NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation and Summary of Significant Accounting Policies
As a leading synthetic biotechnology company and a top supplier of sustainable and natural ingredients, Amyris, Inc. and its subsidiaries (collectively, Amyris or the Company) leverage its proprietary Lab-to-MarketTM operating platform to engineer, manufacture and market high performance, natural and sustainably sourced products. This platform is comprised of computational, strain construction, screening, and analytics tools, advanced lab automation, and data integration. Through its Lab-to-Market platform, the Company rapidly engineers microbes and uses them as catalysts to metabolize renewable, plant-sourced sugars into high-value ingredients that the Company manufactures at industrial scale. The Company has successfully developed, produced and commercialized many distinct molecules.
The accompanying unaudited condensed consolidated financial statements of Amyris, Inc. should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 (the 2020 Form 10-K), from which the condensed consolidated balance sheet as of December 31, 2020 is derived. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the accompanying interim condensed consolidated financial statements do not include all the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.
Significant Accounting Policies
Note 1, "Basis of Presentation and Summary of Significant Accounting Policies", to the audited consolidated financial statements in the 2020 Form 10-K includes a discussion of the significant accounting policies and estimates used in the preparation of the Company’s condensed consolidated financial statements. Except as noted below, there have been no material changes to the Company's significant accounting policies and estimates during the nine months ended September 30, 2021.
Acquisitions
When the Company acquires a controlling financial interest in an entity or group of assets that are determined to meet the definition of a business, the acquisition method described in ASC Topic 805, Business Combinations, is applied. The Company allocates the purchase consideration paid to acquire the business to the assets and liabilities acquired based on estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the net assets acquired recorded as goodwill. The determination of fair values of identifiable assets and liabilities requires significant judgments and estimates and the use of valuation techniques when market value is not readily available. If during the measurement period (a period not to exceed 12 months from the acquisition date) the Company receives additional information that existed as of the acquisition
date but at the time of the original allocation described above was unknown, the Company makes the appropriate adjustments to the purchase price allocation in the reporting period in which the adjustments are identified.
Contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with ASC 805, “Contingencies”, as appropriate, with the corresponding gain or loss being recognized in profit or loss.
See Note 7, “Acquisitions”.
Goodwill
Goodwill represents the excess of the cost over the fair value of net assets acquired from the Company's business combinations. Goodwill is not subject to amortization and is assessed for impairment using fair value measurement techniques on an annual basis, during the fourth quarter, or more frequently if facts and circumstance warrant such a review. Goodwill is assigned to reporting units within the company. The Company has the option to first perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value. However, the Company may elect to bypass the qualitative assessment and proceed directly to the quantitative impairment tests, whereby the fair value of a reporting unit is compared with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying amount of the reporting unit exceeds its estimated fair value, an impairment loss is recognized in an amount equal to the excess, up to the carrying value of the goodwill. No impairment of goodwill has occurred during the periods presented in these condensed consolidated financial statements.
Intangible Assets
Intangible assets are comprised primarily of customer relationships, trademarks and trade names, developed technology, patents and other acquired through business combinations. Intangible assets are recorded at cost less accumulated amortization and impairment losses, if any.
Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Amortization periods of assets with finite lives are based on management’s estimates at the date of acquisition. The fair value of intangibles assets is determined based on a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. We believe the assumptions are representative of those a market participant would use in estimating fair value. The fair values of the intangible assets were determined to be Level 3 under the fair value hierarchy. Level 3 inputs are unobservable inputs for an asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available thereby allowing for fair value estimates to be made in situations in which there is little, if any, market activity for an asset or liability at the measurement date. For more information on the fair value hierarchy, see Note 3 of the Notes to the Condensed Consolidated Financial Statements. We consider the period of expected cash flows and underlying data used to measure the fair value of the intangible assets when selecting a useful life. Intangible assets with finite useful lives are amortized using an accelerated amortization method reflecting the pattern in which the asset will be consumed if that pattern can be reliably determined. If that pattern cannot be reliably determined, a straight-line amortization method is utilized.
Intangible assets are evaluated periodically for impairment by taking into account events or changes in circumstances that may warrant revised estimates of useful lives or that indicate the carrying value of an asset group may not be recoverable. If this evaluation indicates that the value of the intangible asset may be impaired, an assessment is made of the recoverability of the net carrying value of the intangible asset over its remaining useful life. If this assessment indicates that the intangible asset is not recoverable, based on the estimated discounted future cash flows of the asset group over the estimated useful life, an impairment will be recorded to reduce the net carrying value of the related intangible asset to its fair value and may require an adjustment to the remaining amortization period.
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 condensed 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.
Accounting Standards or Updates Recently Adopted
In the nine months ended September 30, 2021, the Company adopted these accounting standards or updates:
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 became effective for the Company in the first quarter of fiscal year 2021. The adoption of this standard did not have any impact on the Company’s condensed consolidated financial statements.
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 became effective for the Company in the first quarter of 2021. The adoption of this standard did not have any impact on the Company’s condensed consolidated financial statements.
Accounting Standards or Updates Not Yet Adopted
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 and related disclosures.
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Balance at Beginning of Period
|
Provisions
|
Write-offs, Net
|
Balance at End of Period
|
|
Nine months ended September 30, 2021
|
$
|
137
|
|
$
|
806
|
|
$
|
(4)
|
|
$
|
939
|
|
|
Nine months ended September 30, 2020
|
$
|
45
|
|
$
|
57
|
|
$
|
—
|
|
$
|
102
|
|
Inventories
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
September 30, 2021
|
December 31, 2020
|
|
Raw materials
|
$
|
29,368
|
|
$
|
11,800
|
|
|
Work-in-process
|
6,443
|
|
10,760
|
|
|
Finished goods
|
36,251
|
|
20,302
|
|
|
Inventories
|
$
|
72,062
|
|
$
|
42,862
|
|
Deferred cost of products sold - related party
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
September 30, 2021
|
December 31, 2020
|
|
Deferred cost of products sold - related party
|
$
|
9,182
|
|
$
|
9,801
|
|
|
Deferred cost of products sold, noncurrent - related party
|
3,061
|
|
9,939
|
|
|
Total
|
$
|
12,243
|
|
$
|
19,740
|
|
Amounts reported as "Deferred cost of products sold - related party" are in connection with an agreement with Koninklijke DSM N.V. (DSM) under which DSM will provide capacity for sweetener production at DSM's Brotas, Brazil manufacturing facility through December 2022. The deferred cost of products sold asset is being 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. During the three and nine months ended September 30, 2021, the Company expensed $0.2 million and $3.5 million, respectively, of the deferred cost of products sold asset to cost of products sold. During the three and nine months ended September 30, 2020, the Company expensed $0.7 million and $2.0 million, respectively, of the deferred cost of products sold asset to cost of products sold. Inception-to-date amortization through September 30, 2021 totaled $8.3 million.
Prepaid expenses and other current assets
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
September 30, 2021
|
December 31, 2020
|
|
Prepayments, advances and deposits
|
$
|
23,043
|
|
$
|
6,637
|
|
|
Non-inventory production supplies
|
3,306
|
|
3,989
|
|
|
Recoverable taxes from Brazilian government entities
|
1,065
|
|
1,063
|
|
|
Other
|
2,959
|
|
1,414
|
|
|
Total prepaid expenses and other current assets
|
$
|
30,373
|
|
$
|
13,103
|
|
Property, Plant and Equipment, Net
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
September 30, 2021
|
December 31, 2020
|
|
Machinery and equipment
|
$
|
51,641
|
|
$
|
50,415
|
|
|
Leasehold improvements
|
45,195
|
|
45,197
|
|
|
Computers and software
|
8,399
|
|
6,741
|
|
|
Furniture and office equipment, vehicles and land
|
3,714
|
|
3,507
|
|
|
Construction in progress
|
28,646
|
|
7,250
|
|
|
|
137,595
|
|
113,110
|
|
|
Less: accumulated depreciation and amortization
|
(84,471)
|
|
(80,235)
|
|
|
Property, plant and equipment, net
|
$
|
53,124
|
|
$
|
32,875
|
|
During the three and nine months ended September 30, 2021 and 2020, depreciation and amortization expense, including amortization of right-of-use assets under financing leases, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
(In thousands)
|
2021
|
2020
|
|
2021
|
2020
|
|
Depreciation and amortization expense
|
$
|
2,226
|
|
$
|
1,905
|
|
|
$
|
4,300
|
|
$
|
5,300
|
|
Goodwill
The changes in the carrying amount of goodwill were as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
September 30, 2021
|
|
Balance at beginning of year
|
$
|
—
|
|
|
Acquisitions
|
130,927
|
|
|
Effect of currency translation adjustment
|
(2,235)
|
|
|
Ending balance
|
$
|
128,692
|
|
Additions to goodwill during the nine months ended September 30, 2021 related to acquisitions completed during the period. See Note 7, "Acquisitions".
Intangible Assets, Net
During the nine months ended September 30, 2021, the Company recorded $40.1 million of intangible assets which related to customer relationships, and trademarks and trade names, developed technology and patents as a result of the acquisitions completed during the period. See Note 7, "Acquisitions".
The following table summarizes the components of intangible assets (in thousands, except estimated useful life):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
Amounts in thousands
|
Estimated Useful Life
(in Years)
|
Gross
|
Accumulated Amortization
|
Net
|
|
Trademarks and trade names
|
10
|
$
|
11,472
|
|
$
|
(301)
|
|
$
|
11,171
|
|
|
Customer relationships
|
5 - 16
|
8,187
|
|
(124)
|
|
8,063
|
|
|
Developed technology
|
12
|
19,884
|
|
(50)
|
|
19,834
|
|
|
Patents
|
17
|
600
|
|
(6)
|
|
594
|
|
|
Total intangible assets
|
|
$
|
40,143
|
|
$
|
(481)
|
|
$
|
39,662
|
|
The Company amortizes intangible assets on a straight-line basis over their useful lives. Amortization expense for intangible assets was approximately $0.3 million and $0.5 million for the three and nine months ended September 30, 2021 and is included in general and administrative expenses.
