AMRS 09302011 10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
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x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2011
OR
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o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
Commission File Number: 001-34885
AMYRIS, INC.
(Exact name of registrant as specified in its charter)
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Delaware | | 55-0856151 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
Amyris, Inc.
5885 Hollis Street, Suite 100
Emeryville, CA 94608
(510) 450-0761
(Address and telephone number of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuance to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
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Large accelerated filer | ¨ | Accelerated filer | ¨ |
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Non-accelerated filer | x | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. |
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Class | Outstanding at October 28, 2011 |
Common Stock, $0.0001 par value per share | 45,554,640 shares |
AMYRIS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2011
INDEX
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PART I: FINANCIAL INFORMATION |
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Item 1. | | |
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Item 2. | | |
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Item 3. | | |
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Item 4. | | |
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PART II: OTHER INFORMATION |
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Item 1. | | |
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Item 1A. | | |
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Item 2. | | |
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Item 6. | | |
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PART I: FINANCIAL INFORMATION
Amyris, Inc.
Condensed Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
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| | | | | | | |
| September 30, 2011 | | December 31, 2010 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 106,142 |
| | $ | 143,060 |
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Short-term investments | 17,652 |
| | 114,873 |
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Accounts receivable | 4,982 |
| | 5,215 |
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Inventories | 8,492 |
| | 4,006 |
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Prepaid expenses and other current assets | 9,432 |
| | 2,905 |
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Total current assets | 146,700 |
| | 270,059 |
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Property and equipment, net | 115,850 |
| | 54,847 |
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Other assets | 38,752 |
| | 32,547 |
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Total assets | $ | 301,302 |
| | $ | 357,453 |
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Liabilities and Equity | | | |
Current liabilities: | | | |
Accounts payable | $ | 25,246 |
| | $ | 7,116 |
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Deferred revenue | 2,044 |
| | 565 |
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Accrued and other current liabilities | 30,333 |
| | 14,795 |
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Capital lease obligation, current portion | 2,931 |
| | 2,854 |
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Debt, current portion | 2,336 |
| | 1,911 |
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Total current liabilities | 62,890 |
| | 27,241 |
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Capital lease obligation, net of current portion | 905 |
| | 3,091 |
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Long-term debt, net of current portion | 9,970 |
| | 4,734 |
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Deferred rent, net of current portion | 10,290 |
| | 11,186 |
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Deferred revenue, net of current portion | 4,238 |
| | 1,130 |
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Other liabilities | 9,434 |
| | 2,523 |
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Total liabilities | 97,727 |
| | 49,905 |
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Commitments and contingencies (Note 5) |
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Stockholders’ equity: | | | |
Preferred stock - $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding. | — |
| | — |
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Common stock - $0.0001 par value, 100,000,000 shares authorized as of September 30, 2011 and December 31, 2010; 45,160,247 shares and 43,847,425 shares issued and outstanding as of September 30, 2011 and December 31, 2010, respectively. | 5 |
| | 4 |
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Additional paid-in capital | 530,847 |
| | 506,988 |
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Accumulated other comprehensive income (loss) | (5,451 | ) | | 2,872 |
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Accumulated deficit | (321,760 | ) | | (202,318 | ) |
Total Amyris, Inc. stockholders’ equity | 203,641 |
| | 307,546 |
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Noncontrolling interest | (66 | ) | | 2 |
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Total equity | 203,575 |
| | 307,548 |
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Total liabilities and equity | $ | 301,302 |
| | $ | 357,453 |
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See the accompanying notes to the unaudited condensed consolidated financial statements.
Amyris, Inc.
Condensed Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
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| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2011 | | 2010 | | 2011 | | 2010 |
Revenues | | | | | | | |
Product sales | $ | 31,162 |
| | $ | 22,055 |
| | $ | 92,998 |
| | $ | 42,037 |
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Grants and collaborations revenue | 5,114 |
| | 2,170 |
| | 12,454 |
| | 8,545 |
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Total revenues | 36,276 |
| | 24,225 |
| | 105,452 |
| | 50,582 |
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Cost and operating expenses | | | | | | | |
Cost of product sales | 35,729 |
| | 22,900 |
| | 99,247 |
| | 43,032 |
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Research and development | 23,441 |
| | 14,701 |
| | 66,622 |
| | 38,293 |
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Sales, general and administrative | 21,174 |
| | 10,484 |
| | 59,401 |
| | 29,385 |
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Restructuring income | — |
| | (2,061 | ) | | — |
| | (2,061 | ) |
Total cost and operating expenses | 80,344 |
| | 46,024 |
| | 225,270 |
| | 108,649 |
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Loss from operations | (44,068 | ) | | (21,799 | ) | | (119,818 | ) | | (58,067 | ) |
Other income (expense): | | | | | | | |
Interest income | 609 |
| | 702 |
| | 1,250 |
| | 1,264 |
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Interest expense | (291 | ) | | (524 | ) | | (1,172 | ) | | (1,284 | ) |
Other income, net | 310 |
| | 1,013 |
| | 160 |
| | 953 |
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Total other income | 628 |
| | 1,191 |
| | 238 |
| | 933 |
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Loss before income taxes | $ | (43,440 | ) | | $ | (20,608 | ) | | $ | (119,580 | ) | | $ | (57,134 | ) |
Provision for income taxes | (474 | ) | | — |
| | (299 | ) | | — |
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Net loss | $ | (43,914 | ) | | $ | (20,608 | ) | | $ | (119,879 | ) | | $ | (57,134 | ) |
Net loss attributable to noncontrolling interest | 224 |
| | 477 |
| | 437 |
| | 907 |
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Net loss attributable to Amyris, Inc. | $ | (43,690 | ) | | $ | (20,131 | ) | | $ | (119,442 | ) | | $ | (56,227 | ) |
Deemed dividend related to the beneficial conversion feature of Series D convertible preferred stock and conversion of Amyris Brasil S.A. shares held by third parties | — |
| | (42,009 | ) | | — |
| | (42,009 | ) |
Net loss attributable to Amyris, Inc. common stockholders | $ | (43,690 | ) | | $ | (62,140 | ) | | $ | (119,442 | ) | | $ | (98,236 | ) |
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.97 | ) | | $ | (11.89 | ) | | $ | (2.68 | ) | | $ | (19.26 | ) |
Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, basic and diluted | 45,031,613 |
| | 5,227,689 |
| | 44,507,686 |
| | 5,099,635 |
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See the accompanying notes to the unaudited condensed consolidated financial statements.
Amyris, Inc.
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited)
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| Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interest | | Total Equity |
(In Thousands, Except Share Amounts) | Shares | | Amount | | | | | |
December 31, 2010 | 43,847,425 |
| | $ | 4 |
| | $ | 506,988 |
| | $ | (202,318 | ) | | $ | 2,872 |
| | $ | 2 |
| | $ | 307,548 |
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Issuance of common stock upon exercise of stock options, net of restricted stock | 1,230,867 |
| | 1 |
| | 5,023 |
| | — |
| | — |
| | — |
| | 5,024 |
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Issuance of common stock upon net exercise of warrants | 77,087 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
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Shares issued from restricted stock unit settlement | 6,005 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
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Repurchase of common stock | (1,137 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
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Stock-based compensation | — |
| | — |
| | 18,836 |
| | — |
| | — |
| | — |
| | 18,836 |
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Fair value of assets and liabilities assigned to noncontrolling interest | — |
| | — |
| | — |
| | — |
| | — |
| | 369 |
| | 369 |
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Components of comprehensive income (loss) | | | | | | | | | | | | | |
Change in unrealized loss on investments | — |
| | — |
| | — |
| | — |
| | (5 | ) | | — |
| | (5 | ) |
Foreign currency translation adjustment, net of tax | — |
| | — |
| | — |
| | — |
| | (8,318 | ) | | — |
| | (8,318 | ) |
Net loss | — |
| | — |
| | — |
| | (119,442 | ) | | — |
| | (437 | ) | | (119,879 | ) |
Total comprehensive loss | | | | | | | | | | | | | (128,202 | ) |
September 30, 2011 | 45,160,247 |
| | $ | 5 |
| | $ | 530,847 |
| | $ | (321,760 | ) | | $ | (5,451 | ) | | $ | (66 | ) | | $ | 203,575 |
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See the accompanying notes to the unaudited condensed consolidated financial statements.
Amyris, Inc.
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
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| Nine Months Ended September 30, |
| 2011 | | 2010 |
Operating activities | | | |
Net loss | $ | (119,879 | ) | | $ | (57,134 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | |
Convertible preferred stock warrants | — |
| | 33 |
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Depreciation and amortization | 7,728 |
| | 5,300 |
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Inventory write-down to net realizable value | 2,468 |
| | — |
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Loss on the sale of investments | — |
| | (4 | ) |
Stock-based compensation | 18,836 |
| | 6,908 |
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Amortization of premium on investments | 630 |
| | 895 |
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Change in fair value of convertible preferred stock warrant liability | — |
| | (929 | ) |
Restructuring income | — |
| | (2,061 | ) |
Other noncash (income) expenses | (79 | ) | | 67 |
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Changes in assets and liabilities: |
| |
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Accounts receivable | 234 |
| | (2,989 | ) |
Inventories | (7,091 | ) | | (1,243 | ) |
Prepaid expenses and other assets | (1,134 | ) | | 1,449 |
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Accounts payable | 10,993 |
| | 4,412 |
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Restructuring | — |
| | (511 | ) |
Accrued and other long-term liabilities | 17,700 |
| | 2,015 |
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Deferred revenue | 4,587 |
| | 1,458 |
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Deferred rent | (761 | ) | | (480 | ) |
Net cash used in operating activities | (65,768 | ) | | (42,814 | ) |
Investing activities | | | |
Purchase of short-term investments | (55,286 | ) | | (190,408 | ) |
Maturities of short-term investments | 105,000 |
| | 53,561 |
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Sales of short-term investments | 44,826 |
| | 28,374 |
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Purchase of long-term investments | — |
| | (7,998 | ) |
Change in restricted cash | — |
| | (18 | ) |
Acquisition of cash in noncontrolling interest | 344 |
| | — |
|
Purchase of property and equipment, net of disposals | (54,416 | ) | | (8,249 | ) |
Deposits on property and equipment | (16,832 | ) | | (2,159 | ) |
Net cash provided by (used in) investing activities | 23,636 |
| | (126,897 | ) |
Financing activities | | | |
Proceeds from issuance of convertible preferred stock, net of issuance costs | — |
| | 184,369 |
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Proceeds from issuance of common stock, net of repurchases | 4,987 |
| | 75 |
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Proceeds from equipment financing | — |
| | 1,445 |
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Principal payments on capital leases | (2,109 | ) | | (2,064 | ) |
Proceeds from debt | 7,622 |
| | — |
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Principal payments on debt | (3,962 | ) | | (9,325 | ) |
Proceeds from issuance of common stock in initial public offering, net of underwriting discounts and commission | (497 | ) | | 75,359 |
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Proceeds from sale of noncontrolling interest | — |
| | 7,069 |
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Net cash provided by financing activities | 6,041 |
| | 256,928 |
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Effect of exchange rate changes on cash and cash equivalents | (827 | ) | | 973 |
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Net increase (decrease) in cash and cash equivalents | (36,918 | ) | | 88,190 |
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Cash and cash equivalents at beginning of period | 143,060 |
| | 19,188 |
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Cash and cash equivalents at end of period | $ | 106,142 |
| | $ | 107,378 |
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See the accompanying notes to the unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows—(Continued)
(In Thousands)
(Unaudited)
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| | | | | | | |
| Nine Months Ended September 30, |
| 2011 | | 2010 |
Supplemental disclosures of cash flow information: | | | |
Cash paid for interest | $ | 1,131 |
| | $ | 1,077 |
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Supplemental disclosures of noncash investing and financing activities: | | | |
Additions to property and equipment under notes payable | $ | — |
| | $ | 958 |
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Acquisitions of assets under accounts payable and accrued liabilities | $ | 7,166 |
| | $ | 1,901 |
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Capitalization of manufacturing equipment under ASC 840 (see Note 9) | $ | 7,272 |
| | $ | — |
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Financing of insurance premium under notes payable | $ | — |
| | $ | 101 |
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Change in unrealized gain (loss) on investments | $ | (5 | ) | | $ | 21 |
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Change in unrealized gain (loss) on foreign currency | $ | (7,265 | ) | | $ | 383 |
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Asset retirement obligation | $ | — |
| | $ | 175 |
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Warrants issued in connection with the issuance of convertible preferred stock | $ | — |
| | $ | 507 |
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Accrued deferred offering costs | $ | — |
| | $ | 1,653 |
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Accrued Series D preferred stock issuance costs | $ | — |
| | $ | 9 |
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Financing of rent payments under notes payable | $ | — |
| | $ | 239 |
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Deferred charge asset related to issuance of Series D preferred stock | $ | — |
| | $ | 27,909 |
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Receivable from stock option exercises | $ | 4 |
| | $ | — |
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Issuance of common stock upon exercise of warrants | $ | 3,554 |
| | $ | — |
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Unpaid investment in joint venture | $ | 108 |
| | $ | — |
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Conversion of convertible preferred stock to common stock | $ | — |
| | $ | 391,411 |
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Conversion of preferred stock warrants to common stock warrants | $ | — |
| | $ | 2,318 |
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Conversion of shares of Amyris Brasil S.A. held by third parties into Amyris, Inc. common stock | $ | — |
| | $ | 11,653 |
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Deemed dividend related to the beneficial conversion feature of Series D convertible preferred stock and Amyris Brasil S.A. shares | $ | — |
| | $ | 42,009 |
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Transfer of fixed assets to current assets | $ | 886 |
| | $ | — |
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Acquisition of net assets in noncontrolling interest | $ | 25 |
| | $ | — |
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See the accompanying notes to the unaudited condensed consolidated financial statements.
