10.8 million payment obligation, which was deemed to be more readily determinable than the fair value of the Novvi partnership interest. The Company measured the fair value of this three-year unsecured financial liability using the Company’s weighted average cost of capital of 29% which resulted in a present value of $5.0 million. The Company recorded the $5.0 million fair value of the investment and present value of financial obligation in other assets and other noncurrent liabilities and will accrete the $5.8 million difference between the $5.0 million present value of the liability and the $10.8 million payment obligation to interest expense under the effective interest method over the three-year payment term. For additional information regarding the Company's accounting this equity-method investment and the related asset value, see Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" and Note 7, “Consolidated Variable-interest Entities and Unconsolidated Investments”.
Accrued and other current liabilities
|
|
|
|
|
|
|
|
|
|
December 31,
(In thousands)
|
2020
|
2019
|
|
Accrued interest
|
$
|
9,327
|
|
$
|
8,209
|
|
|
Payroll and related expenses
|
8,230
|
|
7,296
|
|
|
Contract termination fees
|
5,344
|
|
5,347
|
|
|
Asset retirement obligation(1)
|
3,041
|
|
3,184
|
|
|
Professional services
|
994
|
|
2,968
|
|
|
Ginkgo partnership payments obligation
|
878
|
|
4,319
|
|
|
Tax-related liabilities
|
656
|
|
1,685
|
|
|
Other
|
2,237
|
|
3,647
|
|
|
Total accrued and other current liabilities
|
$
|
30,707
|
|
$
|
36,655
|
|
______________
(1) The asset retirement obligation represents liabilities incurred but not yet discharged in connection with our 2013 abandonment of a partially constructed facility in Pradópolis, Brazil.
Other noncurrent liabilities
|
|
|
|
|
|
|
|
|
|
December 31,
(In thousands)
|
2020
|
2019
|
|
Liability for unrecognized tax benefit
|
$
|
7,496
|
|
$
|
7,204
|
|
|
Ginkgo partnership payments, net of current portion(1)
|
7,277
|
|
4,492
|
|
|
Liability in connection with acquisition of equity-method investment
|
6,771
|
|
5,249
|
|
|
Contract liabilities, net of current portion(2)
|
111
|
|
1,449
|
|
|
Refund liability(3)
|
—
|
|
3,750
|
|
|
Other
|
1,099
|
|
880
|
|
|
Total other noncurrent liabilities
|
$
|
22,754
|
|
$
|
23,024
|
|
______________
(1) On August 10, 2020, the Company and Ginkgo entered into a Second Amendment to Promissory Note and Partnership Agreement (Second Amendment) to reduce the partnership payments frequency 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 (the “End of Term Payment”), provided that, if the Ginkgo Promissory Note is not fully repaid by April 19, 2022, the End of Term Payment shall be of $10.4 million. See Note 4, “Debt.” for more information. As a result of changes to key provisions in the partnership payments, the Company analyzed the combined before and after cash flows under the Promissory Note and Partnership Agreement that resulted from (i) the reduced interest rate on the Promissory Note, (ii) reduced payment frequency under the Promissory Note and Partnership Agreement, and (iii) changes in the periodic and total payment amounts under the Partnership Agreement, to determine whether these changes resulted in a modification or extinguishment of the obligations under the Second Amendment. Based on the combined before and after cash flows of the Promissory Note and Partnership Agreement, the change was significantly different. Consequently, the modifications resulting from the Second Amendment were accounted for as a debt extinguishment and a new debt issuance. The Company recorded a $0.1 million loss upon extinguishment of the partnership payment obligation, related to the write-off of the unamortized debt discount. Further, since the partnership payment obligation does not contain an explicit interest rate, the Company recorded the $11.9 million of total payments at its net present value of $8.1 million in other liabilities, with the $3.8 million difference recorded as a discount that is accreted to interest expense over the repayment term using the effective interest method.
(2) Contract liabilities, net of current portion at December 31, 2020 and 2019 includes $0 and $1,204 at each date in connection with DSM, which is a related party.
(3) In April 2019, the Company assigned the Value Sharing Agreement to DSM. See Note 10, "Revenue Recognition" for further information. The assignment was accounted for as a contract modification under ASC 606 that resulted in $12.5 million of prepaid variable consideration to the Company. The $12.5 million was recorded as a refund liability. During the first quarter of 2020, the Company concluded that it would not be required to return any portion of the remaining refund liability to DSM, and recorded $3.8 million of royalty revenue related to this change in estimate and reduction of the refund liability.
3. Fair Value Measurement
Liabilities Measured and Recorded at Fair Value on a Recurring Basis
As of December 31, 2020 and 2019, the Company’s financial liabilities measured and recorded at fair value on a recurring basis were classified within the fair value hierarchy as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(In thousands)
|
2020
|
|
2019
|
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Senior Convertible Notes
|
$
|
—
|
|
$
|
—
|
|
$
|
53,387
|
|
53,387
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
50,624
|
|
$
|
50,624
|
|
|
Foris Convertible Note (LSA Amendment)
|
—
|
|
—
|
|
123,164
|
|
123,164
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Embedded derivatives bifurcated from debt instruments
|
—
|
|
—
|
|
247
|
|
247
|
|
|
—
|
|
—
|
|
2,832
|
|
2,832
|
|
|
Freestanding derivative instruments issued in connection with other debt and equity instruments
|
—
|
|
—
|
|
8,451
|
|
8,451
|
|
|
—
|
|
—
|
|
6,971
|
|
6,971
|
|
|
Total liabilities measured and recorded at fair value
|
$
|
—
|
|
$
|
—
|
|
$
|
185,249
|
|
$
|
185,249
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
60,427
|
|
$
|
60,427
|
|
The Company did not hold any financial assets to be measured and recorded at fair value on a recurring basis as of December 31, 2020 and 2019. Also, there were no transfers between the levels during 2020 or 2019.
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 method of determining the fair value of embedded derivative liabilities is described subsequently in this note. Market risk associated with embedded derivative liabilities relates to the potential reduction in fair value and negative impact to future earnings from a decrease in interest rates.
Changes in fair value of derivative liabilities are presented as gains or losses in the consolidated statements of operations in the line captioned "Gain (loss) from change in fair value of derivative instruments".
Changes in the fair value of debt that is accounted for at fair value are presented as gains or losses in the consolidated statements of operations in the line captioned "Gain (loss) from change in fair value of debt".
Fair Value of Debt — Foris Convertible Note (LSA Amendment)
On June 1, 2020, the Company and Foris Ventures, LLC (Foris), an entity affiliated with director John Doerr and which beneficially owns greater than 5% of the Company’s outstanding common stock, entered into an Amendment No. 1 to the Amended and Restated Foris LSA (LSA Amendment), pursuant to which, among other provisions, Foris has the option, in its sole discretion, to convert all or a portion of the secured indebtedness under the LSA Amendment, including accrued interest, into shares of Common Stock at a $3.00 conversion price (Conversion Option), which Conversion Option was approved by the Company’s stockholders on August, 14, 2020. See Note 4, “Debt” for further information regarding the LSA Amendment and related extinguishment accounting treatment. The Company elected to account for the new debt issuance under the fair value option and recorded a $22.0 million loss upon extinguishment of the Foris LSA, representing the difference between the carrying value of the Foris LSA prior to the modification and the $72.1 million reacquisition price of the Foris LSA (which is the fair value of the LSA Amendment with the conversion option). The LSA Amendment also contains certain change in control embedded derivatives and a contingent beneficial conversion feature and management believes the fair value option best reflects the underlying economics of new convertible note. Under the fair value election, changes in fair value will be reported in the consolidated statements of operations as "Gain (loss) from change in fair value of debt" in each reporting period subsequent to the issuance of the Foris Convertible Note (LSA Amendment).
At December 31, 2020, the contractual outstanding principal of the Foris Convertible Note was $50.0 million and the fair value was $123.2 million. The Company measured the fair value of the Foris Convertible Note using a binomial lattice model (which is discussed in further detail below) using the following inputs: (i) $6.18 stock price, (ii) 18% secured discount yield, (iii) 0.11% risk free interest rate (iv) 45% equity volatility and (v) 5% probability of change in control. The Company assumed that if a change of control event were to occur, it would occur at the end of the calendar year. The Company recorded a loss of $51.1 million related to change in fair value of the Foris Convertible Note for the year ended December 31, 2020.
Fair Value of Debt — Senior Convertible Notes
On January 14, 2020, the Company exchanged the $66 million Senior Convertible Notes (or the Prior Notes) for (i) new senior convertible notes in an aggregate principal amount of $51 million (the New Notes or Senior Convertible Notes), (ii) an aggregate of 2,742,160 shares of common stock (the Exchange Shares), (iii) rights (the Rights) to acquire up to an aggregate of 2,484,321 shares of common stock, (iv) warrants (the Warrants) to purchase up to an aggregate of 3,000,000 shares of common stock (the Warrant Shares) at an exercise price of $3.25 per share, with an exercise term of two years from issuance, (v) accrued and unpaid interest on the Prior Notes (payable on or prior to January 31, 2020) and (vi) cash fees in an aggregate amount of $1.0 million (payable on or prior to January 31, 2020). Due to the legal extinguishment and exchange of the Prior Notes and significantly different cash flows contained in the New Notes, the Company accounted for the exchange as a debt extinguishment of the Prior Notes and a new debt issuance of the New Notes. The Company recorded a $5.3 million loss upon extinguishment of debt, which was comprised of the $4.1 million fair value of the Warrants, the $1.0 million cash fee and $0.2 million excess fair value of the Exchange Shares and Rights over the $2.87 per share contractual value. See Note 4, "Debt” for further information regarding the transaction.
The Company elected to account for the Senior Convertible Notes at fair value, as of the January 14, 2020 issuance date. Management believes that the fair value option better reflects the underlying economics of the Senior Convertible Notes, which contain multiple embedded derivatives. Under the fair value election, changes in fair value will be reported as "Gain (loss) from change in fair value of debt" in the consolidated statements of operations in each reporting period subsequent to the issuance of the Senior Convertible Notes. At January 14, 2020, the contractual outstanding principal of the Senior Convertible Notes was $51.0 million and the fair value was $35.8 million. The Company measured the fair value at January 14, 2020 using a binomial lattice model (which is discussed in further detail below) using the following inputs: (i) $2.90 stock price, (ii) 226% discount yield, (iii) 1.59% risk free interest rate (iv) 45% equity volatility, (v) 25% / 75% probability of principal repayment in cash or stock, respectively and (vi) 5% probability of change in control. The Company assumed that if a change of control event were to occur, it would occur at the end of the calendar year.
At December 31, 2020, the contractual outstanding principal of the Senior Convertible Notes was $30.0 million and the fair value was $53.4 million. The Company measured the fair value at December 31, 2020 using a binomial lattice model (which is discussed in further detail below) using the following inputs: (i) $6.18 stock price, (ii) 221% discount yield, (iii) 0.09% risk free interest rate (iv) 45% equity volatility, and (v) 5% probability of change in control. The Company assumed that if a change of control event were to occur, it would occur at the end of the calendar year.
For the year ended December 31, 2020, the Company recorded a $38.7 million loss from change in fair value of debt in connection with the fair value remeasurement of the Prior Notes and the Senior Convertible Notes, as follows:
|
|
|
|
|
|
|
|
In thousands
|
|
|
Fair value at November 14, 2019
|
$
|
54,425
|
|
|
Less: gain from change in fair value
|
(3,801)
|
|
|
Equals: fair value at December 31, 2019
|
50,624
|
|
|
Less: principal repaid in cash
|
(17,950)
|
|
|
Less: principal repaid in common stock
|
(18,030)
|
|
|
Add: loss from change in fair value
|
38,743
|
|
|
Equals: fair value at December 31, 2020
|
$
|
53,387
|
|
Binomial Lattice Model
A binomial lattice model was used to determine whether the Foris Convertible Note and the Senior Convertible Notes (Debt Instruments) 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. Using this lattice method, the Company valued the Debt Instruments using the "with-and-without method", where the fair value of the Debt Instruments including the embedded and freestanding features is defined as the "with," and the fair value of the Debt Instruments excluding the embedded and freestanding features is defined as the "without." This method estimates the fair value of the Debt Instruments by looking at the difference in the values of the Debt Instruments with the embedded and freestanding derivatives and the fair value of the Debt Instruments without the embedded and freestanding features. The lattice model uses the stock price, conversion price, maturity date, risk-free interest rate, estimated stock volatility, estimated credit spread and other instrument-specific assumptions. The Company remeasures the fair value of the Debt Instruments and records the change as a gain or loss from change in fair value of debt in the statement of operations for each reporting period.
6% Convertible Notes Due 2021
On December 10, 2018, the Company issued $60.0 million of 6% Convertible Notes Due 2021 (see Note 4, "Debt" for details) and elected the fair value option of accounting for this debt instrument. The notes were extinguished in November 2019. The Company recorded a $23.2 million loss from change in fair value of debt in the year ended December 31, 2019 prior to extinguishing the debt.
Derivative Liabilities Recognized in Connection with the Issuance of Debt and Equity Instruments
The following table provides a reconciliation of the beginning and ending balances for the Company's derivative liabilities recognized in connection with the issuance of debt instruments, either freestanding or compound embedded, measured at fair value using significant unobservable inputs (Level 3):
|
|
|
|
|
|
|
|
(In thousands)
|
Derivative Liability
|
|
Balance at December 31, 2019
|
$
|
9,803
|
|
|
Fair value of derivative liabilities issued during the period
|
8,751
|
|
|
Change in fair value of derivative liabilities
|
11,362
|
|
|
Derecognition on settlement or extinguishment
|
(21,218)
|
|
|
Balance at December 31, 2020
|
$
|
8,698
|
|
Freestanding Derivative Instruments
In connection with the January 14, 2020 issuance of the Senior Convertible Notes as discussed above and in Note 4, “Debt” (which was accounted for as an extinguishment of the original $66 million Senior Convertible Notes), the Company issued warrants (the Warrants) to purchase up to an aggregate of 3.0 million shares of common stock (the Warrant Shares). Due to stock exchange ownership limitations, which if exceeded would require stockholder approval and possibly require cash settlement for failure to deliver shares upon exercise, the Company concluded that a portion of the Warrant Shares met the derivative scope exception and equity classification criteria and were accounted for as additional paid in capital, and a portion of the Warrant Shares did not meet the derivative scope exception or equity classification criteria and were accounted for as a derivative liability. The Warrants had an initial fair value of $4.1 million, which was recorded as: (i) $4.1 million loss upon extinguishment of debt, (ii) $2.4 million additional paid in capital and (iii) $1.7 million derivative liability. The Warrant Shares derivative liability portion will be remeasured each reporting period until settled or extinguished with subsequent changes in fair value recorded through the statement of operations. The fair value of the Warrants was determined using a Black-Scholes-Merton option pricing model based on the input assumptions for liability classified warrants table in the valuation methodology section below. At March 31, 2020, the fair value of the Warrant Shares derivative liability portion was $1.5 million, and the Company recorded a $0.2 million gain on change in fair value of derivative instruments during the three months ended March 31, 2020. On May 29, 2020, the Company obtained stockholder approval to remove the stock ownership limitations. As a result, the Company was able to physically deliver shares under the Warrants without the potential for cash settlement. In the three months ended June 30, 2020, the Company recorded a $1.3 million final mark-to-market loss on change in derivative liability, using a Black-Scholes-Merton option pricing model based on the input assumptions for liability classified warrants table in the valuation methodology section below, and derecognized the $2.8 million derivative liability balance relate to this portion of the Warrant Shares into additional paid in capital.
In connection with the January 31, 2020 private placement transaction with Foris (an entity affiliated with director John Doerr and which beneficially owns greater than 5% of the Company’s outstanding common stock discussed in Note 6, “Stockholders’ Deficit”), the Company issued a right (the Right) to purchase up to an aggregate of 5.2 million shares of common stock (the Right Shares). Due to certain contractual provisions in the Right, the Company concluded that a portion of the Right Shares met the derivative scope exception and equity classification criteria and were accounted for as additional paid in capital, and a portion of the Right Shares did not meet the derivative scope exception or equity classification criteria and were accounted for as a derivative liability. The Right had an initial fair value of $5.3 million, of which $2.3 million was recorded as additional paid in capital and $3.0 million was recorded as a derivative liability. The Right Shares derivative liability portion will be remeasured each reporting period until settled or extinguished with subsequent changes in fair value recorded through the statement of operations. The fair value of the Right was determined using a Black-Scholes-Merton option pricing model based on the input assumptions for liability classified warrants table in the valuation methodology section below. At March 31, 2020, the fair value of the Right Shares derivative liability portion was $2.0 million, and the Company recorded a $1.0 million gain on change in fair value of derivative instruments during the three months ended March 31, 2020. On May 29, 2020, the Company obtained stockholder approval to increase its authorized common share count from 250 million to 350 million. As a result, the portion of the Right Shares initially accounting for as a derivative liability was no longer precluded
from the derivative scope exception and met the criteria for equity classification. In the three months ended June 30, 2020, the Company recorded a $1.8 million final mark-to-market loss on change in fair value of derivative instruments using a Black-Scholes-Merton option pricing model based on the input assumptions for liability classified warrants table in the valuation methodology section below, and derecognized the $3.7 million derivative liability balance into additional paid in capital.
In connection with the January 31, 2020 Debt Equitization transaction with Foris, which was accounted for as a debt extinguishment as discussed in Note 4, “Debt” and Note 6, “Stockholders’ Deficit”, the Company issued rights (the Right) to purchase up to of 8.8 million shares of common stock at $2.87 per share for 12 months from the issuance date. The Company concluded that the Right met the derivative scope exception and criteria to be accounted for in equity. The Right had a fair value of $8.9 million which was recorded as additional paid in capital and a charge to loss upon extinguishment of debt. The fair value of the Right was determined using a Black-Scholes-Merton option pricing model based on the input assumptions for liability classified warrants table in the valuation methodology section below.
During the second half of 2019, the Company issued five freestanding liability warrants related to the September 2019 and November 2019 Schottenfeld Notes (the Schottenfeld Notes), which the Company recorded at fair value as a derivative liability and debt discount on the respective issuance dates (see Note 4, “Debt” for further information). These freestanding liability warrants had a collective fair value of $7.0 million at December 31, 2019. As a result of the Foris Debt Equitization transaction on January 31, 2020, the variability causing these instruments to be recorded as a derivative liability was eliminated and upon derecognition of this liability into equity, the Company recorded a $1.8 million gain on change in fair value of derivative instruments for the year ended December 31, 2020, using a Black-Scholes-Merton option pricing model based on the input assumptions for liability classified warrants table in the valuation methodology section below, and reclassified the derivative liability balance of $5.2 million to additional paid in capital.
On February 28, 2020, the Company entered into forbearance agreements with certain affiliates of the Schottenfeld Group LLC (the Lenders) related to certain defaults under the Schottenfeld Notes. The transaction was accounted for as a debt extinguishment. See Note 4, “Debt” for further information. In connection with entering into the forbearance agreements, the Company committed to issuing new warrants (the New Warrants) to the Lenders under certain contingent events for 1.9 million shares of common stock at a $2.87 purchase price and a two-year term. The contingent obligation to issue the New Warrants did not meet the derivative scope exception or equity classification criteria and were accounted for as a derivative liability. The contingently issuable New Warrants derivative liability had an initial fair value of $3.2 million and was recorded as a derivative liability with a $3.2 million charge to loss upon extinguishment of debt. The New Warrants derivative liability will be remeasured each reporting period until settled or extinguished with subsequent changes in fair value recorded through the statement of operations. The fair value of the New Warrants derivative liability was determined using a Black-Scholes-Merton option pricing model based on the input assumptions for liability classified warrants table in the valuation methodology section below. At December 31, 2020, the fair value of the contingently issuable New Warrants derivative liability was $8.5 million, and the Company recorded a $5.3 million loss on change in fair value of derivative instruments for the year ended December 31, 2020.
On April 6, 2020, the Company and Total entered into a Senior Convertible Note Maturity Extension Agreement to extend the maturity date of the 2014 Rule 144A Convertible Note to April 30, 2020 and reduce the conversion price from $56.16 to $2.87 per share. See Note 4, “Debt” for further information. Historically, the embedded conversion option was bifurcated and accounted for as a derivative liability, and at December 31, 2019 and March 31, 2020 had a $0 fair value due to the Note’s short maturity and the significant conversion price differential when compared to the Company’s current stock price. As a result of the conversion price reduction, the Company remeasured the fair value of the conversion option using a Black-Scholes-Merton option pricing model based on the input assumptions for liability classified warrants table in the valuation methodology section below, and recorded a $6.5 million loss on change in fair value of derivative instruments in the three months ended June 30, 2020. On June 2, 2020, Total elected to convert all the outstanding principal and interest under the 2014 Rule 144A Convertible Note totaling $9.3 million into 3,246,489 shares of common stock. Upon conversion, the $6.5 million liability was derecognized into additional paid in capital, along with the debt principal and interest balance.