Total future amortization estimated as of September 30, 2021 is as follows (in thousands):
|
|
|
|
|
|
|
|
Amounts in thousands
|
|
|
2021 (remainder)
|
$
|
496
|
|
|
2022
|
2,287
|
|
|
2023
|
3,551
|
|
|
2024
|
4,590
|
|
|
2025
|
4,792
|
|
|
Thereafter
|
23,946
|
|
|
Total future amortization
|
$
|
39,662
|
|
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 to 10 years, and often include one or more options to renew. These renewal terms can extend the lease term for an additional 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 condensed 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 condensed 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 $11.0 million and $10.1 million of right-of-use assets as of September 30, 2021 and December 31, 2020, respectively. Operating lease liabilities were $14.5 million and $15.0 million as of September 30, 2021 and December 31, 2020, respectively. During the three months ended September 30, 2021 and 2020, respectively, the Company recorded $2.3 million and $2.1 million of operating lease amortization that was charged to expense, of which $0.3 million and $0.3 million was recorded to cost of products sold. During the nine months ended September 30, 2021 and 2020, respectively, the Company recorded $5.8 million and $5.9 million of operating lease amortization that was charged to expense, of which $0.7 million and $0.9 million 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 which may contain lease and non-lease components which it 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:
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2021
|
2020
|
|
Cash paid for operating lease liabilities, in thousands
|
$5,659
|
$5,759
|
|
Right-of-use assets obtained in exchange for new operating lease obligations, in thousands
|
$3,397
|
$—
|
|
Weighted-average remaining lease term
|
3.5
|
2.5
|
|
Weighted-average discount rate
|
17.6%
|
18.0%
|
Financing Leases
The Company has financing leases primarily for laboratory equipment. Assets purchased under financing leases are included in "Right-of-use assets under financing leases, net" on the condensed 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 $6.1 million and $4.6 million as of September 30, 2021 and December 31, 2020, respectively.
Maturities of Financing and Operating Leases
Maturities of lease liabilities as of September 30, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ending December 31:
(In thousands)
|
Financing
Leases
|
Operating
Leases
|
Total Leases
|
|
2021 (Remaining Three Months)
|
$
|
1,205
|
|
$
|
2,143
|
|
$
|
3,348
|
|
|
2022
|
21
|
|
8,896
|
|
8,917
|
|
|
2023
|
21
|
|
4,157
|
|
4,178
|
|
|
2024
|
21
|
|
739
|
|
760
|
|
|
2025
|
21
|
|
613
|
|
634
|
|
|
Thereafter
|
15
|
|
5,406
|
|
5,421
|
|
|
Total lease payments
|
1,304
|
|
21,954
|
|
23,258
|
|
|
Less: amount representing interest
|
(59)
|
|
(7,446)
|
|
(7,505)
|
|
|
Total lease liability
|
$
|
1,245
|
|
$
|
14,508
|
|
$
|
15,753
|
|
|
|
|
|
|
|
Current lease liability
|
$
|
1,182
|
|
$
|
6,786
|
|
$
|
7,968
|
|
|
Noncurrent lease liability
|
63
|
|
7,722
|
|
7,785
|
|
|
Total lease liability
|
$
|
1,245
|
|
$
|
14,508
|
|
$
|
15,753
|
|
Other Assets
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
September 30, 2021
|
December 31, 2020
|
|
Advance payment for manufacturing equipment
|
$
|
3,000
|
|
$
|
—
|
|
|
Equity-method investment
|
2,472
|
|
2,380
|
|
|
Deposits
|
130
|
|
128
|
|
|
Other
|
1,151
|
|
1,196
|
|
|
Total other assets
|
$
|
6,753
|
|
$
|
3,704
|
|
Accrued and Other Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
September 30, 2021
|
December 31, 2020
|
|
Beauty Labs deferred consideration payable(1)
|
$
|
31,921
|
|
$
|
—
|
|
|
Accrued interest
|
9,112
|
|
9,327
|
|
|
Payroll and related expenses
|
8,491
|
|
8,230
|
|
|
Asset retirement obligation(2)
|
3,371
|
|
3,041
|
|
|
Professional services
|
3,304
|
|
994
|
|
|
Contract termination fees
|
2,554
|
|
5,344
|
|
|
Tax-related liabilities
|
907
|
|
656
|
|
|
Ginkgo partnership payments obligation
|
878
|
|
878
|
|
|
Other
|
2,143
|
|
2,237
|
|
|
Total accrued and other current liabilities
|
$
|
62,681
|
|
$
|
30,707
|
|
______________
(1) The Beauty Labs deferred consideration will be settled with Amyris common stock in February 2022.See Note 7, "Acquisitions", for additional information.
(2) 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
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
September 30, 2021
|
December 31, 2020
|
|
Liability in connection with acquisition of equity-method investment
|
$
|
8,196
|
|
$
|
6,771
|
|
|
Ginkgo partnership payments obligation, net of current portion
|
8,076
|
|
7,277
|
|
|
Liability for unrecognized tax benefit
|
7,666
|
|
7,496
|
|
|
Contract liabilities, net of current portion
|
111
|
|
111
|
|
|
Other
|
130
|
|
1,099
|
|
|
Total other noncurrent liabilities
|
$
|
24,179
|
|
$
|
22,754
|
|
3. Fair Value Measurement
Liabilities Measured and Recorded at Fair Value on a Recurring Basis
The following tables summarize liabilities measured at fair value, and the respective fair value by input classification level within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
September 30, 2021
|
|
December 31, 2020
|
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Foris Convertible Note (LSA Amendment)
|
$
|
—
|
|
$
|
—
|
|
$
|
273,137
|
|
$
|
273,137
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
123,164
|
|
$
|
123,164
|
|
|
Contingent consideration
|
—
|
|
—
|
|
65,077
|
|
65,077
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Freestanding derivative instruments issued in connection with other debt and equity instruments
|
—
|
|
—
|
|
21,340
|
|
21,340
|
|
|
—
|
|
—
|
|
8,451
|
|
8,451
|
|
|
Embedded derivatives bifurcated from debt instruments
|
—
|
|
—
|
|
125
|
|
125
|
|
|
—
|
|
—
|
|
247
|
|
247
|
|
|
Senior Convertible Notes
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
53,387
|
|
53,387
|
|
|
Total liabilities measured and recorded at fair value
|
$
|
—
|
|
$
|
—
|
|
$
|
359,679
|
|
$
|
359,679
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
185,249
|
|
$
|
185,249
|
|
The Company did not hold any financial assets to be measured and recorded at fair value on a recurring basis as of September 30, 2021 and December 31, 2020. Also, there were no transfers between the levels during the nine months ended September 30, 2021 or the year ended December 31, 2020.
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 condensed 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 condensed consolidated statements of operations in the line captioned "Gain (loss) from change in fair value of debt".
Fair Value of Debt — Foris Convertible Note
At September 30, 2021, the contractual outstanding principal of the Foris Convertible Note was $50.0 million, and fair value was $273.1 million. The Company remeasured the fair value of the Foris Convertible Note under a binomial lattice model (which is discussed in further detail below) using the following inputs: (i) $13.73 stock price, (ii) 15% discount yield, (iii) 0.07% 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 three and nine months ended September 30, 2021, the Company recorded a gain of $52.3 million and a loss of $150.0 million, respectively, related to change in fair value of the Foris Convertible Note. The most sensitive input to the valuation model is the Company’s stock price in relation to the $3.00 conversion price.
Fair Value of Debt — Senior Convertible Notes
During the nine months ended September 30, 2021, the holders of the Senior Convertible notes elected to convert all of their $30.0 million principal into common stock. See Note 4, "Debt", for additional information.
For the three and nine months ended September 30, 2021, the Company recorded losses of zero and $54.4 million, respectively, from change in fair value of debt in connection with fair value remeasurement of the Senior Convertible Notes, as follows:
|
|
|
|
|
|
|
|
In thousands
|
|
|
Fair value at December 31, 2020
|
$
|
53,387
|
|
|
Loss from change in fair value
|
54,386
|
|
|
Less: principal converted into common stock
|
(30,020)
|
|
|
Less: fair value adjustment extinguished upon conversion of debt principal
|
(77,753)
|
|
|
Fair value at September 30, 2021
|
$
|
—
|
|
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.
Derivative Liabilities Recognized in Connection with the Issuance of Debt 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 embedded, measured at fair value using significant unobservable inputs (Level 3):
|
|
|
|
|
|
|
|
(In thousands)
|
Derivative Liability
|
|
Balance at December 31, 2020
|
$
|
8,698
|
|
|
Change in fair value of derivative instruments
|
12,826
|
|
|
Derecognition on settlement or extinguishment
|
(59)
|
|
|
Balance at September 30, 2021
|
$
|
21,465
|
|
Freestanding Derivative Instruments
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. In connection with entering into the forbearance agreements, the Company committed to issuing warrants (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 Warrants did not meet the derivative scope exception or equity classification criteria and was accounted for as a derivative liability and 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 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 September 30, 2021, the fair value of the contingently issuable Warrants derivative liability was $21.3 million. For the three and nine months ended September 30, 2021, the Company recorded a $4.8 million gain and a $12.9 million loss, respectively, on change in fair value of the freestanding derivative instruments.
Valuation Methodology and Approach to Measuring the Derivative Liabilities
Substantially all the outstanding liabilities associated with the Company’s derivatives at September 30, 2021 and December 31, 2020 represent the fair value of freestanding equity 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 instruments using the Black-Scholes-Merton option pricing model, which is discussed in more detail below.