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. The Company
Amyris, Inc. (the “Company”) was incorporated in California on July 17, 2003 and reincorporated in Delaware on June 10, 2010 for the purpose of leveraging breakthroughs in synthetic biology to develop and provide renewable compounds for a variety of markets. The Company is currently building and applying its industrial synthetic biology platform to provide alternatives to select petroleum-sourced products used in specialty chemical and transportation fuel markets worldwide. The Company’s first commercialization efforts have been focused on a molecule called farnesene, which forms the basis for a wide range of products varying from specialty chemical applications to transportation fuels, such as diesel. While the Company’s platform is able to use a wide variety of feedstocks, the Company has focused initially on Brazilian sugarcane. The Company intends to secure access to this feedstock and to expand its production capacity by working with existing sugar and ethanol mill owners to build new, adjacent bolt-on facilities at their existing mills in return for a share of the higher gross margin the Company believes it will realize from the sale of its renewable products. In addition, the Company has entered into various contract manufacturing agreements to support commercial production. The Company has established two principal operating subsidiaries, Amyris Brasil Ltda. (formerly Amyris Brasil S.A., “Amyris Brasil”) for production in Brazil, and Amyris Fuels, LLC for fuel distribution capabilities in the U.S.
On June 21, 2010, the name of the Company was changed from Amyris Biotechnologies, Inc. to Amyris, Inc.
On September 30, 2010, the Company closed its initial public offering (“IPO”) of 5,300,000 shares of common stock at an offering price of $16.00 per share, resulting in net proceeds to the Company of approximately $73.7 million, after deducting underwriting discounts of $5.9 million and offering costs of $5.2 million and in October 2010, the Company subsequently sold an additional 795,000 shares to the underwriters pursuant to the over-allotment option raising an additional $11.8 million of net proceeds. Upon the closing of the IPO, the Company’s outstanding shares of convertible preferred stock were automatically converted into 31,550,277 shares of common stock and the outstanding convertible preferred stock warrants were automatically converted into common stock warrants to purchase a total of 195,604 shares of common stock and shares of Amyris Brasil held by third party investors were automatically converted into 861,155 shares of the Company’s common stock.
The Company has incurred significant losses from operations since its inception and its accumulated deficit as of September 30, 2011 was $321.8 million. The Company expects to finance its operations for the foreseeable future with cash and investments currently on hand, with cash inflows from collaboration and grant funding, potential cash contributions from product sales, and with new debt to provide additional working capital and to cover portions of its capital expenditures. As currently contemplated, the Company's operating expenditures, capital expenditures and other strategic plans for the remainder of 2011 and for 2012 require significant inflows of cash from credit facilities and similar sources of indebtedness, as well as funding from collaboration partners, that are not yet subject to definitive agreements or commitments from such parties. In addition, some of the Company's anticipated capital expenditures depend on the Company finding additional sources of funding beyond those the Company has currently identified. If the Company fails to secure any such debt or collaboration cash, it will be required to seek other types of funding (such as corporate debt or equity funding) or to curtail its operations, including through reductions and delays of planned capital expenditures and scaling back operations. If the Company is forced to curtail its operations, it may be unable to proceed with construction of certain planned production facilities, enter into definitive agreements for supply of feedstock and associated milling and production arrangements that are currently subject to letters of intent, commercialize its products within the timeline it expects, or otherwise continue its business as currently contemplated.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions for Form 10-Q and Regulations S-X statements. Accordingly, they do not include all of the information and notes required for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 14, 2011. The unaudited condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
Principles of Consolidations
The Company has interests in joint venture entities that are variable interest entities (“VIEs”). Determining whether to consolidate a variable interest entity may require judgment in assessing (i) whether an entity is a VIE and (ii) if the Company is the entity’s primary beneficiary and thus required to consolidate the entity. To determine if the Company is the primary beneficiary of a VIE, the Company evaluates whether it has (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. The Company’s evaluation includes identification of significant activities and an assessment of its ability to direct those activities based on governance provisions and arrangements to provide or receive product and process technology, product supply, operations services, equity funding and financing and other applicable agreements and circumstances. The Company’s assessment of whether it is the primary beneficiary of its VIEs requires significant assumptions and judgment.
The unaudited condensed consolidated financial statements of the Company include the accounts of Amyris, Inc., its subsidiaries and two consolidated VIEs with respect to which the Company is considered the primary beneficiary, after elimination of intercompany accounts and transactions. Disclosure regarding the Company’s participation in the VIE is included in Note 8.
Use of Estimates
In preparing the unaudited condensed consolidated financial statements, management must make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Unaudited Interim Financial Information
The accompanying interim condensed consolidated financial statements and related disclosures are unaudited, have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The condensed consolidated results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents, short-term investments, accounts receivable and derivatives commodity financial instruments. The Company places its cash equivalents and investments with high credit quality financial institutions and, by policy, limits the amount of credit exposure with any one financial institution. Deposits held with banks may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses on its deposits of cash and cash equivalents and short-term investments.
The Company’s accounts receivable are primarily derived from customers located in the United States. The Company performs ongoing credit evaluation of its customers, does not require collateral, and maintains allowances for potential credit losses on customer accounts when deemed necessary. To date, there have been no such losses and the Company has not recorded an allowance for doubtful accounts.
Customers representing greater than 10% of accounts receivable were as follows:
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| | | | | |
Customers | September 30, 2011 |
| | December 31, 2010 |
|
Customer A | 19 | % | | 36 | % |
Customer B | 17 | % | | * |
|
Customer C | 15 | % | | ** |
|
Customer D | ** |
| | 28 | % |
_____________________
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
Customers representing greater than 10% of revenues were as follows:
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| | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
Customers | 2011 | | 2010 | | 2011 | | 2010 |
Customer A | ** | | 33% | | 17% | | 16% |
Customer B | 17% | | ** | | ** | | ** |
Customer C | 12% | | * | | ** | | ** |
Customer D | * | | * | | * | | 16% |
Customer E | ** | | 11% | | ** | | ** |
Customer F | ** | | ** | | ** | | 13% |
___________________
* Not a customer
* * Less than 10%
The Company is exposed to counterparty credit risk on all of its derivative commodity instruments. The Company has established and maintains strict counterparty credit guidelines and enters into agreements only with counterparties that are investment grade or better. The Company does not require collateral under these agreements.
Fair Value of Financial Instrument
The Company measures certain financial assets and liabilities at fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Financial instruments are primarily comprised of money market funds, certificates of deposit, commercial paper, and U.S. government agency securities. Where available, fair value is based on or derived from observable market prices or other observable inputs. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity.
The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities, and low market interest rates if applicable. Based on the borrowing rates currently available to the Company for debt with similar terms, and after considering nonperformance and credit risk, the carrying value of the notes payable and credit facility approximates its fair value.
Cash and Cash Equivalents
All highly liquid investments purchased with an original maturity date of 90 days or less at the date of purchase are considered to be cash equivalents. Cash and cash equivalents consist of money market funds, commercial paper, U.S. Government agency securities and various deposit accounts.
Investments
Investments with original maturities greater than 90 days that mature less than one year from the consolidated balance sheet date are classified as short-term investments. The Company classifies investments as short-term or long-term based upon whether such assets are reasonably expected to be realized in cash or sold or consumed during the normal cycle of business. The Company invests its excess cash balances primarily in short-term investment grade commercial paper and corporate bonds, U.S. Government agency securities and notes, and auction rate securities (“ARS”). The Company classifies all of its investments, other than ARS, as available-for-sale and records such assets at estimated fair value in the consolidated balance sheets, with unrealized gains and losses, if any, reported as a component of accumulated other comprehensive income (loss) in stockholders' equity (deficit). Debt securities are adjusted for amortization of premiums and accretion of discounts and such amortization and accretion are reported as a component of interest income. Realized gains and losses and declines in value that are considered to be other than temporary are recognized in the statements of operations. The cost of securities sold is determined on the specific identification method. There were no significant realized gains or losses from sales of debt securities during the three and nine months ended September 30, 2011 and 2010. As of September 30, 2011 and December 31, 2010, the Company did not have any other-than-temporary declines in the fair value of its debt securities.
The Company classified the ARS as trading securities and recorded all changes in fair value as component of other income (expense), net. The underlying securities had stated or contractual maturities that were generally greater than one year. The Company
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
estimated the fair value of the ARS using a discounted cash flow model incorporating assumptions that market participants would use in their estimates of fair value. The Company had a put option to sell its ARS at par value. The Company accounted for the put option as a freestanding financial instrument and elected to record it at fair value with changes in fair value recorded as a component of other income (expense), net. As of September 30, 2011 and December 31, 2010, the Company did not hold any ARS due to the liquidation of ARS during the second and third quarters of 2010.
Inventories
Inventories, which consist of ethanol and reformulated ethanol-blended gasoline and farnesene-derived products, are stated at the lower of cost or market and categorized as finished goods, work-in-process or raw material inventories. Cost is computed on a first-in, first-out basis. Inventory costs include transportation costs incurred in bringing the inventory to its existing location.
Derivative Instruments
The Company is exposed to market risks related to price volatility of ethanol and reformulated ethanol-blended gasoline. The Company makes limited use of derivative instruments, which include futures positions on the New York Mercantile Exchange and the CME/Chicago Board of Trade. The Company does not engage in speculative derivative activities, and the purpose for its activity in derivative commodity instruments is to manage the financial risk posed by physical transactions and inventory. Changes in the fair value of the derivative contracts are recognized currently in the consolidated statements of operations as specific hedge accounting criteria are not met.
Asset Retirement Obligations
The fair value of an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. In addition, asset retirement cost is added to the carrying amount of the associated asset and this additional carrying amount is amortized over the life of the asset. The Company’s asset retirement obligations are associated with its commitment to return property subject to an operating lease in Brazil to its original condition upon lease termination.
As of September 30, 2011 and December 31, 2010, the Company recorded asset retirement obligations of $957,000 and $984,000, respectively. The related leasehold improvements are being amortized to depreciation expense over the term of the lease or the useful life of the assets, whichever is shorter. Related amortization expense was $4,000 and $31,000 for the three months ended September 30, 2011 and 2010, respectively, and $136,000 and $93,000 for nine months ended September 30, 2011 and 2010, respectively.
The change in the asset retirement obligation is summarized below (in thousands):
|
| | | |
Balance at December 31, 2010 | $ | 984 |
|
Foreign currency impact | (110 | ) |
Accretion expenses recorded during the period | 83 |
|
Balance at September 30, 2011 | $ | 957 |
|
Property and Equipment, net
Property and equipment, net are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the related assets. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in operations in the period realized.
Depreciation and amortization periods for the Company’s property and equipment are as follows:
|
| |
Machinery and equipment | 7 -15 years |
Computers and software | 3-5 years |
Furniture and office equipment | 5 years |
Vehicles | 5 years |
Leasehold improvements are amortized on a straight-line basis over the terms of the lease, or the useful life of the assets,
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
whichever is shorter.
Computers and software includes internal-use software that is acquired, internally developed or modified to meet the Company's internal needs. Amortization commences when the software is ready for its intended use and the amortization period is the estimated useful life of the software, generally three to five years. Capitalized costs primarily include contract labor and payroll costs of the individuals dedicated to the development of internal-use software. Capitalized software additions totaled approximately $1.2 million and $0.7 million for the nine months ended September 30, 2011 and 2010, respectively, related to software development costs pertaining to the installation of a new financial reporting system. For the nine months ended September 30, 2011 and 2010, $308,000 and $181,000, respectively, of amortization expense was recorded and the total unamortized cost of capitalized software was $2.9 million and $2.1 million, respectively, as of September 30, 2011 and December 31, 2010.
Impairment of Long-Lived Assets
Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, or the estimated useful life is no longer appropriate. If indicators of impairment exist and the undiscounted projected cash flows associated with such assets are less than the carrying amount of the asset, an impairment loss is recorded to write the asset down to their estimated fair values. Fair value is estimated based on discounted future cash flows. There were zero impairment charges recorded during the nine months ended September 30, 2011 and 2010.
Noncontrolling Interest and Redeemable Noncontrolling Interest
As of January 1, 2009, the Company adopted the new accounting standard which establishes accounting and reporting standards for noncontrolling interests in consolidated financial statements. These provisions require that the carrying value of noncontrolling interests to be removed from the mezzanine equity section of the consolidated balance sheets and reclassified as equity, and that consolidated net income be recast to include net income attributable to the noncontrolling interests. The standard requires retrospective presentation and disclosure of existing noncontrolling interests. Accordingly, the Company presented noncontrolling interests as a separate component of equity (deficit) and has also presented net loss attributable to the noncontrolling interest in the consolidated statements of operations. Upon adoption, the noncontrolling interest of $1.1 million was reclassified to a component of total equity (deficit) in the consolidated balance sheets from the mezzanine equity section.
In accordance with accounting and reporting standards for redeemable equity instruments, a noncontrolling interest with redemption features (“redeemable noncontrolling interest”), such as a put option, that is not solely within the control of the Company, is required to be reported in the mezzanine equity section of the consolidated balance sheets.
Changes in noncontrolling interest ownership that do not result in a change of control and where there is a difference between fair value and carrying value are accounted for as equity transactions.
On April 14, 2010, the Company entered into a joint venture with Usina São Martinho. The carrying value of the noncontrolling interest from this joint venture is recorded in the equity section of the consolidated balance sheets (see Note 8).
On January 3, 2011, the Company entered into a production service agreement with Glycotech, Inc. ("Glycotech"). The Company has determined that the arrangement with Glycotech qualifies as a VIE. The Company determined that it is the primary beneficiary. The carrying value of the noncontrolling interest from this VIE is recorded in the equity section of the consolidated balance sheets (see Note 8).
Revenue Recognition
The Company recognizes revenue from the sale of ethanol and reformulated ethanol-blended gasoline, farnesene-derived products, delivery of research and development services, and governmental grants. Revenue is recognized when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee is fixed or determinable, and collectability is reasonably assured.
If sales arrangements contain multiple elements, the Company evaluates whether the components of each arrangement represent separate units of accounting. To date the Company has determined that all revenue arrangements should be accounted for as a single unit of accounting.
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
Product Sales
The Company sells ethanol and reformulated ethanol-blended gasoline under short-term agreements at prevailing market prices. Ethanol and reformulated ethanol-blended gasoline sales consists of sales to customers through purchases from third-party suppliers in which the Company takes physical control of the ethanol and reformulated ethanol-blended gasoline and accepts risk of loss. Starting in the second quarter of 2011, the Company began to sell farnesene-derived products, which are procured from contracted third parties. Revenues are recognized, net of discounts and allowances, once passage of title and risk of loss has occurred and contractually specified acceptance criteria have been met, provided all other revenue recognition criteria have also been met.