Bifurcated Embedded Features in Debt Instruments
During the second half of 2019, the Company issued four debt instruments with embedded mandatory redemption features which were bifurcated from the debt host instruments and recorded at fair value as a derivative liability and debt discount. The collective fair value of the four bifurcated derivatives totaled $2.8 million at December 31, 2019. In January and February 2020, the Company again modified certain key terms in three of the four underlying debt instruments, resulting in a debt extinguishment of the three modified debt instruments. Consequently, in the three months ended March 31, 2020, the collective fair value of the three extinguished bifurcated derivatives totaling $2.3 million was recorded as a loss upon extinguishment of debt and the $0.9 million collective fair value of the new bifurcated embedded mandatory redemption features was recorded as a derivative liability and new debt discount at the modification date. Also, one of the bifurcated features was embedded in the Foris LSA, which was modified and accounted for as an extinguishment in the three months ended June 30, 2020. As a result of
the extinguishment accounting treatment, the $0.7 million derivative liability balance was derecognized and recorded into the initial fair value of the new Foris Convertible Note (see “Fair Value of Debt – Foris Convertible Note (LSA Amendment)” above). The fair value of the bifurcated derivative liability was determined using a probability weighted discounted cash flow analysis which is discussed in the valuation methodology and approach section below. At December 31, 2020, the fair value of the bifurcated embedded mandatory redemption features totaled $0.2 million, and the Company recorded a $0.4 million gain on change in fair value derivative instruments during the year ended December 31, 2020.
Valuation Methodology and Approach to Measuring the Derivative Liabilities
The liabilities associated with the Company’s freestanding and compound embedded derivatives outstanding at December 31, 2020 and 2019 represent the fair value of freestanding equity instruments and mandatory redemption features embedded in certain debt instruments. See Note 4, "Debt", and Note 6, "Stockholders' Deficit" for further information regarding these host instruments. There is no current observable market for these types of derivatives and, as such, the Company determined the fair value of the freestanding instrument or embedded derivatives using the Black-Scholes-Merton option pricing model, or a probability-weighted discounted cash flow analysis, measuring the fair value of the debt instrument both with and without the embedded feature, both of which are discussed in more detail below.
The Company uses the Black-Scholes-Merton option pricing model to determine the fair value of its liability classified warrants as of December 31, 2020 and 2019. Input assumptions for these freestanding instruments measured during the 12 months ended December 31, 2020 and 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2020
|
2019
|
|
Fair value of common stock on valuation date
|
$2.56 – $6.18
|
$3.09 – $4.76
|
|
Exercise price of warrants
|
$2.87 – $3.25
|
$3.87 – $3.90
|
|
Expected volatility
|
94% – 117%
|
94% – 105%
|
|
Risk-free interest rate
|
0.13% – 1.58%
|
1.58% – 1.67%
|
|
Expected term in years
|
1.00 – 2.00
|
1.51 – 2.00
|
|
Dividend yield
|
0%
|
0%
|
The Company uses a probability weighted discounted cash flow model to measure the fair value of the mandatory redemption features embedded in the four debt instruments issued in the second half of 2019. The model is designed to measure and determine if the debt instruments would be called or held at each decision point. Within the model, the following assumption is made: the underlying debt instrument will be called early if the change in control redemption value is greater than the holding value. If the underlying debt instrument is called, the holder will maximize their value by finding the optimal decision between (i) redeeming at the redemption price and (ii) holding the instrument until maturity. Using this assumption, the Company valued the embedded derivatives on a "with-and-without method", where the fair value of each underlying debt instrument including the embedded derivative is defined as the "with", and the fair value of each underlying debt instrument excluding the embedded derivatives is defined as the "without". This method estimates the fair value of the embedded derivatives by comparing the fair value differential between the with and without mandatory redemption feature. The model incorporates the mandatory redemption price, time to maturity, risk-free interest rate, estimated credit spread and estimated probability of a change in control default event.
The market-based assumptions and estimates used in valuing the embedded derivative liabilities include values in the following ranges/amounts:
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2020
|
2019
|
|
Risk-free interest rate
|
0.1% - 1.6%
|
1.6% - 1.7%
|
|
Risk-adjusted discount yield
|
18.0% - 27.0%
|
20.0% - 27.0%
|
|
Stock price volatility
|
96% - 214%
|
45%
|
|
Probability of change in control
|
5.0%
|
5.0%
|
|
Stock price
|
$2.56 - $6.18
|
$2.09 - $4.76
|
|
Credit spread
|
17.9% - 36.8%
|
18.4% - 25.4%
|
|
Estimated conversion dates
|
2022 - 2023
|
2022 - 2023
|
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 held
constant, generally an increase in the Company’s stock price, change of control probability, risk-adjusted yield term to maturity/conversion or stock price volatility increases the value of the derivative liability.
Assets and Liabilities Recorded at Carrying Value
Financial Assets and Liabilities
The carrying amounts of certain financial instruments, such as cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities and low market interest rates, if applicable. Loans payable and credit facilities are recorded at carrying value, which is representative of fair value at the date of acquisition. The Company estimates the fair value of these instruments using observable market-based inputs (Level 2). The carrying amount (the total amount of net debt presented on the balance sheet) of the Company's debt at December 31, 2020 and at December 31, 2019, excluding the debt instruments recorded at fair value, was $86.5 million and $195.8 million, respectively. The fair value of such debt at December 31, 2020 and at December 31, 2019 was $83.3 million and $194.8 million, respectively, and was determined by (i) discounting expected cash flows using current market discount rates estimated for certain of the debt instruments and (ii) using third-party fair value estimates for the remaining debt instruments.
4. Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
(In thousands)
|
Principal
|
Unaccreted Debt (Discount) Premium
|
Fair Value Adjustment
|
Net
|
|
Principal
|
Unaccreted Debt (Discount) Premium
|
Fair Value Adjustment
|
Net
|
|
Convertible notes payable
|
|
|
|
|
|
|
|
|
|
|
Senior convertible notes
|
$
|
30,020
|
|
$
|
—
|
|
$
|
23,367
|
|
$
|
53,387
|
|
|
$
|
66,000
|
|
$
|
—
|
|
$
|
(15,376)
|
|
$
|
50,624
|
|
|
|
30,020
|
|
—
|
|
23,367
|
|
53,387
|
|
|
66,000
|
|
—
|
|
(15,376)
|
|
50,624
|
|
|
Related party convertible notes payable
|
|
|
|
|
|
|
|
|
|
|
Foris convertible note
|
50,041
|
|
—
|
|
73,123
|
|
123,164
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Total 2014 Rule 144A convertible note
|
—
|
|
—
|
|
—
|
|
—
|
|
|
10,178
|
|
—
|
|
—
|
|
10,178
|
|
|
|
50,041
|
|
—
|
|
73,123
|
|
123,164
|
|
|
10,178
|
|
—
|
|
—
|
|
10,178
|
|
|
Loans payable and credit facilities
|
|
|
|
|
|
|
|
|
|
|
Schottenfeld notes
|
12,500
|
|
(240)
|
|
—
|
|
12,260
|
|
|
20,350
|
|
(1,315)
|
|
—
|
|
19,035
|
|
|
Ginkgo note
|
12,000
|
|
—
|
|
—
|
|
12,000
|
|
|
12,000
|
|
(3,139)
|
|
—
|
|
8,861
|
|
|
Nikko notes
|
2,802
|
|
(759)
|
|
—
|
|
2,043
|
|
|
14,318
|
|
(901)
|
|
—
|
|
13,417
|
|
|
Other loans payable
|
1,227
|
|
—
|
|
—
|
|
1,227
|
|
|
1,828
|
|
—
|
|
—
|
|
1,828
|
|
|
|
28,529
|
|
(999)
|
|
—
|
|
27,530
|
|
|
48,496
|
|
(5,355)
|
|
—
|
|
43,141
|
|
|
Related party loans payable
|
|
|
|
|
|
|
|
|
|
|
DSM notes
|
33,000
|
|
(2,443)
|
|
—
|
|
30,557
|
|
|
33,000
|
|
(4,621)
|
|
—
|
|
28,379
|
|
|
Naxyris note
|
23,914
|
|
(493)
|
|
—
|
|
23,421
|
|
|
24,437
|
|
(822)
|
|
—
|
|
23,615
|
|
|
Foris notes
|
5,000
|
|
—
|
|
—
|
|
5,000
|
|
|
115,351
|
|
(9,516)
|
|
—
|
|
105,835
|
|
|
|
61,914
|
|
(2,936)
|
|
—
|
|
58,978
|
|
|
172,788
|
|
(14,959)
|
|
—
|
|
157,829
|
|
|
Total debt
|
$
|
170,504
|
|
$
|
(3,935)
|
|
$
|
96,490
|
|
263,059
|
|
|
$
|
297,462
|
|
$
|
(20,314)
|
|
$
|
(15,376)
|
|
261,772
|
|
|
Less: current portion
|
|
|
|
(77,437)
|
|
|
|
|
|
(63,805)
|
|
|
Long-term debt, net of current portion
|
|
|
|
$
|
185,622
|
|
|
|
|
|
$
|
197,967
|
|
Future minimum payments under the debt agreements as of December 31, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ending December 31
(In thousands)
|
Convertible Notes
|
Loans Payable and Credit Facilities
|
Related Party Convertible Notes
|
Related Party Loans Payable and Credit Facilities
|
Total
|
|
2021
|
$
|
33,897
|
|
$
|
4,249
|
|
$
|
—
|
|
$
|
31,823
|
|
$
|
69,969
|
|
|
2022
|
—
|
|
14,769
|
|
59,578
|
|
40,940
|
|
115,287
|
|
|
2023
|
—
|
|
12,899
|
|
—
|
|
—
|
|
12,899
|
|
|
2024
|
—
|
|
398
|
|
—
|
|
—
|
|
398
|
|
|
2025
|
—
|
|
396
|
|
—
|
|
—
|
|
396
|
|
|
Thereafter
|
—
|
|
1,472
|
|
—
|
|
—
|
|
1,472
|
|
|
Total future minimum payments
|
33,897
|
|
34,183
|
|
59,578
|
|
72,763
|
|
200,421
|
|
|
Less: amount representing interest(1)
|
(3,877)
|
|
(5,654)
|
|
(9,537)
|
|
(10,849)
|
|
(29,917)
|
|
|
Less: future conversion of accrued interest to principal
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Present value of minimum debt payments
|
30,020
|
|
28,529
|
|
50,041
|
|
61,914
|
|
170,504
|
|
|
Less: current portion of debt principal
|
(30,020)
|
|
(1,495)
|
|
—
|
|
(25,000)
|
|
(56,515)
|
|
|
Noncurrent portion of debt principal
|
$
|
—
|
|
$
|
27,034
|
|
$
|
50,041
|
|
$
|
36,914
|
|
$
|
113,989
|
|
______________
(1) Excluding net debt discount of $3.9 million that will be amortized to interest expense over the term of the debt.
Exchange of Senior Convertible Notes
On January 14, 2020, the Company completed the exchange of the Company’s $66 million Senior Convertible Notes (or the Prior Notes), pursuant to separate exchange agreements (the Exchange Agreements) with certain private investors (the Holders), for (i) new senior convertible notes in an aggregate principal amount of $51 million (the New Notes or Senior Convertible Notes), (ii) an aggregate of 2,742,160 shares of common stock (the Exchange Shares), (iii) rights (the Rights) to
acquire up to an aggregate of 2,484,321 shares of common stock (the Rights Shares), (iv) warrants (the Warrants) to purchase up to an aggregate of 3,000,000 shares of common stock (the Warrant Shares) at an exercise price of $3.25 per share, with an exercise term of two years from issuance, (v) accrued and unpaid interest on the Senior Convertible Notes (payable on or prior to January 31, 2020) and (vi) cash fees in an aggregate amount of $1.0 million (payable on or prior to January 31, 2020). The Exchange Shares and Warrants were issued on January 14, 2020. The unpaid interest and cash fees were paid in accordance with the Exchange Agreements. The Rights were exercised by the Holder and common stock shares issued by the Company according to the terms of the Senior Convertible Notes on February 24, 2020.
The New Notes have substantially similar terms as the Prior Notes, except under the New Notes (i) the requirement to redeem an aggregate principal amount of $10 million on December 31, 2019 was eliminated, (ii) the Company would be required to redeem the New Notes in an aggregate amount of $10 million following the receipt by the Company of at least $80 million of aggregate net cash proceeds from one or more financing transactions, and at a price of 107% of the amount being redeemed, (iii) the financing activity requirement was reduced such that the Company would be required to raise aggregate net cash proceeds of $50 million from one or more financing transactions by January 31, 2020, (iv) the Company would have until January 31, 2020 to comply with certain covenants related to the repayment, conversion or exchange into equity or amendment of certain outstanding indebtedness of the Company, and (v) the deadline for the Company to seek stockholder approval for the Holders to exceed a 19.99% stock exchange ownership limitation (the Stockholder Approval) would be extended from January 31, 2020 to March 15, 2020.
Due to multiple changes in key provisions of the Prior Notes, the Company analyzed the before and after cash flows between the (i) fair value of the New Notes and (ii) reacquisition price of the Prior Notes resulting from the (A) decreased principal from $66 million to $51 million, (B) fair value of the Exchange Shares, (C) fair value of the Rights, (D) fair value of the Warrants and (E) cash fees to be paid prior to January 31, 2020 to determine whether these changes resulted in a modification or extinguishment of the Prior Notes. Based on the before and after cash flows of each note, the change was significantly different. Consequently, the Exchange Agreements were accounted for as a debt extinguishment of the Prior Notes and a new debt issuance of the New Notes. The Company recorded a $5.3 million loss upon extinguishment of debt in the three months ended March 31, 2020, which was comprised of the $4.1 million fair value of the Warrants (considered a non-cash fee paid to the lender), the $1.0 million cash fee and $0.2 million excess fair value of the Exchange Shares and the Rights Shares over the contractual value. See Note 6, “Stockholders’ Deficit” for further information on the accounting treatment of the Exchange Shares and the Rights Shares upon issuance of the New Notes. Also, see Note 3, “Fair Value Measurement” for more information regarding the valuation methodology used to determine the fair value of the Warrants.
The Company elected to account for the New Notes at fair value, as of the January 14, 2020 issuance date. Management believes that the fair value option better reflects the underlying economics of the Senior Convertible Notes, which contain multiple embedded derivatives. Under the fair value election, changes in fair value will be reported in the consolidated statements of operations as "Gain (loss) from change in fair value of debt" in each reporting period subsequent to the issuance of the New Notes. For the three months ended March 31, 2020, the Company recorded a loss of $1.1 million, which is shown as Fair Value Adjustment in the table at the beginning of this Note 4. See Note 3, "Fair Value Measurement" for information about the assumptions that the Company used to measure the fair value of the Senior Convertible Notes.
On February 18, 2020, the Company and the Holders entered into separate waiver and forbearance agreements, (the W&F Agreements), pursuant to which the Holders agreed to, for 60 days following the date of the W&F Agreement, except in case of early termination of the W&F Agreement or, solely with respect to the Stockholder Approval if the other defaults described below have been cured on or prior to the date that is 60 days following the date of the W&F Agreement, until May 31, 2020 (the W&F Period), and in each case subject to certain conditions to effectiveness contained in the W&F Agreement, (i) forbear from exercising certain of their rights and remedies with respect to certain defaults by the Company, including, but not limited to, the Company's failure, on or before January 31, 2020, (A) to receive aggregated net cash proceeds of not less than $50 million from one or more financing transactions, (B) to repay in full or convert into equity the $20.4 million of indebtedness outstanding under the Schottenfeld Credit Agreements (discussed under the Schottenfeld Forbearance Agreement below) or amend all such indebtedness outstanding to fit within the definition of permitted indebtedness of the New Notes, and certain other events of default, and (ii) waive any event of default for (A) violations of the minimum liquidity covenant since December 31, 2019 and (B) failure to obtain the Stockholder Approval prior to March 15, 2020.
In addition, pursuant to the W&F Agreements, the Company and the Holders agreed that (i) the New Note amortization payment due on March 1, 2020 would be in the aggregate amount of $10.0 million (the Amortization Payment), split proportionally among the Holders, and that the Company would elect to pay such amortization payment in shares of Common Stock in accordance with the terms of the New Notes, provided however, that: (A) the Amortization Stock Payment Price (as defined in the New Notes) would be $3.00, (B) the Amortization Share Payment Period (as defined in the New Notes) with respect to the Amortization Payment would end on April 30, 2020 rather than March 31, 2020; and (C) in the event that Holder
did not elect to receive the full Amortization Share Amount (as defined in the New Notes) during such Amortization Share Payment Period, then the Amortization Payment would be automatically reduced by the portion of such Amortization Payment not received by the Holder, (ii) there would be no amortization payment due on April 1, 2020, and (iii) the amortization payment due on May 1, 2020 would be in the aggregate amount of $8.9 million split proportionally among the Holders. The W&F Agreements were accounted for as a debt modification, as the before and after cash flows were not significantly different.
Amendment to Senior Convertible Notes
On May 1, 2020, the Company and the holders of the Senior Convertible Notes entered into separate amendments to the New Notes and the W&F Agreements (Note Amendment), pursuant to which the Company and the Holders agreed: (i) to amend the maturity date of the New Notes from September 30, 2022 to June 1, 2021 (Maturity Date); (ii) to remove from the New Notes all equity triggering provisions that allowed the Holders to convert the notes at a reduced conversion price in certain circumstances other than events of default; (iii) that the Company would no longer be required to redeem the New Notes in an aggregate amount of $10 million following the receipt by the Company of at least $80 million of aggregate net cash proceeds from one or more financing transactions; (iv) that interest payments would be due quarterly (as opposed to monthly), starting on August 1, 2020; (v) that an aggregate amortization payment of approximately $16.4 million (split proportionally among the Holders) would be due on or before the earlier of May 31, 2020 and the date on which the Company receives at least $50 million of aggregate net proceeds in an offering of securities (Amended May Amortization), an amortization payment of $5 million (to the largest Holder) would be due on December 1, 2020 unless the Company receives at least $50 million of aggregate net cash proceeds from one or more financing transactions after May 1, 2020, and no other amortization payment would be due prior to the Maturity Date; (vi) to reduce the conversion price of the New Notes from $5.00 to $3.50; (vii) to reduce the redemption price with respect to optional redemptions by the Company prior to October 1, 2020 to 100%, prior to December 31, 2020 to 105% and to 110% thereafter (as opposed to 115%), of the amount being redeemed; and (viii) that an aggregate of 2,836,364 shares of Common Stock held by the Holders would not be considered as Pre-Delivery Shares (issued in connection with the November 15, 2019 Senior Convertible Notes Due 2022 and as defined in the New Notes) and would be subject to certain selling restrictions until June 15, 2020, and that an aggregate of 1,363,636 Pre-Delivery Shares held by certain Holders would be promptly returned to the Company. These Pre-Delivery Shares were returned to the Company on May 5, 2020 and May 6, 2020. The Company paid $16.4 million on June 1, 2020 to satisfy the required amortization payment and is no longer required to make the $5.0 million amortization payment on December 1, 2020. On June 4, 2020, the Company released an additional 700,000 Pre-Delivery Shares to the largest Holder in connection with the Second Amendment to New Notes and the W&F Agreements. The Company recorded $10.5 million of additional interest expense, representing the fair value of the 3,536,364 Pre-Delivery Shares released to the Holders.
Further, in connection with the Note Amendment, the Company and the Holders entered into certain warrant amendment agreements pursuant to which (i) the exercise price of the warrants issued on January 14, 2020 in connection with the Exchange of the Senior Convertible Notes was reduced to $2.87 per share, from $3.25, with respect to an aggregate of 2,000,000 warrant shares; (ii) the exercise price of a warrant to purchase 960,225 shares of the Company’s Common Stock issued to one of the Holders on May 10, 2019 was reduced to $2.87 per share, from $5.02, and the exercise term of such warrant was extended to January 31, 2022, from May 10, 2021; and (iii) the exercise term of a right to purchase 431,378 shares of the Company’s Common Stock issued to one of the Holders on January 31, 2020 was extended to January 31, 2022, from January 31, 2021. See Note 6, “Stockholders’ Deficit” for more information regarding the accounting treatment of these warrant modifications.
The Company has elected to account for the Senior Convertible Notes at fair value, as of the issuance date. Management believes that the fair value option better reflects the underlying economics of the Senior Convertible Notes, which contain multiple embedded derivatives. Under the fair value election, changes in fair value will be reported in the consolidated statements of operations as "Gain (loss) from change in fair value of debt" in each reporting period subsequent to the issuance of the Senior Convertible Notes. For the year ended December 31, 2020, the Company recorded a loss of $38.7 million, which is shown as Fair Value Adjustment in the table at the beginning of this Note 4. See Note 3, "Fair Value Measurement" for information about the assumptions that the Company used to measure the fair value of the Senior Convertible Notes.
2014 Rule 144A Note Exchange and Extensions – Total, Related Party
On March 11, 2020, the Company and Total entered into a Senior Convertible Note Maturity Extension Agreement (the Extension Agreement) due to the Company’s failure to pay the $10.2 million principal amount due under the December 20, 2019 reissued 2014 Rule 144A Convertible Notes that matured on January 31, 2020. The Extension Agreement resulted in the reissuance and extension of the December 20, 2019 promissory note to March 31, 2020. Under the terms of the extension agreement, the Company paid Total $1.5 million to satisfy all accrued but unpaid interest and to reduce the principal balance
of the reissued note by $1.1 million. The reissued note: (i) had a maturity date of March 31, 2020, (ii) had a $9.1 million principal amount due, (iii) accrued interest at a rate of 12.0% per annum, and (iv) had terms substantially identical to the December 20, 2019 promissory note. The Extension Agreement was accounted for as a debt modification, as the before and after cash flows were not significantly different.