The Company used the Black-Scholes-Merton option pricing model to determine the fair value of its liability classified warrants as of September 30, 2021 and December 31, 2020. Input assumptions for these freestanding instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Range for the Period
|
|
Input assumptions for liability classified warrants:
|
September 30, 2021
|
December 31, 2020
|
|
Fair value of common stock on issue date
|
$13.73
|
$2.56 – $6.18
|
|
Exercise price of warrants
|
$2.87
|
$2.87 – $3.25
|
|
Expected volatility
|
107%
|
94% – 117%
|
|
Risk-free interest rate
|
0.28%
|
0.13% – 1.58%
|
|
Expected term in years
|
2
|
1 – 2
|
|
Dividend yield
|
0.0
|
%
|
0.0 %
|
Changes in valuation assumptions can have a significant impact on the valuation of the 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.
Acquisition related contingent consideration
The fair value of acquisition related contingent consideration (Earnout Payments) was determined using a Monte Carlo simulation to estimate the probability of the acquired business units achieving the relevant financial and operational milestones. The model results reflect the time value of money, non-performance risk within the required time frame and the risk due to uncertainty in the estimated cash flows. Key inputs to the Monte Carlo simulation for the Costa Brazil acquisition were: Revenue Risk Adjustment of 27%, Annual Revenue Volatility of 68%, EBITDA Risk Adjustment of 32%, and Annual EBITDA Volatility of 85%. Key inputs to the Monte Carlo simulations for the Olika, MG Empower and Beauty Labs acquisitions were: Revenue Risk Adjustment of 1.5% to 2.3% and Annual Revenue Volatility of 12.5% to 15%. A significant decrease or increase in an acquired business unit’s financial performance and the timing of such changes could materially decrease or increase the fair value of contingent consideration period over period. Contingent consideration is recorded in other liabilities in the accompanying consolidated balance sheets.
The fair value of contingent consideration is classified as Level 3. The changes in fair value are as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
September 30, 2021
|
|
Beginning balance January 1, 2021
|
$
|
—
|
|
|
Costa Brazil
|
8,100
|
|
|
MG Empower
|
4,071
|
|
|
Olika
|
13,778
|
|
|
Beauty Labs
|
39,128
|
|
|
Change in fair value of contingent consideration
|
—
|
|
|
Ending balance September 30, 2021
|
$
|
65,077
|
|
Any change in the fair value of the contingent consideration liability is recognized in general and administrative expense and reflects the changes in the business unit’s expected performance over the remaining earnout period and the Company’s estimate of the likelihood of achieving the applicable operational milestones (see Note 7, “Acquisitions”).
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 other current 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 September 30, 2021 and at December 31, 2020, excluding the debt instruments recorded at fair value, was $49.2 million and $86.5 million, respectively. The fair value of such debt at September 30, 2021 and at December 31, 2020 was $54.6 million and $83.3 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
Net carrying amounts of debt are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
(In thousands)
|
Principal
|
Unaccreted Debt Discount
|
Change in Fair Value
|
Net
|
|
Principal
|
Unaccreted Debt Discount
|
Change in Fair Value
|
Net
|
|
Convertible notes payable
|
|
|
|
|
|
|
|
|
|
|
Senior convertible notes
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
30,020
|
|
$
|
—
|
|
$
|
23,367
|
|
$
|
53,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party convertible notes payable
|
|
|
|
|
|
|
|
|
|
|
Foris convertible note (due July 2022)
|
50,041
|
|
—
|
|
223,096
|
|
273,137
|
|
|
50,041
|
|
—
|
|
73,123
|
|
123,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans payable and credit facilities
|
|
|
|
|
|
|
|
|
|
|
Ginkgo note (due October 2022)
|
12,000
|
|
—
|
|
—
|
|
12,000
|
|
|
12,000
|
|
—
|
|
—
|
|
12,000
|
|
|
Naxyris note(1) (due July 2022)
|
23,914
|
|
(248)
|
|
|
23,666
|
|
|
23,914
|
|
(493)
|
|
—
|
|
23,421
|
|
|
Nikko notes (maturity date January 2026)
|
128
|
|
—
|
|
—
|
|
128
|
|
|
2,802
|
|
(759)
|
|
—
|
|
2,043
|
|
|
Schottenfeld notes
|
—
|
|
—
|
|
—
|
|
—
|
|
|
12,500
|
|
(240)
|
|
—
|
|
12,260
|
|
|
Other loans payable (revolving)
|
919
|
|
—
|
|
—
|
|
919
|
|
|
1,227
|
|
—
|
|
—
|
|
1,227
|
|
|
|
36,961
|
|
(248)
|
|
—
|
|
36,713
|
|
|
52,443
|
|
(1,492)
|
|
—
|
|
50,951
|
|
|
Related party loans payable
|
|
|
|
|
|
|
|
|
|
|
DSM notes (due April 2022)
|
10,000
|
|
(2,504)
|
|
—
|
|
7,496
|
|
|
33,000
|
|
(2,443)
|
|
—
|
|
30,557
|
|
|
Foris note (due December 2022)
|
5,000
|
|
—
|
|
—
|
|
5,000
|
|
|
5,000
|
|
—
|
|
—
|
|
5,000
|
|
|
|
15,000
|
|
(2,504)
|
|
—
|
|
12,496
|
|
|
38,000
|
|
(2,443)
|
|
—
|
|
35,557
|
|
|
Total debt
|
$
|
102,002
|
|
$
|
(2,752)
|
|
$
|
223,096
|
|
322,346
|
|
|
$
|
170,504
|
|
$
|
(3,935)
|
|
$
|
96,490
|
|
263,059
|
|
|
Less: current portion
|
|
|
|
(305,247)
|
|
|
|
|
|
(77,437)
|
|
|
Long-term debt, net of current portion
|
|
|
|
$
|
17,099
|
|
|
|
|
|
$
|
185,622
|
|
(1) Naxyris was a related party at December 31, 2020, but ceased to be a related party upon Carole Piwnica’s departure from the Company’s Board of Directors on May 29, 2021. For the purpose of comparability, the condensed consolidated balance sheets classify the Naxyris note as nonrelated party debt at both September 30, 2021 and December 31, 2020.
Senior Convertible Notes Conversions
On February 4, 2021, the Company received a notice of conversion from HT Investments MA, LLC (HT) with respect to $20.0 million of its outstanding Senior Convertible Notes, pursuant to which the Company was required to issue 5.7 million shares of common stock per the conversion price stated in the agreement and cancelled the outstanding Note. Also, 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, and as a result the Company net settled the $20 million principal conversion by issuing 3.1 million of incremental shares to HT. Upon conversion of the HT Senior Convertible Note, the Company recorded a $31.9 million loss upon extinguishment of debt, which was primarily comprised of a fair value adjustment upon repayment of the note's principal.
On May 18 and 26, 2021, the Company received notices of conversion from Blackwell Partners LLS - Series B (Blackwell) and Silverback Opportunistic Credit Master Fund Limited (Silverback) with respect to $10.0 million of their outstanding Senior Convertible Notes, pursuant to which the Company was required to issue 2.9 million shares of common stock per the conversion price stated in the agreement and cancelled the outstanding Notes. Upon conversion of the Blackwell and Silverback Senior Convertible Notes, the Company recorded a $0.9 million gain upon extinguishment of debt related to accrued interest that was no longer due upon conversion.
See the Company's 2020 Form 10-K, Note 4, “Debt” for additional information regarding the Senior Convertible Notes.
Schottenfeld Note Exchange
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 4.1 million net shares of common stock in a cashless 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.
Upon conversion of the Schottenfeld note balance, the Company recorded a $28.9 million loss upon extinguishment of debt, which primarily represented the fair value of common shares issued in excess of debt principal extinguished.
See the Company's 2020 Form 10-K, Note 4, “Debt” for additional information regarding the Schottenfeld Notes.
DSM Notes Amendments and Repayment
On December 28, 2017, the Company and DSM Finance, a wholly owned subsidiary of Koninklijke DSM N.V. (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 and issued a promissory note to DSM Finance. The $25 million Note matures on December 31, 2021 and accrues interest at 10% per annum, payable quarterly.
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. In September 2019, the Company borrowed the $8.0 million in three installments. 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, payable quarterly and (iii) are secured by a first-priority lien on certain Company intellectual property licensed to DSM.
In March 2021, the Company entered into amendments (the March 2021 Amendments) to the $25 million Note and the $8 million Note that provided for (i) the prepayment of the $8 million Note, (ii) a $15 million partial prepayment of the $25 million Note and (iii) extension of the maturity date from December 31, 2021 to April 15, 2022 for the remaining $10 million principal balance under the $25 million Note, in exchange for a $2.5 million prepayment fee The Company repaid $23 million on March 31, 2021 to extinguish the $8 million Note and to partially repay the $25 million Note.
The Company evaluated the March 2021 Amendments, and concluded the before and after cash flows resulting from the amendments were not significantly different and accounted for the amendments to the Notes as a debt modification. Consequently, the $2.5 million Prepayment Fee was recorded as an incremental debt discount to the remaining $10 million principal balance under the $25 million Note. The Company will accrete the adjusted discount over the Note’s amended remaining term using the effective interest method.
See the Company's 2020 Form 10-K, Note 4, “Debt” for additional information regarding the DSM notes.
Nikko Note Extinguishment
In July 2021, the Company repaid the remaining $2.5 million principal on a note owed to Nikko Chemicals Co., Ltd. The note was scheduled to mature in December 2029. At the repayment date, there was $0.7 million of unaccreted debt discount on the note, which the Company extinguished, resulting in a $0.7 million loss on extinguishment of debt for the three months ended September 30, 2021.