Grants and Collaborative Revenue
Revenue from collaborative research services is recognized as the services are performed consistent with the performance requirements of the contract. In cases where the planned levels of research services fluctuate over the research term, the Company recognizes revenue using the proportionate performance method based upon actual efforts to date relative to the amount of expected effort to be incurred by the Company. When up-front payments are received and the planned levels of research services do not fluctuate over the research term, revenue is recorded on a ratable basis over the arrangement term, up to the amount of cash received. When up-front payments are received and the planned levels of research services fluctuate over the research term, revenue is recorded using the proportionate performance method, up to the amount of cash received. Where arrangements include milestones that are determined to be substantive and at risk at the inception of the arrangement, revenue is recognized upon achievement of the milestone and is limited to those amounts whereby collectability is reasonably assured.
Government grants are agreements that generally provide cost reimbursement for certain types of expenditures in return for research and development activities over a contractually defined period. Revenues from government grants are recognized in the period during which the related costs are incurred, provided that the conditions under which the government grants were provided have been met and only perfunctory obligations are outstanding.
Cost of Product Sales
Cost of product sales consists primarily of cost of purchased ethanol and reformulated ethanol-blended gasoline, terminal fees paid for storage and handling, transportation costs between terminals and changes in the fair value of the derivative commodity instruments. Starting in the second quarter of 2011, cost of product sales also includes production costs of farnesene-derived products.
Shipping and handling costs charged to customers are recorded as revenues. Shipping costs are included in cost of product revenues. Such charges were not significant in any of the periods presented.
Costs of Start-Up Activities
Start-up activities are defined as those one-time activities related to opening a new facility, introducing a new product or service, conducting business in a new territory, conducting business with a new class of customer or beneficiary, initiating a new process in an existing facility, commencing some new operation or activities related to organizing a new entity. All the costs associated with a potential site are expensed and recorded within the selling, general and administrative expenses until the site is considered viable by management, at which time costs would be considered for capitalization based on authoritative accounting literature.
Research and Development
Research and development costs are expensed as incurred and include costs associated with research performed pursuant to collaborative agreements and government grants. Research and development costs consist of direct and indirect internal costs related to specific projects as well as fees paid to other entities that conduct certain research activities on the Company’s behalf.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires, among other things, that deferred income taxes be provided for temporary differences between the tax basis of the Company’s assets and liabilities and their financial statement reported amounts. In addition, deferred tax assets are recorded for the future benefit of utilizing net
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
operating losses and research and development credit carryforwards. A valuation allowance is provided against deferred tax assets unless it is more likely than not that they will be realized.
The Company recognizes and measures uncertain tax positions in accordance with the Income Taxes subtopic 05-6 of ASC 740, which prescribes a recognition threshold and measurement process for recording uncertain tax positions taken, or expected to be taken in a tax return, in the consolidated financial statements. Additionally, the guidance also prescribes new treatment for the derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. The Company accrues for the estimated amount of taxes for uncertain tax positions if it is more likely than not that the Company would be required to pay such additional taxes. An uncertain tax position will not be recognized if it has a less than 50% likelihood of being sustained.
Currency Translation
The Brazilian real is the functional currency of the Company’s wholly-owned subsidiary in Brazil and also of the Company’s joint venture with Usina São Martinho. Accordingly, asset and liability accounts of those operations are translated into United States dollars using the current exchange rate in effect at the balance sheet date and equity accounts are translated into United States dollars using historical rates. The revenues and expenses are translated using the exchange rates in effect when the transactions occur. Gains and losses from foreign currency translation adjustments are included as a component of accumulated other comprehensive income (loss) in the consolidated balance sheets.
Stock-Based Compensation
The Company accounts for stock-based compensation arrangements with employees using a fair value method which requires the recognition of compensation expense for costs related to all stock-based payments including stock options. The fair value method requires the Company to estimate the fair value of stock-based payment awards on the date of grant using an option pricing model. The Company uses the Black-Scholes pricing model to estimate the fair value of options granted that are expensed on a straight-line basis over the vesting period. The Company accounts for restricted stock units issued to employees based on the fair market value of the Company’s common stock.
The Company accounts for stock options issued to nonemployees based on the estimated fair value of the awards using the Black-Scholes option pricing model. The Company accounts for restricted stock units issued to nonemployees based on the fair market value of the Company’s common stock. The measurement of stock-based compensation is subject to periodic adjustments with the resulting change in value, if any, is recognized in the Company’s consolidated statements of operations during the period the related services are rendered.
Comprehensive Income (Loss)
Comprehensive income (loss) represents all changes in stockholders’ equity (deficit) except those resulting from investments or contributions by stockholders. The Company’s unrealized gains and losses on available-for-sale securities and foreign currency translation adjustments represent the components of comprehensive income (loss) excluded from the Company’s net loss and have been disclosed in the consolidated statements of convertible preferred stock, redeemable noncontrolling interest and equity (deficit) for all periods presented.
The components of accumulated other comprehensive income are as follows (in thousands):
|
| | | | | | | |
| September 30, 2011 | | December 31, 2010 |
|
Foreign currency translation adjustment, net of tax | $ | (5,451 | ) | | $ | 2,867 |
|
Accumulated unrealized gain on investment | — |
| | 5 |
|
Total accumulated other comprehensive income (loss) | $ | (5,451 | ) | | $ | 2,872 |
|
Net Loss Attributable to Common Stockholders and Net Loss per Share
The Company computes net loss per share in accordance with ASC 260, “Earnings per Share.” Basic net loss per share of common stock is computed by dividing the Company’s net loss attributable to Amyris, Inc. common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share of common stock is computed by giving effect to all potentially dilutive securities, including stock options, restricted stock units, common stock warrants,
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
convertible preferred stock and convertible preferred stock warrants using the treasury stock method or the as converted method, as applicable. Basic and diluted net loss per share of common stock attributable to Amyris, Inc. stockholders was the same for all periods presented as the inclusion of all potentially dilutive securities outstanding was anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss are the same for each period presented.
The following table presents the calculation of basic and diluted net loss per share of common stock attributable to Amyris, Inc. common stockholders (in thousands, except share and per share amounts):
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2011 | | 2010 | | 2011 | | 2010 |
Numerator: | | | | | | | |
Net loss attributable to Amyris, Inc. common stockholders | $ | (43,690 | ) | | $ | (62,140 | ) | | $ | (119,442 | ) | | $ | (98,236 | ) |
Denominator: | | | | | | | |
Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, basic and diluted | 45,031,613 |
| | 5,227,689 |
| | 44,507,686 |
| | 5,099,635 |
|
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.97 | ) | | $ | (11.89 | ) | | $ | (2.68 | ) | | $ | (19.26 | ) |
The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have been antidilutive:
|
| | | | | |
| Nine Months Ended September 30, |
| 2011 | | 2010 |
Period-end stock options to purchase common stock | 8,353,279 |
| | 6,833,698 |
|
Period-end common stock subject to repurchase | 10,335 |
| | 39,872 |
|
Period-end common stock warrants | 5,136 |
| | 195,604 |
|
Period-end restricted stock units | 375,189 |
| | — |
|
Total | 8,743,939 |
| | 7,069,174 |
|
Recent Accounting Pronouncements
In October 2009, the FASB issued a new accounting standard that changes the accounting for arrangements with multiple deliverables. Specifically, the new accounting standard requires an entity to allocate arrangement consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. In addition, the new standard eliminates the use of the residual method of allocation and requires the relative-selling-price method in all circumstances in which an entity recognizes revenue for an arrangement with multiple deliverables. The standard became effective for the Company on January 1, 2011. The adoption of the updated guidance did not have an impact on the Company's consolidated financial position, results of operations or cash flows for the three and nine months ended September 30, 2011 and does not change the units of accounting for its revenue transactions. The new accounting standard, if applied to the year ended December 31, 2010, would not have an impact on revenue for that year.
In January 2010, the FASB issued an amendment to an accounting standard which requires new disclosures for fair value measures and provides clarification for existing disclosure requirements. Specifically, this amendment requires an entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and to describe the reasons for the transfers; and to disclose separately information about purchases, sales, issuances and settlements in the reconciliation for fair value measurements using significant unobservable inputs, or Level 3 inputs. The amendment also clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and requires disclosure about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. The updated guidance is effective for interim or annual reporting periods beginning after December 15, 2009, except for the disclosures regarding the reconciliation of Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In April 2010, the FASB issued an accounting standard update related to revenue recognition under the milestone method. The standard provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
of revenue recognition for research or development transactions. Research or development arrangements frequently include payment provisions whereby a portion or all of the consideration is contingent upon milestone events such as successful completion of phases in a study or achieving a specific result from the research or development efforts. The amendments in these standards provide guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. The standard is effective for fiscal years and interim periods within those years beginning on or after June 15, 2010, with early adoption permitted, and applies to milestones achieved on or after that time. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In May 2011, the FASB issued an amendment to an accounting standard related to fair value measurement. This amendment is intended to result in convergence between U.S. GAAP and International Financial Reporting Standards (“IFRS”) requirements for measurement of and disclosures about fair value. This guidance clarifies the application of existing fair value measurements and disclosures, and changes certain principles or requirements for fair value measurements and disclosures. The amended guidance is effective for interim and annual periods beginning after December 15, 2011. The Company is currently assessing the potential impact, if any, this amendment may have on its consolidated financial position, results of operations and cash flows.
In June 2011, the FASB issued an amendment to an accounting standard related to the presentation of the Statement of Comprehensive Income. This amendment will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. The amended guidance is effective for interim and annual periods beginning after December 15, 2011 with full retrospective application required. Early adoption is permitted. The adoption of this amendment concerns disclosure only and the Company is currently assessing the impact it will have on its consolidated financial position, results of operations or cash flows.
3. Fair Value of Financial Instruments
The following tables set forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. As of September 30, 2011, the Company’s fair value hierarchy for its financial assets and financial liabilities that are carried at fair value was as follows (in thousands):
|
| | | | | | | | | | | | | | | |
| Quoted Prices in Active Markets for Identical Assets (Level 1) | | Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Balance as of September 30, 2011 |
Financial Assets | | | | | | | |
Money market funds | $ | 78,237 |
| | $ | — |
| | $ | — |
| | $ | 78,237 |
|
Certificates of Deposit | 17,652 |
| | — |
| | — |
| | 17,652 |
|
U.S. Government agency securities | — |
| | — |
| | — |
| | — |
|
Derivative assets | 130 |
| | — |
| | — |
| | 130 |
|
Total financial assets | $ | 96,019 |
| | $ | — |
| | $ | — |
| | $ | 96,019 |
|
Financial Liabilities | | | | | | | |
Derivative liabilities | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Total financial liabilities | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
As of December 31, 2010, the Company’s fair value hierarchy for its financial assets and financial liabilities that are carried at fair value was as follows (in thousands):
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
|
| | | | | | | | | | | | | | | |
| Quoted Prices in Active Markets for Identical Assets (Level 1) | | Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Balance as of December 31, 2010 |
Financial Assets | | | | | | | |
Money market funds | $ | 124,228 |
| | $ | — |
| | $ | — |
| | $ | 124,228 |
|
Certificates of Deposit(1) | 9,238 |
| | — |
| | — |
| | 9,238 |
|
U.S. Government agency securities | — |
| | 105,635 |
| | — |
| | 105,635 |
|
Total financial assets | $ | 133,466 |
| | $ | 105,635 |
| | $ | — |
| | $ | 239,101 |
|
Financial Liabilities | | | | | | | |
Derivative liabilities | $ | 324 |
| | $ | — |
| | $ | — |
| | $ | 324 |
|
Total financial liabilities | $ | 324 |
| | $ | — |
| | $ | — |
| | $ | 324 |
|
______________
(1) Prior year fair value hierarchy now includes certificates of deposits to conform with current period presentation. Such reclassification did not change previously reported consolidated financial statements.
Derivative Instruments
The Company utilizes derivative financial instruments to mitigate its exposure to certain market risks associated with its ongoing operations. The primary objective for holding derivative financial instruments is to manage commodity price risk. The Company’s derivative instruments principally include Chicago Board of Trade (CBOT) ethanol futures and Reformulated Blendstock for Oxygenate Blending (RBOB) gasoline futures. All derivative commodity instruments are recorded at fair value on the consolidated balance sheets. None of the Company’s derivative instruments are designated as a hedging instrument. Changes in the fair value of these non-designated hedging instruments are recognized in cost of product sales in the consolidated statements of operations.