On April 6, 2020, the Company and Total entered into a Senior Convertible Note Maturity Extension Agreement to extend the maturity date of the 2014 Rule 144A Convertible Note to April 30, 2020 and reduce the conversion price of the 2014 Rule 144A Convertible Note to $2.87 per share. Effective April 30, 2020, the Company and Total entered into a subsequent Senior Convertible Note Maturity Extension Agreement to extend the maturity date of the 2014 Rule 144A Convertible Note to the earlier of the day the Company receives cash proceeds from any private placement of its equity and/or equity-linked securities, and May 31, 2020. The 2014 Rule 144A Convertible Note was reissued as a result of such extensions with terms substantially identical to the previously issued promissory notes. On June 2, 2020, Total elected to convert all the outstanding principal and interest due under the 2014 Rule 144A Convertible Note totaling $9.3 million into 3,246,489 shares of common stock. Upon conversion, the $9.3 million debt principal and interest balance and the $6.5 million derivative liability balance related to the fair value of the conversion option was derecognized into additional paid in capital. See Note 3, “Fair Value Measurement” for more information regarding the accounting treatment of the embedded conversion option and subsequent conversion price reduction.
Foris Debt Transactions—Related Party
The Company has loans payable to Foris Ventures, LLC (Foris) with a total principal balance of $55.0 million at December 31, 2020. Foris is an entity affiliated with director John Doerr of Kleiner Perkins Caufield & Byers, a current stockholder, and an owner of greater than five percent of the Company’s outstanding common stock. The notes payable to Foris are comprised of the following (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
Date Issued
|
Original Loan Amount
|
Balance at December 31, 2020
|
Interest Rate per Annum
|
Maturity Date
|
|
Foris Convertible Note
|
June 1, 2020
|
$
|
50,041
|
|
$
|
50,041
|
|
6%
|
July 1, 2022
|
|
Foris $5M Note
|
April 29, 2020
|
5,000
|
|
5,000
|
|
12%
|
December 31, 2022
|
|
|
|
$
|
55,041
|
|
$
|
55,041
|
|
|
|
Debt Equitization – Foris, Related Party
At December 31, 2019, the Company had two loans payable to Foris with a total principal balance of $110.0 million, excluding capitalized interest of $5.3 million. The first loan (Foris $19 million Note) was a $19 million unsecured borrowing that accrued interest at 12% per annum and matures on January 1, 2023. The second loan (Foris LSA) is a $91.0 million secured borrowing that accrues interest at 12.5% per annum and matured on March 1, 2023. The Foris LSA required quarterly principal payments and monthly interest payments. See Amendment No. 1 to Amended and Restated LSA — Foris, Related Party below for more information on the maturity date and payment terms of the Foris LSA.
On January 31, 2020, the Company completed a series of equity transactions with Foris that resulted in the Company (i) reducing its aggregate debt principal with Foris by $60.0 million and accrued interest and fees due to Foris by $9.9 million (including $5.4 million of capitalized interest), (ii) issuing an aggregate of 19,287,780 shares of common stock as a result of the exercise of outstanding warrants at a weighted average exercise price of approximately $2.84 per share for an aggregate of $54.8 million, (iii) issuing an aggregate of 5,279,171 shares of common stock at $2.87 per share for an aggregate of $15.1 million in a private placement, and (iv) issuing rights (the Rights) to purchase an aggregate of 8,778,230 shares of common stock, at an exercise price of $2.87 per share, for an exercise term of 12 months. The exercise price of the outstanding warrants and the purchase price of the private placement common stock was paid through the cancellation of principal and accrued interest and fees totaling $69.9 million. See Note 6, “Stockholders’ Deficit” for information on the accounting treatment of the various equity related instruments.
As a result of the transaction described above, on January 31, 2020, the principal balance of the Foris $19 million Note and accrued but unpaid interest was fully settled through the exercise price of certain of outstanding warrants. Upon settlement of the Foris $19 million Note, the Company recorded a $5.7 million loss upon extinguishment debt, which was comprised of $6.1 million of unaccreted discount, less the $0.4 million fair value of the extinguished bifurcated derivative liability.
In addition, this series of equity transactions directly impacted the cash flows of the Foris LSA and, as a result, the Company analyzed the before and after cash flows resulting from the significant decrease in principal, the warrant exercise
price modifications and the issuance rights to purchase additional shares of common stock at $2.87, to determine whether these changes result in a modification or extinguishment of the Foris LSA. Based on the before and after cash flows, the change was significantly different. Consequently, the accelerated paydown of the Foris LSA loan balance through the exercise price of the remaining outstanding warrants and the purchase price of the private placement common stock was accounted for as a debt extinguishment and a new debt issuance. The Company recorded a $10.4 million loss upon extinguishment of debt, which was comprised of $8.9 million fair value of the Rights and $3.1 million of unaccreted discount, less the $1.6 million fair value of the extinguished bifurcated derivative liability. See Note 6, “Stockholders’ Deficit” for further information on the valuation methodology and related accounting treatment of the Rights. In recording the new debt issuance, the Company capitalized $0.7 million for the initial fair value of the embedded mandatory redemption feature as a debt discount to be amortized to interest expense under the effective interest method over the term of the remaining term of the new debt issuance.
Amendment No. 1 to Foris LSA (Foris Convertible Note) — Related Party
On June 1, 2020, the Company and Foris entered into Amendment No. 1 to the Foris LSA (LSA Amendment), pursuant to which: (i) the interest rate applicable to the then outstanding secured indebtedness (Secured Indebtedness) was amended from and after June 1, 2020 to a per annum rate of interest equal to 6.00% (previously 12.5%), (ii) the Company shall not be required to make any interest payments outstanding as of May 31, 2020 or accruing thereafter prior to July 1, 2022 (previously due monthly), (iii) the quarterly principal amortization payments were eliminated and all outstanding principal under the LSA Amendment became due on July 1, 2022, and (iv) Foris shall have the option, in its sole discretion, to convert all or portion of the Secured Indebtedness, including accrued interest, into shares of common stock at a $3.00 conversion price (Conversion Option), subject to the Company’s stockholder approval to issue shares of common stock upon exercise of the Conversion Option in accordance with applicable rules and regulations of the Nasdaq Stock Market, including Nasdaq Listing Standard Rule 5635(d); for which stockholder approval was obtained on August 14, 2020.
The Company analyzed the before and after cash flows resulting from the LSA Amendment to determine whether these changes result in a modification or extinguishment of the Foris LSA. Based on the before and after cash flows, the change was significant. Consequently, the LSA Amendment was accounted for as a debt extinguishment and a new debt issuance. The Company elected to account for the new debt issuance under the fair value option and recorded a $22.0 million loss upon extinguishment of the Foris LSA, representing the difference between the carrying value of the Foris LSA prior to the modification and the $72.1 million reacquisition price of the Foris LSA (which is the fair value of the LSA Amendment with the conversion option). Management believes the fair value option best reflects the underlying economics of the LSA Amendment, which contains embedded derivatives, a conversion option requiring bifurcation and a beneficial conversion feature. Under the fair value election, changes in fair value will be reported in the consolidated statements of operations as "Gain (loss) from change in fair value of debt" in each reporting period subsequent to the issuance of the LSA Amendment (Foris Convertible Note). The Company also recorded gains of $23.1 million and $13.6 million for the three and nine months ended September 30, 2020 related to the change in fair value of the LSA Amendment (Foris Convertible Note) after the June 1, 2020 issuance date, which is shown as Fair Value Adjustment in the table at the beginning of this Note 4. See Note 3, "Fair Value Measurement" for information about the assumptions that the Company used to measure the fair value of the LSA Amendment (Foris Convertible Note).
Foris $5 Million Note – Related Party
On April 29, 2020, the Company borrowed $5.0 million from Foris, an entity affiliated with director John Doerr and which beneficially owns greater than 5% of the Company’s outstanding common stock. The note is unsecured and accrues interest at 12% per annum. Principal and interest will be payable at maturity, on December 31, 2022.
Naxyris LSA – Related Party
On August 14, 2019, the Company, certain of the Company’s subsidiaries (the Subsidiary Guarantors) and, as lender, Naxyris, an existing stockholder of the Company and an investment vehicle owned by Naxos Capital Partners SCA Sicar, which is affiliated with NAXOS S.A.R.L. (Switzerland), for which director Carole Piwnica serves as director, entered into a Loan and Security Agreement (the Naxyris Loan Agreement) to make available to the Company a secured term loan facility in an aggregate principal amount of up to $10.4 million (the August 2019 Naxyris Loan), which the Company borrowed in full on August 14, 2019. In connection with the funding of the August 2019 Naxyris Loan, the Company paid Naxyris an upfront fee of $0.4 million.
Loans under the August 2019 Naxyris Loan have a maturity date of July 1, 2022 and accrue interest at a rate per annum equal to the greater of (i) 12% or (ii) the rate of interest payable with respect to any indebtedness of the Company plus 25 basis
points, which interest will be payable monthly in arrears, provided that all interest accruing from and after August 14, 2019 through December 1, 2019 shall be due and payable on December 15, 2019.
The obligations of the Company under the Naxyris Loan Agreement are (i) guaranteed by the Subsidiary Guarantors and (ii) secured by a perfected security interest in substantially all of the assets of the Company and the Subsidiary Guarantors (the Collateral), junior in payment priority to Foris subject to certain limitations and exceptions, as well as the terms of the Intercreditor Agreement.
Mandatory prepayments of the outstanding amounts under the August 2019 Naxyris Loan will be required upon the occurrence of certain events, including asset sales, a change in control, and the incurrence of additional indebtedness, subject to certain exceptions and reinvestment rights. Outstanding amounts under the August 2019 Naxyris Loan must also be prepaid to the extent that the borrowing base exceeds the outstanding principal amount of the loans under the August 2019 Naxyris Loan. In addition, the Company may at its option prepay the outstanding principal amount of the loans under the August 2019 Naxyris Loan in full before the maturity date. Any prepayment of the loans under the August 2019 Naxyris Loan prior to the maturity date, whether pursuant to a mandatory or optional prepayment, is subject to a prepayment charge equal to one year’s interest at the then-current interest rate for the August 2019 Naxyris Loan. Upon any repayment of the loans under the August 2019 Naxyris Loan, whether on the maturity date or earlier pursuant to an optional or mandatory prepayment, the Company will pay Naxyris an end of term fee based on a percentage of the aggregate amount borrowed. In addition, (i) the Company will be required to pay a fee equal to 6% of any amount the Company fails to pay within three business days of its due date and (ii) any interest that is not paid when due will be added to principal and will accrue compound interest at the applicable rate.
The August 2019 Naxyris Loan contains customary affirmative and negative covenants and financial covenants, including covenants related to minimum revenue, minimum liquidity and minimum asset coverage requirements.
The August 2019 Naxyris Loan also contained a mandatory redemption feature that was not clearly and closely related to the debt host instrument, and thus, required bifurcation and separate accounting as a derivative liability. The embedded feature had an initial fair value of $0.3 million and was recorded as a derivative liability and a debt discount to be amortized to interest expense under the effective interest method over the term of the August 2019 Naxyris Loan. See Note 3, “Fair Value Measurement” for information regarding the fair value measurement and subsequent accounting for the embedded mandatory redemption feature.
In connection with the entry into the August 2019 Naxyris Loan, on August 14, 2019 the Company issued to Naxyris a warrant (the Naxyris LSA Warrant) to purchase up to 2.0 million shares of common stock at an exercise price of $2.87 per share, with an exercise term of two years from issuance. See Note 6, “Stockholders’ Deficit” for information regarding the fair value measurement and issuance of this warrant. The warrant had a $4.0 million fair value and a $3.0 million relative fair value after allocating the August 2019 Naxyris Loan proceeds to the $0.3 million fair value of the embedded mandatory redemption feature contained in the August 2019 Naxyris Loan, and allocating on a residual basis, to the relative fair values of the August 2019 Naxyris Loan and the Naxyris LSA Warrant. The $3.0 million relative fair value of the Naxyris LSA Warrant was recorded as an increase to additional paid in capital and as a debt discount to be amortized to interest expense under the effective interest method over the term of the August 2019 Naxyris Loan.
In addition to the $3.0 million relative fair value of the Naxyris LSA Warrant and the $0.3 million fair value of the embedded mandatory redemption feature, the August 2019 Naxyris Loan contained $0.4 million original issue discount, $0.5 million mandatory end of term fee and $0.3 million of issuances costs, all totaling $4.5 million. All such amounts were recorded as a debt discount to be amortized to interest expense over the term of the August 2019 Naxyris Loan.
Naxyris LSA Amendment – Related Party
On October 28, 2019, the Company, the Subsidiary Guarantors and Naxyris amended and restated the Naxyris Loan Agreement (the A&R Naxyris LSA), pursuant to which the maximum loan commitment of Naxyris under the Naxyris Loan Agreement was increased by $10.4 million. On October 29, 2019, the Company borrowed an additional $10.4 million (the October 2019 Naxyris Loan) from Naxyris under the A&R Naxyris LSA, which is subject to the terms and provisions of the A&R Naxyris LSA, including the lien on substantially all of the assets of the Company and the Subsidiary Guarantors. Also, under the terms of A&R Naxyris LSA, the Company owes a 5% end of term fee on the October 2019 Naxyris Loan amount and a $2.0 million term loan fee, both of which are due at July 1, 2022 maturity or upon full repayment of the amounts borrowed under the A&R Naxyris LSA. Also, the Company paid Naxyris an upfront fee of $0.4 million at the funding date of the October 2019 Naxyris Loan. After giving effect to the October 2019 Naxyris Loan amount, there is $24.4 million aggregate principal amount of loans outstanding under the A&R Naxyris LSA.
Also, in connection with the entry into the A&R Naxyris LSA, on October 28, 2019 the Company issued to Naxyris a warrant to purchase up to 2.0 million shares of common stock, at an exercise price of $3.87 per share, with an exercise term of two years from issuance (the October 2019 Naxyris Warrant). The warrant had a $3.6 million fair value and a $2.8 million relative fair value after allocating the October 2019 Naxyris Loan proceeds to the $0.5 million fair value of the embedded mandatory redemption feature contained in the October 2019 Naxyris Loan, and allocating on a residual basis, to the relative fair values of the October 2019 Naxyris Loan and the October 2019 Naxyris Warrant. The $2.8 million relative fair value of the October 2019 Naxyris Warrant was recorded as an increase to additional paid in capital and as a loss on debt extinguishment (as discussed below).
Due to changes in key terms of the Naxyris Loan Agreement through the addition of the October 2019 Naxyris Loan, the Company analyzed the before and after cash flows under the August 2019 Naxyris Loan and October 2019 Naxyris Loan in order to determine if these changes result in a modification or extinguishment of the original Naxyris Loan Agreement. Based on the combined before and after cash flows related to the increased principal balance, increased end of term fees and the fair value of new warrants provided to Naxyris, the Company determined that the change in cash flows were significantly different. Consequently, the October 2019 Naxyris Loan was accounting for as a debt extinguishment and new debt issuance. The Company recorded a $9.7 million loss on extinguishment comprised of (i) $4.0 million of unamortized debt discount, net of the $0.3 million fair value of the bifurcated embedded mandatory redemption feature, (ii) $2.9 million of original issue discount and end of term fees and (iii) the $2.8 million fair value of the October 2019 Naxyris Warrant (a non-cash fee paid to the lender).
The October 2019 Naxyris Loan contained a mandatory redemption feature that was not clearly and closely related to the debt host instrument, and thus, required bifurcation and separate accounting as a derivative liability. The embedded feature had an initial fair value of $0.5 million and was recorded as a derivative liability and a debt discount to be amortized to interest expense under the effective interest method over the term of the new debt issuance. See Note 3, “Fair Value Measurement” for information regarding the fair value measurement and subsequent accounting for the embedded mandatory redemption feature. The Company also capitalized $0.4 million of legal fees related to the October 2019 Naxyris Loan as a debt discount.
DSM Credit Agreements—Related Party
DSM $25 Million Note
In December 2017, the Company and DSM entered into a credit agreement (the DSM Credit Agreement) to make available to the Company an unsecured credit facility of $25.0 million. On December 28, 2017, the Company borrowed $25.0 million under the DSM Credit Agreement, representing the entire amount available thereunder, and issued a promissory note to DSM in an equal principal amount (the DSM Note). The Company used the proceeds of the amounts borrowed under the DSM Credit Agreement to repay all outstanding principal under a promissory note in the principal amount of $25.0 million issued to Guanfu Holding Co., Ltd. in December 2016. Given multiple elements in the arrangements with DSM, the Company fair valued the DSM Note to determine the arrangement consideration that should be allocated to the DSM Note. The fair value of the DSM Note was discounted using a Company specific weighted average cost of capital rate that resulted in a debt discount of $8.0 million. The debt discount is being amortized over the loan term using the effective interest method.
The DSM Note (i) is an unsecured obligation of the Company, (ii) matures on December 31, 2021 and (iii) accrues interest from and including December 28, 2017 at 10% per annum, payable quarterly. The DSM Note may be prepaid in full or in part at any time without penalty or premium. The DSM Credit Agreement and the DSM Note contain customary terms, covenants and restrictions, including certain events of default after which the DSM Note may become due and payable immediately.
DSM $8 Million Note
On September 17, 2019, the Company and DSM entered into a credit agreement (the 2019 DSM Credit Agreement) to make available to the Company a secured credit facility in an aggregate principal amount of $8.0 million, to be issued in separate installments of $3.0 million, $3.0 million and $2.0 million, respectively, with each installment being subject to certain closing conditions, including the payment of certain existing obligations of the Company to DSM. On September 17, 2019, the Company borrowed the first installment of $3.0 million under the 2019 DSM Credit Agreement, all of which proceeds were used to pay certain existing obligations of the Company to DSM, and issued to DSM a promissory note in the principal amount of $3.0 million. On September 19, 2019, the Company borrowed the second installment of $3.0 million under the 2019 DSM Credit Agreement, all of which proceeds were used to pay certain existing obligations of the Company to DSM, and issued to DSM a promissory note in the principal amount of $3.0 million. On September 23, 2019, the Company borrowed the final
installment of $2.0 million under the 2019 DSM Credit Agreement, $1.5 million of which proceeds were used to pay certain existing obligations of the Company to DSM, and issued to DSM a promissory note in the principal amount of $2.0 million. The promissory notes issued under the 2019 DSM Credit Agreement (i) mature on August 7, 2022, (ii) accrue interest at a rate of 12.5% per annum from and including the applicable date of issuance, which interest is payable quarterly in arrears on each January 1, April 1, July 1 and October 1, beginning January 1, 2020, and (iii) are secured by a first-priority lien on certain Company intellectual property licensed to DSM. The Company may at its option repay the amounts outstanding under the 2019 DSM Credit Agreement before the maturity date, in whole or in part, at a price equal to 100% of the amount being repaid plus accrued and unpaid interest on such amount to the date of repayment. In addition, the Company is required to repay the amounts outstanding under the 2019 DSM Credit Agreement (i) in an amount equal to the gross cash proceeds, if any, received by the Company upon the exercise by DSM of any of the common stock purchase warrants issued by the Company to DSM on May 11, 2017 or August 7, 2017 (see Note 6, “Stockholders’ Deficit”) and (ii) in full upon the request of DSM at any time following the receipt by the Company of at least $50.0 million of gross cash proceeds from one or more sales of equity securities of the Company on or prior to June 30, 2020. In connection with issuance of the 2019 DSM Credit Agreement, the Company incurred $0.3 million of legal fees which were recorded as a debt discount to be amortized as interest expense under the effective interest method over the term of the 2019 DSM Credit Agreement.
Schottenfeld Forbearance Agreement
The Company, Schottenfeld Group LLC (Schottenfeld) and certain of its affiliates (collectively, the Lenders) are parties (i) to certain Credit Agreements, each dated September 10, 2019 (collectively, the September Credit Agreements) and (ii) to a Credit and Security Agreement, dated November 14, 2019 (the CSA, and collectively with the September Credit Agreements, the Credit Agreements), pursuant to which the Company issued to the Lenders certain notes (the September Notes and the November Notes, respectively, and collectively, the Schottenfeld Notes) and warrants (the September Warrants and the November Warrants, respectively, and collectively, the Schottenfeld Warrants) to purchase shares (the Warrant Shares) of the Company’s common stock. See Note 6, “Stockholders’ Deficit” for further information. At December 31, 2020, indebtedness under the September Notes totals $12.5 million, accrues interest at 12% per annum and matures on January 1, 2023. Indebtedness under the November Notes total $7.9 million, accrued interest at 12% per annum and originally matured on January 15, 2020. The Company failed to repay the $7.9 million November Notes by January 15, 2020.