Future Minimum Payments
Future minimum payments under the Company's debt agreements as of September 30, 2021 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Loans
Payable and Credit Facilities
|
Related Party Convertible Notes
|
Related Party Loans Payable and Credit Facilities
|
Total
|
|
2021 (Remaining Three Months)
|
|
$
|
2,155
|
|
$
|
—
|
|
$
|
500
|
|
$
|
2,655
|
|
|
2022
|
|
38,381
|
|
59,578
|
|
16,898
|
|
114,857
|
|
|
2023
|
|
33
|
|
—
|
|
—
|
|
33
|
|
|
2024
|
|
32
|
|
—
|
|
—
|
|
32
|
|
|
2025
|
|
30
|
|
—
|
|
—
|
|
30
|
|
|
Thereafter
|
|
6
|
|
—
|
|
—
|
|
6
|
|
|
Total future minimum payments
|
|
40,637
|
|
59,578
|
|
17,398
|
|
117,613
|
|
|
Less: amount representing interest
|
|
(3,676)
|
|
(9,537)
|
|
(2,398)
|
|
(15,611)
|
|
|
Present value of minimum debt payments
|
|
36,961
|
|
50,041
|
|
15,000
|
|
102,002
|
|
|
Less: current portion of debt principal
|
|
(24,862)
|
|
(50,041)
|
|
(10,000)
|
|
(84,903)
|
|
|
Noncurrent portion of debt principal
|
|
$
|
12,099
|
|
$
|
—
|
|
$
|
5,000
|
|
$
|
17,099
|
|
5. Mezzanine Equity
Gates Foundation
Contingently redeemable common stock as of September 30, 2021 and December 31, 2020 is comprised of proceeds from shares of common stock sold on May 10, 2016 to the Bill & Melinda Gates Foundation (the Gates Foundation). In connection with the stock sale, the Company and the Gates Foundation entered into an agreement under which the Company agreed to expend an aggregate amount not less than the proceeds from the stock sale 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. If the Company defaults on its obligation to use the proceeds from the stock sale as set forth above or defaults under certain other commitments in the agreement, the Gates Foundation will have the right to request that the Company redeem, or facilitate the purchase by a third party, the 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%. The Company concluded a redemption event was not probable to occur. As of September 30, 2021, the Company's remaining research and development obligation under this arrangement was $0.3 million.
Ingredion Contingently Redeemable Noncontrolling Interest in Subsidiary
On June 1, 2021, the Company entered into a Membership Interest Purchase Agreement (MIPA) with Ingredion Corporation (Ingredion) to purchase 31% of the member units in RealSweet LLC (RealSweet), a 100% owned Amyris, Inc. subsidiary. Total consideration was $28.5 million in the form of a $10 million cash payment, the exchange of a $4 million payable previously due to Ingredion and $14.5 million of manufacturing intellectual property rights. The terms of the MIPA provide both parties with put/call rights under certain circumstances, including the occurrence of either or both of the following: (i) a change in ownership of fifty percent (50%) or more of the voting shares of such Member; or (ii) a change in the right to appoint or remove a majority of the board of directors of such Member. The Company concluded this change in control provision was not solely within its control and Ingredion’s contingently redeemable noncontrolling interest should be reflected outside of permanent equity in accordance with SEC’s Accounting Series Release 268, Presentation in Financial Statements of Redeemable Preferred Stocks (ASR 268).
The redemption price of this common-share noncontrolling interest is considered to be at fair value on the redemption date. Ingredion’s noncontrolling interest is not currently redeemable and the Company concluded a contingent redemption event is not probable to occur. The primary redemption contingency relates to a decrease in Ingredion’s ownership percentage below 8.4%, which is not likely to occur given that capital transactions require the unanimous consent of each member. Consequently, the noncontrolling interest will not be subsequently remeasured to its redemption amount until such contingency event and the related redemption are probable to occur; however, the Company will continue to reflect the attribution of any losses and distribution of dividends to the noncontrolling interest each quarter in accordance with ASC 810-10. The Company recorded the $28.5 million noncontrolling interest in RealSweet as Mezzanine equity - contingently redeemable noncontrolling interest, which represents the value of Ingredion’s 31% ownership interest in the net assets of the RealSweet subsidiary and recorded a $14.5 million decrease to additional paid in capital for the difference between the fair value of the consideration received and Ingredion's ownership interest claims against the net assets of the RealSweet subsidiary. Under the terms of the MIPA, Amyris, Inc., is funding the cash construction costs of the project, which are estimated to be approximately $72 million. As of
September 30, 2021, the Company has funded approximately $42.5 million towards the project and has $40.3 million of contractual purchase commitments for construction related costs.
6. Stockholders' Deficit
Primary Offering
On April 8, 2021, the Company entered into an underwriting agreement (the Underwriting Agreement) with J.P. Morgan Securities LLC and Cowen and Company, LLC (the Underwriters), pursuant to which the Company agreed to issue and sell 7,656,822, at a public offering price of $15.75 per share. Under the terms of the Underwriting Agreement, the Company granted the Underwriters a 30-day option to purchase up to an additional 1,148,523 shares of Common Stock from Amyris. The Underwriters exercised this option in full.
Net proceeds to the Company from the 8,805,345 new shares issued by the Company were $130.8 million (inclusive of the underwriters’ option to purchase additional shares), after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.
Warrants and Rights Activity Summary
In connection with various debt and equity transactions (see Note 4, “Debt” above, and Note 4, "Debt" and Note 6, “Stockholders’ Deficit” in Part II, Item 8 of the 2020 Form 10-K), the Company has issued warrants exercisable for shares of common stock. The following table summarizes warrants outstanding at September 30, 2021:
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|
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|
Transaction
|
Year Issued
|
Expiration Date
|
|
|
|
|
|
|
|
|
|
|
|
|
Number Outstanding as of September 30, 2021
|
Exercise Price per Share as of September 30, 2021
|
|
Silverback warrant
|
2020
|
July 10, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000
|
|
$
|
3.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2020 warrant exercise right shares
|
2020
|
January 31, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
431,378
|
|
$
|
2.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
|
|
|
May 2019 6.50% Note Exchange warrants
|
2019
|
January 31, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
960,225
|
|
$
|
2.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 2017 cash warrants
|
2017
|
July 10, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
1,863,056
|
|
$
|
2.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 2017 dilution warrant
|
2017
|
July 10, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
56,910
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2015 related party debt exchange
|
2015
|
July 29, 2025
|
|
|
|
|
|
|
|
|
|
|
|
|
58,690
|
|
$
|
0.15
|
|
|
Other
|
2011
|
December 23, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
1,406
|
|
$
|
160.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,371,665
|
|
|
Warrant Exercises
During the nine months ended September 30, 2021, warrant-holders exercised warrants to purchase 40.1 million shares of the Company’s common stock at a weighted-average exercise price of $2.67 per share, for proceeds to the Company of $55.4 million.
7. Acquisitions
The purchase accounting for the net assets acquired, including goodwill, and the fair value of the contingent consideration for the following acquisitions is preliminarily recorded based on available information and incorporates management's best estimates. The purchase accounting for taxes remains preliminary pending receipt of certain information required to finalize the determination of fair value. The net assets acquired in the transaction are generally recorded at their estimated acquisition-date fair values, while transaction costs associated with the acquisition are expensed as incurred. These transactions were accounted for by the acquisition method, and accordingly, the results of operations were included in the Company’s consolidated financial statements from their respective acquisition dates. Pro forma financial information is not presented as amounts are not material to the Company’s consolidated financial statements.
Costa Brazil
On May 7, 2021, the Company acquired 100% of the outstanding equity of Upland 1 LLC, also known as Costa Brazil, a privately held company providing consumer products made and inspired by pure, potent, enriching ingredients, sustainably sourced from the Brazilian Amazon. The acquisition allows the Company to further expand its consumer product offering and to leverage its science platform and fermentation technology to develop and scale Costa Brazil products.
Costa Brazil was acquired for total purchase consideration with a fair value of $11.6 million. The following table summarizes the components of the purchase consideration:
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|
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|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Paid at Closing
|
Contingent Consideration
|
Total
|
|
Cash payments
|
$
|
314
|
|
$
|
—
|
|
$
|
314
|
|
|
Amyris common stock value
|
3,167
|
|
70,000
|
|
73,167
|
|
|
Fair value adjustments
|
—
|
|
(61,900)
|
|
(61,900)
|
|
|
Total consideration
|
$
|
3,481
|
|
$
|
8,100
|
|
$
|
11,581
|
|
Total contractual contingent payments based on achieving 100% of the at-target measurement range from $0 to $70 million and are payable annually up to $10 million each year for six years after acquisition plus a one-time $10 million payment, upon the successful achievement of annual product revenue targets and certain cost milestones. The $70 million of at-target contingent consideration payments have been adjusted to fair value based on the passage of time and likelihood of achieving the relevant milestones (see Note 3, "Fair Value Measurement") and are recorded as other liabilities in the accompanying condensed consolidated balance sheets. Allocation of the contingent consideration payments between short-term and long-term liabilities on the accompanying consolidated balance sheets is based on management’s best estimates of when the relevant milestone will be achieved.
The $11.6 million total purchase consideration is allocated to tangible net assets, identifiable intangible assets related to trademarks, trade names, website domain names, other social media intellectual property and customer relationships based on the estimated fair value of each asset. The excess purchase price over the fair value of the net assets and identifiable intangible assets was recorded as goodwill. Goodwill represents the value of the acquired workforce, time to market and the synergies generated between the Company and Costa Brazil (see Note 2, "Balance Sheet Details").
The following table summarizes the purchase price allocation:
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Net tangible assets
|
$
|
(540)
|
|
|
Trademarks, trade names and other intellectual property
|
6,949
|
|
|
Customer relationships
|
1,158
|
|
|
Goodwill
|
4,014
|
|
|
Total consideration
|
$
|
11,581
|
|
Acquisition-related costs totaled $0.3 million and are included in general and administrative expense.
MG Empower Ltd.
On August 11, 2021, the Company entered into a Share Purchase Agreement with MG Empower Ltd. (MG Empower) and the securityholders of MG Empower for the acquisition of the outstanding shares of MG Empower, a U.K.-based privately held company providing influencer marketing and digital innovation services. Amyris' acquisition of MG Empower represents its
continued investment in the future of marketing innovation by establishing a unique operating model that places digital technology and influencer marketing at the core of its consumer growth strategy.