Derivative instruments measured at fair value as of September 30, 2011 and December 31, 2010, and their classification on the condensed consolidated balance sheets and condensed consolidated statements of operations, are presented in the following tables (in thousands) except contract amounts:
|
| | | | | | | | | | | | | |
| Asset/Liability as of |
| September 30, 2011 | | December 31, 2010 |
Type of Derivative Contract | Quantity of Net Short Contracts | | Fair Value | | Quantity of Net Short Contracts | | Fair Value |
Regulated fixed price futures contracts, included as asset in prepaid expenses and other current assets | 53 |
| | $ | 130 |
| | — |
| | $ | — |
|
Regulated fixed price futures contracts, included as liability in accounts payable | — |
| | $ | — |
| | 92 |
| | $ | 324 |
|
|
| | | | | | | | | | | | | | | | | |
Type of Derivative Contract | Income Statement Classification | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2011 | | 2010 | | 2011 | | 2010 |
| Gain (Losses) Recognized | | Gain (Losses) Recognized |
Regulated fixed price futures contracts | Cost of product sales | | $ | 625 |
| | $ | (1,224 | ) | | $ | (2,103 | ) | | $ | (379 | ) |
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
4. Balance Sheet Components
Investments
The following table summarizes the Company’s investments as of September 30, 2011 (in thousands):
|
| | | | | | | | | | | |
| September 30, 2011 |
| Amortized Cost | | Unrealized Gain (Loss) | | Fair Value |
Short-Term Investments | | | | | |
Certificates of Deposit | $ | 17,652 |
| | $ | — |
| | $ | 17,652 |
|
Total short-term investments | $ | 17,652 |
| | $ | — |
| | $ | 17,652 |
|
The following table summarizes the Company’s investments as of December 31, 2010 (in thousands):
|
| | | | | | | | | | | |
| December 31, 2010 |
| Amortized Cost | | Unrealized Gain (Loss) | | Fair Value |
Short-Term Investments | | | | | |
U.S. Government agency securities | $ | 105,630 |
| | $ | 5 |
| | $ | 105,635 |
|
Certificates of Deposit | 9,238 |
| | — |
| | 9,238 |
|
Total short-term investments | $ | 114,868 |
| | $ | 5 |
| | $ | 114,873 |
|
Inventories
Inventories, net is comprised of the following (in thousands):
|
| | | | | | | |
| September 30, 2011 | | December 31, 2010 |
Raw materials | $ | 1,312 |
| | $ | — |
|
Work-in-process | 1,794 |
| | — |
|
Finished goods | 5,386 |
| | 4,006 |
|
Inventories, net | $ | 8,492 |
| | $ | 4,006 |
|
Prepaid and Other Current Assets
Prepaid and other current assets is comprised of the following (in thousands):
|
| | | | | | | |
| September 30, 2011 | | December 31, 2010 |
Advances to contract manufacturers | $ | 3,108 |
| | $ | — |
|
Manufacturing catalysts | 1,469 |
| | — |
|
Advances on manufacturing catalysts | 809 |
| | — |
|
Interest receivable | — |
| | 744 |
|
Recoverable VAT and other taxes | 752 |
| | 24 |
|
Margin deposits on derivative instruments | 523 |
| | 373 |
|
Advances on collaboration services | 442 |
| | — |
|
Other | 2,329 |
| | 1,764 |
|
Prepaid and other current assets | $ | 9,432 |
| | $ | 2,905 |
|
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
Property and Equipment, net
Property and equipment, net is comprised of the following (in thousands):
|
| | | | | | | |
| September 30, 2011 | | December 31, 2010 |
Leasehold improvements | $ | 39,180 |
| | $ | 29,445 |
|
Machinery and equipment | 45,429 |
| | 22,115 |
|
Computers and software | 6,115 |
| | 5,225 |
|
Furniture and office equipment | 1,862 |
| | 1,486 |
|
Vehicles | 602 |
| | 493 |
|
Construction in progress | 46,032 |
| | 12,431 |
|
| 139,220 |
| | 71,195 |
|
Less: accumulated depreciation and amortization | (23,370 | ) | | (16,348 | ) |
Property and equipment, net | $ | 115,850 |
| | $ | 54,847 |
|
Property and equipment includes $9.4 million of machinery and equipment and furniture and office equipment under capital leases as of September 30, 2011 and December 31, 2010. Accumulated amortization of assets under capital leases totaled $4.2 million and $3.0 million as of September 30, 2011 and December 31, 2010, respectively.
Depreciation and amortization expense, including amortization of assets under capital leases, was $3.0 million and $1.9 million for the three months ended September 30, 2011 and 2010, respectively, and was $7.5 million and $5.3 million for the nine months ended September 30, 2011 and 2010, respectively.
Construction in progress as of September 30, 2011 includes $9.9 million of assets accounted for under ASC 840 "Leases" (see Note 9).
Other Assets
Other assets are comprised of the following (in thousands):
|
| | | | | | | |
| September 30, 2011 | | December 31, 2010 |
Deferred charge asset(1) | $ | 22,197 |
| | $ | 27,631 |
|
Deposits on property and equipment | 15,243 |
| | 4,556 |
|
Other | 1,312 |
| | 360 |
|
Total other assets | $ | 38,752 |
| | $ | 32,547 |
|
——————————————————————
| |
(1) | The deferred charge asset relates to the collaboration agreement between the Company and Total (see Note 9). |
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
Accrued and Other Current Liabilities
Accrued and other current liabilities are comprised of the following (in thousands):
|
| | | | | | | |
| September 30, 2011 | | December 31, 2010 |
Professional services | $ | 4,200 |
| | $ | 3,552 |
|
Accrued vacation | 2,611 |
| | 1,996 |
|
Payroll and related expenses | 11,144 |
| | 2,729 |
|
Construction in progress | 1,367 |
| | 2,227 |
|
Tax-related liabilities | 1,513 |
| | 1,273 |
|
Deferred rent, current portion | 1,233 |
| | 1,099 |
|
Customer advances | 6,121 |
| | — |
|
Refundable exercise price on early exercise of stock options | 37 |
| | 70 |
|
Other | 2,107 |
| | 1,849 |
|
Total accrued and other current liabilities | $ | 30,333 |
| | $ | 14,795 |
|
5. Commitments and Contingencies
Capital Leases
In March 2008, the Company executed an equipment financing agreement intended to cover certain qualifying research and laboratory hardware and software. In January 2009, the agreement was amended to increase the financing amount. During the years ended December 31, 2010, 2009 and 2008, the Company financed certain purchases of hardware equipment and software of approximately $1.4 million, $4.8 million and $3.3 million, respectively. Pursuant to the equipment financing agreement, the Company financed the equipment with the transactions representing capital leases. Accordingly, fixed assets and capital lease liabilities were recorded at the present values of the future lease payments of $3.8 million and $5.9 million at September 30, 2011 and December 31, 2010, respectively. The incremental borrowing rates used to determine the present values of the future lease payments was 9.5%. The capital lease obligations expire at various dates, with the latest maturity in March 2013. In connection with the agreement entered into in 2008, the Company issued a warrant to purchase shares of the Company's convertible preferred stock (see Note 10).
The Company recorded interest expense in connection with its capital leases of $126,000 and $205,000 for the three months ended September 30, 2011 and 2010, respectively, and $437,000 and $636,000 for the nine months ended September 30, 2011 and 2010, respectively. Future minimum payments under capital leases as of September 30, 2011, are as follows (in thousands):
|
| | | |
Years ending December 31: | Capital Leases |
2011 (Three Months) | $ | 849 |
|
2012 | 2,910 |
|
2013 | 391 |
|
Thereafter | — |
|
Total future minimum lease payments | 4,150 |
|
Less: amount representing interest | (314 | ) |
Present value of minimum lease payments | 3,836 |
|
Less: current portion | (2,931 | ) |
Long-term portion | $ | 905 |
|
Operating Leases
The Company has noncancelable operating lease agreements for office, research and development and manufacturing space in the United States that expire at various dates, with the latest expiration in May 2018 with an estimated annual rent payment of approximately $5.9 million. In addition, the Company leases facilities in Brazil pursuant to noncancelable operating leases that expires at various dates, with the latest expiration in November 2016 with an estimated annual rent payment of approximately
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
$467,000.
In 2007, the Company entered into an operating lease for its headquarters in Emeryville, California, with a term of ten years commencing in May 2008. As part of the operating lease agreement, the Company received a tenant improvements allowance of $11.4 million. The Company recorded the allowance as deferred rent and associated expenditures as leasehold improvements that are being amortized over the shorter of their useful life or the term of the lease. In connection with the operating lease, the Company elected to defer a portion of the monthly base rent due under the lease and entered into notes payable agreements with the lessor for the purchase of certain tenant improvements. In October 2010, the Company amended its lease agreement with the lessor of its headquarters, to lease up to approximately 22,000 square feet of research and development and office space. In return for the removal of the early termination clause in its amended lease agreement, the Company received approximately $1.0 million from the lessor in December 2010.
The Company recognizes rent expense on a straight-line basis over the noncancelable lease term and records the difference between cash rent payments and the recognition of rent expense as a deferred rent liability. Where leases contain escalation clauses, rent abatements, and/or concession, such as rent holidays and landlord or tenant incentives or allowances, the Company applies them in the determination of straight-line rent expense over the lease term. Rent expense was $1.2 million and $0.8 million for the three months ended September 30, 2011 and 2010, respectively, and $3.5 million and $2.3 million for the nine months ended September 30, 2011 and 2010, respectively.
The Company has terminalling agreements with terminal storage facility vendors for the storage and handling of products. As of September 30, 2011 the Company had $0.9 million in outstanding commitments under these terminalling agreements of which $0.4 million and $0.5 million are expected to be paid in 2011 and 2012, respectively.
In January 2011, the Company entered into a right of first refusal agreement with respect to a facility and site in Leland, North Carolina leased by Glycotech covering a two year period commencing in January 2011. Under the right of first refusal agreement, the lessor agrees not to sell the facility and site leased by Glycotech during the term of the production service agreement. If the lessor is presented with an offer to sell, or decides to sell, an adjacent parcel, the Company has a right of first refusal to acquire the adjacent parcel or leased property.
In February 2011, the Company commenced payment of rent related to an operating lease on a real property owned by Usina São Martinho in Brazil. In conjunction with a joint venture agreement (see Note 7) with the same entity, the real property will be used by the joint venture entity, SMA Indústria Química S.A. (“SMA”), for the construction of a production facility. This lease has a term of 20 years commencing in February 2011 with an estimated annual rent payment of approximately $59,000.
In February 2011, the Company entered into an operating lease for certain equipment owned by GEA Engenharia de Processos e Sistemas Industriais Ltda (“GEA”) in Brazil. The equipment under this lease will be used by the Company in its production activities in Brazil. This lease has a term of one year commencing in March 2011 with an estimated annual rent payment of approximately $96,000 and is renewable for up to two years from the end of the initial term.
In March 2011, the Company entered into an operating lease on a real property owned by Paraíso Bioenergia S.A. (“Paraíso Bioenergia”) in Brazil. In conjunction with a supply agreement (see Note 9) with the same entity, the real property will be used by the Company for the construction of an industrial facility. This lease has a term of 15 years commencing in March 2011 with an estimated annual rent payment of approximately $147,000.
In August 2011, the Company notified the lessor of its leased office facilities in Brazil of the Company's termination of its existing lease effective November 30, 2011. At the same time, the Company entered into an operating lease for new office facilities in Campinas, Brazil. The new lease has a term of 5 years commencing in November 2011 with an estimated annual rent payment of approximately $467,000.
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
Future minimum payments under operating leases as of September 30, 2011, are as follows (in thousands):
|
| | | | | | | | | | | | | | | |
Years ending December 31: | Operating Leases - Facilities | | Operating Leases - Land | | Operating Leases - Equipment | | Total Operating Leases |
2011 (Three Months) | $ | 1,623 |
| | $ | 15 |
| | $ | 24 |
| | $ | 1,662 |
|
2012 | 6,556 |
| | 169 |
| | 16 |
| | 6,741 |
|
2013 | 6,330 |
| | 206 |
| | — |
| | 6,536 |
|
2014 | 6,408 |
| | 206 |
| | — |
| | 6,614 |
|
2015 | 6,586 |
| | 206 |
| | — |
| | 6,792 |
|
Thereafter | 15,950 |
| | 2,389 |
| | — |
| | 18,339 |
|
Total future minimum lease payments | $ | 43,453 |
| | $ | 3,191 |
| | $ | 40 |
| | $ | 46,684 |
|
Guarantor Arrangements
The Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company's request in such capacity. The term of the indemnification period is for the officer 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 amounts paid. 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, 2011 and December 31, 2010.
The Company has an uncommitted facility letter (“Credit Agreement”) with a financial institution to finance the purchase and sale of fuel and for working capital requirements, as needed. The Company is a parent guarantor for the payment of the outstanding balance under the Credit Agreement. As of September 30, 2011 the Company had $5.4 million in outstanding letters of credit under the Credit Agreement which are guaranteed by the Company and payable on demand. The Credit Agreement is collateralized by a first priority security interest in certain of the Company's present and future assets.
The Company has a facility (“FINEP Credit Facility”) with a financial institution to finance a research and development project on sugarcane-based biodiesel (see Note 6). The FINEP Credit Facility provides for loans of up to an aggregate principal amount of R$6.4 million Brazilian reais (approximately $3.5 million based on the exchange rate at September 30, 2011) which is guaranteed by a chattel mortgage on certain equipment of the Company. The Company's total acquisition cost for the equipment under this guarantee is approximately R$6.0 million Brazilian reais (approximately $3.2 million based on the exchange rate at September 30, 2011). Subject to compliance with certain terms and conditions under the FINEP Credit Facility, four disbursements of the loan will become available to the Company for withdrawal, as described in more detail in Note 6. After the release of the first disbursement, prior to any subsequent drawdown from the FINEP Credit Facility, the Company also needs to provide bank letters of guarantee of up to R$3.3 million Brazilian reais (approximately $1.8 million based on the exchange rate at September 30, 2011).
The Company has a terminalling agreement with a terminal storage facility vendor for storing and handling of products. The Company is a parent guarantor for the payment of the outstanding balance under the Terminalling Agreement. As of September 30, 2011 the Company had $0.4 million in outstanding commitments under the Terminalling Agreement which are guaranteed by the Company and payable on demand.
Under an operating lease agreement for its office facilities in Brazil, which commences November 15, 2011, the Company is required to maintain restricted cash or letters of credit equal to three months rent of approximately R$191,000 Brazilian reais (approximately $103,000 based on the exchange rate at September 30, 2011) as guarantee that the Company will meet its performance obligations under such operating lease agreement.
Other Matters
The Company may be involved, from time to time, in legal proceedings and claims arising in the ordinary course of its business. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. The Company accrues amounts, to the extent they can be reasonably estimated, that it believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that the Company believes will result in a probable loss.