On February 28, 2020, the Company entered into a forbearance agreement with the Lenders (Forbearance Agreement), pursuant to which the Lenders would forbear, for 60 days from the date of the Forbearance Agreement, unless terminated earlier (the Forbearance Period), to exercise certain rights as a result of the Company’s defaults under the Credit Agreements and related Schottenfeld Notes, including the failure of the Company to (i) to pay all principal and accrued interest on the November Notes at the maturity date, (ii) the failure to pay on or before December 31, 2019, all accrued and unpaid interest through December 31, 2019 on the September Notes, and (iii) the failure, on or before December 15, 2019, to convert or exchange at least $60 million, but not less than 100%, of certain junior outstanding indebtedness into equity in the Company, and certain other events of default. Under the Forbearance Agreement, the Company agreed to (i) pay a late fee of 5% on any obligations under the November Notes not paid in full on or before the last day of the Forbearance Period; (ii) pay on or prior to the earliest to occur of April 19, 2020 or the last day of the Forbearance Period, (A) all interest due pursuant to the November Notes and the September Notes, plus all interest accruing on such unpaid interest, plus all interest accrued on account of the November Notes and the September Notes from the date of the Forbearance Agreement through the date of such payment, and (B) a forbearance fee in the amount of $150,000; (iii) pay, upon signature of the Forbearance Agreement, $150,000 as a partial payment of the interest that has accrued pursuant to the November Notes and the September Notes as of the date of the Forbearance Agreement; (iv) issue new warrants upon the occurrence of certain contingent events and (v) amend the Schottenfeld Warrants to (A) reduce the exercise price of each Schottenfeld Warrant to $2.87 per share, and (B) with respect to the November Warrants, extend the deadline to register the Warrant Shares for resale by the Holders.
Due to multiple changes in key provisions of Schottenfeld Credit Agreements, the Company analyzed the before and after cash flows resulting from the warrant modification and forbearance fee to determine whether these changes result in a modification or extinguishment of the original Schottenfeld and Phase Five notes. Based on the combined before and after cash flows of each note, the change was significantly different. Consequently, the modifications resulting from the Forbearance Agreement were accounted for as a debt extinguishment and a new debt issuance. The Company recorded a $5.6 million loss upon extinguishment of debt, which was comprised of the $3.2 million fair value of contingent warrant issuance obligation, the $1.3 million incremental fair value of the modified warrants, $1.1 million of unaccreted discount and the forbearance fee, less the balance of the extinguished bifurcated derivative liability. In recording the new debt issuance, the Company capitalized $0.2 million of legal fees and $0.2 million for the initial fair value of the embedded mandatory redemption feature as a debt discount to be amortized to interest expense under the effective interest method over the term of the remaining term of the new debt issuance.
On April 19, 2020, the Company failed to pay the amounts due under the Forbearance Agreement, including the past due interest on the September Notes, and was unable to obtain a waiver or extension for the past due amounts. As a result, $20.4 million of principal outstanding under the Schottenfeld Notes was classified as a current liability on the condensed consolidated balance sheet as of March 31, 2020. On June 5, 2020, the Company repaid the past due November 2019 Notes totaling $7.9 million. Consequently, the September 2019 Notes due January 1, 2023 totaling $12.5 million were reclassified to a non-current liability as of September 30, 2020.
Ginkgo Note, Partnership Agreement and Note Amendment
In November 2017, the Company and Ginkgo Bioworks, Inc. (Ginkgo) entered into a partnership agreement (Ginkgo Partnership Agreement) to replace and supersede the 2016 Ginkgo Collaboration Agreement. Under the Ginkgo Partnership Agreement, the Company and Ginkgo agreed:
•to issue the $12 million November 2017 Ginkgo Note (as defined below), which effectively guarantees Ginkgo $12 million minimum future royalties under the profit margin sharing provisions noted below;
•to pay Ginkgo quarterly fees of $0.8 million (Partnership Payments) for a total of $12.7 million, beginning on December 31, 2018 and ending on September 30, 2022; and
•to share profit margins from sales of a certain product to be developed under the Ginkgo Partnership Agreement on a 50/50 basis, subject to certain conditions, provided that net profits will be payable to Ginkgo for any quarterly period to the extent that such net profits exceed the sum of (a) quarterly interest payments due under the November 2017 Ginkgo Note and (b) Partnership Payments due in such quarter.
The Company recorded the $6.1 million present value of the $12.7 million partnership payments in other liabilities (see Note 2, "Balance Sheet Details"), with the remaining $6.6 million recorded as a debt discount to be recognized as interest expense under the effective interest method over the five-year payment term.
In November 2017, the Company issued an unsecured promissory note in the principal amount of $12.0 million to Ginkgo (the November 2017 Ginkgo Note) in connection with the termination of the 2016 Ginkgo Collaboration Agreement and the execution of the Ginkgo Partnership Agreement. The November 2017 Ginkgo Note accrues interest at 10.5% per annum, payable monthly, and has a maturity date of October 19, 2022. The November 2017 Ginkgo Note may be prepaid in full without penalty or premium at any time, provided that certain payments have been made under the Company’s partnership agreement with Ginkgo. The November 2017 Ginkgo Note also contains customary terms, covenants and restrictions, including certain events of default after which the note may become due and payable immediately. The Company recorded the $7.0 million present value of the November 2017 Ginkgo Note as a note payable liability, and the remaining $5.0 million was recorded as a debt discount which is being accreted to interest expense over the loan term using the effective interest method.
On September 29, 2019, in connection with Ginkgo granting certain waivers under the November 2017 Ginkgo Note and the Ginkgo Partnership Agreement, (i) the Company and Ginkgo amended the November 2017 Ginkgo Note to increase the interest rate from 10.5% per annum to 12% per annum, beginning October 1, 2019, (ii) Ginkgo agreed to waive default interest, defer past due interest and partnership payments under the November 2017 Ginkgo Note and Ginkgo Partnership Agreement until December 15 and (iii) the Company agreed to pay a cash waiver fee of $1.3 million, payable in installments of $0.5 million on December 15, 2019 and $0.8 million on March 31, 2020. The Company accounted for this amendment as a modification and accrued the $1.3 million waiver fee in other current liabilities and a charge to interest expense during the year ended December 31, 2019. The Company failed to pay the $5.2 million past due interest, default interest on past due amounts, partnership payments and the $0.5 million waiver fee installment on December 15, 2019.
Ginkgo Waiver Agreement
On March 11, 2020, the Company and Ginkgo Bioworks, Inc. (Ginkgo) entered into a Waiver Agreement and Amendment to Partnership Agreement (the Ginkgo Waiver), pursuant to the terms of (i) the Ginkgo promissory note dated October 20, 2017, issued by the Company to Ginkgo (as amended, the Ginkgo Note), (ii) the Ginkgo Partnership Agreement, dated October 20, 2017, by and between the Company and Ginkgo, and (iii) the Waiver Agreement and Amendment to Ginkgo Note, dated September 29, 2019, by and between the Company and Ginkgo, pursuant to which Ginkgo agreed to (a) waive the Company’s failure to pay past due interest and partnership payments, including interest thereon of $6.7 million by December 15, 2019, and to comply with a reporting covenant prior to March 31, 2020, (b) to make a prior waiver fee payment of $0.5 million on December 15, 2019, (c) waive any cross defaults due to events of default under other debt obligations by the Company, (d) amend payments on the Ginkgo Partnership Agreement beginning on March 31, 2020 to a monthly payment of $0.5 million through and including October 31, 2021, and (e) to defer all past due payments totaling $7.2 million until April
30, 2020. The Ginkgo Waiver was accounted for as a debt modification, as the before and after cash flows were not significantly different.
On May 6, 2020, the Company entered into a waiver agreement under which the maturity date for all past due amounts to Ginkgo was extended to the earlier of the day the Company receives cash proceeds from any private placement of its equity and/or equity-linked securities, and May 31, 2020. The Company paid all past-due amounts to Ginkgo.
On August 10, 2020, the Company and Ginkgo entered into a Second Amendment to Promissory Note and Partnership Agreement (Second Amendment) to, among other things, (i) with respect to the Promissory Note, amend the interest payment frequency from monthly to quarterly beginning September 30, 2020 and reduce the interest rate from 12% to 9% beginning January 1, 2021, conditioned to the timely payment of interest on September 30, 2020 and December 31, 2020; and (ii) with respect to the Partnership Agreement, reduce the partnership payments frequency 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 (the “End of Term Payment”), provided that, if the Promissory Note is not fully repaid by April 19, 2022, the End of Term Payment shall be of $10.4 million.
As a result of changes to key provisions of both the Promissory Note and Partnership Agreement, the Company analyzed the before and after cash flows resulting from (i) a reduced interest rate of the Promissory Note, (ii) reduced payment frequency for the Promissory Note interest and Partnership Agreement payments and (iii) changes in the periodic and total payment amounts under the Partnership Agreement, in order to determine whether these changes result in a modification or extinguishment of the obligations under the Second Amendment. Based on the combined before and after cash flows of the Promissory Note and Partnership Agreement, the change was significantly different. Consequently, the modifications resulting from the Second Amendment were accounted for as a debt extinguishment and a new debt issuance. The Company recorded a $2.5 million loss upon extinguishment of the Promissory Note and a $0.1 million loss upon extinguishment of the partnership payments, which was primarily related to the unamortized debt discounts. The $12.0 million principal amount due under the Promissory Note was unchanged and reflects the present value of the obligation after the modifications. See Note 2, “Balance Sheet Details”, for more information on the payments due under the Partnership Agreement.
Nikko Loan Agreements and Notes
The loans payable to Nikko Chemicals Co., Ltd. at December 31, 2020 are comprised of the following (amounts in thousands):
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Description
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Date Issued
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Original Loan Amount
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Balance at December 31, 2020
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Interest Rate per Annum
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Maturity Date
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Nikko $3.9M Note
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December 19, 2016
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$
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3,900
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$
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2,653
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5.00%
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December 1, 2029
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Nikko $200K Capex Loan
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February 1, 2019
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200
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150
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5.00%
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January 1, 2026
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$
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4,100
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$
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2,803
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Nikko Loan Agreement
On July 29, 2019, the Company and Nikko entered into a loan agreement (the Nikko Loan Agreement) to make available to the Company secured loans in an aggregate principal amount of $5.0 million, to be issued in separate installments of $3.0 million and $2.0 million, respectively. On July 30, 2019, the Company borrowed the first installment of $3.0 million under the Nikko Loan Agreement and received net cash proceeds of $2.8 million, with the remaining $0.2 million being withheld by Nikko as prepayment of the interest payable on such loan through the maturity date. On August 8, 2019, the Company borrowed the remaining $2.0 million available under the Nikko Loan Agreement and received net cash proceeds of $1.9 million, with the remaining $0.1 million being withheld by Nikko as prepayment of the interest payable on such loan through the maturity date. The loans (i) mature on December 18, 2020, (ii) accrue interest at a rate of 5% per annum from and including the applicable loan date through the maturity date, which interest is required to be prepaid in full on the date of the applicable loan, and (iii) are secured by a first-priority lien on 12.8% of the Aprinnova JV interests owned by the Company. The Company fully repaid the $5.0 million aggregate principal balance in December 2020.
Nikko Secured Loan Agreement Amendment
On December 19, 2019, the Company borrowed $4.5 million from Nikko under a second secured loan agreement. The loan (i) matured on January 31, 2020, (ii) accrues interest at a rate of 2.75% per annum, and (iii) is secured by a first-priority lien on 27.2% of the Aprinnova JV interests owned by the Company. The Company failed to pay the $4.5 million loan on January 31, 2020.
On March 12, 2020, the Company and Nikko Chemicals Co. Ltd. (Nikko), entered into an amendment to the secured loan agreement (Loan Agreement) under which the Company paid Nikko $0.5 million to reduce the principal balance of the Loan Agreement to $4.0 million, extended the maturity date of the loan from January 31, 2020 to March 31, 2020 and increased the interest rate to 8.0% per annum. The loan (i) matured on March 31, 2020, (ii) accrued interest at a rate of 2.75% per annum, and (iii) was secured by a first-priority lien on 27.2% of the Aprinnova JV interests owned by the Company. The Loan Agreement was accounted for as a debt modification, as the before and after cash flows were not significantly different.
On April 3, 2020, the Company entered into a second amendment to the Loan Agreement under which the maturity date of the loan was extended to April 30, 2020. Subsequently, on May 7, 2020, the Company entered into a third amendment to the Loan Agreement under which the maturity date of the loan was extended to May 31, 2020. The Company fully repaid the $4.0 million loan on June 5, 2020.
Nikko Notes
Facility Note: In December 2016, in connection with the Company's formation of its cosmetics joint venture (the Aprinnova JV) with Nikko Chemicals Co., Ltd. (Nikko), Nikko made a loan to the Company in the principal amount of $3.9 million and the Company issued a promissory note (the Nikko Note) to Nikko in an equal principal amount. The proceeds of the Nikko Note were used to satisfy the Company's remaining liabilities related to the Company's purchase of a manufacturing facility in Leland, North Carolina and related assets in December 2016, including liabilities under a promissory note in the principal amount of $3.5 million issued in connection therewith. The Nikko Note (i) accrues interest at 5% per year, (ii) has a term of 13 years, (iii) is payable in equal monthly installments of principal and interest beginning on January 1, 2017 and (iv) is secured by a first-priority lien on 10% of the Aprinnova JV interests owned by the Company. In addition, the Company is required to repay the Nikko Note with any profits distributed to the Company by the Aprinnova JV, beginning with the distributions for the year ended December 31, 2020, until the Nikko Note is fully repaid. The Nikko Note may be prepaid in full or in part at any time without penalty or premium. The Nikko Note contains customary terms and provisions, including certain events of default after which the Nikko Note may become due and payable immediately.
Aprinnova JV Working Capital Notes: In February 2017, in connection with the formation of the Aprinnova JV in December 2016, Nikko made a working capital loan to the Aprinnova JV in the principal amount of $1.5 million (the First Aprinnova Note). The First Aprinnova Note was fully repaid in January 2018. In August 2017, Nikko made a second working capital loan to the Aprinnova JV in the principal amount of $1.5 million (the Second Aprinnova Note). The Second Aprinnova Note was payable in full on August 1, 2019, with interest payable quarterly. Both notes accrue interest at 2.75% per annum. Effective July 31, 2019, the Company repaid $500,000 and agreed with Nikko to extend the term of the Second Aprinnova Note to August 1, 2020. Under the terms of the extension, the Company was required to make four quarterly principal payments of $100,000 each beginning November 1, 2019 through May 1, 2020 and a final payment of $700,000 at August 1, 2020 maturity. The Company fully repaid this working capital note at maturity in August 2020.
Aprinnova JV Palladium Notes: In October, November and December 2019, Nikko advanced Aprinnova JV a total of $1.3 million under three separate promissory notes to purchase a palladium catalyst used in the manufacturing process at the Leland facility. These short-term notes accrue interest at 2.75% per annum and mature between January 10, 2020 and March 31, 2020. As of February 28, 2020, the total $1.3 million of note balances has been fully repaid in cash and are no longer outstanding.
Aprinnova JV CapEx Note: On February 1, 2019, the Aprinnova JV and Nikko agreed to fund Nikko’s $0.2 million share of the joint venture’s 2018 capital expenditures through an unsecured seven-year promissory note (the 2018 CapEx Note). The 2018 CapEx note (i) requires quarterly principal payments of $7,200 beginning April 1, 2019, (ii) accrues 5% simple interest per annum, and (iii) matures on January 1, 2026.
Letters of Credit
In June 2012, the Company entered into a letter of credit agreement for $1.0 million under which it provided a letter of credit to the landlord for its headquarters in Emeryville, California in order to cover the security deposit on the lease. This letter of credit is secured by a certificate of deposit. Accordingly, the Company has $1.0 million of restricted cash, noncurrent in connection with this arrangement as of December 31, 2020 and 2019.
5. Mezzanine Equity
Mezzanine equity at December 31, 2020 and 2019 is comprised of proceeds from common shares sold on May 10, 2016 to the Bill & Melinda Gates Foundation (the Gates Foundation). On April 8, 2016, the Company entered into a Securities Purchase Agreement with the Gates Foundation, pursuant to which the Company agreed to sell and issue 292,398 shares of its common stock to the Gates Foundation in a private placement at a purchase price per share of $17.10, the average of the daily closing price per share of the Company’s common stock on the Nasdaq Stock Market for the twenty consecutive trading days ending on April 7, 2016, for aggregate proceeds to the Company of approximately $5.0 million (the Gates Foundation Investment). The Securities Purchase Agreement includes customary representations, warranties and covenants of the parties.
In connection with the entry into the Securities Purchase Agreement, on April 8, 2016, the Company and the Gates Foundation entered into a Charitable Purposes Letter Agreement, pursuant to which the Company agreed to expend an aggregate amount not less than the amount of the Gates Foundation Investment to develop a yeast strain that produces artemisinic acid and/or amorphadiene at a low cost and to supply such artemisinic acid and amorphadiene to companies qualified to convert artemisinic acid and amorphadiene to artemisinin for inclusion in artemisinin combination therapies used to treat malaria commencing in 2017. The Company is currently conducting the project. If the Company defaults in its obligation to use the proceeds from the Gates Foundation Investment as set forth above or defaults under certain other commitments in the Charitable Purposes Letter Agreement, the Gates Foundation will have the right to request that the Company redeem, or facilitate the purchase by a third party of, the Gates Foundation Investment shares then held by the Gates Foundation at a price per share equal to the greater of (i) the closing price of the Company’s common stock on the trading day prior to the redemption or purchase, as applicable, or (ii) an amount equal to $17.10 plus a compounded annual return of 10%. As of December 31, 2020, the Company's remaining research and development obligation under this arrangement was $0.3 million.
6. Stockholders’ Deficit
Foris Warrant Exercises for Cash
On January 13, 2020, Foris, an entity affiliated with director John Doerr and which beneficially owns greater than 5% of the Company’s outstanding common stock, delivered to the Company an irrevocable notice of cash exercise with respect to a warrant to purchase 4,877,386 shares of the Company’s common stock at an exercise price of $2.87 per share, pursuant to a warrant issued by the Company on August 17, 2018. The Company received approximately $14.0 million from Foris in connection with the warrant exercise representing 4,877,386 shares of common stock issued and recorded $14.0 million as additional paid-in capital.
On March 11, 2020, Foris provided to the Company a notice of cash exercise to purchase 5,226,481 shares of the Company’s common stock at an exercise price of $2.87 per share, pursuant to the PIPE Rights (discussed in the January 2020 Private Placement section below) issued by the Company on January 31, 2020. On March 12, 2020, the Company received approximately $15.0 million from Foris in connection with the PIPE Rights exercise. The Company and Foris agreed to defer the issuance of the shares until such time as stockholder approval has been obtained to increase the Company’s authorized share count. At March 31, 2020, the PIPE Rights exercise proceeds were recorded as additional paid-in capital as there is no contractual obligation to return the consideration if stockholder approval is not obtained. Stockholder approval was obtained on May 29, 2020 and the 5,226,481 shares of common stock were issued to Foris on June 2, 2020.
January 2020 Warrant Amendments and Exercises, Foris Debt Equitization and Private Placement
As described below in further detail, on January 31, 2020, the Company completed a series of equity transactions that resulted in the Company (i) receiving $28.3 million in cash, (ii) reducing its aggregate debt principal by $60.0 million and accrued interest by approximately $9.9 million, (iii) issuing an aggregate of (A) 25,326,095 shares of common stock as a result of the exercise of outstanding warrants, and (B) 13,989,973 new shares of common stock in private placements, and (iv) issuing rights to purchase an aggregate of 18,649,961 shares of common stock, at an exercise price of $2.87 per share, for an exercise term of 12 months. See Note 4, “Debt,” for more information regarding the accounting treatment of the $60.0 million debt reduction.
Warrant Amendments and Exercises by Certain Holders
On January 31, 2020, the Company entered into separate warrant amendment agreements (the Warrant Amendments) with certain holders (the Warrant Holders) of the Company’s outstanding warrants to purchase shares of common stock, pursuant to which the exercise price of certain warrants (the Amended Warrants) held by the Warrant Holders totaling 1.2 million shares
was reduced to $2.87 per share. In connection with the entry into the Warrant Amendments, on January 31, 2020, the Warrant Holders exercised their Amended Warrants, representing an aggregate of 1,160,929 shares of common stock (the Warrant Amendment Shares), and the Company issued the Warrant Amendment Shares to the Holders along with a right to purchase an aggregate of 1,160,929 shares of Common Stock, at an exercise price of $2.87 per share, for an exercise term of 12 months from the January 31, 2020 issuance (the Rights). The Company received net proceeds of $3.3 million from the exercise of the Amended Warrants and recorded the $3.3 million as additional paid in capital. The Company also measured the before and after fair value of the Amended Warrants using the Black-Scholes-Merton option pricing model and determined there was no incremental value to record related to the purchase price reduction. Further, the Rights warrants met the derivative scope exception and equity classification criteria to be accounted for in equity.