MG Empower was acquired for total purchase consideration of $14.6 million, consisting of cash of $3.1 million, Amyris stock of $7.4 million and contingent consideration with a fair value of $4.1 million. The contingent consideration consists of three potential payments (the Earnout Payments) of up to $20.0 million in total that are based on achieving certain thresholds of revenue for the calendar years ending on December 31, 2022, December 31, 2023 and December 31, 2024. The portion of the Earnout Payments due to the nonemployee shareholders are treated as consideration transferred, the fair value of which in the amount of $4.1 million is recorded as other liabilities in the accompanying condensed consolidated balance sheets. Allocation of the contingent consideration payments between short-term and long-term liabilities on the accompanying consolidated balance sheets is based on management’s best estimates of when the relevant milestone will be achieved.
The following table summarizes the purchase price allocation:
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Net tangible assets
|
$
|
(800)
|
|
|
Trademarks, trade names and other intellectual property
|
1,900
|
|
|
Customer relationships and influencer network database
|
2,600
|
|
|
Goodwill
|
10,871
|
|
|
Total consideration
|
$
|
14,571
|
|
Olika Inc.
On August 11, 2021, the Company entered into an Agreement and Plan of Merger and Reorganization with OLIKA Inc. (Olika), and the other parties thereto, and a Note Purchase Agreement with Olika and the selling stockholders party thereto, for the acquisition of Olika and the purchase of outstanding notes from certain Olika noteholders, respectively. Olika was a privately held company specializing in the clean wellness category, combining safe and effective ingredients and nature-inspired design packages. The acquisition of Olika furthers the Company's growth in clean health and beauty, and complements the Company's family of consumer brands.
Olika was acquired for total purchase consideration of $29.9 million, consisting of cash of $1.8 million, Amyris stock of $14.3 million and contingent consideration with a fair value of $13.8 million. The contingent consideration consists of i) two potential payments of $5.0 million each that are based on achieving certain thresholds of revenue for the calendar years ending on December 31, 2022 and December 31, 2023 (the Revenue Earnout Payments) and; ii) two potential payments of $2.5 million each that are based on continuing employment of certain key management during predetermined measurement periods (the Retention Earnout Payments). The Revenue Earnout Payments to all selling stockholders and the portion of the Retention Earnout Payments to the nonemployee shareholders totaling $15.0 million are treated as consideration transferred. The aggregate fair value of $13.8 million is recorded as other liabilities in the accompanying condensed consolidated balance sheets. Allocation of the contingent consideration payments between short-term and long-term liabilities on the accompanying consolidated balance sheets is based on management’s best estimates of when the relevant milestone will be achieved.
The following table summarizes the purchase price allocation:
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Net tangible assets
|
$
|
1,764
|
|
|
Trademarks, trade names and other intellectual property
|
1,500
|
|
|
Customer relationships
|
4,500
|
|
|
Patents
|
600
|
|
|
Goodwill
|
21,545
|
|
|
Total consideration
|
$
|
29,909
|
|
Beauty Labs International, Ltd.
On August 31, 2021, the Company entered into a Share Purchase Agreement with Beauty Labs International Limited (Beauty Labs) and the shareholders and warrant holders of Beauty Labs as set forth therein, and an Option Cancellation Agreement with Beauty Labs and the option holders of Beauty Labs as set forth therein for the acquisition of the outstanding shares of Beauty Labs and the cancellation of outstanding Beauty Labs warrants and stock options, respectively. Beauty Labs is a U.K.-based data sciences and machine learning technology company that has developed one of the leading consumer
applications for "try before you buy" color cosmetics. The acquisition of Beauty Labs accelerates the Company's growth and market leadership in clean beauty by adding digital innovation, machine learning and data science to further enhance the consumer experience of its family of consumer brands.
Beauty Labs was acquired for total purchase consideration of $115.9 million, consisting of cash of $15.2 million (including deferred cash consideration of $1.9 million payable to the shareholders of Beauty Labs shortly after the acquisition), Amyris stock of $61.6 million (including deferred stock consideration of $30 million payable within six months after the closing date) and contingent consideration with a fair value of $39.1 million. The contingent consideration consists of two potential payments that are based on future revenue of up to $31.3 million each, with additional payments due in case of overperformance (together, the Earnout Payments) for the calendar years ending on December 31, 2022 and December 31, 2023. The portion of the Earnout Payments due to the nonemployee shareholders are treated as consideration transferred, the fair value of which in the amount of $39.1 million is recorded as other liabilities in the accompanying condensed consolidated balance sheets. Allocation of the contingent consideration payments between short-term and long-term liabilities on the accompanying consolidated balance sheets is based on management’s best estimates of when the relevant milestone will be achieved.
The following table summarizes the purchase price allocation:
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Net tangible assets
|
$
|
(134)
|
|
|
Trademarks, trade names and other intellectual property
|
1,200
|
|
|
Developed technology
|
20,300
|
|
|
Goodwill
|
94,499
|
|
|
Total consideration
|
$
|
115,865
|
|
8. Net Loss per Share Attributable to Common Stockholders
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 loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
(In thousands, except shares and per share amounts)
|
2021
|
2020
|
|
2021
|
2020
|
|
Numerator:
|
|
|
|
|
|
|
Net loss attributable to Amyris, Inc.
|
$
|
(32,944)
|
|
$
|
(23,156)
|
|
|
$
|
(308,814)
|
|
$
|
(221,422)
|
|
|
Less: deemed dividend to preferred stockholders upon conversion of Series E preferred stock
|
—
|
|
(67,151)
|
|
|
—
|
|
(67,151)
|
|
|
Less: loss allocated to participating securities
|
—
|
|
6,832
|
|
|
787
|
|
15,369
|
|
|
Net loss attributable to Amyris, Inc. common stockholders, basic
|
$
|
(32,944)
|
|
$
|
(83,475)
|
|
|
$
|
(308,027)
|
|
$
|
(273,204)
|
|
|
Adjustment to earnings allocated to participating securities
|
—
|
|
744
|
|
|
—
|
|
120
|
|
|
Interest on convertible debt
|
767
|
|
1,081
|
|
|
—
|
|
317
|
|
|
Gain from change in fair value of debt
|
(52,294)
|
|
(17,221)
|
|
|
—
|
|
(5,945)
|
|
|
Net loss attributable to Amyris, Inc. common stockholders, diluted
|
$
|
(84,471)
|
|
$
|
(98,871)
|
|
|
$
|
(308,027)
|
|
$
|
(278,712)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, basic
|
300,888,579
|
|
227,267,553
|
|
|
286,919,463
|
|
189,192,973
|
|
|
Net loss per share, basic
|
$
|
(0.11)
|
|
$
|
(0.37)
|
|
|
$
|
(1.07)
|
|
$
|
(1.44)
|
|
|
|
|
|
|
|
|
|
Weighted-average shares of common stock outstanding
|
300,888,579
|
|
227,267,553
|
|
|
286,919,463
|
|
189,192,973
|
|
|
Effect of dilutive convertible debt
|
16,680,334
|
|
15,464,681
|
|
|
—
|
|
2,313,526
|
|
|
Weighted-average shares of common stock equivalents used in computing net loss per share of common stock, diluted
|
317,568,913
|
|
242,732,234
|
|
|
286,919,463
|
|
191,506,499
|
|
|
Net loss per share, diluted
|
$
|
(0.27)
|
|
$
|
(0.41)
|
|
|
$
|
(1.07)
|
|
$
|
(1.46)
|
|
For the three months ended September 30, 2021 and 2020 and for the nine months ended September 30, 2020, basic income per share differed from diluted loss per share, because the inclusion of all potentially dilutive securities outstanding was dilutive. For the nine months ended September 30, 2021, basic loss per share equaled diluted loss per share, because the inclusion of all potentially dilutive securities outstanding was antidilutive. The following table presents outstanding shares of potentially dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2021
|
2020
|
|
2021
|
2020
|
|
Period-end common stock warrants
|
4,256,065
|
43,298,741
|
|
4,256,065
|
43,298,741
|
|
Convertible promissory notes(1)
|
—
|
—
|
|
16,680,334
|
8,574,399
|
|
Period-end stock options to purchase common stock
|
3,157,279
|
6,571,703
|
|
3,157,279
|
6,571,703
|
|
Period-end restricted stock units
|
14,127,109
|
7,722,630
|
|
14,127,109
|
7,722,630
|
|
Period-end preferred stock
|
—
|
1,943,661
|
|
—
|
1,943,661
|
|
Total potentially dilutive securities excluded from computation of diluted loss per share
|
21,540,453
|
59,536,735
|
|
38,220,787
|
68,111,134
|
______________
(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 September 30, 2021 and December 31, 2020.
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.
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, 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. In early 2021, the parties attended court-ordered mediation, but as the case did not settle, the parties commenced discovery. On July 30, 2021, plaintiffs filed a motion seeking class certification and the Company filed its opposition on September 24, 2021.
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 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 attended a preliminary hearing on 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. In response, the Kimbrough complaint was dismissed in federal court on March 4, 2021 and refiled in state court on March 12, 2021. By agreement, the Kimbrough and Bonner complaints were consolidated for all purposes on April 9, 2021. The motion to dismiss was granted without prejudice on June 30, 2021, whereby the plaintiffs must file an amended complaint. The Company believes the securities class action and 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 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). The Company 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 court denied the Company's motions on July 26, 2021, and the Company appealed the court's ruling regarding its motion to compel arbitration on July 27, 2021. 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, and are not predictable with reasonable assurance; therefore, an estimate of all the reasonably possible losses cannot be determined at this time. 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 condensed consolidated financial statements for the relevant reporting period could be materially adversely affected.