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
6. Debt
Debt is comprised of the following (in thousands):
|
| | | | | | | |
| September 30, 2011 | | December 31, 2010 |
|
Credit facilities | $ | 7,447 |
| | $ | — |
|
Notes payable | 3,407 |
| | 5,668 |
|
Loans payable | 1,452 |
| | 977 |
|
Total debt | 12,306 |
| | 6,645 |
|
Less: current portion | (2,336 | ) | | (1,911 | ) |
Long-term debt | $ | 9,970 |
| | $ | 4,734 |
|
Credit Facility
In November 2010, the Company entered into the FINEP Credit Facility with Financiadora de Estudos e Projetos (“FINEP”), a state-owned company subordinated to the Brazilian Ministry of Science and Technology. This FINEP Credit Facility was extended to partially fund expenses related to the Company's research and development project on sugarcane-based biodiesel (“FINEP Project”) and provides for loans of up to an aggregate principal amount of R$6.4 million Brazilian reais (approximately $3.5 million based on the exchange rate at September 30, 2011) which is guaranteed by a chattel mortgage on certain equipment of the Company as well as bank letters of guarantee. Subject to compliance with certain terms and conditions under the FINEP Credit Facility, four disbursements of the loan will become available to the Company for withdrawal. The first disbursement received in February 2011 was approximately R$1.8 million Brazilian reais, and the next three disbursements will each be approximately R$1.6 million Brazilian reais. As of September 30, 2011 and December 31, 2010, there were R$1.8 million Brazilian reais (approximately $0.9 million based on the exchange rate at September 30, 2011) and zero amount outstanding, respectively, under this FINEP Credit Facility.
Interest on loans drawn under this credit facility is fixed at 5.0% per annum. In case of default under or non-compliance with the terms of the agreement, the interest on loans will be dependent on the long-term interest rate as published by the Central Bank of Brazil (“TJLP”). If the TJLP at the time of default is greater than 6.0%, then the interest will be 5.0% + a TJLP adjustment factor otherwise the interest will be at 11.0% per annum. In addition, a fine of up to 10.0% will apply to the amount of any obligation in default. Interest on late balances will be 1.0% interest per month, levied on the overdue amount. Payment of the outstanding loan balance will be made in 81 monthly installments which will commence in July 2012 and extend through March 2019. Interest on loans drawn and other charges are paid on a monthly basis commencing in March 2011.
The FINEP Credit Facility contains the following significant terms and conditions:
| |
• | The Company will share with FINEP the costs associated with the FINEP Project. At a minimum, the Company will contribute from its own funds approximately R$14.5 million Brazilian reais ($7.8 million based on the exchange rate at September 30, 2011) of which R$11.1 million Brazilian reais should have been contributed prior to the release of the second disbursement; |
| |
• | After the release of the first disbursement, prior to any subsequent drawdown from the FINEP Credit Facility, the Company must provide bank letters of guarantee of up to R$3.3 million Brazilian reais in aggregate (approximately $1.8 million based on the exchange rate at September 30, 2011); |
| |
• | Amounts released from the FINEP Credit Facility must be completely used by the Company towards the FINEP Project within 30 months after the contract execution. |
Notes Payable
During the period between May 2008 and October 2008, the Company entered into notes payable agreements with the lessor of its headquarters under which it borrowed a total of $3.3 million for the purchase of tenant improvements, bearing an interest rate of 9.5% per annum and to be repaid over a period of 55 to 120 months. As of September 30, 2011 and December 31, 2010, a principal amount of $2.1 million and $2.4 million, respectively, was outstanding under these notes payable.
During the period between January 2009 and December 2009, the Company entered into notes payable agreements with a service provider in connection with its software implementation under which it borrowed a total of $1.2 million for the payment of implementation services and software licenses, bearing an interest rate of 8.53% per annum and to be repaid over a period of 69 to 83 months. As of September 30, 2011 and December 31, 2010, a principal amount of zero and $1.0 million, respectively,
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
was outstanding under these notes payable.
In February 2010, the Company entered into a notes payable agreement with its landlord for a loan of $239,000. The notes are payable in monthly principal and interest installments of $31,000 from June 2010 through January 2011. The notes payable accrue interest at 10.5%. As of September 30, 2011 and December 31, 2010, a principal amount of zero and $31,000, respectively, was outstanding under these notes payable.
During the period between August 2010 and November 2010, the Company entered into notes payable agreements with an equipment financing company under which it borrowed a total of $2.4 million for the purchase of equipment and leasehold improvements. The notes payable bears an interest rate of 16.7% per annum to be repaid over a period of 42 months. As of September 30, 2011 and December 31, 2010, a principal amount of zero and $2.2 million, respectively, was outstanding under these notes payable.
In connection with the operating lease for its headquarters (see Note 5) in Emeryville, California, the Company elected to defer a portion of monthly base rent due under the lease. In June 2011, a deferred rent obligation of $1.5 million resulting from this election became due and payable in 24 equal monthly installments of approximately $63,000. As such, the Company reclassified this obligation from Other Liabilities to Notes Payable. As of September 30, 2011 a principal amount of $1.3 million was outstanding under this note payable.
Loans Payable
In August 2009, the Company entered into a loans payable agreement with the lessor of its headquarters under which it borrowed $750,000. The loan is payable in monthly installments of interest only and unpaid interest and principal is payable in December 2011. Interest accrues at an interest rate of 10.5%. As of September 30, 2011 and December 31, 2010, a principal amount of $750,000, was outstanding under the loan. The notes payable agreement is secured by a $750,000 letter of credit.
In December 2009, the Company entered into a loans payable agreement with the lessor of its Emeryville pilot plant under which it borrowed a total of $250,000, bearing an interest rate of 10% per annum and to be repaid over a period of 96 months. As of September 30, 2011 and December 31, 2010, a principal amount of $210,000 and $228,000, respectively, was outstanding under the loan.
Letters of Credit
In November 2008, the Company entered into an uncommitted facility letter (the “Credit Agreement”) with a financial institution to finance the purchase and sale of fuel and for working capital requirements, as needed. In October 2009, the agreement was amended to decrease the maximum amount that the Company may borrow under such facility. The Credit Agreement, as amended, provides an aggregate maximum availability up to the lower of $20.0 million and the borrowing base as defined in the agreement, and is subject to a sub-limit of $5.7 million for the issuance of letters of credit and a sub-limit of $20.0 million for short-term cash advances for product purchases. The Credit Agreement is collateralized by a first priority security interest in certain of the Company's present and future assets. Amyris is a parent guarantor for the payment of the outstanding balance under the Credit Agreement. Outstanding advances bear an interest rate at the Company's option of the bank's prime rate plus 1.0% or the bank's cost of funds plus 3.5%. As of September 30, 2011, the Company had sufficient borrowing base levels to draw down up to a total of $9.2 million in short term cash advances and $0.3 million available for letters of credit in addition to those outstanding as of September 30, 2011. As of September 30, 2011 and December 31, 2010, the Company had no outstanding advances and had $5.4 million and $4.6 million, respectively, in outstanding letters of credit under the Credit Agreement.
To the extent that amounts under the Credit Agreement remain unused, while the Credit Agreement is in effect and for so long thereafter as any of the obligations under the Credit Agreement are outstanding, the Company will pay an annual commitment fee of $300,000. The Credit Agreement requires compliance with certain customary covenants that require maintenance of certain specified financial ratios and conditions. As of September 30, 2011, the Company was in compliance with its financial covenants under the Credit Agreement.
Revolving Credit Facility
On December 23, 2010, the Company established a revolving credit facility with a financial institution which provides for loans and standby letters of credit of up to an aggregate principal amount of $10.0 million, with a sublimit of $5.0 million on standby letters of credit. Interest on loans drawn under this revolving credit facility will be equal to (i) the Eurodollar Rate plus 3.0%; or (ii) the Prime Rate plus 0.5%. In case of default or non-compliance with the terms of the agreement, the interest on loans will be Prime Rate plus 2.0%. The credit facility is collateralized by a first priority security interest in certain of the Company's present and future assets. It has a $5,000 annual loan fee and contains the following significant financial and non-financial covenants,
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
all of which the Company was in compliance as of September 30, 2011:
Financial Covenants: The Company must maintain a liquidity of at least $10 million plus two times its quarterly “Net Cash Used in Operating Activities” calculated using the Company's Condensed Consolidated Statements of Cash Flows reflected in the Company's most recent periodic report filed with the SEC. In addition, as of the end of each fiscal quarter, the Company must maintain a current ratio (current assets to current liabilities) equal to or greater than 2:1.
Financial Statements: The Company must provide financial statements to the lender on a quarterly basis within 60 days after the end of each of the first three quarters of each fiscal year and audited financial statements within 105 days after the end of each fiscal year.
Under this facility, loans aggregating $6.5 million and three letters of credit totaling $3.5 million were outstanding as of September 30, 2011. The outstanding letters of credit serve as security for certain facility leases and expire between November and December 2011 and may be automatically extended for another one-year period.
Future minimum payments under the debt agreements as of September 30, 2011 are as follows (in thousands):
|
| | | | | | | | | | | |
Years ending December 31: | Notes Payable | | Loans Payable | | Credit Facility |
2011(Three Months) | $ | 351 |
| | $ | 785 |
| | $ | 71 |
|
2012 | 1,405 |
| | 400 |
| | 282 |
|
2013 | 770 |
| | 179 |
| | 6,583 |
|
2014 | 355 |
| | 45 |
| | 55 |
|
2015 | 355 |
| | 45 |
| | 55 |
|
Thereafter | 834 |
| | 89 |
| | 1,049 |
|
Total future minimum payments | 4,070 |
| | 1,543 |
| | 8,095 |
|
Less: amount representing interest | (663 | ) | | (91 | ) | | (648 | ) |
Present value of minimum debt payments | 3,407 |
| | 1,452 |
| | 7,447 |
|
Less: current portion | (1,202 | ) | | (1,134 | ) | | — |
|
Noncurrent portion of debt | $ | 2,205 |
| | $ | 318 |
| | $ | 7,447 |
|
7. Joint Ventures
SMA Indústria Química S.A.
On April 14, 2010, the Company established SMA, a joint venture with Usina São Martinho, to build the first facility in Brazil fully dedicated to the production of Amyris renewable products. The new company is located at the Usina São Martinho mill in Pradópolis, São Paulo state. SMA has a 20 year initial term.
Amyris plans to provide genetically engineered yeast to enable SMA to produce Amyris farnesene, or Biofene®, a molecule which may be used as an ingredient in a wide range of consumer and industrial products, including detergents, cosmetics, perfumes and industrial lubricants.
SMA is managed by a three member executive committee, of which the Company appoints two members one of whom is the plant manager who is the most senior executive responsible for managing the construction and operation of the facility. SMA is governed by a four member board of directors, of which the Company and Usina São Martinho each appoint two members. The board of directors has certain protective rights which include final approval of the engineering designs and project work plan developed and recommended by the executive committee.
Under the joint venture agreements, the Company granted a royalty-free license to SMA. The Company will fund the construction costs of the new facility. Usina São Martinho will reimburse up to R$61.8 million Brazilian reais (approximately $33.3 million based on the exchange rate as of September 30, 2011) of the construction costs after SMA commences production. Post commercialization, the Company will market and distribute the Amyris renewable products. Usina São Martinho will sell feedstock and provide certain other services to SMA. The cost of the feedstock to SMA is a price that is based on the average return that Usina São Martinho could receive from the production of its current products, sugar and ethanol. The Company is required to purchase the output of SMA for the first four years at a price that guarantees the return of Usina São Martinho's investment plus a fixed interest rate. After this four year period, the price is set to guarantee a break-even price to SMA plus an agreed upon return.
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
Under the terms of the joint venture agreements, if the Company becomes controlled, directly or indirectly, by a competitor of Usina São Martinho, then Usina São Martinho has the right to acquire the Company’s interest in SMA. If Usina São Martinho becomes controlled, directly or indirectly, by a competitor of the Company, then the Company has the right to sell its interest in SMA to Usina São Martinho. In either case, the purchase price shall be determined in accordance with the joint venture agreements, and the Company would continue to have the obligation to acquire products produced by SMA for the remainder of the term of the supply agreement then in effect even though the Company would no longer be involved in SMA’s management.
Amyris has a 50% ownership interest in SMA. The Company has identified SMA as a VIE. The Company is the primary beneficiary and consequently consolidates SMA’s operations in its financial statements. As of September 30, 2011, the Company’s investment in SMA did not have a significant impact on its consolidated financial position, results of operations or cash flows.
Joint Venture with Cosan
In June 2011, the Company entered into joint venture agreements with Cosan Combustíveis e Lubrificantes S.A. and Cosan S.A. Industria e Comércio (such Cosan entities, collectively or individually, “Cosan”), related to the formation of joint venture (the “JV”), which will focus on the worldwide development, production and commercialization of base oils made from Biofene produced by the JV or purchased from the Company or a contract manufacturer. The Company and Cosan are establishing entities related to the joint venture in both Brazil and the United States.
Under the joint venture agreements, the JV will undertake, on a worldwide basis, the development, production and commercialization of certain classes of base oils produced from Biofene for use in lubricants products in the automotive, commercial and industrial markets. The agreements provide that the Company will perform research and development activities on behalf of the JV under a research services arrangement and will grant a royalty-free license to the JV to use the Company's technology to develop, produce, market and distribute renewable base oils for use in lubricant products sold worldwide. The joint venture agreements provide that Cosan will provide technical expertise and use commercially reasonable efforts to contribute a base oils offtake agreement with a third party to the JV.
Subject to certain exceptions for the Company, the joint venture agreements provide that the JV will be the exclusive means through which the Company and Cosan will engage in the worldwide development and commercialization of specified classes of renewable base oils that are derived from Biofene or, under certain circumstances, from other intermediate molecules or technologies. The JV has certain rights of first refusal with respect to alternative base oil technologies that may be acquired by the Company or Cosan during the term of the JV.
Under the joint venture agreements, the Company and Cosan each own 50% of the JV and each party will share equally in any costs and any profits ultimately realized by the JV. The joint venture agreement has an initial term of 20 years from the date of the agreement, subject to earlier termination by mutual written consent or by a non-defaulting party in the event of specified defaults by the other party (including breach by a party of any material obligations under the joint venture agreements). The Shareholders' Agreement has an initial term of 10 years from the date of the agreement, subject to earlier termination if either the Company or Cosan ceases to own at least 10% of the voting stock of the JV.
The Company has identified the initial Brazilian JV entity formed (Novvi S.A.) as a VIE. The power to direct activities, which most significantly impact the economic success of joint venture, is shared between the Company and Cosan who are not related parties. Accordingly, the Company is not the primary beneficiary and therefore will account for its investments in the JV using the equity method. The Company will periodically review its consolidation analysis on an ongoing basis. As of September 30, 2011, the carrying amounts of the unconsolidated VIE's assets and liabilities were not material to the Company's consolidated financial statements.