Warrant Amendments and Exercises, Common Stock Purchase and Debt Equitization by Foris – Related Party
On January 31, 2020, the Company and Foris entered into certain warrant amendment agreements (the Foris Warrant Amendments) totaling 10.2 million shares of the Company’s outstanding warrants to purchase shares of common stock, pursuant to which the exercise price of these certain warrants (the Amended Foris Warrants) was reduced to $2.87 per share. In connection with the Foris Warrant Amendments, on January 31, 2020 (i) Foris exercised all its then-outstanding common stock purchase warrants, including the Amended Foris Warrants, totaling 19,287,780 shares of common stock, at a weighted average exercise price of approximately $2.84 per share for an aggregate exercise price of $54.8 million (the Exercise Price), and purchased 5,279,171 shares of common stock (the Foris Shares) at $2.87 per share for a total purchase price of $15.1 million (Purchase Price), (ii) Foris paid the Exercise Price and the Purchase Price through the cancellation of $60 million of principal and $9.9 million of accrued interest and fees owed by the Company to Foris under the Foris $19 million Note and the Foris LSA (which was treated as a debt extinguishment as discussed in Note 4, "Debt") and (iii) the Company issued to Foris the Foris Shares and an additional right (the Additional Right) to purchase 8,778,230 shares of Common Stock at a purchase price of $2.87 per share, for a period of 12 months from the execution of the warrant exercise agreement.
Upon exercise of the Amended Foris Warrants and issuance of the Foris Shares, the Company recorded a $69.9 million increase to additional paid-in capital. The Company also measured the before and after fair value of the Amended Foris Warrants using the Black-Scholes-Merton option pricing model and determined there was no incremental value to record related to the purchase price reduction. Further, the Company concluded the Additional Rights met the derivative scope exception and criteria to be accounted for in equity and recorded the $8.9 million fair value of the Additional Rights to additional paid-in capital and loss upon extinguishment of debt. The fair value was determined using a Black-Scholes-Merton option pricing model based on the following input assumptions: (i) $2.56 stock price, (ii) 112% volatility, (iii) 1.45% risk free rate and (iv) 0% dividend.
January 2020 Private Placement
On January 31, 2020, the Company entered into separate Security Purchase Agreements with certain accredited investors and Foris, for the issuance and sale of an aggregate of 8,710,802 shares of common stock and rights to purchase an aggregate of 8,710,802 shares of common stock (PIPE Rights) at a purchase price of $2.87 per share, for a period of 12 months, for an aggregate purchase price of $25 million. The $25 million in proceeds was recorded as additional paid-in capital. See Note 3, “Fair Value Measurement,” for information regarding the valuation methodology used to determine fair value and the related accounting treatment of the PIPE rights.
Principal Conversion into Common Stock and New Warrants Issued in Exchange of Senior Convertible Notes
On January 14, 2020, the Company completed the exchange of the Company’s $66 million Senior Convertible Notes (or the Prior Notes), pursuant to separate exchange agreements (the Exchange Agreements) with certain private investors (the Holders), for (i) new senior convertible notes in an aggregate principal amount of $51 million (the New Notes or Senior Convertible Notes), (ii) an aggregate of 2,742,160 shares of common stock (the Exchange Shares), (iii) rights (the Rights) to acquire up to an aggregate of 2,484,321 shares of common stock (the Rights Shares), and (iv) warrants (the Warrants) to purchase up to an aggregate of 3,000,000 shares of common stock (the Warrant Shares) at an exercise price of $3.25 per share, with an exercise term of two years from issuance, The New Notes, Exchange Shares, Rights and Warrants were issued on January 14, 2020. The Rights were exercised by the Holder and the Rights Shares were issued by the Company according to the terms of the Senior Convertible Notes on February 24, 2020. The contractual value of the Exchange Shares and the Rights Shares was $2.87 per share. Upon issuance of the New Notes, Exchange Shares and Rights, the $15.0 million of debt principal was extinguished and the $15.2 million fair value of the Exchange Shares and the Rights Shares was recorded as additional paid in capital. See Note 3, “Fair Value Measurement,” for more information regarding the valuation methodology used to determine the fair value and the related accounting treatment of the Warrants, and see Note 4, “Debt,” for further information on the accounting treatment and the terms of the note exchange.
Release of Pre-Delivery Shares and Amendment to Warrants Issued to Holders of Senior Convertible Notes
Under the terms of the November 15, 2019 Senior Convertible Notes and the January 14, 2020 Senior Convertible Notes, the Company was required to pre-deliver 7.5 million shares of common stock (the Pre-Delivery Shares) to the Holders, which are freely tradeable, validly issued, fully paid, nonassessable and free from all preemptive or similar rights or liens, for the Holders to sell, trade or hold, subject to certain limitations, for as long as the Senior Convertible Notes are outstanding. However, the Company may elect or be required to apply the value of the pre-delivered shares to satisfy periodic principal and interest payments or other repayment events. Within ten business days following redemption or repayment of in full the Senior Convertible Notes and the satisfaction or discharge by the Company of all outstanding Company obligations under the Senior Convertible Notes, the Holders shall deliver 7.5 million shares of the Company’s common stock to the Company, less any shares used to satisfy any accrued interest or principal amortization payments under such notes. The Company concluded the Pre-Delivery Shares provision meets the criteria of freestanding instrument that is legally detachable and separately exercisable from the Senior Convertible Notes and should be classified in equity as the common shares issued are both indexed to the Company’s own stock and meet the equity classification criteria. As such, the Company accounted for the fair value of the Pre-Delivery Shares within equity.
On May 1, 2020, in connection with the amendment to the Senior Convertible Notes described in Note 4, “Debt”, the Company and the Holders of the Senior Convertible Notes agreed, among other provisions described in Note 4, “Debt”: (i) to remove all equity triggering provisions that allowed the Holders to convert the notes at a reduced conversion price in certain circumstances; (ii) to reduce the conversion price of the New Notes from $5.00 to $3.50; (iii) to release to the Holders an aggregate of 2,836,364 shares of common stock originally required to be returned under the Pre-Delivery Share arrangement, and (iv) return an aggregate of 1,363,636 Pre-Delivery Shares held by certain Holders to the Company. Further, on June 4, 2020, the Company agreed to release an additional 700,000 Pre-Delivery Shares to one of the Holders, in connection with the second amendment to the Senior Convertible Notes described in Note 4, “Debt”. After the release and return of the Pre-Delivery Shares on May 1, 2020 and June 4, 2020, the total number of Pre-Delivery Shares subject to the arrangement is 2,600,000 and must be returned to the Company following full redemption or repayment of the Senior Convertible Notes. As a result of releasing the 3,536,364 Pre-Delivery Shares to the Holders, the Company recorded $10.5 million of additional interest expense, representing the fair value of the released share.
Further, in connection with the May 1, 2020 amendment to the Senior Convertible Notes the Company and the Holders entered into certain warrant amendment agreements pursuant to which (i) the exercise price of the warrants issued on January 14, 2020 in connection with the Exchange of the Senior Convertible Notes was reduced to $2.87 per share (from $3.25) with respect to an aggregate of 2,000,000 warrant shares; (ii) the exercise price of a warrant to purchase 960,225 shares of the Company’s common stock issued to one of the Holders on May 10, 2019 was reduced to $2.87 per share (from $5.02), and the exercise term of such warrant was extended to January 31, 2022 (from May 10, 2021); and (iii) the exercise term of a right to purchase 431,378 shares of the Company’s common stock issued to one of the Holders on January 31, 2020 was extended to January 31, 2022 (from January 31, 2021). Each of these warrant instruments were previously accounted for in equity. As a result of the warrant amendments, the Company performed a before and after remeasurement of the warrants using the Black-Scholes-Merton option pricing model and recorded $1.1 million of incremental interest expense and a corresponding increase to additional paid in capital.
Total Conversion Price Reduction and Subsequent Conversion into Common Stock
On April 6, 2020, the Company and Total entered into a Senior Convertible Note Maturity Extension Agreement to extend the maturity date of the 2014 Rule 144A Convertible Note to April 30, 2020 and reduce the conversion price of the 2014 Rule 144A Convertible Note from $56.16 to $2.87 per share. See Note 4, “Debt” for further information related to this debt instrument. On June 2, 2020, Total elected to convert all the outstanding principal and interest totaling $9.3 million due under the 2014 Rule 144A Convertible Note into 3,246,489 shares of common stock. Upon conversion, the $9.3 million debt principal and interest balance and the $6.5 million derivative liability balance related to the conversion option was derecognized into additional paid-in capital. See Note 3, “Fair Value Measurement,” for more information regarding the accounting treatment of the embedded conversion option and subsequent conversion price reduction.
Increase in Authorized Common Stock
On May 29, 2020, through a proxy vote at the Company’s Annual Stockholder meeting, the Company’s stockholders approved an increase in the Company’s authorized common stock share count from 250 million to 350 million.
June 2020 PIPE
On June 1, 2020 and June 4, 2020, the Company entered into separate security purchase agreements (Purchase Agreements) with certain accredited investors (Investors), including Foris and Vivo Capital LLC, stockholders that beneficially own more than 5% of the Company’s outstanding common stock and are, respectively, owned by or affiliated with individuals serving on the Company’s Board of Directors, for the issuance and sale of an aggregate of 32,614,573 shares of the Company’s common stock, $0.0001 par value per share and 102,156 shares of the Company’s Series E Convertible Preferred Stock, $0.0001 par value per share, convertible into 34,052,070 shares of common stock, at a price of $3.00 per common share and $1,000 per preferred share, resulting in an aggregate purchase price of $200 million (Offering). The transaction closed on June 5, 2020, following the satisfaction of customary closing conditions. Upon closing, the Company received aggregate net proceeds of approximately $190 million after payment of the Offering expenses and placement agent fees. The Company used the proceeds from the Offering for the repayment of certain outstanding indebtedness and the remainder for general corporate purposes.
The Purchase Agreements included customary representations, warranties and covenants of the parties. In addition, the Company executed a letter agreement pursuant to which, subject to certain exceptions, the Company, the members of the Company’s Board of Directors, and the Company’s named executive officers agreed not to issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or securities convertible into or exercisable or exchangeable for common stock until September 2, 2020. The securities issued pursuant to the Purchase Agreements were sold in private placements pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (Securities Act) and Rule 506(b) of Regulation D promulgated under the Securities Act, without general solicitation, made only to and with accredited investors as defined in Regulation D.
Series E Convertible Preferred Stock and Amendment to Articles of Incorporation or Bylaws
On June 5, 2020, the Company filed the Certificate of Designation of Preferences, Rights and Limitations of Series E Convertible Preferred Stock (Preferred Stock) with the Secretary of State of Delaware. Each share of Series E Preferred Stock issued in the June 2020 PIPE had a stated value of $1,000 and was convertible into 333.33 shares of common stock. All preferred shares automatically converted into common stock without any action by the holders on the first trading day after the Company obtains stockholder approval (as described below). Unless and until converted into common stock in accordance with its terms, the Preferred Stock had no voting rights, other than as required by law or with respect to matters specifically affecting the Preferred Stock.
The Company agreed to obtain stockholder approval for the issuance of common stock upon conversion of the Preferred Stock as is required by the applicable rules and regulations of the Nasdaq Stock Market, including Nasdaq Listing Standard Rule 5635(d), and including the issuance of common stock upon conversion of the Preferred Shares in excess of 19.99% of the issued and outstanding common stock on the date of the Purchase Agreements. Pursuant to the Purchase Agreements, the Company was required to hold a special meeting of stockholders within 75 calendar days of the date of the Purchase Agreements for the purpose of obtaining stockholder approval. This special meeting of stockholders was held on August 14, 2020, at which the Company’s stockholders approved the conversion of the Series E Preferred Stock and as a result, 34,052,084 shares of common stock were issued on August 17, 2020 in exchange for the 102,156 shares of the Company’s Series E Convertible Preferred Stock.
The Company analyzed the automatic conversion provision related to the Series E Preferred Stock at the original commitment dates and determined the holders received a contingent beneficial conversion feature (BCF) equal to $67.2 million. This amount represents the difference between the Company’s closing stock price at the June 1, 2020 and June 4, 2020 commitment dates ($5.35 and $4.88, respectively) and the $3.00 conversion price. As the automatic conversion provision was contingent on stockholder approval on August 14, 2020, the BCF would be recognized when the contingency was resolved. Upon obtaining stockholder approval, the $67.2 million BCF was recognized in additional paid-in capital and reflected as a deemed dividend to the preferred stockholders in the December 31, 2020 consolidated statement of operations, increasing the net loss attributable to common stockholders and increasing basic net loss per share.
Shares Issuable under Convertible Notes and Convertible Preferred Stock
In connection with various debt transactions (see Note 4, "Debt"), the Company issued certain convertible notes and preferred shares that are convertible into shares of common stock as follows as of December 31, 2020, at any time at the election of each debtholder:
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|
|
|
|
|
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|
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Number of Shares Instrument Is Convertible into as of December 31, 2020
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|
Senior convertible notes
|
8,574,399
|
|
|
Foris convertible note
|
16,680,334
|
|
|
Series D preferred stock (8,280 shares outstanding at December 31, 2020)
|
1,943,661
|
|
|
|
27,198,394
|
|
Warrants
The Company issues warrants in certain debt and equity transactions in order to facilitate raising equity capital or reduce borrowing costs. In connection with various debt and equity transactions (see Note 4, "Debt" and below), the Company has issued warrants exercisable for shares of common stock. The following table summarizes warrant activity for the year ended December 31, 2020:
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|
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|
|
|
|
|
|
|
|
|
|
|
Transaction
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Year Issued
|
Expiration Date
|
Number Outstanding as of December 31, 2019
|
Additional Warrants Issued
|
Exercises
|
Expired
|
Exercise Price per Share of Warrants Exercised
|
|
Number Outstanding as of December 31, 2020
|
Exercise Price per Share as of December 31, 2020
|
|
High Trail/Silverback warrants
|
2020
|
January 14, 2022 and July 10, 2022
|
—
|
|
3,000,000
|
|
—
|
|
—
|
|
$
|
—
|
|
|
3,000,000
|
|
$2.87/$3.25
|
|
2020 PIPE right shares
|
2020
|
February 4, 2021
|
—
|
|
8,710,802
|
|
(5,226,481)
|
|
—
|
|
$
|
2.87
|
|
|
3,484,321
|
|
$2.87
|
|
January 2020 warrant exercise right shares
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2020
|
January 31, 2021, July 31, 2021 and January 31, 2022
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—
|
|
9,939,159
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|
(5,000,000)
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|
—
|
|
$
|
—
|
|
|
4,939,159
|
|
$
|
2.87
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|
|
Foris LSA warrants
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2019
|
August 14, 2021
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3,438,829
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|
—
|
|
(3,438,829)
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|
—
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|
$
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2.87
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|
|
—
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|
$
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—
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|
|
November 2019 Foris warrant
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2019
|
November 27, 2021
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1,000,000
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|
—
|
|
(1,000,000)
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|
—
|
|
$
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2.87
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|
|
—
|
|
$
|
—
|
|
|
August 2019 Foris warrant
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2019
|
August 28, 2021
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4,871,795
|
|
—
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|
(4,871,795)
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|
—
|
|
$
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2.87
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|
|
—
|
|
$
|
—
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|
|
April 2019 PIPE warrants
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2019
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April 26, 2021, April 29, 2021 and May 3, 2021
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8,084,770
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|
—
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|
(4,712,781)
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|
—
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|
$
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2.87
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|
|
3,371,989
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|
$4.76/$5.02
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|
April 2019 Foris warrant
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2019
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April 16, 2021
|
5,424,804
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|
—
|
|
(5,424,804)
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|
—
|
|
$
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2.87
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|
|
—
|
|
$
|
—
|
|
|
September and November 2019 Investor Credit Agreement warrants
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2019
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September 10, 2021 and November 14, 2021
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5,233,551
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|
—
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(50,000)
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|
—
|
|
$
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—
|
|
|
5,183,551
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|
$2.87
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Naxyris LSA warrants
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2019
|
August 14, 2021
|
2,000,000
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|
—
|
|
—
|
|
—
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|
$
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—
|
|
|
2,000,000
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|
$2.87
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October 2019 Naxyris warrant
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2019
|
October 28, 2021
|
2,000,000
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|
—
|
|
—
|
|
—
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|
$
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—
|
|
|
2,000,000
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|
$3.87
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|
May-June 2019 6% Note Exchange warrants
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2019
|
May 15, 2021 and June 24, 2021
|
2,181,818
|
|
—
|
|
—
|
|
—
|
|
$
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—
|
|
|
2,181,818
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|
$2.87/$5.12
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|
May 2019 6.50% Note Exchange warrants
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2019
|
May 14, 2021 and January 31, 2022
|
1,744,241
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|
—
|
|
(784,016)
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|
—
|
|
$
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2.87
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|
|
960,225
|
|
$
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2.87
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|
|
July 2019 Wolverine warrant
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2019
|
July 8, 2021
|
1,080,000
|
|
—
|
|
—
|
|
—
|
|
$
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—
|
|
|
1,080,000
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|
$2.87
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|
August 2018 warrant exercise agreements
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2018
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May 17, 2020 and May 20, 2020
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12,097,164
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|
—
|
|
(4,877,386)
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|
(7,219,778)
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|
$
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2.87
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|
|
—
|
|
$
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—
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|
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May 2017 cash warrants
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2017
|
July 10, 2022
|
6,078,156
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|
—
|
|
—
|
|
—
|
|
$
|
—
|
|
|
6,078,156
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|
$2.87
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|
August 2017 cash warrants
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2017
|
August 7, 2022
|
3,968,116
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|
—
|
|
—
|
|
—
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|
$
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—
|
|
|
3,968,116
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|
$2.87
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|
May 2017 dilution warrants
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2017
|
July 10, 2022
|
3,085,893
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|
—
|
|
—
|
|
—
|
|
$
|
—
|
|
|
3,085,893
|
|
$0.00
|
|
August 2017 dilution warrants
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2017
|
May 23, 2023
|
3,028,983
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|
—
|
|
—
|
|
—
|
|
$
|
—
|
|
|
3,028,983
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|
$0.00
|
|
February 2016 related party private placement
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2016
|
February 12, 2021
|
171,429
|
|
—
|
|
(152,381)
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|
—
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|
$
|
0.15
|
|
|
19,048
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|
$0.15
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|
July 2015 related party debt exchange
|
2015
|
July 29, 2020 and July 29, 2025
|
133,334
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|
—
|
|
(133,334)
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|
—
|
|
$
|
0.15
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|
|
—
|
|
$
|
—
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|
|
July 2015 private placement
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2015
|
July 29, 2020
|
72,650
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|
—
|
|
(72,650)
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|
—
|
|
$
|
0.15
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|
|
—
|
|
$
|
—
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|
|
July 2015 related party debt exchange
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2015
|
July 29, 2025
|
58,690
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|
—
|
|
—
|
|
—
|
|
$
|
—
|
|
|
58,690
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|
$0.15
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|
Other
|
2011
|
December 23, 2021
|
1,406
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|
—
|
|
—
|
|
—
|
|
$
|
—
|
|
|
1,406
|
|
$160.05
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|
|
|
|
65,755,629
|
|
21,649,961
|
|
(35,744,457)
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|
(7,219,778)
|
|
|
|
44,441,355
|
|
|
For information regarding warrants issued or exercised subsequent to December 31, 2020, see Note 15, “Subsequent Events”.
Right of First Investment to Certain Investors
In connection with investments in the Company has granted certain investors, including Vivo and DSM, a right of first investment if the Company proposes to sell securities in certain financing transactions. With these rights, such investors may subscribe for a portion of any such new financing and require the Company to comply with certain notice periods, which could discourage other investors from participating in, or cause delays in its ability to close, such a financing.
7. Consolidated Variable-interest Entities and Unconsolidated Investments
Consolidated Variable-interest Entity
Aprinnova, LLC (Aprinnova JV) — Related Party
In December 2016, the Company, 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 (the Aprinnova JV Agreement) pursuant to which the Company contributed certain assets, including certain intellectual property and other commercial assets relating to its business-to-business cosmetic ingredients business (the Aprinnova JV Business), as well as its Leland production facility. The Company also agreed to provide the Aprinnova JV with exclusive (to the extent not already granted to a third party), royalty-free licenses to certain of the Company's intellectual property necessary to make and sell products associated with the Aprinnova JV Business (the Aprinnova JV Products). Nikko purchased their 50% interest in the Aprinnova JV in exchange for the following payments to the Company: (i) an initial payment of $10.0 million and (ii) the profits, if any, distributed to Nikko in cash as members of the Aprinnova JV during the three-year period from 2017 to 2019, up to a maximum of $10.0 million. Under the Aprinnova JV Agreement, in the event of a merger, acquisition, sale or other similar reorganization, or a bankruptcy, dissolution, insolvency or other similar event, of the Company, on the one hand, or Nikko, on the other hand, the other member will have a right of first purchase with respect to such member’s interest in the Aprinnova JV, at the fair market value of such interest, in the case of a merger, acquisition, sale or other similar reorganization, and at the lower of the fair market value or book value of such interest, in the case of a bankruptcy, dissolution, insolvency or other similar event.
The Aprinnova JV operates in accordance with the Aprinnova Operating Agreement under which the Aprinnova JV is managed by a Board of Directors consisting of four directors: two appointed by the Company and two appointed by Nikko. In addition, Nikko has the right to designate the Chief Executive Officer of the Aprinnova JV from among the directors and the Company has the right to designate the Chief Financial Officer. The Company determined that it has the power to direct the activities of the Aprinnova JV that most significantly impact its economic performance because of its (i) significant control and ongoing involvement in operational decision making, (ii) guarantee of production costs for certain Aprinnova JV products, as discussed below, and (iii) control over key supply agreements, operational and administrative personnel and other production inputs. The Company has concluded that the Aprinnova JV is a variable-interest entity (VIE) under the provisions of ASC 810, Consolidation, and that the Company has a controlling financial interest and is the VIE's primary beneficiary. As a result, the Company accounts for its investment in the Aprinnova JV on a consolidation basis in accordance with ASC 810.
