AMRS 2013 Q2 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 June 30, 2013
OR
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¨ | 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 x 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 | x |
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Non-accelerated filer | ¨ | 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 August 2, 2013 |
Common Stock, $0.0001 par value per share | 76,191,175 | shares |
AMYRIS, INC.
QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended June 30, 2013
INDEX
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| PART I - FINANCIAL INFORMATION | |
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Item 1. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
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| PART II - OTHER INFORMATION | |
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Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
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PART I
ITEM 1. FINANCIAL STATEMENTS
Amyris, Inc.
Condensed Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
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| | | | | | | |
| June 30, | | December 31, |
| 2013 | | 2012 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 11,503 |
| | $ | 30,592 |
|
Short-term investments | 1,412 |
| | 97 |
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Accounts receivable, net of allowance of $481 as of June 30, 2013 and December 31, 2012 | 7,268 |
| | 3,846 |
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Inventories, net | 4,065 |
| | 6,034 |
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Prepaid expenses and other current assets | 7,136 |
| | 8,925 |
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Total current assets | 31,384 |
| | 49,494 |
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Property, plant and equipment, net | 144,141 |
| | 163,121 |
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Restricted cash | 956 |
| | 955 |
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Other assets | 17,234 |
| | 20,112 |
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Goodwill and intangible assets | 9,120 |
| | 9,152 |
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Total assets | $ | 202,835 |
| | $ | 242,834 |
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Liabilities and Equity | | | |
Current liabilities: | | | |
Accounts payable | $ | 8,889 |
| | $ | 15,392 |
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Deferred revenue | 7,637 |
| | 1,333 |
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Accrued and other current liabilities | 22,745 |
| | 24,410 |
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Capital lease obligation, current portion | 1,014 |
| | 1,366 |
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Debt, current portion | 4,959 |
| | 3,325 |
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Total current liabilities | 45,244 |
| | 45,826 |
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Capital lease obligation, net of current portion | 728 |
| | 1,244 |
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Long-term debt, net of current portion | 56,651 |
| | 61,806 |
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Related party debt | 45,572 |
| | 39,033 |
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Deferred rent, net of current portion | 9,976 |
| | 8,508 |
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Deferred revenue, net of current portion | 6,500 |
| | 4,255 |
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Other liabilities | 17,889 |
| | 15,933 |
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Total liabilities | 182,560 |
| | 176,605 |
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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 | — |
| | — |
|
Common stock - $0.0001 par value, 200,000,000 and 100,000,000 shares authorized as of June 30, 2013 and December 31, 2012, respectively; 76,177,691 and 68,709,660 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively | 8 |
| | 7 |
|
Additional paid-in capital | 695,538 |
| | 666,233 |
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Accumulated other comprehensive loss | (16,892 | ) | | (12,807 | ) |
Accumulated deficit | (657,817 | ) | | (586,327 | ) |
Total Amyris, Inc. stockholders’ equity | 20,837 |
| | 67,106 |
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Noncontrolling interest | (562 | ) | | (877 | ) |
Total stockholders' equity | 20,275 |
| | 66,229 |
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Total liabilities and stockholders' equity | $ | 202,835 |
| | $ | 242,834 |
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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 June 30, | | Six Months Ended June 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Revenues | | | | | | | |
Product sales | $ | 4,185 |