10. Revenue Recognition, and Contract Assets and Liabilities
Disaggregation of Revenue
The following table presents revenue by major product and service, as well as by primary geographical market, based on the location of the customer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
(In thousands)
|
2021
|
|
2020
|
|
|
Renewable Products
|
Licenses and Royalties
|
Collaborations, Grants and Other
|
Total
|
|
Renewable Products
|
Licenses and Royalties
|
Collaborations, Grants and Other
|
Total
|
|
North America
|
$
|
29,255
|
|
$
|
6
|
|
$
|
495
|
|
$
|
29,756
|
|
|
$
|
20,759
|
|
$
|
—
|
|
$
|
263
|
|
$
|
21,022
|
|
|
Europe
|
3,793
|
|
6,000
|
|
3,059
|
|
12,852
|
|
|
3,752
|
|
3,563
|
|
919
|
|
8,234
|
|
|
Asia
|
2,598
|
|
—
|
|
1,798
|
|
4,396
|
|
|
1,542
|
|
—
|
|
1,936
|
|
3,478
|
|
|
Brazil
|
457
|
|
—
|
|
—
|
|
457
|
|
|
1,298
|
|
—
|
|
—
|
|
1,298
|
|
|
Other
|
405
|
|
—
|
|
—
|
|
405
|
|
|
226
|
|
—
|
|
—
|
|
226
|
|
|
|
$
|
36,508
|
|
$
|
6,006
|
|
$
|
5,352
|
|
$
|
47,866
|
|
|
$
|
27,577
|
|
$
|
3,563
|
|
$
|
3,118
|
|
$
|
34,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
(In thousands)
|
2021
|
|
2020
|
|
|
Renewable Products
|
Licenses and Royalties
|
Collaborations, Grants and Other
|
Total
|
|
Renewable Products
|
Licenses and Royalties
|
Collaborations, Grants and Other
|
Total
|
|
North America
|
$
|
79,574
|
|
$
|
11,006
|
|
$
|
745
|
|
$
|
91,325
|
|
|
$
|
49,568
|
|
$
|
—
|
|
$
|
263
|
|
$
|
49,831
|
|
|
Europe
|
9,265
|
|
149,800
|
|
8,309
|
|
167,374
|
|
|
10,100
|
|
9,714
|
|
6,073
|
|
25,887
|
|
|
Asia
|
10,932
|
|
—
|
|
5,322
|
|
16,254
|
|
|
7,901
|
|
—
|
|
6,724
|
|
14,625
|
|
|
Brazil
|
1,102
|
|
—
|
|
—
|
|
1,102
|
|
|
2,546
|
|
—
|
|
—
|
|
2,546
|
|
|
Other
|
986
|
|
—
|
|
—
|
|
986
|
|
|
504
|
|
—
|
|
—
|
|
504
|
|
|
|
$
|
101,859
|
|
$
|
160,806
|
|
$
|
14,376
|
|
$
|
277,041
|
|
|
$
|
70,619
|
|
$
|
9,714
|
|
$
|
13,060
|
|
$
|
93,393
|
|
The following table presents revenue by major product and service, as well as by management classification:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
(In thousands)
|
2021
|
|
2020
|
|
|
Renewable Products
|
Licenses and Royalties
|
Grants, Collaborations and Other
|
Total
|
|
Renewable Products
|
Licenses and Royalties
|
Grants, Collaborations and Other
|
Total
|
|
Consumer
|
$
|
22,984
|
|
$
|
6
|
|
$
|
—
|
|
$
|
22,990
|
|
|
$
|
12,309
|
|
$
|
—
|
|
$
|
—
|
|
$
|
12,309
|
|
|
Ingredients
|
13,524
|
|
—
|
|
—
|
|
13,524
|
|
|
15,268
|
|
3,563
|
|
—
|
|
18,831
|
|
|
R&D and other services
|
—
|
|
6,000
|
|
5,352
|
|
11,352
|
|
|
—
|
|
—
|
|
3,118
|
|
3,118
|
|
|
|
$
|
36,508
|
|
$
|
6,006
|
|
$
|
5,352
|
|
$
|
47,866
|
|
|
$
|
27,577
|
|
$
|
3,563
|
|
$
|
3,118
|
|
$
|
34,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
(In thousands)
|
2021
|
|
2020
|
|
|
Renewable Products
|
Licenses and Royalties
|
Grants, Collaborations and Other
|
Total
|
|
Renewable Products
|
Licenses and Royalties
|
Grants, Collaborations and Other
|
Total
|
|
Consumer
|
$
|
59,583
|
|
$
|
6
|
|
$
|
—
|
|
$
|
59,589
|
|
|
$
|
34,362
|
|
$
|
—
|
|
$
|
—
|
|
$
|
34,362
|
|
|
Ingredients
|
42,276
|
|
153,800
|
|
—
|
|
196,076
|
|
|
36,257
|
|
9,714
|
|
—
|
|
45,971
|
|
|
R&D and other services
|
—
|
|
7,000
|
|
14,376
|
|
21,376
|
|
|
—
|
|
—
|
|
13,060
|
|
13,060
|
|
|
|
$
|
101,859
|
|
$
|
160,806
|
|
$
|
14,376
|
|
$
|
277,041
|
|
|
$
|
70,619
|
|
$
|
9,714
|
|
$
|
13,060
|
|
$
|
93,393
|
|
Revenue from Significant Revenue Agreements
In connection with the significant revenue agreements discussed below and others previously disclosed (see Note 10, “Revenue Recognition” in Part II, Item 8 of the 2020 Form 10-K), the Company recognized the following revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
(In thousands)
|
2021
|
|
2020
|
|
|
Renewable Products
|
Licenses and Royalties
|
Collaborations, Grants and Other
|
Total
|
|
Renewable Products
|
Licenses and Royalties
|
Collaborations, Grants and Other
|
Total
|
|
DSM - related party
|
$
|
6,214
|
|
$
|
6,000
|
|
$
|
2,000
|
|
$
|
14,214
|
|
|
$
|
88
|
|
$
|
—
|
|
$
|
750
|
|
$
|
838
|
|
|
Sephora
|
9,080
|
|
—
|
|
—
|
|
9,080
|
|
|
3,501
|
|
—
|
|
—
|
|
3,501
|
|
|
Yifan
|
—
|
|
—
|
|
1,798
|
|
1,798
|
|
|
—
|
|
—
|
|
1,937
|
|
1,937
|
|
|
Firmenich
|
127
|
|
—
|
|
555
|
|
682
|
|
|
5,099
|
|
3,563
|
|
—
|
|
8,662
|
|
|
PureCircle
|
44
|
|
—
|
|
—
|
|
44
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Givaudan
|
—
|
|
—
|
|
—
|
|
—
|
|
|
2,059
|
|
—
|
|
—
|
|
2,059
|
|
|
Subtotal revenue from significant revenue agreements
|
15,465
|
|
6,000
|
|
4,353
|
|
25,818
|
|
|
10,747
|
|
3,563
|
|
2,687
|
|
16,997
|
|
|
Revenue from all other customers
|
21,043
|
|
6
|
|
999
|
|
22,048
|
|
|
16,830
|
|
—
|
|
431
|
|
17,261
|
|
|
Total revenue from all customers
|
$
|
36,508
|
|
$
|
6,006
|
|
$
|
5,352
|
|
$
|
47,866
|
|
|
$
|
27,577
|
|
$
|
3,563
|
|
$
|
3,118
|
|
$
|
34,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
(In thousands)
|
2021
|
|
2020
|
|
|
Renewable Products
|
Licenses and Royalties
|
Collaborations, Grants and Other
|
Total
|
|
Renewable Products
|
Licenses and Royalties
|
Collaborations, Grants and Other
|
Total
|
|
DSM - related party
|
$
|
12,495
|
|
$
|
149,612
|
|
$
|
6,000
|
|
$
|
168,107
|
|
|
$
|
193
|
|
$
|
3,750
|
|
$
|
5,019
|
|
$
|
8,962
|
|
|
Sephora
|
21,599
|
|
—
|
|
—
|
|
21,599
|
|
|
10,389
|
|
—
|
|
—
|
|
10,389
|
|
|
Yifan
|
—
|
|
—
|
|
5,322
|
|
5,322
|
|
|
90
|
|
—
|
|
6,675
|
|
6,765
|
|
|
PureCircle
|
2,297
|
|
10,000
|
|
—
|
|
12,297
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Firmenich
|
506
|
|
187
|
|
1,328
|
|
2,021
|
|
|
7,308
|
|
5,964
|
|
454
|
|
13,726
|
|
|
Givaudan
|
210
|
|
—
|
|
—
|
|
210
|
|
|
5,328
|
|
—
|
|
—
|
|
5,328
|
|
|
Subtotal revenue from significant revenue agreements
|
37,107
|
|
159,799
|
|
12,650
|
|
209,556
|
|
|
23,308
|
|
9,714
|
|
12,148
|
|
45,170
|
|
|
Revenue from all other customers
|
64,752
|
|
1,007
|
|
1,726
|
|
67,485
|
|
|
47,311
|
|
—
|
|
912
|
|
48,223
|
|
|
Total revenue from all customers
|
$
|
101,859
|
|
$
|
160,806
|
|
$
|
14,376
|
|
$
|
277,041
|
|
|
$
|
70,619
|
|
$
|
9,714
|
|
$
|
13,060
|
|
$
|
93,393
|
|
DSM License Agreement and Contract Assignment
On March 31, 2021, the Company and DSM entered into a license agreement and asset purchase agreement pursuant to which DSM acquired exclusive rights to the Company’s Flavor and Fragrance (F&F) product portfolio. The Company granted DSM exclusive licenses covering specific intellectual property (F&F Intellectual Property License) of the Company and assigned the Company’s rights and obligations under certain F&F ingredients supply agreements to DSM, in exchange for non-refundable upfront consideration totaling $150 million, and up to $235 million of contingent consideration if and when certain commercial milestones are achieved in each of the calendar years 2022 through 2024. DSM also acquired the Company’s F&F finished goods inventory on-hand, unbilled accounts receivables and billed accounts receivable that were uncollected at closing. The Company and DSM also entered into a 15-year manufacturing agreement whereby the Company will manufacture certain F&F ingredients for DSM to supply to third parties.