In September 2011, the U.S. JV entity, Novvi LLC was formed. The Company and Cosan are still finalizing operating agreements for this new entity. Through September 30, 2011, there has been no activity in this joint venture.
8. Noncontrolling Interest
Redeemable Noncontrolling Interest
In February 2008, the Company formed a subsidiary Amyris Pesquisa e Desenvolvimento de Biocombustíveis, Ltda. In March 2008, the Company sold a 30% interest to Crystalsev and the subsidiary was renamed Amyris-Crystalsev Pesquisa e Desenvolvimento de Biocombustíveis Ltda. (“ACB”). The Company invested $3.8 million of cash for a 70% interest in ACB and Crystalsev contributed $1.6 million of cash for the remaining 30% interest.
In April 2009, the Company re-purchased Crystalsev’s 30% interest in ACB for $2.3 million resulting in ACB once again
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
becoming a wholly-owned subsidiary. The purchase of the noncontrolling interest was treated as an equity transaction and the fair value of the consideration paid of $2.3 million was recorded as a reduction of the carrying value of the noncontrolling interest and additional paid-in capital. In December 2009, ACB was renamed Amyris Brasil S.A. In May 2011, Amyris Brasil S.A. was converted into Amyris Brasil Ltda.
In December 2009, Amyris Brasil sold 1,111,111 of its shares representing a 4.8% interest in Amyris Brasil for R$10.0 million Brazilian reais. The redeemable noncontrolling interest was reported in the mezzanine equity section of the consolidated balance sheet because the Company was then subject to a contingent put option under which it could have been required to repurchase an interest in Amyris Brasil from the noncontrolling interest holder. The Company has recognized a noncontrolling interest from December 22, 2009 to December 31, 2009 in the consolidated balance sheets and statements of operations.
In March 2010, Amyris Brasil sold an additional 853,333 shares of its stock, an incremental 3.4% interest, for R$3.0 million Brazilian reais. In May 2010, Amyris Brasil sold an additional 1,111,111 shares of its stock, an incremental 4.07% interest, for R$10.0 million Brazilian reais.
Under the terms of the agreements with these Amyris Brasil investors, the Company had the right to require the investors to convert their shares of Amyris Brasil into shares of common stock at a 1:0.28 conversion ratio. On September 30, 2010, in connection with the Company’s IPO, shares of Amyris Brasil held by these investors were converted into 861,155 shares of the Company’s common stock. The remaining noncontrolling interest as of September 30, 2010 was converted to common stock and additional paid-in capital.
At the closing of the IPO, the Company recorded a one-time beneficial conversion feature charge of $2.7 million associated with the conversion of the shares of Amyris Brasil held by investors into shares of Amyris, Inc. common stock, which impacted earnings per share for the year ended December 31, 2010.
Noncontrolling Interest
SMA Indústria Química
The joint venture, SMA (see Note 7), is a VIE pursuant to the accounting guidance for consolidating VIEs because the amount of total equity investment at risk is not sufficient to permit SMA to finance its activities without additional subordinated financial support, as well as because the related commercialization agreement provides a substantive minimum price guarantee. Under the terms of the joint venture agreement, Amyris directs the design and construction activities, as well as production and distribution. In addition, Amyris has the obligation to fund the design and construction activities until commercialization is achieved. Subsequent to the construction phase, both parties equally fund SMA for the term of the joint venture. Based on those factors, the Company was determined to have the power to direct the activities that most significantly impact SMA’s economic performance and the obligation to absorb losses and the right to receive benefits. Accordingly, the financial results of SMA are included in the Company’s consolidated financial statements and amounts pertaining to Usina São Martinho’s interest in SMA are reported as noncontrolling interests in subsidiaries.
Glycotech
On January 3, 2011, the Company entered into a production service agreement with Glycotech, whereby Glycotech is to provide process development and production services for the manufacturing of various Amyris products at its leased facility in Leland, North Carolina. The Amyris products to be manufactured by Glycotech will be owned and distributed by the Company. Pursuant to the terms of the agreement, the Company will pay the manufacturing and operating costs of the Glycotech facility which is dedicated solely to the manufacture of Amyris products. The Company has determined that the arrangement with Glycotech qualifies as a VIE. The Company determined that it is the primary beneficiary of this arrangement since it has the power through the management committee over which it has majority control to direct the activities that most significantly impact the arrangement's economic performance. In addition, the Company is required to fund 100% of the Glycotech's actual operating costs for providing services each month while the facility is in operation under the production service agreement. Accordingly, the Company consolidates the financial results of Glycotech. As of September 30, 2011, the carrying amounts of the consolidated VIE's assets and liabilities were not material to the Company's consolidated financial statements.
The table below reflects the carrying amount of the assets and liabilities of the two consolidated VIEs for which the Company is the primary beneficiary. The assets primarily comprise of approximately $7.0 million in property and equipment and approximately $2.9 million in other assets, and $1.5 million in current assets. The liabilities comprise of $2.3 million in accounts payable and accrued current liabilities and $0.5 million in loan obligations by Glycotech to a financial institution that are non-recourse to the Company. The creditors of each consolidated VIE have recourse only to the assets of that VIE.
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
|
| | | |
| September 30, 2011 |
| (In thousands) |
Assets | $ | 11,396 |
|
Liabilities | $ | 2,768 |
|
The change in noncontrolling interest for nine months ended September 30, 2011 and 2010 is summarized below (in thousands):
|
| | | | | | | |
| 2011 | | 2010 |
Balance at January 1 | $ | 2 |
| | $ | — |
|
Addition to noncontrolling interest | 369 |
| | 28 |
|
Loss attributable to noncontrolling interest | (437 | ) | | (13 | ) |
Balance at September 30 | $ | (66 | ) | | $ | 15 |
|
9. Significant Agreements
Research and Development Activities
Total Collaboration Agreement
In June 2010, the Company entered into a technology license, development, research and collaboration agreement (“collaboration agreement”) with Total Gas & Power USA Biotech, Inc., an affiliate of Total S.A. (Total S.A. and its relevant affiliates, collectively, “Total”). The collaboration agreement sets forth the terms for the research, development, production and commercialization of certain to be determined chemical and/or fuel products made through the use of the Company’s synthetic biology platform. The collaboration agreement establishes a multiphased process through which projects are identified, screened, studied for feasibility, and ultimately selected as a project for development of an identified lead compound using an identified microbial strain. Under the terms of the collaboration agreement, Total will fund up to the first $50.0 million in research and development costs for the selected projects; thereafter the parties will share such costs equally. Amyris has agreed to dedicate the laboratory resources needed for collaboration projects. Total also plans to second employees at Amyris to work on the projects. Once a development project has commenced, the parties are obligated to work together exclusively to develop the lead compound during the project development phase. After a development project is completed, the Company and Total expect to form one or more joint ventures to commercialize any products that are developed, with costs and profits to be shared on an equal basis, provided that if Total has not achieved profits from sales of a joint venture product equal to the amount of funding it provided for development plus an agreed upon rate of return within three years of commencing sales, then Total will be entitled to receive all profits from sales until this rate of return has been achieved. Each party has certain rights to independently produce commercial quantities of these products under certain circumstances, subject to paying royalties to the other party. Total has the right of first negotiation with respect to exclusive commercialization arrangements that the Company would propose to enter into with certain third parties, as well as the right to purchase any of the Company’s products on terms no less favorable than those offered to or received by the Company from third parties in any market where Total or its affiliates have a significant market position.
The collaboration agreement has an initial term of 12 years and is renewable by mutual agreement by the parties for additional three year periods. Neither the Company nor Total has the right to terminate the agreement voluntarily. The Company and Total each have the right to terminate the agreement in the event the other party commits a material breach, is the subject of certain bankruptcy proceedings or challenges a patent licensed to it under the collaboration agreement. Total also has the right to terminate the collaboration agreement in the event the Company undergoes a sale or change of control to certain entities. If the Company terminates the collaboration agreement due to a breach, bankruptcy or patent challenge by Total, all licenses the Company has granted to Total terminate except licenses related to products for which Total has made a material investment and licenses related to products with respect to which binding commercialization arrangements have been approved, which will survive subject, in most cases, to the payment of certain royalties by Total to the Company. Similarly, if Total terminates the collaboration agreement due to a breach, bankruptcy or patent challenge by the Company, all licenses Total has granted to the Company terminate except licenses related to products for which the Company has made a material investment, certain grant-back licenses and licenses related to products with respect to which binding commercialization arrangements have been approved, which will survive subject, in most cases, to the payment of certain royalties to Total by the Company. On expiration of the collaboration agreement, or in the event the collaboration agreement is terminated for a reason other than a breach, bankruptcy or patent challenge by one party,
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
licenses applicable to activities outside the collaboration generally continue with respect to intellectual property existing at the time of expiration or termination subject, in most cases, to royalty payments. There are circumstances under which certain of the licenses granted to Total will survive on a perpetual, royalty-free basis after expiration or termination of the collaboration agreement. Generally these involve licenses to use the Company’s synthetic biology technology and core metabolic pathway for purposes of either independently developing further improvements to marketed collaboration technologies or products or the processes for producing them within a specified scope agreed to by the Company and Total prior to the time of expiration or termination, or independently developing early stage commercializing products developed from collaboration compounds that met certain performance criteria prior to the time the agreement expired or was terminated and commercializing products related to such compounds. After the collaboration agreement expires, the Company may be obligated to provide Total with ongoing access to Amyris laboratory facilities to enable Total to complete research and development activities that commenced prior to termination.
In June 2010, concurrent with the collaboration agreement, the Company issued 7,101,548 shares of Series D preferred stock to Total for aggregate proceeds of approximately $133.0 million at a per share price of $18.75, which was lower than the per share fair value of common stock as determined by management and the Board of Directors. Due to the fact the collaboration agreement and the issuance of shares to Total occurred concurrently, the terms of both the collaboration agreement and the issuance of preferred stock were evaluated to determine whether their separately stated pricing was equal to the fair value of services and preferred stock. The Company determined that the fair value of Series D preferred stock was $22.68 at the time of issuance, and therefore, the Company measured the preferred stock initially at its fair value with a corresponding reduction in the consideration for the services under the collaboration agreement. As revenue from collaboration agreement will be generated over a period of time based on the performance requirements, the Company recorded the difference between the fair value and consideration received for Series D preferred stock of $27.9 million as deferred charge asset within other assets at the time of issuance which will be recognized as a reduction to revenue in proportion to the total estimated revenue under the collaboration agreement. As of September 30, 2011 and December 31, 2010, the Company has recognized a cumulative reduction of $5.7 million and $0.3 million, respectively against the deferred charge asset.
As a result of recording Series D preferred stock at its fair value, the effective conversion price was greater than the fair value of common stock as determined by management and the Board of Directors. Therefore, no beneficial conversion feature was recorded at the time of issuance. The Company further determined that the conversion option with a contingent reduction in the conversion price upon a qualified IPO was a potential contingent beneficial feature and, as a result, the Company calculated the intrinsic value of such conversion option upon occurrence of the qualified IPO. The Company determined that a contingent beneficial conversion feature existed and the Company recorded a charge within the equity section of its balance sheet, which impacted earnings per share for the year ended December 31, 2010, based upon the price at which shares were offered to the public in the IPO in relation to the adjustment provisions provided for the Series D preferred stock. Based on the IPO price of $16.00 per share, the charge to net loss attributable to Amyris’ common stockholders was $39.3 million.
In connection with Total’s equity investment, the Company agreed to appoint a person designated by Total to serve as a member of the Company’s Board of Directors in the class subject to the latest reelection date, and to use reasonable efforts, consistent with the Board of Directors’ fiduciary duties, to cause the director designated by Total to be re-nominated by the Board of Directors in the future. These membership rights terminate upon the earlier of Total holding less than half of the shares of common stock originally issuable upon conversion of the Series D preferred stock or a sale of the Company.
The Company also agreed with Total that, so long as Total holds at least 10% of the Company’s voting securities, the Company will notify Total if the Company’s Board of Directors seeks to cause the sale of the Company or if the Company receives an offer to be acquired. In the event of such decision or offer, the Company must provide Total with all information given to an offering party and certain other information, and Total will have an exclusive negotiating period of 15 business days in the event the Board of Directors authorizes the Company to solicit offers to buy the Company, or five business days in the event that the Company receives an unsolicited offer to be acquired. This exclusive negotiation period will be followed by an additional restricted negotiation period of 10 business days, during which the Company will be obligated to negotiate with Total and will be prohibited from entering into an agreement with any other potential acquirer. Total has also entered into a standstill agreement pursuant to which it agreed for a period of three years not to acquire in excess of the greater of 20% or the number of shares of Series D preferred stock purchased by Total (during the initial two years) or 30% (during the third year) of the Company’s common stock without the prior consent of our Board of Directors, except that, among other things, if another person acquires more than Total’s then current holdings of the Company’s common stock, then Total may acquire up to that amount plus one share.
In July 2011, the Company and Total entered into a term sheet to expand the current collaboration and to form a joint venture to commercialize diesel and other potential products produced with the Company's technology. Under the contemplated agreement, Total would fund expanded research and development at the Company and would provide capital for the acquisition and construction of dedicated production facilities.
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
Soliance Development and Commercialization Agreement
In June 2010, the Company entered into an agreement with Soliance for the development and commercialization of Biofene-based squalane for use as an ingredient in cosmetics products.
M&G Finanziaria Collaboration Agreement
In June 2010, the Company entered into a collaboration agreement with M&G Finanziaria S.R.L. ("M&G") to incorporate Biofene as an ingredient in M&G's polyethylene terephthalate, or PET, resins to be incorporated into containers for food, beverages and other products. Under the terms of the collaboration agreement each party bears its own costs incurred for the collaboration milestones. The agreement also establishes the terms under which M&G may purchase Biofene from the Company upon successful completion of product integration.