Under the Aprinnova Operating Agreement, profits from the operations of the Aprinnova JV, if any, are distributed as follows: (i) first, to the Company and Nikko (the Members) in proportion to their respective unreturned capital contribution balances, until each Member’s unreturned capital contribution balance equals zero and (ii) second, to the Members in proportion to their respective interests. Any future capital contributions will be made by the Company and Nikko on an equal (50%/50%) basis each time, unless otherwise mutually agreed. For the year ended December 31, 2019, a $0.3 million distribution was made to Nikko and was recorded as a decrease in noncontrolling interest. In addition, the Company agreed to guarantee a maximum production cost for squalane and hemisqualane to be produced by the Aprinnova JV and to bear any cost of production above such guaranteed costs.
In connection with the contribution of the Leland Facility by the Company to the Aprinnova JV, at the closing of the formation of the Aprinnova JV, Nikko made a loan to the Company in the principal amount of $3.9 million, and the Company in consideration therefore issued a promissory note to Nikko in an equal principal amount, as described in more detail in Note 4, “Debt” under “Nikko Note.” Also, pursuant to the Aprinnova JV Agreement, the Company and Nikko agreed to make initial working capital loans to the Aprinnova JV in the amounts of $0.5 million and $1.5 million, respectively, and again in 2019 with additional loans of $0.2 million each, and in 2019 Nikko provided the Aprinnova JV with $1.2 million of short-term loans to purchase certain manufacturing supplies. These loans are described in more detail in Note 4, “Debt”.
The following presents the carrying amounts of the Aprinnova JV’s assets and liabilities included in the accompanying consolidated balance sheets. Assets presented below are restricted for settlement of the Aprinnova JV's obligations and all liabilities presented below can only be settled using the Aprinnova JV resources.
|
|
|
|
|
|
|
|
|
|
December 31,
(In thousands)
|
2020
|
2019
|
|
Assets
|
$24,114
|
$17,390
|
|
Liabilities
|
$1,490
|
$3,690
|
The Aprinnova JV's assets and liabilities are primarily comprised of inventory, property, plant and equipment, accounts payable and debt, which are classified in the same categories in the Company's consolidated balance sheets.
The change in noncontrolling interest for the Aprinnova JV for the years ended December 31, 2020 and 2019 is as follows:
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|
|
|
|
|
|
|
|
Year Ended December 31,
(In thousands)
|
2020
|
2019
|
|
Balance at beginning of year
|
$609
|
$937
|
|
Income (loss) attributable to noncontrolling interest
|
4,710
|
(328)
|
|
Balance at end of year
|
$5,319
|
$609
|
Clean Beauty Collaborative, Inc. — Related Party
In October 2020, the Company through its 100% owned subsidiary, Amyris Clean Beauty, Inc. entered into an agreement with Rosie Huntington-Whiteley, (RHW), model turned businesswoman and founder of beauty knowledge and commerce destination, RoseInc.com, for the commercialization of clean sustainable cosmetics under the Amyris umbrella using the creative design capabilities of RHW.
Clean Beauty Collaborative, Inc. was formed as a Delaware Corporation. Amyris Clean Beauty, Inc. has the right to designate three Board of Directors and owns 60% of the issued and outstanding common shares and RHW has the right to designate two Board of Directors and owns 40% of the issued and outstanding common shares. The Company concluded the newly formed legal entity was a VIE due to insufficient equity at-risk and that the Company was the primary beneficiary through its controlling financial interest. Therefore, the Company will consolidate the business activities of the new venture.
At the formation date, RHW assigned all rights and title to the Roseinc.com internet domain name and the ROSE INC. trademark to Clean Beauty Collaborative, Inc., however, no financial assets were contributed by either party. Amyris Clean Beauty, Inc. is committed to the initial funding and commercial launch of the new product line to the general public, which is anticipated for later in 2021. As of December 31, 2020, the newly formed company did not have any substantive assets or liabilities, but incurred a $1.3 million loss related business formation and launch activities during the fourth quarter of 2020, of which $0.5 million is attributable to RHW’s noncontrolling interest and reflected in Income (loss) attributable to noncontrolling interest in the consolidated statement of operations for the year ended December 31, 2020.
Unconsolidated Investments
Equity-method Investments
Novvi LLC (Novvi)
Novvi is a U.S.-based joint venture among the Company, American Refining Group, Inc., Chevron U.S.A. Inc. and H&R Group US, Inc. Novvi's purpose is to develop, produce and commercialize base oils, additives and lubricants derived from Biofene for use in the automotive, commercial and industrial lubricants markets.
As of December 31, 2020, each of the investors held equity ownership in Novvi as follows:
|
|
|
|
|
|
|
|
Amyris, Inc.
|
18.4
|
%
|
|
American Refining Group, Inc.
|
8.8
|
%
|
|
Chevron U.S.A., Inc.
|
61.2
|
%
|
|
H&R Group US, Inc.
|
11.6
|
%
|
|
|
100.0
|
%
|
The Company accounts for its investment in Novvi under the equity method of accounting, having determined that (i) Novvi is a VIE, (ii) the Company is not Novvi's primary beneficiary, and (iii) the Company has the ability to exert significant influence over Novvi. Under the equity method, the Company's share of profits and losses and impairment charges on investments in affiliates are included in “Loss from investments in affiliates” in the consolidated statements of operations. In accordance with equity-method accounting, the Company records its share of Novvi's earnings or losses for each accounting period and adjusts the investment balance accordingly. However, the Company is not obligated to fund Novvi's potential future losses, so the Company will not record equity-method losses that would result in the investment in Novvi falling to below zero and becoming a liability. As of December 31, 2020 and 2019, the carrying amount of the Company's equity investment in Novvi was $2.4 million and $4.7 million, respectively.
8. Net Loss per Share Attributable to Common Stockholders
The Company computes net loss per share in accordance with ASC 260, “Earnings per Share.” Basic net loss per share of common stock is computed by dividing the Company’s net loss attributable to Amyris, Inc. common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share of common stock is computed by giving effect to all potentially dilutive securities, including stock options, restricted stock units, convertible preferred stock, convertible promissory notes and common stock warrants, using the treasury stock method or the as converted method, as applicable. For the year ended December 31, 2020, basic net loss per share was the same as diluted net loss per share because the inclusion of all potentially dilutive securities outstanding was anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss were the same for those years.
The Company follows the two-class method when computing net loss per common share when shares are issued that meet the definition of participating securities. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The two-class method also requires losses for the period to be allocated between common stock and participating securities based on their respective rights if the participating security contractually participates in losses. The Company’s convertible preferred stock are participating securities as they contractually entitle the holders of such shares to participate in dividends and contractually require the holders of such shares to participate in the Company’s losses.
The following table presents the calculation of basic and diluted net loss per share of common stock attributable to Amyris, Inc. common stockholders:
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
(In thousands, except shares and per share amounts)
|
2020
|
2019
|
|
Numerator:
|
|
|
|
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, basic
|
(382,311)
|
|
(270,351)
|
|
|
Adjustment to loss allocated to participating securities
|
—
|
|
137
|
|
|
Gain from change in fair value of derivative instruments
|
—
|
|
(4,963)
|
|
|
Net loss attributable to Amyris, Inc. common stockholders, diluted
|
$
|
(382,311)
|
|
$
|
(275,177)
|
|
|
|
|
|
|
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
|
203,598,673
|
|
101,370,632
|
|
|
Effect of dilutive common stock warrants
|
—
|
|
(74,057)
|
|
|
Weighted-average common stock equivalents 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)
|
|
The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have been anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
2020
|
2019
|
|
Period-end common stock warrants
|
38,248,741
|
|
59,204,650
|
|
|
Convertible promissory notes(1)
|
22,061,759
|
|
13,381,238
|
|
|
Period-end stock options to purchase common stock
|
6,502,096
|
|
5,620,419
|
|
|
Period-end restricted stock units
|
7,043,909
|
|
5,782,651
|
|
|
Period-end preferred shares on an as-converted basis
|
1,943,661
|
|
1,943,661
|
|
|
Total potentially dilutive securities excluded from computation of diluted net loss per share
|
75,800,166
|
|
85,932,619
|
|
______________
(1) The potentially dilutive effect of convertible promissory notes was computed based on conversion ratios in effect as of the respective period end dates. A portion of the convertible promissory notes issued carries a provision for a reduction in conversion price under certain circumstances, which could potentially increase the dilutive shares outstanding. Another portion of the convertible promissory notes issued carries a provision for an increase in the conversion rate under certain circumstances, which could also potentially increase the dilutive shares outstanding.
9. Commitments and Contingencies
Guarantor Arrangements
The Company has agreements whereby it indemnifies its executive officers and directors for certain events or occurrences while the executive officer or director is serving in his or her official capacity. The indemnification period remains enforceable for the executive officer's or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and enables the Company to recover a portion of any future payments. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. Accordingly, the Company had no liabilities recorded for these agreements as of December 31, 2020 and 2019.
The Foris Convertible Note (see Note 4, "Debt") is collateralized by first-priority liens on substantially all of the Company's assets, including Company intellectual property, other than certain Company intellectual property licensed to DSM and the Company's shares of Aprinnova. Certain of the Company’s subsidiaries have guaranteed the Company’s obligations under the Foris Convertible Note.
The obligations of the Company under the Naxyris Note (see Note 4, "Debt") are (i) guaranteed by the Subsidiary Guarantors and (ii) secured by a perfected security interest in substantially all of the assets of the Company and the Subsidiary Guarantors (the Collateral), junior in payment priority to Foris subject to certain limitations and exceptions, as well as the terms of the Intercreditor Agreement.
The Nikko $3.9 million note is collateralized by a first-priority lien on 10.0% of the Aprinnova JV interests owned by the Company.
The promissory notes issued under the 2019 DSM Credit Agreement (see Note 4, "Debt") are secured by a first-priority lien on certain Company intellectual property licensed to DSM.
The obligations of the Company under the Schottenfeld Notes (see Note 4, "Debt") are secured by a perfected security interest in substantially all of the assets of the Company and the Subsidiary Guarantors, junior in payment priority to Foris and Naxyris subject to the Subordination Agreement among Foris, Naxyris and the Schottenfeld Lenders.
Other Matters
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but will only be recorded when one or more future events occur or fail to occur. The Company's management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgement. In assessing loss contingencies related to legal proceedings that are pending against and by the Company or unasserted claims that may result in such proceedings, the Company's management evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be reasonably estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
On April 3, 2019, a securities class action complaint was filed against Amyris and our CEO, John G. Melo, and former CFO (and current Chief Business Officer), Kathleen Valiasek, in the U.S. District Court for the Northern District of California. The complaint seeks unspecified damages on behalf of a purported class that would comprise all persons and entities that purchased or otherwise acquired our securities between March 15, 2018 and March 19, 2019. The complaint, which was amended by the lead plaintiff on September 13, 2019, alleges securities law violations based on statements and omissions made by the Company during such period. On October 25, 2019, the defendants filed a motion to dismiss the securities class action complaint, which was denied by the court on October 5, 2020. The Company filed its answer to the securities class action complaint on October 26, 2020. Subsequent to the filing of the securities class action complaint
described above, on June 21, 2019 and October 1, 2019, respectively, two separate purported shareholder derivative complaints were filed in the U.S. District Court for the Northern District of California (Bonner v. Doerr, et al., and Carlson v. Doerr, et al.) based on similar allegations to those made in the securities class action complaint described above and naming the Company, and certain of the Company’s current and former officers and directors, as defendants. The derivative lawsuits sought to recover, on the Company’s behalf, unspecified damages purportedly sustained by the Company in connection with allegedly misleading statements and omissions made in connection with the Company’s securities filings. The derivative lawsuits were dismissed on October 18, 2019 (Bonner) and December 10, 2019 (Carlson), without prejudice. On November 3, 2020, Bonner re-filed its derivative complaint against the Company in San Mateo County Superior Court. The Company filed its demurrer to the complaint on January 13, 2021; and the hearing is scheduled for April 22, 2021. An additional shareholder derivative complaint (Kimbrough v. Melo, et al.), substantially identical to the Bonner complaint, was filed on December 18, 2020 in the United States District Court for the Northern District of California. On February 19, 2021, the Company filed its motion to dismiss the Kimbrough complaint. The Company believes the securities class action complaint, and the derivative complaints, lack merit, and intends to continue to defend itself vigorously. Given the early stage of these proceedings, it is not yet possible to reliably determine any potential liability that could result from these matters.
On July 24, 2020, a securities class action complaint was filed against Amyris and the members of the Board in the Court of Chancery of the State of Delaware (Flatischler v. Melo, et. al.). The complaint alleged a breach of fiduciary obligation to disclose material information to stockholders in the proxy statement filed with the Securities and Exchange Commission on July 6, 2020 (Proxy), with respect to the Company’s special stockholders’ meeting held on August 14, 2020 (Special Meeting), at which stockholders were to vote to approve the conversion of all outstanding indebtedness under the Foris Convertible Note and of the Series E Preferred Stock held by Foris issued in the Company's June 2020 PIPE into shares of common stock, in accordance with Nasdaq Listing Standard Rule 5635(d). See Note 4, “Debt,” “Amendment No. 1 to Foris LSA — Foris, Related Party,” and Note 6, “Stockholders’ Deficit,” “June 2020 PIPE,” and “Series E Convertible Preferred Stock and Amendment to Articles of Incorporation or Bylaws” in Part II, Item 8 of this Annual Report on Form 10-K for more information. The plaintiffs sought to enjoin the Special Meeting. On August 6, 2020, the plaintiffs withdrew their complaint as moot following the Company’s filing of a supplement to the Proxy on August 5, 2020. The Proxy supplement provided additional information regarding the approval process of the Foris transactions outlined above and the June 2020 PIPE, and the relationships between the Company and its financial advisors to the June 2020 PIPE. Without admitting that the allegations in the complaint had any merit, the Company decided it was in its and the stockholders’ best interests to agree to pay $125,000 to plaintiff’s counsel in full satisfaction of its claim for attorneys’ fees and expenses incurred by filing the complaint. Three substantially similar complaints were filed: on July 28, 2020, in the United States District Court of Delaware (Sabatini v. Amyris, Inc.); on July 31, 2020, in the Northern District of California (Nair v. Amyris); and on August 4, 2020, in the Southern District of New York (Chamorro v. Amyris). Amyris answered the Chamorro case on October 19, 2020. The plaintiffs in the Sabatini and Nair cases voluntarily dismissed their complaints on October 8, and October 22, 2020, respectively, and the plaintiff for the Chamorro case agreed to dismiss without prejudice upon a nominal payment by the Company.
On September 10, 2020, LAVVAN, Inc. (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.
The Company is subject to disputes and claims that arise or have arisen in the ordinary course of business and that have not resulted in legal proceedings or have not been fully adjudicated. Such matters that may arise in the ordinary course of business are subject to many uncertainties and outcomes are not predictable with reasonable assurance and therefore an estimate of all the reasonably possible losses cannot be determined at this time. Therefore, if one or more of these legal disputes or claims resulted in settlements or legal proceedings that were resolved against the Company for amounts in excess of management’s expectations, the Company’s consolidated financial statements for the relevant reporting period could be materially adversely affected.
10. Revenue Recognition
Disaggregation of Revenue
The following tables present revenue by primary geographical market, based on the location of the customer, as well as by major product and service:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Years Ended December 31,
(In thousands)
|
Renewable Products
|
Licenses and Royalties
|
Grants and Collaborations
|
TOTAL
|
|
Renewable Products
|
Licenses and Royalties
|
Grants and Collaborations
|
TOTAL
|
|
Europe
|
$
|
17,156
|
|
$
|
50,991
|
|
$
|
8,765
|
|
$
|
76,912
|
|
|
$
|
10,092
|
|
$
|
54,043
|
|
$
|
6,674
|
|
$
|
70,809
|
|
|
United States
|
68,675
|
|
—
|
|
526
|
|
69,201
|
|
|
34,295
|
|
—
|
|
24,376
|
|
58,671
|
|
|
Asia
|
13,720
|
|
—
|
|
8,517
|
|
22,237
|
|
|
11,503
|
|
—
|
|
7,477
|
|
18,980
|
|
|
Brazil
|
4,105
|
|
—
|
|
—
|
|
4,105
|
|
|
3,612
|
|
—
|
|
115
|
|
3,727
|
|
|
Other
|
682
|
|
—
|
|
—
|
|
682
|
|
|
370
|
|
—
|
|
—
|
|
370
|
|
|
|
$
|
104,338
|
|
$
|
50,991
|
|
$
|
17,808
|
|
$
|
173,137
|
|
|
$
|
59,872
|
|
$
|
54,043
|
|
$
|
38,642
|
|
$
|
152,557
|
|
Significant Revenue Agreements
Yifan Collaborations
From September 2018 to December 2019, the Company entered into a series of license and collaboration agreements, culminating in a master services agreement for research and development services, with a subsidiary of Yifan Pharmaceutical Co., Ltd. (Yifan), a leading Chinese pharmaceutical company. Upon execution of the master services agreement in December 2019 (the Collaboration Agreement), the Company evaluated and concluded that the series of agreements should be combined and accounted for as a single revenue contract under ASC 606.
The Yifan Collaboration Agreement has a total transaction price of $21.0 million, subject to the variable consideration constraint guidance in ASC 606 using the most likely outcome method to estimate the variable consideration associated with the identified performance obligation. The Company concluded the Collaboration Agreement contained a single performance obligation of research and development services provided continuously over time. The Collaboration Agreement provides for upfront and periodic payments based on project milestones. The Company concluded the performance obligation is delivered continuously over time and that revenue recognition is based on an input measure of progress as labor hours are expended in the achievement of the performance obligations (i.e., proportional performance). Estimates of variable consideration are updated quarterly, with cumulative adjustments to revenue recorded as necessary. The Company recognized $8.5 million and $6.1 million of collaboration revenue for the 12 months ended December 31, 2020 and 2019, respectively, and $14.6 million of cumulative-to-date collaboration revenue. At December 31, 2020, the Company also recorded a $3.6 million contract asset in connection with the Collaboration Agreement.
Cannabinoid Agreement
On May 2, 2019, the Company consummated a research, collaboration and license agreement (the Cannabinoid Agreement) with LAVVAN, Inc., an investment-backed company (Lavvan), to develop, manufacture and commercialize cannabinoids, subject to certain closing conditions. Under the agreement, the Company would perform research and development activities and Lavvan would be responsible for the manufacturing and commercialization of the cannabinoids developed under the agreement. The Cannabinoid Agreement principally funds milestones that include both technical R&D targets and completion of production campaigns, with the Company also entitled to receive certain supplementary research and development funding from Lavvan. Additionally, the Cannabinoid Agreement provides for profit share to the Company on Lavvan's gross profit margin once products are commercialized. On May 2, 2019, the parties formed 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 the Company background intellectual property being licensed to Lavvan under the Cannabinoid Agreement, which lien would be subordinated to the lien on such intellectual property under the Foris Convertible Note (see Note 4, “Debt”). On March 11, 2020, the parties revised the agreement to reflect product specifications and cost assumptions.
The Cannabinoid Agreement is accounted for as a revenue contract under ASC 606, with the total transaction price estimated and updated on a quarterly basis, subject to the variable consideration constraint guidance in ASC 606 using the most likely outcome method to estimate the variable consideration associated with the identified performance obligations. The
Company concluded the agreement contained a single performance obligation of research and development services. The Company also concluded that the performance obligation is continuously delivered over time and that revenue recognition is based on an input measure of progress of labor hours incurred compared to total estimated labor hours to be incurred (i.e., proportional performance). Estimates of variable consideration are updated quarterly, based on changes in estimated project plan hours, with proportional performance adjustments to quarterly revenue as necessary. Prior to September 30, 2020, the Company estimated the total unconstrained transaction price to be $145 million, based on a high probability of achieving certain underlying milestones, and had recognized $18.3 million of cumulative revenue to date. As of December 31, 2020, the Company has constrained $282 million of variable consideration which relates to milestones that do not meet the criteria necessary under ASC 606 to be included in the transaction price. The Company recognized no collaboration revenue for the 12 months ended December 31, 2020, and in the third quarter of 2020, the Company recorded a credit loss reserve against a previously recorded $8.3 million contract asset in connection with the Cannabinoid Agreement. See Contract Assets and Liabilities below for further information.
Firmenich Agreements
In July 2017, the Company and Firmenich entered into the Firmenich Collaboration Agreement (for the development and commercialization of multiple renewable flavors and fragrances molecules), pursuant to which the parties agreed to exclude certain molecules from the scope of the agreement and to amend certain terms connected with the supply and use of such molecules when commercially produced. In addition, the parties agreed to (i) fix at a 70/30 basis (70% for Firmenich) the ratio at which the parties will share profit margins from sales of two molecules; (ii) set at a 70/30 basis (70% for Firmenich) the ratio at which the parties will share profit margins from sales of a distinct form of compound until Firmenich receives $15.0 million more than the Company in the aggregate from such sales, after which time the parties will share the profit margins 50/50 and (iii) a maximum Company cost of a compound where a specified purchase volume is satisfied, and alternative production and margin share arrangements in the event such Company cost cap is not achieved.