The Company determined the licenses to be functional intellectual property licenses allowing DSM the immediate use of and benefit from the technology, and concluded the licenses and related assigned F&F ingredients supply agreements, the asset purchase agreement and the manufacturing agreement were revenue contracts within the scope of ASC 606. The Company identified three distinct performance obligations: (i) F&F license, (ii) finished goods inventory and (iii) receivables, that once delivered are satisfied at a point in time. The Company also concluded the additional contingent consideration and manufacturing supply agreement represent variable consideration that will be fully constrained until the commercial targets are probable of achievement and the products are manufactured and sold.
The Company allocated the $150 million transaction price to the three revenue performance obligations using the residual approach. The transaction price was first allocated to the transferred inventory and receivables at the stand-alone selling price for these performance obligations, and the residual consideration was allocated to the F&F intellectual property licenses:
•Finished goods inventory - $1.5 million
•Receivables - $4.9 million
•F&F intellectual property licenses - $143.6 million
The Company also concluded the F&F intellectual property licenses and the assigned F&F supply agreements had been fully delivered with no further performance obligation upon closing the transaction, and recognized license revenue of $143.6 million for the nine months ended September 30, 2021.
Due to the related party nature of the transaction with DSM, who is a significant shareholder with two members on the Company’s board of directors, the Company performed a fair value assessment of the F&F intellectual property licenses under an income approach using a discounted cash flow model, in part with the assistance of a third-party valuation firm, and concluded the $143.6 million residual consideration received in exchange for the F&F intellectual property licenses approximated the fair value and stand-alone selling price of the F&F intellectual property licenses.
DSM Performance Agreement
In December 2017, the Company and DSM entered into a research and development services agreement (Performance Agreement), pursuant to which the Company would provide services to DSM relating to the further development of the technology underlying farnesene-related products in exchange for certain bonus payments in the event that specific performance metrics were achieved. If the Company did not meet the established metrics under the Performance Agreement, the Company would be required to pay $1.9 million to DSM. The Company accounted for the Performance Agreement under ASC 606 as a combined transaction with the Farnesene license granted to DSM in connection with the sale of the Brotas facility in December 2017. The Performance Agreement was allocated $1.2 million of the transaction price under a relative fair value allocation approach, and was recorded as a contract asset reflecting the Company’s right to receive additional consideration and deferred revenue reflecting the probability of returning to DSM a portion of the cash received under the combined transaction. In the first quarter of 2021, the Company and DSM determined the performance metrics would not be reasonably achieved without the Company providing further research and development services and concluded the Performance Agreement and related activities should be terminated. As a result, the Company paid DSM $1.9 million and reduced the deferred revenue liability, and expensed the contract asset balance and recorded $1.9 million of additional research and development expense during the nine months ended September 30, 2021.
DSM Ingredients Collaboration
Pursuant to the September 2017 research and development collaboration agreement, as amended, the Company provides DSM with research and development services for specific field of use ingredients. The Company concluded the amended 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. DSM funds the development work with payments of $2.0 million quarterly from October 1, 2020 to September 30, 2021 for services singularly focused on achieving a certain fermentation yield and cost target over the twelve-month period. During the three and nine months ended September 30, 2021, the Company recognized $2.0 million and $6.0 million of collaboration revenue in connection with the amended agreement.
DSM Developer License
In September 2021, the Company granted DSM a three-year license to perform research and development to improve and enhance certain technology underlying the Company’s farnesene-related yeast strain in exchange for a $6.0 million license fee. The Company determined the license to be a functional intellectual property license allowing DSM the immediate use of and benefit from the technology and concluded the license agreement was a revenue contract within the scope of ASC 606. The Company concluded the license agreement contained a single performance obligation to deliver the technology license, and that once delivered was satisfied at a point in time. The Company recorded the $6.0 million fee as license and royalty revenue in the three and nine months ended September 30, 2021.
PureCircle License and Supply Agreement
On June 1, 2021, the Company and PureCircle Limited (PureCircle), a subsidiary of Ingredion Incorporated, entered into an intellectual property license agreement under which the Company (i) granted certain intellectual property licenses to PureCircle to make, have made, commercialize and advance the development of sustainably sourced, zero-calorie, nature-based sweeteners and potentially other types of fermentation-based ingredients, as the exclusive global business-to-business commercialization partner for the Company’s sugar reduction technology that includes fermented RebM, (ii) entered into a product supply and profit sharing agreement to provide manufacturing services and products to PureCircle, and (iii) assigned and transferred certain customer contracts to PureCircle related to the sale and distribution of RebM. Concurrent with the PureCircle license and product supply agreements, Ingredion purchased 31% of the membership interests in Amyris RealSweet LLC (RealSweet), a 100% owned subsidiary of the Company, which entity owns the new manufacturing facility under construction in Brazil. Ingredion’s purchase of the contingently redeemable noncontrolling interest in RealSweet was deemed to be an equity transaction to be accounting for under ASC 810, Consolidation and ASR 268, Presentation in Financial Statements of Redeemable Preferred Stocks (see Note 5, ”Mezzanine Equity” for further information). Under the PureCircle license agreement, the Company will continue to own and market its Purecane® consumer brand offering of tabletop and culinary sweetener products to consumers. As consideration for the license and product supply agreements, the Company received a $10 million license fee at closing and may receive additional payments in the aggregate of up to $35 million upon achievement of certain milestones related to RebM sales and manufacturing cost targets. Additionally, under the product supply and profit sharing agreement, the Company will earn revenues from product sales to PureCircle and a profit share from future product sales, including RebM, by PureCircle.
The Company determined the PureCircle license to be a functional intellectual property license allowing PureCircle the immediate use of and benefit from the technology and concluded the license, the product supply and profit sharing agreement and the assigned contracts would be treated as a combined revenue contract within the scope of ASC 606, Revenue Contracts with Customers. The Company identified two distinct performance obligations in the revenue contract: (i) granting of the intellectual property license and (ii) the manufacturing and delivery of products under the product supply and profit sharing agreement. The functional intellectual property license is deemed to be satisfied at a point in time upon delivery of the license, and the product supply and profit-sharing performance obligation is considered variable consideration to be delivered over time if and when commercial production of the products begin. The Company also concluded the contingent milestone payments and the profit-sharing provisions represents variable consideration that is dependent upon future contingent events, and will be fully constrained from the transaction price until the commercial targets are probable of achievement and the future products are manufactured and then sold by PureCircle. The Company also concluded the intellectual property license had been fully delivered upon closing the transaction and recognized license revenue of $10 million in the three months ended June 30, 2021.
Yifan Collaborations
The Company has a collaboration agreement with Yifan Pharmaceutical Co., Ltd. (Yifan), a leading Chinese pharmaceutical company. During the three and nine months ended September 30, 2021, the Company recognized $1.8 million and $5.3 million of collaboration revenue in connection with the amended agreement. During the three and nine months ended
September 30, 2020, the Company recognized $1.8 million and $5.3 million of collaboration revenue in connection with the amended agreement. Since inception of the agreement, the Company has recognized $19.7 million of cumulative-to-date collaboration revenue in connection with the agreement. At September 30, 2021, the Company also recorded a $2.9 million contract asset in connection with the Collaboration Agreement.
For more information about the DSM ingredients collaboration and Yifan collaboration, see the Company's 2020 Form 10-K, Part II, Item 8, Note 10, "Revenue Recognition".
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 condensed consolidated balance sheets, net of the allowance for doubtful accounts. Trade receivables are recorded for the sale of goods or the performance of services 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.
Contract Balances
The following table provides information about accounts receivable, contract assets and contract liabilities from contracts with customers:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
September 30, 2021
|
December 31, 2020
|
|
Accounts receivable, net
|
$
|
34,920
|
|
$
|
32,846
|
|
|
Accounts receivable - related party, net
|
$
|
10,841
|
|
$
|
12,110
|
|
|
Contract assets
|
$
|
3,513
|
|
$
|
4,178
|
|
|
Contract assets - related party
|
$
|
2,000
|
|
$
|
1,203
|
|
|
Contract liabilities
|
$
|
3,486
|
|
$
|
4,468
|
|
|
Contract liabilities, noncurrent(1)
|
$
|
111
|
|
$
|
111
|
|
(1)As of September 30, 2021 and December 31, 2020, contract liabilities, noncurrent is presented in Other noncurrent liabilities in the condensed consolidated balance sheets.
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 September 30, 2021.
|
|
|
|
|
|
|
|
(In thousands)
|
As of September 30, 2021
|
|
Remaining 2021
|
$
|
1,292
|
|
|
2022
|
143
|
|
|
2023
|
143
|
|
|
2024
|
143
|
|
|
2025 and thereafter
|
286
|
|
|
Total from all customers
|
$
|
2,007
|
|
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, approximately $281.7 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 the DSM Notes Amendments and Repayments that occurred during the nine months ended September 30, 2021.
Related party debt was as follows(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
In thousands
|
Principal
|
Unaccreted Debt Discount
|
Change in Fair Value
|
Net
|
|
Principal
|
Unaccreted Debt Discount
|
Change in Fair Value
|
Net
|
|
Foris notes
|
$
|
55,041
|
|
$
|
—
|
|
$
|
223,096
|
|
$
|
278,137
|
|
|
$
|
55,041
|
|
$
|
—
|
|
$
|
73,123
|
|
$
|
128,164
|
|
|
DSM note
|
10,000
|
|
(2,504)
|
|
—
|
|
7,496
|
|
|
33,000
|
|
(2,443)
|
|
—
|
|
30,557
|
|
|
|
$
|
65,041
|
|
$
|
(2,504)
|
|
$
|
223,096
|
|
$
|
285,633
|
|
|
$
|
88,041
|
|
$
|
(2,443)
|
|
$
|
73,123
|
|
$
|
158,721
|
|
(1) Naxyris was a related party at December 31, 2020, but ceased to be a related party upon Carole Piwnica’s departure from the Company’s Board of Directors on May 29, 2021. For the purpose of comparability, the condensed consolidated balance sheets classify the Naxyris note as nonrelated party debt at both September 30, 2021 and December 31, 2020.