Firmenich Collaboration and Joint Development Agreements
In November 2010, the Company entered into collaboration and joint development agreements with Firmenich SA (“Firmenich”), a flavors and fragrances company based in Geneva, Switzerland. Under the agreement, Firmenich will fund technical development at the Company to produce an ingredient for the flavors and fragrances market. The Company will manufacture the ingredient and Firmenich will market it, and the parties will share in any resulting economic value. The agreement also grants worldwide exclusive flavors and fragrances commercialization rights to Firmenich for the ingredient. In addition, Firmenich has an option to collaborate with the Company to develop a second ingredient. In July 2011, the Company and Firmenich expanded their collaboration agreement to include a third ingredient. The Company is also eligible to receive potential total payments of $6.0 million upon the achievement of certain performance milestones towards which the Company will be required to make a contributory performance. These milestones are accounted for under the guidance in the FASB accounting standard update related to revenue recognition under the milestone method. The Company concluded that these milestones are substantive.
For the three and nine months ended September 30, 2011, the Company recorded $0.8 million and $4.6 million, respectively, of revenue from the collaboration agreement with Firmenich, including the first milestone payment of $2.0 million recognized in April 2011.
Givaudan Development Agreement
In February 2011, the Company entered into a development agreement with Givaudan SA (“Givaudan”), a flavors and fragrances company headquartered in Vernier, Switzerland. Under the agreement, subject to its successful achievement of certain technical milestones, the Company will supply Biofene to Givaudan to derive a proprietary fragrance ingredient for the global flavors and fragrances market.
Avantium Collaboration Agreement
In March 2011, the Company entered into a collaboration agreement with Avantium Chemicals B.V. ("Avantium"). Under the terms of the collaboration agreement Avantium will provide services to support the Company in the development of chemical processing of Biofene into final products. The term of the collaboration agreement is initially two years.
Kuraray Collaboration Agreement
In July 2011, the Company entered into a collaboration agreement with Kuraray Co., Ltd. ("Kuraray") to develop polymers from Biofene. Upon successful completion of the technical development program for the first polymer, the Company and Kuraray would enter into a supply agreement for Kuraray's exclusive use of Biofene in the manufacturing and commercialization of these polymer products.
Michelin Collaboration Agreement
In September 2011, the Company entered into a collaboration agreement with Manufacture Francaise des Pneumatiques Michelin (“Michelin”). Under the terms of the collaboration agreement the Company and Michelin will collaborate on the development, production and worldwide commercialization of isoprene or isoprenol, generally for tire applications, using the Company's technology. Under the agreement, Michelin has agreed to pay an upfront payment to the Company of $5.0 million, subject to a reimbursement provision under which the Company would have to repay $1.0 million if it fails to achieve specified future technical milestones. The agreement provides that, subject to achievement of technical milestones, Michelin can notify the Company of its desired date for initial delivery, and the parties will either collaborate to establish a production facility or use an existing Company facility for production. The agreement also includes a term sheet for a supply agreement that would be negotiated at the time the decision regarding production facilities is made. The agreement has an initial term that will expire upon the earlier
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
of 42 months from the effective date and the completion of a development work plan. As of September 30, 2011, the Company recognized the upfront payment of $5.0 million from Michelin as deferred revenue.
Wilmar Collaboration Agreement
In September 2011, the Company entered into a collaboration agreement with Wilmar International Limited ("Wilmar"). The collaboration will focus on the development and worldwide commercialization of a family of surfactants derived from Biofene. Upon the earlier of the successful completion of the feasibility study or a decision by the parties to commence capital expenditures in support of developing, testing, certifying and commercializing collaboration products, the agreement contemplates that the parties will form a joint venture to further develop, produce and commercialize collaboration products. During the feasibility study, Wilmar and the Company will bear their own costs and third party costs will be shared equally.
Manufacturing Agreements
SMA Indústria Química S.A.
SMA, the Company's joint venture with Usina São Martinho (See Note 7), will manufacture farnesene using the Company's genetically engineered yeast and the sugarcane syrup feedstock provided by Usina São Martinho.
Biomin
In June 2010, the Company entered into a joint manufacturing agreement with Biomin do Brasil Nutri ão Animal Ltda. (“Biomin”) to utilize a portion of its Brazilian manufacturing facilities to produce Amyris products commencing in 2011. The joint manufacturing agreement requires the acquisition of certain equipment to be used exclusively for the manufacturing of the product. Under the terms of the agreement Amyris will procure and contract the engineering activities and the necessary equipment for the manufacturing of Amyris products. Biomin commenced production operations in the second quarter of 2011.
Tate & Lyle
In November 2010, the Company entered into a contract manufacturing agreement with Tate & Lyle Ingredients Americas, Inc. (“Tate & Lyle”), an affiliate of Tate & Lyle PLC. Under this arrangement, Tate & Lyle will produce Amyris products, which will be owned and distributed by the Company.
Glycotech
On January 3, 2011, the Company entered into a production service agreement with Glycotech, whereby Glycotech is to provide process development and production services for the manufacturing of various Amyris products at its leased facility in Leland, North Carolina. The Amyris products to be manufactured by Glycotech will be owned and distributed by the Company. Pursuant to the terms of the agreement, the Company will pay the manufacturing and operating costs of the Glycotech facility which is dedicated solely for the manufacture of Amyris products. The initial term of the agreement is for a two year period commencing on February 1, 2011 and will renew automatically for successive one-year terms, unless terminated by Amyris. On the same date as the production service agreement, the Company also entered into a right of first refusal agreement with the facility and site leased by Glycotech covering a two year period commencing in January 2011. Per the terms of the right of first refusal agreement the lessor agrees not to sell the facility and site leased by Glycotech during the term of the production service agreement. In the event that the lessor is presented with an offer to sell or decides to sell an adjacent parcel, the Company has the right of first refusal to acquire it. The Company has determined that the arrangement with Glycotech qualifies as a VIE (see Note 8).
Antibióticos
In March 2011, the Company entered into a contract manufacturing agreement with Antibióticos, S.A. (“Antibióticos”) for Antibióticos to produce Biofene for the Company at its facilities in León, Spain. Under the terms of the agreement the Company will provide required equipment for the manufacturing of its products. Antibióticos commenced production operations in the third quarter of 2011.
Paraíso Bioenergia
In March 2011, the Company entered into a supply agreement with Paraíso Bioenergia, a renewable energy company producing sugar, ethanol and electricity headquartered in São Paulo State, Brazil. Under the agreement, the Company will construct fermentation and separation capacity to produce its products and Paraíso Bioenergia will supply sugar cane juice and other utilities. The Company will retain the full economic benefits enabled by the sale of Amyris renewable products over the lower of sugar or ethanol alternatives. In conjunction with the supply agreement the Company also entered into an operating lease on a real property
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
owned by Paraíso Bioenergia. The real property will be used by the Company for the construction of an industrial facility (see Note 5).
Per the terms of the supply agreement, in the event that Paraíso is presented with an offer to sell or decides to sell the real property, the Company has the right of first refusal to acquire it. If the Company fails to exercise its right of first refusal the purchaser of the real property will need to comply with the specific obligations of Paraíso Bioenergia to the Company under the lease agreement.
Albemarle
In July 2011, the Company entered into a contract manufacturing agreement with Albemarle Corporation ("Albemarle"), which will provide toll manufacturing services at its facility in Orangeburg, South Carolina. Under this agreement, Albemarle will manufacture lubricant base oils from Biofene, which will be owned and distributed by the Company or a Company commercial partner. The initial term of this agreement is from July 31, 2011 through December 31, 2012. Albemarle is required to modify its facility, including installation and qualification of equipment and instruments necessary in order to perform the toll manufacturing services under the agreement. The Company will reimburse Albemarle up to $10.0 million for all capital expenditures related to the facility modification. All equipment or facility modifications acquired or made by Albemarle will be owned by Albemarle, subject to Albemarle's obligation to transfer title to and ownership of certain assets to the Company within 30 days after termination of the agreement, at the Company's discretion and sole expense. As of September 30, 2011, the Company has paid $2.0 million under the agreement.
In addition, the Company will pay a one-time, non-refundable performance bonus of $5.0 million if Albemarle delivers to the Company certain quantity of the lubricant base stock by December 31, 2011 or $2.0 million if Albemarle delivers the same quantity by January 31, 2012.
Pursuant to the terms of the agreement, the Company has provided Albemarle with the product specifications and development process to be used to produce the Company's product. Even though Albemarle has title and ownership to their facility, the facility modifications and related manufacturing equipment are used entirely for the manufacture of the Company's products. As a result of the Company's financing of the capital project, the Company is deemed the owner of the construction project for accounting purposes during the facility modifications. Therefore, under ASC 840, the Company recorded an asset for construction-in-progress and a liability of $7.3 million attributable to the fair value of Albemarle's existing manufacturing equipment, as well as $2.6 million of facility modification costs as of September 30, 2011.
Supply Agreements
Procter and Gamble
In June 2010, the Company entered into a supply agreement with The Procter & Gamble Company ("P&G") that establishes terms under which P&G may purchase Biofene from the Company for use in P&G’s products. The terms of the agreement call for non-refundable development fees payable to the Company in addition to payments for purchase of Biofene. At this time, P&G does not have an obligation to purchase a specified quantity.
Shell
In June 2010, the Company entered into an agreement with Shell Western Supply and Trading Limited (“Shell"), a subsidiary of Royal Dutch Shell plc, that contemplates the Company’s sale of certain minimum quantities of Company diesel fuel to Shell, commencing 18 months after the Company provides notice of election to sell under this agreement, and running for two years after the date specified in such notice, up to the end of March 2016 at the latest, with an option to renew for a further year. At this time, Shell does not have an obligation to purchase a specific quantity, or any, product under this agreement, and the Company is not obligated to sell specific quantities to Shell, but the parties will become subject to obligations to purchase and sell to the extent that formal notices and orders are submitted under the agreement in the future.
Nikko Chemicals
In August 2011, the Company entered into an agreement with Nikko Chemicals Co., Ltd, (“Nikko"), a private limited company in Japan, which contemplates the Company selling certain minimum quantities of renewable squalane to Nikko (commencing in September 2011 and continuing for two years through the end of December 2013).
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
10. Stockholders’ Equity
Initial Public Offering
On September 30, 2010, the Company closed its initial public offering (“IPO”) of 5,300,000 shares of common stock at an offering price of $16.00 per share, resulting in net proceeds to the Company of approximately $73.7 million, after deducting underwriting discounts of $5.9 million and offering costs of $5.2 million. Upon the closing of the IPO, the Company’s outstanding shares of convertible preferred stock were automatically converted into 31,550,277 shares of common stock and the outstanding convertible preferred stock warrants were automatically converted into common stock warrants to purchase a total of 195,604 shares of common stock and shares of Amyris Brasil held by third party investors were automatically converted into 861,155 shares of common stock.
In connection with the IPO, the Company granted the underwriters the right to purchase up to an additional 795,000 shares of common stock to cover over-allotments. In October 2010, the underwriters exercised such right to purchase 795,000 shares and the Company received approximately $11.8 million of proceeds, net of underwriter’s discount.
Common Stock
Pursuant to the Company’s amended and restated certificate of incorporation, the Company is authorized to issue 100,000,000 shares of common stock. Holders of the Company’s common stock are entitled to dividends as and when declared by the Board of Directors, subject to the rights of holders of all classes of stock outstanding having priority rights as to dividends. There have been no dividends declared to date. The holder of each share of common stock is entitled to one vote.
Preferred Stock
Pursuant to the Company's amended and restated certificate of incorporation, the Company is authorized to issue 5,000,000 shares of preferred stock. The board of directors has the authority, without action by its stockholders, to designate and issue shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof.
Prior to the closing of the Company's IPO, the Company had four series of convertible preferred stock outstanding, including Series D preferred stock issued to Total (see Note 9). At September 30, 2011 and December 31, 2010, the Company had no convertible preferred stock outstanding.
Common Stock Warrants
In 2008, in connection with consulting services, the Company issued a warrant to purchase 2,580 shares of the Company's Series B convertible preferred stock at an exercise price of $24.88 per share. These warrants remain unexercised and outstanding as of September 30, 2011.
In 2008, in connection with a capital lease agreement, the Company issued a warrant to purchase 10,048 shares of the Company's Series B convertible preferred at an exercise price of $24.88 per share. In September 2009, the Company canceled the warrant and issued a warrant to purchase 10,048 shares of the Company's Series C convertible preferred stock with an exercise price of $12.46 per share. These warrants were exercised in March 2011.
In 2008, in connection with the Company's issuance of Series B-1 convertible preferred stock, the Company issued warrants to purchase 100,715 shares of the Company's Series B-1 convertible preferred stock at an exercise price of $25.26 per share to the placement agent. The warrants were immediately exercisable and expire seven years from the effective date. These warrants were exercised in March 2011.
In 2008, in connection with an operating lease, the Company issued a warrant to purchase 2,009 shares of the Company's Series B-1 convertible preferred stock at an exercise price of $25.26 per share. These warrants remain unexercised and outstanding as of September 30, 2011.
In 2009, in connection with the Company's issuance of Series B-1 convertible preferred stock, the Company issued a warrant to purchase 3,843 shares of the Company's Series B-1 convertible preferred stock at an exercise price of $25.26 per share to the placement agent. This warrant was exercised in March 2011.
In September 2009, the Company canceled the warrant to purchase 10,048 shares of the Company's Series B convertible preferred stock and issued a warrant to purchase 16,075 shares of the Company's Series C convertible preferred stock with an exercise price of $12.46 per share. This warrant was exercised in March 2011. In connection with a capital lease arrangement, the Company issued a warrant to purchase 8,026 shares of the Company's Series C convertible preferred stock at an exercise price of
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
$12.46 per share. This warrant was exercised in March 2011.
In January 2010, in connection with the Company's issuance of Series C convertible preferred stock, the Company issued a warrant to purchase 49,157 shares of the Company's Series C convertible preferred stock at an exercise price of $12.46 per share to the placement agent. This warrant was exercised in March 2011.
Upon the closing of the Company's IPO on September 30, 2010, the outstanding convertible preferred stock warrants were automatically converted into common stock warrants to purchase 195,604 shares of common stock. In addition, the fair value of the convertible preferred stock warrants as of September 30, 2010, estimated to be $2.3 million using the Black-Scholes option pricing model, was reclassified to additional paid in capital.