In August 2018, the Company and Firmenich entered into the Firmenich Amended and Restated Supply Agreement, which incorporates all previous amendments and new changes and supersedes the September 2014 supply agreement. With this Amended and Restated Supply Agreement, the parties agreed on the molecules to be supplied under the agreement and the commercial specifications of these products and made some adjustments to the pricing of the molecules.
Pursuant to the Firmenich Collaboration Agreement, the Company agreed to pay a one-time success bonus to Firmenich of up to $2.5 million if certain commercialization targets are met. Such targets have not yet been met as of December 31, 2020. The one-time success bonus will expire upon termination of the Firmenich Collaboration Agreement, which has an initial term of 10 years and will automatically renew at the end of such term (and at the end of any extension) for an additional 3-year term unless otherwise terminated. At December 31, 2020, the Company had a $0.7 million liability associated with this one-time success bonus that has been recorded as a reduction to the associated collaboration revenue.
DSM Revenue Agreements
DSM License Agreement
In December 2020, the Company and DSM entered into an agreement (Farnesene Framework Agreement) that granted DSM a field of use license covering specific intellectual property (Farnesene Intellectual Property) of the Company used in the production and sale of farnesene under a certain farnesene supply agreement (Farnesene Supply Agreement), and assigned the Company’ rights and obligations under the Farnesene Supply Agreement to DSM, in exchange for a non-refundable upfront license fee totaling $40 million, with $30 million due at closing and $10 million due on or before March 31, 2021. The Company is also entitled to two additional of payments of $5 million each if DSM produces and/or sells certain volumes of farnesene under the supply contract before December 31, 2026.
To affect the transaction, the Company granted DSM an exclusive, royalty-bearing, perpetual, world-wide, transferable license to the Farnesene Intellectual Property with the right for DSM to grant and authorize sublicense to affiliates and third parties, to make, have made, import, have imported, use, have used, sell, have sold, offer for sale, or have offered for sale, farnesene solely for purposes currently permitted under the assigned Farnesene Supply Agreement. The specific field of use farnesene license was determined to be functional intellectual property allowing DSM the use and benefit from the technology. The Company concluded the intellectual property license and the assignment and assumption agreement combined to form a combined revenue contract under ASC 606 with a single performance obligation, that once delivered is satisfied at a point in time. The Company also determined the potential additional payments represent variable consideration, rather than a separate performance obligation, since the Company assigned, and DSM assumed, all of the Company’s rights
and obligations under the supply contract. The contingent payments will be accounted for if and when the contingent events occur similar to the guidance described under the sales-based royalty scope exception in ASC 606-10-55-65.
Given that DSM is a related party, the Company performed an income approach discounted cash flow analysis, in part with the assistance of a third-party valuation firm, and concluded the consideration received in exchange for the intellectual property license and contractual asset represented the fair value and stand-alone selling price of the combined contracts and singular performance obligation. The Company also concluded the license and related supply agreement assignment had been fully delivered with no further performance obligation upon closing the transaction, and recognized license revenue of $40.0 million in the period ended December 31, 2020.
DSM Ingredients Collaboration
In September 2017, the Company entered into a collaboration agreement with DSM (DSM Collaboration Agreement) to jointly develop a new molecule in the Clean Health market using the Company’s technology (DSM Ingredient), which the Company would have the sole right to manufacture, and DSM would commercialize. Pursuant to the DSM Collaboration Agreement, DSM provides funding for the development of the DSM Ingredients in the form of milestone-based payments and, upon commercialization, the parties would enter into supply agreements whereby DSM would purchase the applicable DSM Ingredient from the Company at prices agreed by the parties. The development services are directed by a joint steering committee with equal representation by DSM and the Company and are governed by a milestone project plan. The timing of milestone achievements is subject to review and revision as agreed by the joint steering committee. In addition, the parties will share profit margin from DSM’s sales of products that incorporate the DSM Ingredient subject to the DSM Collaboration Agreement.
The DSM Collaboration Agreement is accounted for as a revenue contract under ASC 606 and had a total transaction price of $14.1 million, subject to the variable consideration constraint guidance in ASC 606 using the most likely outcome method to estimate the variable consideration associated with the identified performance obligations. The Company concluded the agreement contained milestone performance obligations of research and development services delivered continuously over time and that revenue recognition is based on an input measure of progress as labor hours are expended in the achievement of the performance obligations (i.e., proportional performance).
In the fourth quarter of 2020, the DSM Collaboration Agreement was amended to eliminate all milestone targets in the original project plan and to replace the project plan with funding payments of $2.0 million quarterly from October 1, 2020 to September 30, 2020 for research and development services singularly focused on achieving a certain fermentation yield and cost target over the twelve-month period. The amendment also transfers the Company’s manufacturing rights to DSM and replaces the value share payments with a tiered perpetual royalty scheme that provides Amyris royalties upon commercialization at the specific cost target, if achieved. The initial royalty rate decreases through year 10 and then reduces to 2% thereafter. DSM’s decision to commercialize with the Amyris technology is subject to certain conditions, including achievement of the cost target.
This amendment was determined to be a contract modification under ASC 606 and accounted for as a separate contract due to the change in the scope of each parties’ rights and obligations and the change in transaction price. The Company concluded the agreement contained a single performance obligation to provide research and development services delivered over time and that revenue recognition is based on an input measure of progress as labor hours are expended each quarter. The right to receive royalties on future product sales will be accounting for as variable consideration under the the sales-based royalty exception, which requires the Company to estimate the revenue to be recognized at a point in time when the licensee’s product sales occur. The Company recognized $7.0 million and $4.9 million of revenue for the year ended December 31, 2020 and 2019, respectively, and $11.9 million of cumulative-to-date collaboration revenue related to the DSM Collaboration Agreement, as amended.
DSM Value Sharing Agreement
In December 2017, the Company and DSM entered into a value sharing agreement (Value Sharing Agreement), pursuant to which DSM agreed to make certain royalty payments to the Company representing a portion of the profit on the sale of products produced using farnesene purchased under a third party supply agreement with DSM.
In April 2019, the Company assigned to DSM, and DSM assumed, all of the Company’s rights and obligations under the Value Sharing Agreement for aggregate consideration to the Company of $57.0 million, which included $7.4 million (less a discount for early payment of $0.7 million) received on March 29, 2019 for the third and final guaranteed annual royalty payment due under the original agreement.
The original Value Sharing Agreement was accounted for as a single performance obligation in connection with an intellectual property license with fixed and determinable consideration and variable consideration that was accounted for pursuant to the sales-based royalty scope exception. The April 2019 assignment of the Value Sharing Agreement was accounted for as a contract modification under ASC 606, resulting in additional fixed and determinable consideration of $37.1 million and variable consideration of $12.5 million in the form of a stand-ready obligation to refund some or all of the $12.5 million consideration if certain criteria outlined in the assignment agreement are not met by December 2021. The Company periodically updated its estimate of amounts to be retained and reduced the refund liability and recorded additional license and royalty revenue as the criteria were met. The effect of the contract modification on the transaction price, and on the Company’s measure of progress toward complete satisfaction of the performance obligation was recognized as an adjustment to revenue at the date of the contract modification on a cumulative catch-up basis. As a result, the Company recognized $37.1 million of license and royalty in the second quarter of 2019, due to fully satisfying the performance obligation at the modification date. The Company also recognized an additional $3.6 million of previously deferred royalty revenue under the Value Sharing Agreement, as the remaining underlying performance obligation was fully satisfied through the April 16, 2019 assignment of the agreement to DSM. The Company recorded an additional $8.8 million and $3.7 million of license and royalty revenue in the fourth quarter of 2019 and the first quarter of 2020, respectively, related to a change in the estimated refund liability.
In connection with the significant revenue agreements discussed above and others previously disclosed, the Company recognized revenue for the years ended December 31, 2020 and 2019 in connection with significant revenue agreements and from all other customers as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Years Ended December 31,
(In thousands)
|
Renewable Products
|
Licenses and Royalties
|
Grants and Collaborations
|
TOTAL
|
|
Renewable Products
|
Licenses and Royalties
|
Grants and Collaborations
|
TOTAL
|
|
Revenue from significant revenue agreements with:
|
|
|
|
|
|
|
|
|
|
|
DSM (related party)
|
$
|
946
|
|
$
|
43,750
|
|
$
|
7,018
|
|
$
|
51,714
|
|
|
$
|
10
|
|
$
|
49,051
|
|
$
|
4,120
|
|
$
|
53,181
|
|
|
Firmenich
|
9,967
|
|
7,241
|
|
594
|
|
17,802
|
|
|
8,591
|
|
4,992
|
|
1,413
|
|
14,996
|
|
|
Sephora
|
13,802
|
|
—
|
|
—
|
|
13,802
|
|
|
8,666
|
|
—
|
|
—
|
|
8,666
|
|
|
Givaudan
|
10,081
|
|
—
|
|
—
|
|
10,081
|
|
|
7,477
|
|
—
|
|
1,500
|
|
8,977
|
|
|
DARPA
|
—
|
|
—
|
|
526
|
|
526
|
|
|
—
|
|
—
|
|
5,504
|
|
5,504
|
|
|
Lavvan
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
18,342
|
|
18,342
|
|
|
Subtotal revenue from significant revenue agreements
|
34,796
|
|
50,991
|
|
8,138
|
|
93,925
|
|
|
24,744
|
|
54,043
|
|
30,879
|
|
109,666
|
|
|
Revenue from all other customers
|
69,542
|
|
—
|
|
9,670
|
|
79,212
|
|
|
35,128
|
|
—
|
|
7,763
|
|
42,891
|
|
|
Total revenue from all customers
|
$
|
104,338
|
|
$
|
50,991
|
|
$
|
17,808
|
|
$
|
173,137
|
|
|
$
|
59,872
|
|
$
|
54,043
|
|
$
|
38,642
|
|
$
|
152,557
|
|
Contract Assets and Liabilities
When a contract results in revenue being recognized in excess of the amount the Company has invoiced or has the right to invoice to the customer, a contract asset is recognized. Contract assets are transferred to accounts receivable, net when the rights to the consideration become unconditional.
Contract liabilities consist of payments received from customers, or such consideration that is contractually due, in advance of providing the product or performing services such that control has not passed to the customer.
Trade receivables related to revenue from contracts with customers are included in accounts receivable on the consolidated balance sheets, net of the allowance for doubtful accounts. Trade receivables are recorded at the point of renewable product sale or in accordance with the contractual payment terms for licenses and royalties, and grants and collaborative research and development services for the amount payable by the customer to the Company for sale of goods or the performance of services, and for which the Company has the unconditional right to receive payment.
Contract Balances
The following table provides information about accounts receivable and contract liabilities from contracts with customers:
|
|
|
|
|
|
|
|
|
|
December 31,
(In thousands)
|
2020
|
2019
|
|
Accounts receivable, net
|
$
|
32,846
|
|
$
|
16,322
|
|
|
Accounts receivable - related party, net
|
$
|
12,110
|
|
$
|
3,868
|
|
|
Contract assets
|
$
|
4,178
|
|
$
|
8,485
|
|
|
Contract assets - related party
|
$
|
1,203
|
|
$
|
—
|
|
|
Contract assets, noncurrent - related party
|
$
|
—
|
|
$
|
1,203
|
|
|
Contract liabilities
|
$
|
4,468
|
|
$
|
1,353
|
|
|
Contract liabilities, noncurrent(1)
|
$
|
111
|
|
$
|
1,449
|
|
______________
(1)The balances in contract liabilities, noncurrent are included in other noncurrent liabilities on the consolidated balance sheets.
Contract liabilities, current increased by $3.1 million at December 31, 2020 resulting from collaboration and royalty amounts invoiced to customers during the year ended December 31, 2020 but not recognized as revenue.
During the third quarter of 2020, the collaboration partner in the Cannabinoid Agreement filed certain litigation claims and, among other things, alleged breach of contract. As a result, the Company concluded that realization and recoverability of the $8.3 million contract asset recorded in connection with the Cannabinoid Agreement was no longer probable and consequently, recorded an $8.3 million credit loss reserve against the contract asset for the year ended December 31, 2020.
Remaining Performance Obligations
The following table provides information regarding the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) based on the Company's existing agreements with customers as of December 31, 2020.
|
|
|
|
|
|
|
|
(In thousands)
|
As of December 31, 2020
|
|
2021
|
$
|
5,158
|
|
|
2022
|
1,517
|
|
|
2023
|
143
|
|
|
2024
|
143
|
|
|
2025 and thereafter
|
286
|
|
|
Total from all customers
|
$
|
7,247
|
|
In accordance with the disclosure provisions of ASC 606, the table above excludes estimated future revenues for performance obligations that are part of a contract that has an original expected duration of one year or less or a performance obligation with variable consideration that is recognized using the sales-based royalty exception for licenses of intellectual property. Additionally, $297.8 million of estimated future revenue is excluded from the table above, as that amount represents constrained variable consideration.
11. Related Party Transactions
Related Party Debt
See Note 4, "Debt" for details of these related party debt transactions:
•2014 Rule 144A Note exchange, extensions and conversion – Total
•DSM credit agreements
•Foris $5 million Note
•Foris Convertible Note
•Foris LSA Amendment
•Naxyris LSA
•Naxyris LSA Amendment
Related party debt was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
(In thousands)
|
Principal
|
Unaccreted Debt (Discount) Premium
|
Fair Value Adjustment
|
Net
|
|
Principal
|
Unaccreted Debt (Discount) Premium
|
Fair Value Adjustment
|
Net
|
|
DSM notes
|
$
|
33,000
|
|
$
|
(2,443)
|
|
$
|
—
|
|
$
|
30,557
|
|
|
$
|
33,000
|
|
$
|
(4,621)
|
|
$
|
—
|
|
$
|
28,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foris
|
|
|
|
|
|
|
|
|
|
|
Foris convertible note
|
50,041
|
|
—
|
|
73,123
|
|
123,164
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Foris promissory notes
|
5,000
|
|
—
|
|
—
|
|
5,000
|
|
|
115,351
|
|
(9,516)
|
|
—
|
|
105,835
|
|
|
|
55,041
|
|
—
|
|
73,123
|
|
128,164
|
|
|
115,351
|
|
(9,516)
|
|
—
|
|
105,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Naxyris note
|
23,914
|
|
(493)
|
|
—
|
|
23,421
|
|
|
24,437
|
|
(822)
|
|
—
|
|
23,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 2014 Rule 144A convertible note
|
—
|
|
—
|
|
—
|
|
—
|
|
|
10,178
|
|
—
|
|
—
|
|
10,178
|
|
|
|
$
|
111,955
|
|
$
|
(2,936)
|
|
$
|
73,123
|
|
$
|
182,142
|
|
|
$
|
182,966
|
|
$
|
(14,959)
|
|
$
|
—
|
|
$
|
168,007
|
|
The following table provides a reconciliation of the beginning and ending balances for the Company's derivative liabilities recognized in connection with the issuance of related party debt instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Foris LSA
|
Naxyris Note
|
TOTAL 2014 144A Convertible Note
|
Total Related Party Debt-related Derivative Liability
|
|
Balance at December 31, 2019
|
$
|
1,678
|
|
$
|
508
|
|
$
|
—
|
|
$
|
2,186
|
|
|
Fair value of derivative liabilities issued during the period
|
747
|
|
—
|
|
—
|
|
747
|
|
|
(Gain) loss on change in fair value
|
(64)
|
|
(320)
|
|
6,461
|
|
6,077
|
|
|
Derecognition on extinguishment
|
(2,361)
|
|
—
|
|
(6,461)
|
|
(8,822)
|
|
|
Balance at December 31, 2020
|
$
|
—
|
|
$
|
188
|
|
$
|
—
|
|
$
|
188
|
|
For additional information, see Note 3, "Fair Value Measurement".
Related Party Equity
See Note 6, "Stockholders' Deficit" for details of these related party equity transactions:
•Foris warrant exercises for cash
•Foris warrant exercise, common stock purchase and debt equitization
•January 2020 private placement, in which Foris purchased 5,226,481 shares of common stock
•June 2020 private placement, in which Foris and affiliated entities purchased 30,000 shares of Series E convertible preferred stock, which automatically converted into 9,999,999 shares of common stock in August 2020 after stockholders approved the conversion of the Series E convertible preferred stock and corresponding issuance of underlying common shares
•June 2020 private placement, in which Vivo Capital LLC and affiliated entities purchased 3,689,225 shares of common stock and 8,932.32 shares of Series E convertible preferred stock, which automatically converted into 2,977,442 shares of common stock in August 2020 after stockholders approved the conversion of the Series E convertible preferred stock and corresponding issuance of underlying common shares
Related Party Revenue
The Company recognized revenue from related parties and from all other customers as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Years Ended December 31,
(In thousands)
|
Renewable Products
|
Licenses and Royalties
|
Grants and Collaborations
|
TOTAL
|
|
Renewable Products
|
Licenses and Royalties
|
Grants and Collaborations
|
TOTAL
|
|
Revenue from related parties:
|
|
|
|
|
|
|
|
|
|
|
DSM
|
$
|
946
|
|
$
|
43,750
|
|
$
|
7,018
|
|
$
|
51,714
|
|
|
$
|
10
|
|
$
|
49,051
|
|
$
|
4,120
|
|
$
|
53,181
|
|
|
Daling (affiliate of a Board member)
|
40
|
|
—
|
|
—
|
|
40
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Total
|
—
|
|
—
|
|
—
|
|
—
|
|
|
46
|
|
—
|
|
—
|
|
46
|
|
|
Subtotal revenue from related parties
|
986
|
|
43,750
|
|
7,018
|
|
51,754
|
|
|
56
|
|
49,051
|
|
4,120
|
|
53,227
|
|
|
Revenue from all other customers
|
103,352
|
|
7,241
|
|
10,790
|
|
121,383
|
|
|
59,816
|
|
4,992
|
|
34,522
|
|
99,330
|
|
|
Total revenue from all customers
|
$
|
104,338
|
|
$
|
50,991
|
|
$
|
17,808
|
|
$
|
173,137
|
|
|
$
|
59,872
|
|
$
|
54,043
|
|
$
|
38,642
|
|
$
|
152,557
|
|
See Note 10, "Revenue Recognition" for details of the Company's revenue agreements with DSM.
Related Party Accounts Receivable
Related party accounts receivable was as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
(In thousands)
|
2020
|
2019
|
|
DSM
|
$
|
12,110
|
|
$
|
3,868
|
|
In addition to the amounts shown above, the following amounts were on the consolidated balance sheet at December 31, 2020 and December 31, 2019, respectively:
•$0 and $1.2 million of unbilled receivables from DSM in Contract assets, noncurrent - related party; and
•$0 and $3.3 million of contingent consideration receivable from DSM in Other assets.
Related Party Accounts Payable and Accrued Liabilities
The following amounts due to DSM on the consolidated balance sheet at December 31, 2020 and December 31, 2019 were as follows, respectively:
•Accounts payable and accrued and other current liabilities of $5.0 million and $14.0 million at December 31, 2020 and December 31, 2019, respectively; and
•Other noncurrent liabilities of $0 and $3.8 million at December 31, 2020 and December 31, 2019, respectively.
Related Party DSM Transactions
The Company is party to the following significant agreements (and related amendments) with DSM:
|
|
|
|
|
|
|
|
|
|
|
Related to
|
Agreement
|
For Additional Information, See the Note Indicated
|
|
Debt
|
DSM Credit Agreement
|
4. Debt
|
|
Debt
|
2019 DSM Credit Agreement
|
4. Debt
|
|
Revenue
|
Farnesene Framework Agreement
|
10. Revenue Recognition
|
|
Revenue
|
DSM Collaboration Agreement
|
10. Revenue Recognition
|
|
Revenue
|
DSM Value Sharing Agreement
|
10. Revenue Recognition
|
Related Party Joint Venture
In December 2016, the Company, 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 (the Aprinnova JV Agreement) pursuant to which the Company contributed certain assets, including certain intellectual property and other commercial assets relating to its business-to-business cosmetic ingredients business (the Aprinnova JV Business), as well as its Leland production facility. See Note 7 “Variable Interest Entities and Joint Ventures” for information regarding the business transactions with Nikko and the assets and liabilities of this related party joint venture.
Office Sublease
The Company subleases certain office space to Novvi, for which the Company charged Novvi $0.6 million and $0.6 million for the years ended December 31, 2020 and 2019, respectively.