Related Party Equity
Related party equity transactions were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2021
|
|
Nine Months Ended September 30, 2020
|
|
|
Shares Issued
|
Fair Value of Transaction, in Thousands
|
|
Shares Issued
|
Fair Value of Transaction, in Thousands
|
|
Issuance of Common Stock Upon Exercise of Warrants
|
|
|
|
|
|
|
DSM
|
12,114,910
|
|
5
|
|
|
—
|
|
—
|
|
|
Foris
|
3,778,230
|
|
10,844
|
|
|
24,165,166
|
|
68,765
|
|
|
|
15,893,140
|
|
$
|
10,849
|
|
|
24,165,166
|
|
$
|
68,765
|
|
|
|
|
|
|
|
|
|
Issuance of Common Stock in Private Placement
|
|
|
|
|
|
|
Foris
|
—
|
|
$
|
—
|
|
|
10,505,652
|
|
$
|
27,189
|
|
|
|
|
|
|
|
|
|
Issuance of Common Stock Rights Warrant
|
|
|
|
|
|
|
Foris
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
8,904
|
|
|
|
|
|
|
|
|
|
Exercise of Common Stock Rights Warrant
|
|
|
|
|
|
|
Foris
|
—
|
|
$
|
—
|
|
|
5,226,481
|
|
$
|
15,000
|
|
|
|
|
|
|
|
|
|
Issuance of Preferred Stock in Private Placement
|
|
|
|
|
|
|
Foris
|
—
|
|
$
|
—
|
|
|
30,000
|
|
$
|
30,000
|
|
Related Party Revenue
See Note 10, "Revenue Recognition", for information about the March 31, 2021 DSM License Agreement and Contract Assignment.
Related Party Accounts Receivable, Unbilled Receivables and Accounts Payable
Related party accounts receivable, contract assets and accounts payable were as follows:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
September 30, 2021
|
December 31, 2020
|
|
Accounts receivable - related party
|
$
|
10,841
|
|
$
|
12,110
|
|
|
Contract assets - related party
|
$
|
2,000
|
|
$
|
1,203
|
|
|
Accounts payable - related party
|
$
|
13,238
|
|
$
|
5,011
|
|
12. Stock-based Compensation
The Company’s stock option activity and related information for the nine months ended September 30, 2021 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantity of Stock Options
|
Weighted-
average
Exercise
Price
|
Weighted-average
Remaining
Contractual
Life, in Years
|
Aggregate
Intrinsic
Value, in Thousands
|
|
Outstanding - December 31, 2020
|
6,502,096
|
|
$
|
7.64
|
|
7.6
|
$
|
8,875
|
|
|
Granted
|
687,729
|
|
$
|
13.92
|
|
|
|
|
Exercised
|
(598,090)
|
|
$
|
5.24
|
|
|
|
|
Forfeited or expired
|
(3,434,456)
|
|
$
|
7.14
|
|
|
|
|
Outstanding - September 30, 2021
|
3,157,279
|
|
$
|
10.00
|
|
7.6
|
$
|
20,941
|
|
|
Vested or expected to vest after September 30, 2021
|
3,032,476
|
|
$
|
10.06
|
|
7.5
|
$
|
20,243
|
|
|
Exercisable at September 30, 2021
|
1,465,549
|
|
$
|
12.58
|
|
6.0
|
$
|
10,272
|
|
Activity related to the Company’s restricted stock units (RSUs) (including performance-based restricted stock units (PSUs)) for the nine months ended September 30, 2021 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantity of Restricted Stock Units
|
Weighted-average Grant-date Fair Value
|
Weighted-average Remaining Contractual Life, in Years
|
|
Outstanding - December 31, 2020
|
7,043,909
|
|
$
|
4.18
|
|
1.5
|
|
Awarded
|
10,410,521
|
|
$
|
12.38
|
|
|
|
Released
|
(2,672,650)
|
|
$
|
5.80
|
|
|
|
Forfeited
|
(654,671)
|
|
$
|
5.83
|
|
|
|
Outstanding - September 30, 2021
|
14,127,109
|
|
$
|
9.84
|
|
2.9
|
|
Vested or expected to vest after September 30, 2021
|
12,123,689
|
|
$
|
9.68
|
|
2.8
|
Stock-based compensation expense related to employee and nonemployee options, RSUs, PSUs and ESPP during the three and nine months ended September 30, 2021 and 2020 is reflected in the condensed consolidated statements of operations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
(In thousands)
|
2021
|
2020
|
|
2021
|
2020
|
|
|
|
|
Cost of products sold
|
$
|
79
|
|
$
|
—
|
|
|
$
|
216
|
|
$
|
—
|
|
|
|
|
|
Research and development
|
1,565
|
|
928
|
|
|
3,945
|
|
2,774
|
|
|
|
|
|
Sales, general and administrative
|
7,261
|
|
2,492
|
|
|
17,772
|
|
7,081
|
|
|
|
|
|
Total stock-based compensation expense
|
$
|
8,905
|
|
$
|
3,420
|
|
|
$
|
21,933
|
|
$
|
9,855
|
|
|
|
|
As of September 30, 2021, $134.4 million of unrecognized compensation expense related to stock options and RSUs is expected to be recognized over a weighted-average period of 3.5 years.
Evergreen Shares for 2020 Equity Incentive Plan and 2010 Employee Stock Purchase Plan
In March 2021, the Board approved increases to the number of shares available for issuance under the Company's 2020 Equity Incentive Plan (the 2020 Equity Plan) and 2010 Employee Stock Purchase Plan (the 2010 ESPP).
The increase in shares in connection with the 2020 Equity Plan represented an automatic annual increase in the number of shares available for grant and issuance under the 2020 Equity Plan of 12,247,572 shares (Evergreen Shares). This increase is equal to approximately 5.0% of the 244,951,446 total outstanding shares of the Company’s common stock as of December 31, 2020. This automatic increase was effective as of January 1, 2021.
The increase in shares in connection with the 2010 ESPP represented an automatic annual increase in the number of shares reserved for issuance of 42,077 shares, which represents the remaining allowable under the existing 1,666,666 maximum limit for share issuance under the 2010 ESPP. This automatic increase was effective as of January 1, 2021.
Performance-based Stock Units
During the three months ended June 30, 2021, the Company’s chief operating officer received performance-based restricted stock units (the COO PSUs) with a per share grant date fair value of $13.39. COO PSUs are equity awards with the final number of restricted stock units that may vest determined based on the Company’s performance against pre-established performance metrics that are related to the completed construction and the successful scaling, commissioning and transitioning of new plants, and the successful launching of new brands. The performance metrics are measured from the grant date through December 31, 2022. The COO PSUs vest in six tranches contingent upon the achievement of both operational performance metrics and the chief operating officer’s continued employment with the Company. Over the measurement period, the number of COO PSUs that may vest and the related stock-based compensation expense that is recognized is adjusted upward or downward based upon the probability of achieving the operational performance metrics. Depending on the probability of achieving the operational performance metrics and certification by the Company’s Board or Leadership, Development, Inclusion and Compensation Committee of achievement of those operational performance metrics for each tranche, the COO PSUs vesting could be from 0 to 600,000 restricted stock units. As of September 30, 2021, the Company’s management has determined that all milestones are probable of achievement. Stock-based compensation expense for this award totaled $8.0 million on the grant date and is recognized ratably through December 31, 2022. Approximately $1.3 million and $1.8 million of stock-based compensation has been recorded to general and administrative expense during the three and nine month period ended September 30, 2021, respectively.
During the three months ended September 30, 2021, the Company’s chief executive officer and chief financial officer each received performance-based restricted stock units (the CEO PSUs and the CFO PSUs) with a per share grant date fair value ranging from $9.79 to $12.93. The CEO PSUs and the CFO PSUs are equity awards with both a service condition and market condition. The number of CEO PSUs that may vest could be from 0 to 6,000,000 restricted stock units and the number of CFO PSUs that may vest could be from 0 to 300,000 restricted stock units, determined based on the performance of the Company’s stock against pre-established Volume Weighted Average Price (VWAP) targets. The VWAP targets are measured from the grant date through July 1, 2025. Upon approval of the CEO PSUs by stockholders and immediately prior to the effectiveness of the CEO PSUs, the performance-based stock option to purchase up to 3,250,000 shares of our common stock granted to the Company’s chief executive officer in 2018 (the 2018 CEO PSO) was automatically cancelled and forfeited. The performance metrics of the 2018 CEO PSO had not been achieved and were not probable to be achieved prior to the conclusion of its term. The CEO PSUs, which are treated as a modification to the 2018 CEO PSO, and the CFO PSUs, vest in four tranches contingent upon both the achievement of VWAP targets and the respective officer’s continued employment with the Company through the vesting dates. Over the measurement period, the number of PSUs that may vest and the related stock-based compensation expense that is recognized is adjusted based upon the actual date of achieving the VWAP targets. Stock-based compensation expense totaled $68.0 million for the CEO PSUs and $3.4 million for the CFO PSUs on the grant date and is recognized ratably through July 1, 2026. Approximately $2.4 million of stock-based compensation has been recorded to general and administrative expense during the three and nine month period ending September 30, 2021. Stock-based compensation expense is not subject to reversal even if the market condition is not achieved. The fair value of PSUs was determined using a Monte Carlo simulation with the following assumptions:
Risk-free interest rate 0.48%
Expected volatility of the Company’s Common Stock 101%
13. Subsequent Events
None.