The Company recorded zero and income of $963,000, respectively, for the three months ended September 30, 2011 and 2010, and zero and income of $929,000, respectively, for the nine months ended September 30, 2011 and 2010, to other income, net to reflect the change in the fair value of the warrants.
Each of these warrants includes a cashless exercise provision which permits the holder of the warrant to elect to exercise the warrant without paying the cash exercise price, and receive a number of shares determined by multiplying (i) the number of shares for which the warrant is being exercised by (ii) the difference between the fair market value of the stock on the date of exercise and the warrant exercise price, and dividing such by (iii) the fair market value of the stock on the date of exercise. During the nine months ended September 30, 2011 and 2010, 190,468 and zero warrants, respectively, were exercised through the cashless exercise provision and 77,087 and zero shares of common stock, respectively, were issued after deducting the shares to cover the cashless exercises. There were no warrants exercised during the three months ended September 30, 2011 and 2010.
At September 30, 2011 and December 30, 2010, the Company had the following unexercised common stock warrants:
|
| | | | | | | | | | |
| | Exercise Price per Share | | Shares as of | | Shares as of |
Underlying Stock | | | September 30, 2011 | | December 31, 2010 |
Common Stock | | $ | 24.88 |
| | 2,884 |
| | 2,884 |
|
Common Stock | | $ | 25.26 |
| | 2,252 |
| | 119,462 |
|
Common Stock | | $ | 12.46 |
| | — |
| | 73,258 |
|
Total | | | | 5,136 |
| | 195,604 |
|
11. Stock-Based Compensation Plans
2010 Equity Incentive Plan
The Company's 2010 Equity Incentive Plan (“2010 Equity Plan”) became effective on September 28, 2010 and will terminate in 2020. Pursuant to the 2010 Equity Plan, any shares of the Company's common stock (i) issued upon exercise of stock options granted under the 2005 Plan that cease to be subject to such option and (ii) issued under the 2005 Plan that are forfeited or repurchased by the Company at the original purchase price will become part of the 2010 Equity Plan. During the nine months ended September 30, 2011, an additional 100,849 shares that were forfeited under the 2005 Plan were added to the shares reserved for issuance under the 2010 Equity Plan.
The number of shares reserved for issuance under the 2010 Equity Plan will increase automatically on the first day of each January, starting with January 1, 2011, by the number of shares equal to five percent of the Company's total outstanding shares as of the immediately preceding December 31st. The Company's Board of Directors or Leadership Development and Compensation Committee will be able to reduce the amount of the increase in any particular year. The 2010 Equity Plan provides for the granting of common stock options, restricted stock awards, stock bonuses, stock appreciation rights, restricted stock units and performance awards. It allows for time-based or performance-based vesting for the awards. Options granted under the 2010 Equity Plan may be either ISOs or NSOs. ISOs may be granted only to Company employees (including officers and directors who are also employees). NSOs may be granted to Company employees, non-employee directors and consultants. The Company will be able to issue no more than 30,000,000 shares pursuant to the grant of ISOs under the 2010 Equity Plan. Options under the 2010 Equity Plan may be granted for periods of up to ten years. All options issued to date have had a ten year life. The exercise price of an ISO and NSO shall not be less than 100% of the fair value of the shares on the date of grant. The exercise price of an ISO and NSO granted to a 10% stockholder shall not be less than 110% of the fair value of the underlying stock on the date of grant. The Company's options generally vest over four to five years.
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
As of September 30, 2011, options and restricted stock awards to purchase 3,837,970 shares of the Company's common stock granted from the 2010 Equity Plan remained outstanding and 2,804,064 shares of the Company's common stock remained available for issuance upon the exercise of awards that may be granted from the 2010 Equity Plan. The options outstanding as of September 30, 2011 had a weighted-average exercise price of approximately $24.73 per share.
2005 Stock Option/Stock Issuance Plan
In 2005, the Company established its 2005 Stock Option/Stock Issuance Plan (the “2005 Plan”) which provided for the granting of common stock options, restricted stock units, restricted stock and stock purchase rights awards to employees and consultants of the Company. The 2005 Plan allowed for time-based or performance-based vesting for the awards. Options granted under the 2005 Plan were either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”). ISOs were granted only to Company employees (including officers and directors who are also employees). NSOs were granted to Company employees, non-employee directors and consultants.
All options issued under the 2005 Plan have had a ten year life. The exercise price of an ISO and NSO should not be less than 100% of the estimated fair value of the shares on the date of grant, as determined by the Board of Directors. The exercise price of an ISO and NSO granted to a 10% stockholder could not be less than 110% of the estimated fair value of the underlying stock on the date of grant as determined by the Board of Directors. The options generally vested over five years.
As of September 30, 2011, options to purchase 4,830,498 shares of the Company's common stock granted from the 2005 Stock Option/Stock Issuance Plan remained outstanding and no shares of the Company's common stock remained available for issuance under the 2005 Plan as a result of the adoption of the 2010 Equity Incentive Plan discussed above. The options outstanding under the 2005 Plan as of September 30, 2011 had a weighted-average exercise price of approximately $6.47 per share.
No income tax benefit has been recognized relating to stock-based compensation expense and no tax benefits have been realized from exercised stock options.
2010 Employee Stock Purchase Plan
The 2010 Employee Stock Purchase Plan (the “2010 ESPP”) became effective on September 28, 2010. The 2010 ESPP is designed to enable eligible employees to purchase shares of the Company's common stock at a discount. Each offering period is for one year and consists of two six-month purchase periods. The purchase price for shares of common stock under the 2010 ESPP is 85% of the lesser of the fair market value of the Company's common stock on the first day of the applicable offering period or the last day of each purchase period. A total of 168,627 shares of common stock were initially reserved for future issuance under the 2010 Employee Stock Purchase Plan. During the first eight years of the life of the 2010 ESPP, the number of shares reserved for issuance increases automatically on the first day of each January, starting with January 1, 2011, by the number of shares equal to one percent of the Company's total outstanding shares as of the immediately preceding December 31st, subject to reduction as described below. Pursuant to this automatic increase, an additional 438,474 shares were reserved for issuance during the nine months ended September 30, 2011. The Company's Board of Directors or Leadership Development and Compensation Committee is able to reduce the amount of the increase in any particular year. No more than 10,000,000 shares of the Company's common stock may be issued under the 2010 ESPP and no other shares may be added to this plan without the approval of the Company's stockholders.
The initial offering period commenced on September 27, 2010, and will end on November 15, 2011. The initial offering period consists of a single purchase period. Thereafter, a twelve-month offering period will commence on each May 16th and November 16th, with each offering period consisting of two six-month purchase periods.
At September 30, 2011, 607,101 shares of the Company's common stock remained available for issuance under the 2010 ESPP.
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
Stock Option Activity
The Company's stock option, restricted stock units, and restricted stock grant activity and related information for the nine months ended September 30, 2011 was as follows:
|
| | | | | | | | | | | | | | | | | | |
| Shares Available for Grant | | Restricted Stock Units Outstanding | | Stock Options |
| Number Outstanding | | Weighted - Average Exercise Price | | Weighted - Average Remaining Contractual Life (Years) | | Aggregate Intrinsic Value |
| | | | | | | | | | | (in thousands) |
Outstanding - December 31, 2010 | 3,301,259 |
| | — |
| | 7,274,637 |
| | $ | 8.01 |
| | 8.0 | | $ | 135,792 |
|
Additional shares authorized | 2,192,371 |
| |
| | — |
| |
| |
| |
|
Options granted | (2,493,125 | ) | |
| | 2,493,125 |
| | 26.71 |
| |
| |
|
Restricted stock units granted | (385,156 | ) | | 385,156 |
| | — |
| | — |
| |
| |
|
Restricted stock units released | — |
| | (9,967 | ) | | — |
| | — |
| |
| |
|
Options exercised | — |
| |
| | (1,230,867 | ) | | 4.06 |
| |
| |
|
Shares repurchased | 1,137 |
| |
| | — |
| | 4.31 |
| |
| |
|
Restricted stock units settled for taxes | 3,962 |
| |
| | — |
| | — |
| |
| |
|
Options canceled | 183,616 |
| |
| | (183,616 | ) | | 15.11 |
| |
| |
|
Outstanding - September 30, 2011 | 2,804,064 |
| | 375,189 |
| | 8,353,279 |
| | $ | 14.02 |
| | 8.1 | | $ | 69,848 |
|
Vested and expected to vest - September 30, 2011 | | | | | 8,034,722 |
| | $ | 13.78 |
| | 8.0 | | $ | 68,701 |
|
Exercisable - September 30, 2011 | | | | | 3,174,992 |
| | $ | 6.60 |
| | 6.9 | | $ | 44,840 |
|
The aggregate intrinsic value of options exercised was $5.2 million and $24,000 for the three months ended September 30, 2011 and 2010, respectively, and $27.4 million and $356,000 for the nine months ended September 30, 2011 and 2010, respectively, determined as of the date of option exercise.
The following table summarizes information about stock options outstanding as of September 30, 2011:
|
| | | | | | | | | | | | | | | |
| Options Outstanding | | Options Exercisable |
Exercise Price | Number of Options | | Weighted -Average Remaining Contractual Life (Years) | | Weighted -Average Exercise Price | | Number of Options | | Weighted -Average Exercise Price |
$ 0.10 - $ 0.20 | 26,700 |
| | 4.2 | | $ | 0.10 |
| | 26,700 |
| | $ | 0.10 |
|
$ 0.28 - $ 0.28 | 886,746 |
| | 5.3 | | $ | 0.28 |
| | 854,258 |
| | $ | 0.28 |
|
$ 1.50 - $ 1.50 | 203,795 |
| | 5.8 | | $ | 1.50 |
| | 179,830 |
| | $ | 1.50 |
|
$ 3.93 - $ 3.93 | 1,323,066 |
| | 6.4 | | $ | 3.93 |
| | 899,583 |
| | $ | 3.93 |
|
$ 4.31 - $ 4.31 | 765,415 |
| | 8.0 | | $ | 4.31 |
| | 331,420 |
| | $ | 4.31 |
|
$ 9.32 - $ 9.32 | 954,022 |
| | 8.3 | | $ | 9.32 |
| | 264,241 |
| | $ | 9.32 |
|
$ 14.28 - $ 19.61 | 908,517 |
| | 9.0 | | $ | 16.33 |
| | 216,691 |
| | $ | 15.55 |
|
$ 20.41 - $ 24.20 | 974,488 |
| | 8.9 | | $ | 22.23 |
| | 233,056 |
| | $ | 21.53 |
|
$ 24.50 - $ 26.50 | 211,450 |
| | 9.7 | | $ | 25.73 |
| | 5,083 |
| | $ | 26.24 |
|
$ 26.84 - $ 30.17 | 2,099,080 |
| | 9.5 | | $ | 27.26 |
| | 164,130 |
| | $ | 27.40 |
|
$ 0.10 - $ 30.17 | 8,353,279 |
| | 8.1 | | $ | 14.02 |
| | 3,174,992 |
| | $ | 6.60 |
|
Common Stock Subject to Repurchase
Historically under the 2005 Plan, the Company allowed employees to exercise options prior to vesting. The Company has the right to repurchase at the original purchase price any unvested (but issued) common shares upon termination of service of an employee. The consideration received for an early exercise of an option is considered to be a deposit of the exercise price and the
Amyris, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)
related dollar amount is recorded as a liability. The shares and liability are reclassified into equity on a ratable basis as the award vests. The Company recorded a liability in accrued expenses of $37,000 and $70,000 relating to options for 10,335 and 33,396 shares of common stock that were exercised and unvested as of September 30, 2011 and December 31, 2010, respectively. These shares were subject to a repurchase right held by the Company and are included in issued and outstanding shares as of September 30, 2011 and December 31, 2010, respectively.
Stock-Based Compensation Expense
Stock-based compensation expense related to options and restricted stock units granted to employees and nonemployees was allocated to research and development expense and sales, general and administrative expense as follows (in thousands):
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2011 | | 2010 | | 2011 | | 2010 |
Research and development | $ | 1,711 |
| | $ | 461 |
| | $ | 4,697 |
| | $ | 1,337 |
|
Sales, general and administrative | 5,162 |
| | 2,144 |
| | 14,139 |
| | 5,571 |
|
Total stock-based compensation expense | $ | 6,873 |
| | $ | 2,605 |
| | $ | 18,836 |
| | $ | 6,908 |
|
Employee Stock–Based Compensation
During the three months ended September 30, 2011 and 2010, the Company granted options to purchase 228,750 and 577,626 shares of its common stock, respectively, to employees with weighted average grant date fair values of $14.48 and $12.88 per share, respectively. During the nine months ended September 30, 2011 and 2010, the Company granted options to purchase 2,478,125 and 2,467,390 shares of its common stock, respectively, to employees with weighted average grant date fair values of $19.21 and $10.78 per share, respectively. As of September 30, 2011 and December 31, 2010, there were unrecognized compensation costs of $60.9 million and $30.9 million, respectively, related to these stock options. The Company expects to recognize those costs over a weighted average period of 3.2 years as of September 30, 2011. Future option grants will increase the amount of compensation expense to be recorded in these periods.
During the three and nine months ended September 30, 2011, 21,000 and 352,301 restricted stock units, respectively, were granted to employees with a weighted average service-inception date fair value of $24.50 and $29.85, respectively. A total of $0.9 million and $2.7 million, respectively, in stock compensation expense was recognized for the three and nine months ended September 30, 2011, respectively, for restricted stock units granted to employees. As of September 30, 2011 and December 31, 2010, there were unrecognized compensation costs of $7.1 million and zero, respectively, related to these restricted stock units. There were no restricted stock units granted to employees during the three and nine months ended September 30, 2010.
Compensation expense was recorded for stock-based awards granted to employees based on the grant date estimated fair value (in thousands):
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2011 | | 2010 | | 2011 | | 2010 |
Research and development | $ | 1,703 |
| | $ | 455 |
| | $ | 4,663 |
| | $ | 1,274 |
|
Sales, general and administrative | 4,883 |
| | 1,507 |
| | 13,274 |
| | 3,504 |
|
Total stock-based compensation expense | $ | |