12. Stock-based Compensation
Stock-based Compensation Expense Related to All Plans
Stock-based compensation expense related to all employee stock compensation plans, including options, restricted stock units and ESPP, was as follows:
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
(In thousands)
|
2020
|
2019
|
|
Research and development
|
$
|
3,871
|
|
$
|
2,900
|
|
|
Sales, general and administrative
|
9,872
|
|
9,654
|
|
|
Total stock-based compensation expense
|
$
|
13,743
|
|
$
|
12,554
|
|
Plans
2020 Equity Incentive Plan
On June 22, 2020 the Company’s 2020 Equity Incentive Plan (2020 Equity Plan) became effective and will terminate in 2030. The 2020 Equity Plan succeeded the 2010 Equity Plan (which provided terms and conditions similar to those governing the 2020 Equity Plan) and provides for the grant of incentive stock options (ISOs) intended to qualify for favorable tax treatment under Section 422 of the U.S. Internal Revenue Code for their recipients, non-statutory stock options (NSOs), restricted stock awards, stock bonuses, stock appreciation rights, restricted stock units and performance awards. ISOs may be granted only to Company employees or employees of its subsidiaries and affiliates. NSOs may be granted to eligible Company employees, consultants and directors or any of the Company’s parent, subsidiaries or affiliates. The Company is able to issue up to 30,000,000 shares pursuant to the grant of ISOs under the 2020 Equity Plan. The Leadership, Development, Inclusion, and Compensation Committee of the Board of Directors (LDICC) determines the terms of each option award, provided that ISOs are subject to statutory limitations. The LDICC also determines the exercise price for a stock option, provided that the exercise price of an option may not be less than 100% (or 110% in the case of recipients of ISOs who hold more than 10% of the Company’s stock on the option grant date) of the fair market value of the Company’s common stock on the date of grant. Options granted under the 2020 Equity Plan vest at the rate specified by the LDICC and such vesting schedule is set forth in the stock option agreement to which such stock option grant relates. Generally, the LDICC determines the term of stock options granted under the 2020 Plan, up to a term of ten years (or five years in the case of ISOs granted to 10% stockholders).
As of December 31, 2020, options were outstanding to purchase 6,502,096 shares of the Company's common stock granted under the 2020 and 2010 Equity Plans, with weighted-average exercise price per share of $7.64. In addition, as of December 31, 2020, restricted stock units representing the right to receive 7,043,909 shares of the Company's common stock granted under the 2020 and 2010 Equity Plans were outstanding. As of December 31, 2020, 5,782,707 shares of the Company’s common stock remained available for future awards that may be granted under the 2020 Equity Plan. Upon the effective date of the 2020 Equity Plan, the Company no longer has shares available for issuance under the 2010 Equity Plan.
The number of shares reserved for issuance under the 2020 Equity Plan increases automatically on January 1 of each year starting with January 1, 2021, by a number of shares equal to 5% of the Company’s total outstanding shares as of the immediately preceding December 31. However, the Company’s Board of Directors or the LDICC retains the discretion to reduce the amount of the increase in any particular year.
2010 Employee Stock Purchase Plan
The 2010 Employee Stock Purchase Plan (2010 ESPP) became effective on September 27, 2010. The 2010 ESPP is designed to enable eligible employees to purchase shares of the Company’s common stock at a discount. Offering periods under the 2010 ESPP generally commence on each May 16 and November 16, with each offering period lasting for one year and consisting of two six-month purchase periods. The purchase price for shares of common stock under the 2010 ESPP is the lesser of 85% of the fair market value of the Company’s common stock on the first day of the applicable offering period or the last day of each purchase period. During the life of the 2010 ESPP, the number of shares reserved for issuance increases automatically on January 1 of each year, starting with January 1, 2011, by a number of shares equal to 1% of the Company’s total outstanding shares as of the immediately preceding December 31. However, the Company’s Board of Directors or the LDICC retains the discretion to reduce the amount of the increase in any particular year. In May 2018, shareholders approved
an amendment to the 2010 ESPP to increase the maximum number of shares of common stock that may be issued over the term of the ESPP by 1 million shares. No more than 1,666,666 shares of the Company’s common stock may be issued under the 2010 ESPP and no other shares may be added to this plan without the approval of the Company’s stockholders.
2018 CEO Performance-based Stock Options
In May 2018, the Company granted its chief executive officer performance-based stock options (PSOs) to purchase 3,250,000 shares. PSOs are equity awards with the final number of PSOs that may vest determined based on the Company’s performance against pre-established EBITDA milestones and Amyris stock price milestones. The EBITDA milestones are measured from the grant date through December 31, 2021, and the stock price milestones are measured from the grant date through December 31, 2022. The PSOs vest in four tranches contingent upon the achievement of both the EBITDA milestones and stock price milestones for each respective tranche, and the chief executive officer’s continued employment with the Company. Over the measurement periods, the number of PSOs that may be issued and the related stock-based compensation expense that is recognized is adjusted upward or downward based upon the probability of achieving the EBITDA milestones. Depending on the probability of achieving the EBITDA milestones and stock price milestones and certification of achievement of those milestones for each vesting tranche by the Company’s Board of Directors or the LDICC, the PSOs issued could be from zero to 3,250,000 stock options, with an exercise price of $5.08 per share.
Stock-based compensation expense for this award is recognized using a graded-vesting approach over the service period beginning at the grant date through December 31, 2022, as the Company’s management has determined that certain EBITDA milestones are probable of achievement over the next four years as of December 31, 2020, The Company utilized a Monte Carlo simulation to estimate the grant date fair value of each tranche of the award which totaled $5.1 million. For the years ended December 31, 2020 and 2019, the Company recognized $0.4 million and $0.7 million, respectively, of compensation expense for this award. The assumptions used to estimate the fair value of this award with performance and market vesting conditions were as follows:
|
|
|
|
|
|
|
|
Stock Option Award with Performance and Market Vesting Conditions:
|
|
|
Fair value of the Company’s common stock on grant date
|
$5.08
|
|
Expected volatility
|
70%
|
|
Risk-free interest rate
|
2.8%
|
|
Dividend yield
|
0.0%
|
Stock Option Activity
Stock option activity is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2020
|
2019
|
|
Options granted
|
1,269,808
|
|
530,140
|
|
|
Weighted-average grant-date fair value per share
|
$
|
3.75
|
|
$
|
3.83
|
|
|
Compensation expense related to stock options (in millions)
|
$
|
2.1
|
|
$
|
2.0
|
|
|
Unrecognized compensation costs as of December 31 (in millions)
|
$
|
5.2
|
|
$
|
4.5
|
|
The Company expects to recognize the December 31, 2020 balance of unrecognized costs over a weighted-average period of 2.3 years. Future option grants will increase the amount of compensation expense to be recorded in these periods.
Stock-based compensation expense for stock options and employee stock purchase plan rights is estimated at the grant date and offering date, respectively, based on a fair-value derived from using the Black-Scholes-Merton option pricing model. The fair value of employee stock options is amortized on a ratable basis over the requisite service period of the awards. The fair value of employee stock options and employee stock purchase plan rights was estimated using the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
2020
|
2019
|
|
Expected dividend yield
|
—%
|
—%
|
|
Risk-free interest rate
|
0.7%
|
1.8%
|
|
Expected term (in years)
|
6.9
|
6.9
|
|
Expected volatility
|
89%
|
84%
|
The expected life of options is based primarily on historical exercise experience of the employees for options granted by the Company. All options are treated as a single group in the determination of expected life, as the Company does not currently expect substantially different exercise or post-vesting termination behavior among the employee population. The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant. Expected volatility is based on the historical volatility of the Company's common stock price. The Company has no history or expectation of paying dividends on common stock.
Stock-based compensation expense associated with options is based on awards ultimately expected to vest. At the time of an option grant, the Company estimates the expected future rate of forfeitures based on historical experience. These estimates are revised, if necessary, in subsequent periods if actual forfeiture rates differ from those estimates. If the actual forfeiture rate is lower than estimated the Company will record additional expense and if the actual forfeiture is higher than estimated the Company will record a recovery of prior expense.
The Company’s stock option activity and related information for the year ended December 31, 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Stock Options
|
Weighted-
average
Exercise
Price
|
Weighted-average
Remaining
Contractual
Life
(in years)
|
Aggregate
Intrinsic
Value
(in thousands)
|
|
Outstanding - December 31, 2019
|
5,620,419
|
|
$
|
10.27
|
|
7.8
|
$
|
24
|
|
|
Options granted
|
1,269,808
|
|
$
|
3.75
|
|
|
|
|
Options exercised
|
(13,213)
|
|
$
|
3.48
|
|
|
|
|
Options forfeited or expired
|
(374,918)
|
|
$
|
34.05
|
|
|
|
|
Outstanding - December 31, 2020
|
6,502,096
|
|
$
|
7.64
|
|
7.6
|
$
|
8,875
|
|
|
Vested or expected to vest after December 31, 2020
|
5,970,394
|
|
$
|
7.90
|
|
7.5
|
$
|
8,120
|
|
|
Exercisable at December 31, 2020
|
1,551,942
|
|
$
|
16.90
|
|
6.2
|
$
|
1,708
|
|
The aggregate intrinsic value of options exercised under all option plans was $0 and $0 for the years ended December 31, 2020 and 2019, respectively, determined as of the date of option exercise.
Restricted Stock Units Activity and Expense
During the years ended December 31, 2020 and 2019, 4,415,209 and 2,996,660 RSUs, respectively, were granted with weighted-average service-inception date fair value per unit of $3.72 and $3.96, respectively. The Company recognized RSU-related stock-based compensation expense of $11.0 million and $10.2 million, respectively, for the years ended December 31, 2020 and 2019. As of December 31, 2020 and 2019, unrecognized RSU-related compensation costs totaled $23.9 million and $22.3 million, respectively.
Stock-based compensation expense for RSUs is measured based on the NASDAQ closing price of the Company's common stock on the date of grant.
The Company’s RSU activity and related information for the year ended December 31, 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Restricted Stock Units
|
Weighted-average Grant-date
Fair Value
|
Weighted-average Remaining Contractual Life
(in years)
|
|
Outstanding - December 31, 2019
|
5,782,651
|
|
$
|
4.77
|
|
1.7
|
|
Awarded
|
4,415,209
|
|
$
|
3.72
|
|
|
|
Vested
|
(2,327,516)
|
|
$
|
4.77
|
|
|
|
Forfeited
|
(826,435)
|
|
$
|
4.17
|
|
|
|
Outstanding - December 31, 2020
|
7,043,909
|
|
$
|
4.18
|
|
1.5
|
|
Vested or expected to vest after December 31, 2020
|
6,432,500
|
|
$
|
4.20
|
|
1.4
|
ESPP Activity and Expense
During the years ended December 31, 2020 and 2019, 357,655 and 318,490 shares, respectively, of the Company's common stock were purchased under the 2010 ESPP. At December 31, 2020 and 2019, 494,855 and 263,797 shares, respectively, of the Company’s common stock remained reserved for issuance under the 2010 ESPP.
During the years ended December 31, 2020 and 2019, the Company also recognized ESPP-related stock-based compensation expense of $0.6 million and $0.4 million, respectively.
13. Income Taxes
Recent Tax Legislation
Coronavirus Aid, Relief and Economic Security Act
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was enacted and signed into law in response to the market volatility and instability resulting from the COVID-19 pandemic. It includes a significant number of tax provisions and lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (the 2017 Act). The changes are mainly related to: (1) the business interest expense disallowance rules for 2019 and 2020; (2) net operating loss rules; (3) charitable contribution limitations; (4) employee retention credit; and (5) the realization of corporate alternative minimum tax credits. The Company does not anticipate the application of the CARES Act provisions to materially impact the overall Consolidated Financial Statements.
Provision for Income Taxes
The components of loss before income taxes and loss from investment in affiliate are as follows:
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
(In thousands)
|
2020
|
2019
|
|
United States
|
$
|
(324,720)
|
|
$
|
(227,614)
|
|
|
Foreign
|
(6,015)
|
|
(14,524)
|
|
|
Loss before income taxes and loss from investment in affiliate
|
$
|
(330,735)
|
|
$
|
(242,138)
|
|
The components of the provision for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
(In thousands)
|
2020
|
2019
|
|
Current:
|
|
|
|
Federal
|
$
|
293
|
|
$
|
621
|
|
|
State
|
—
|
|
—
|
|
|
Foreign
|
—
|
|
8
|
|
|
Total current provision
|
293
|
|
629
|
|
|
Deferred:
|
|
|
|
Federal
|
—
|
|
—
|
|
|
State
|
—
|
|
—
|
|
|
Foreign
|
—
|
|
—
|
|
|
Total deferred provision
|
—
|
|
—
|
|
|
Total provision for income taxes
|
$
|
293
|
|
$
|
629
|
|
A reconciliation between the statutory federal income tax and the Company’s effective tax rates as a percentage of loss before income taxes and loss from investments in affiliate is as follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
2020
|
2019
|
|
Statutory tax rate
|
(21.0)
|
%
|
(21.0)
|
%
|
|
Federal R&D credit
|
(0.6)
|
%
|
(0.7)
|
%
|
|
Derivative liability
|
4.8
|
%
|
4.7
|
%
|
|
Nondeductible interest
|
0.5
|
%
|
1.0
|
%
|
|
Other
|
0.3
|
%
|
2.4
|
%
|
|
Foreign losses
|
0.4
|
%
|
0.9
|
%
|
|
Change in fair value of convertible debt
|
5.7
|
%
|
—
|
%
|
|
Change in valuation allowance
|
10.0
|
%
|
13.0
|
%
|
|
Effective income tax rate
|
0.1
|
%
|
0.3
|
%
|
Temporary differences and carryforwards that gave rise to significant portions of deferred taxes are as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
(In thousands)
|
2020
|
2019
|
|
Net operating loss carryforwards
|
$
|
123,638
|
|
$
|
88,513
|
|
|
Property, plant and equipment
|
6,965
|
|
8,239
|
|
|
Research and development credits
|
18,279
|
|
15,002
|
|
|
Foreign tax credit
|
—
|
|
—
|
|
|
Accruals and reserves
|
12,003
|
|
13,934
|
|
|
Stock-based compensation
|
4,291
|
|
6,164
|
|
|
Disallowed interest carryforward
|
10,843
|
|
7,072
|
|
|
Capitalized research and development costs
|
16,390
|
|
21,723
|
|
|
Intangible and others
|
1,888
|
|
2,503
|
|
|
Equity investments
|
531
|
|
304
|
|
|
Total deferred tax assets
|
194,828
|
|
163,454
|
|
|
Operating lease right-of-use assets
|
(2,051)
|
|
(2,643)
|
|
|
Debt discounts and derivatives
|
(774)
|
|
(7,176)
|
|
|
Total deferred tax liabilities
|
(2,825)
|
|
(9,819)
|
|
|
Net deferred tax assets prior to valuation allowance
|
192,003
|
|
153,635
|
|
|
Less: deferred tax assets valuation allowance
|
(192,003)
|
|
(153,635)
|
|
|
Net deferred tax assets
|
$
|
—
|
|
$
|
—
|
|
Activity in the deferred tax assets valuation allowance is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Balance at Beginning of Year
|
Additions
|
Reductions / Charges
|
Balance at End of Year
|
|
Deferred tax assets valuation allowance:
|
|
|
|
|
|
Year ended December 31, 2020
|
$
|
153,635
|
|
$
|
38,368
|
|
$
|
—
|
|
$
|
192,003
|
|
|
Year ended December 31, 2019
|
$
|
124,025
|
|
$
|
29,610
|
|
$
|
—
|
|
$
|
153,635
|
|
Recognition of deferred tax assets is appropriate when realization of such assets is more likely than not. Based on the weight of available evidence, especially the uncertainties surrounding the realization of deferred tax assets through future taxable income, the Company believes that it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company has provided a full valuation allowance against its net deferred tax assets as of December 31, 2020 and 2019. The valuation allowance increased by increased by $38.4 million during the year ended December 31, 2020 and $29.6 million during the year ended December 31, 2019.
As of December 31, 2020, the Company had federal net operating loss carryforwards of $568.8 million and state net operating loss carryforwards of $181.9 million available to reduce future taxable income, if any. The Internal Revenue Code of 1986, as amended, imposes restrictions on the utilization of net operating losses in the event of an “ownership change” of a
corporation. Accordingly, a company’s ability to use net operating losses may be limited as prescribed under Internal Revenue Code Section 382 (IRC Section 382). Events that may cause limitations in the amount of net operating losses that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. During the year ended December 31, 2019, the Company experienced a greater than 50% ownership shift on April 16, 2019. Per the Section 382 analysis, this 2019 ownership change did not result in a limitation such that there would be any permanent loss of NOL or research tax credit carryovers. Any NOLs and other tax attributes generated by the Company subsequent to April 16, 2019 are currently not subject to any IRC Section 382 limitations. The Company notes that federal net operating losses generated during 2018, 2019 and 2020 have an indefinite carryover life and that NOL utilization is limited to 80% of taxable income. As of December 31, 2020, the Company had foreign net operating loss carryovers of $23.4 million.
As of December 31, 2020, the Company had federal research and development credit carryforwards of $5.2 million and California research and development credit carryforwards of $16.8 million.
If not utilized, the federal net operating loss carryforward will begin expiring in 2034, and the California net operating loss carryforward will begin expiring in 2031. The federal research and development credit carryforwards will expire starting in 2037 if not utilized. The California research and development credit carryforwards can be carried forward indefinitely.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Balance as of December 31, 2018
|
$
|
30,127
|
|
|
Increases in tax positions for prior period
|
—
|
|
|
Increases in tax positions during current period
|
1,411
|
|
|
Balance as of December 31, 2019
|
31,538
|
|
|
Increases in tax positions for prior period
|
—
|
|
|
Increases in tax positions during current period
|
1,556
|
|
|
Balance as of December 31, 2020
|
$
|
33,094
|
|
The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for income taxes. The Company accrued $0.3 million and $0.6 million for such interest for the years ended December 31, 2020 and 2019, respectively.
The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $7.0 million and $7.0 million for the years ended December 31, 2020 and 2019, respectively. The Company believes it is reasonably possible that up to approximately $7.0 million of unrecognized tax benefits may reverse in the next 12 months.
The Company’s primary tax jurisdiction is the United States. For United States federal and state income tax purposes, returns for tax years from 2006 through the current year remain open and subject to examination by the appropriate federal or state taxing authorities. Brazil tax years from 2011 through the current year remain open and subject to examination.
As of December 31, 2020, the U.S. Internal Revenue Service (the IRS) has completed its audit of the Company for tax year 2008 and concluded that there were no adjustments resulting from the audit. While the statutes are closed for tax year 2008, the U.S. federal tax carryforwards (net operating losses and tax credits) may be adjusted by the IRS in the year in which the carryforward is utilized.
14. Geographical Information
The chief operating decision maker is the Company's Chief Executive Officer, who makes resource allocation decisions and assesses business performance based on financial information presented on a consolidated basis. There are no segment managers who are held accountable by the chief operating decision maker, or anyone else, for operations, operating results, and planning for levels or components below the consolidated unit level. Accordingly, the Company has determined that it has a single reportable segment and operating segment structure.
Revenue
Revenue by geography, based on each customer's location, is shown in Note 10, "Revenue Recognition".
Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
|
December 31,
(In thousands)
|
2020
|
2019
|
|
United States
|
$
|
14,686
|
|
$
|
13,799
|
|
|
Brazil
|
16,845
|
|
14,277
|
|
|
Europe
|
1,344
|
|
854
|
|
|
|
$
|
32,875
|
|
$
|
28,930
|
|
15. Subsequent Events
Senior Convertible Notes Conversion
On February 4, 2021, the Company received a notice of conversion from HT Investments MA, LLC (HT) with respect to $20.0 million its outstanding Senior Convertible Note, pursuant to which the Company issued 5.7 million shares of common stock per the conversion price stated in the agreement and cancelled the outstanding Note. Under the terms of the Senior Convertible Note, HT was required to return 2.6 million shares of common stock outstanding under the Pre-Delivery Shares provision once the Company had fully repaid the principal balance. HT fulfilled its obligation to return these shares in accordance with the contractual requirement. See Note 4, “Debt” for information regarding the Pre-Delivery Shares.
Schottenfeld Note Conversion
On March 1, 2021, the Company entered into an Exchange and Settlement Agreement (Exchange Agreement) with Schottenfeld Opportunities Fund II, L.P. and certain other holders of Notes under the Credit and Security Agreement dated November 14, 2019 (Schottenfeld Notes). Pursuant to the terms of the Exchange Agreement, the Company paid all accrued and unpaid interest on the $12.5 million principal balance outstanding under the Schottenfeld Notes, and issued 6.8 million shares of common stock in exchange and cancellation of all amounts due and outstanding under the Notes and related loan documents and all warrants held by each of the holders of Schottenfeld Notes. See Note 4, “Debt” for information regarding the Schottenfeld Notes.
DSM Notes Amendment
On March 1, 2021, the Company entered into an Amendment to Notes (the Amendment) with DSM Finance, B.V. (DSM) to amend a promissory note dated as of December 28, 2017 (the 2017 Note) under the DSM Credit Agreement and certain other promissory notes dated September 17, 2019, September 19, 2019, and September 23, 2019 (the 2019 Notes and, together with the 2017 note, the Notes) under the 2019 DSM Credit Agreement. Pursuant to the terms of the Amendment, if the Company redeems the Notes on or before March 31, 2021, the Company will pay a prepayment fee of $2.5 million; if the Notes are not so redeemed, the interest rate on the 2017 Note will be increased from 2.50% to 5.85% per quarter beginning April 1, 2021 (such additional 3.35% interest, the incremental interest). If the Company redeems the Notes any time between April 1, 2021 and the December 31, 2021, the Company will pay a prepayment fee of $2.5 million, minus the incremental interest paid to date, plus 4% per quarter on the $2.5 million fee for days elapsed between April 1, 2021 and such redemption date. See Note 4, “Debt” for information regarding the DSM Credit Agreement and 2019 DSM Credit Agreement.