| | $ | 15,580 |
| | $ | 7,168 |
| | $ | 41,887 |
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Grants and collaborations revenue | 6,664 |
| | 3,683 |
| | 11,550 |
| | 6,845 |
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Total revenues | 10,849 |
| | 19,263 |
| | 18,718 |
| | 48,732 |
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Cost and operating expenses | | | | | | | |
Cost of products sold | 8,853 |
| | 23,636 |
| | 17,813 |
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| 67,447 |
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Loss on purchase commitments and write off of production assets | 8,423 |
| | — |
| | 8,423 |
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| 36,652 |
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Research and development | 13,992 |
| | 18,500 |
| | 29,746 |
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| 39,844 |
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Sales, general and administrative | 14,718 |
| | 22,231 |
| | 29,545 |
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| 43,946 |
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Total cost and operating expenses | 45,986 |
| | 64,367 |
| | 85,527 |
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| 187,889 |
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Loss from operations | (35,137 | ) | | (45,104 | ) | | (66,809 | ) | | (139,157 | ) |
Other income (expense): | | | | | | | |
Interest income | 57 |
| | 503 |
| | 93 |
| | 1,109 |
|
Interest expense | (1,558 | ) | | (1,260 | ) | | (3,120 | ) | | (2,314 | ) |
Other expense, net | (2,030 | ) | | (1,025 | ) | | (911 | ) | | (1,176 | ) |
Total other expense | (3,531 | ) | | (1,782 | ) | | (3,938 | ) | | (2,381 | ) |
Loss before income taxes | (38,668 | ) | | (46,886 | ) | | (70,747 | ) | | (141,538 | ) |
Provision for income taxes | (246 | ) | | (249 | ) | | (482 | ) | | (493 | ) |
Net loss | $ | (38,914 | ) | | $ | (47,135 | ) | | (71,229 | ) | | (142,031 | ) |
Net (income) loss attributable to noncontrolling interest | 38 |
| | 329 |
| | (261 | ) | | 677 |
|
Net loss attributable to Amyris, Inc. common stockholders | $ | (38,876 | ) | | $ | (46,806 | ) | | (71,490 | ) | | (141,354 | ) |
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.51 | ) | | $ | (0.81 | ) | | (0.96 | ) | | (2.63 | ) |
Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, basic and diluted | 75,959,228 |
| | 57,442,834 |
| | 74,640,314 |
| | 53,828,541 |
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See the accompanying notes to the unaudited condensed consolidated financial statements.
Amyris, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(In Thousands)
(Unaudited)
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| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Comprehensive loss: | | | | | | | |
Net loss | $ | (38,914 | ) | | $ | (47,135 | ) | | $ | (71,229 | ) | | $ | (142,031 | ) |
Foreign currency translation adjustment, net of tax | (4,742 | ) | | (7,407 | ) | | (4,031 | ) | | (5,936 | ) |
Total comprehensive loss | (43,656 | ) | | (54,542 | ) | | (75,260 | ) | | (147,967 | ) |
Loss (income) attributable to noncontrolling interest | 38 |
| | 329 |
| | (261 | ) | | 677 |
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Foreign currency translation adjustment attributable to noncontrolling interest | (62 | ) | | (81 | ) | | (54 | ) | | (168 | ) |
Comprehensive loss attributable to Amyris, Inc. | $ | (43,680 | ) | | $ | (54,294 | ) | | $ | (75,575 | ) | | $ | (147,458 | ) |
See the accompanying notes to the unaudited condensed consolidated financial statements.
Amyris, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
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| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | | | | | | | | | |
| | Shares | | Amount | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interest | | Total Equity |
December 31, 2012 | | 68,709,660 |
| | $ | 7 |
| | $ | 666,233 |
| | $ | (586,327 | ) | | $ | (12,807 | ) | | $ | (877 | ) | | $ | 66,229 |
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Issuance of common stock upon exercise of stock options, net of restricted stock | | 475,907 |
| | — |
| | 736 |
| | — |
| | — |
| | — |
| | 736 |
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Issuance of common stock in a private placement, net of issuance cost of $39 | | 6,567,299 |
| | 1 |
| | 19,960 |
| | | | | | | | 19,961 |
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Shares issued from restricted stock unit settlement | | 424,825 |
| | — |
| | (569 | ) | | — |
| | — |
| | — |
| | (569 | ) |
Stock-based compensation | | — |
| | — |
| | 9,178 |
| | — |
| | — |
| | — |
| | 9,178 |
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Foreign currency translation adjustment, net of tax | | — |
| | — |
| | — |
| | — |
| | (4,085 | ) | | 54 |
| | (4,031 | ) |
Net income (loss) | | — |
| | — |
| | — |
| | (71,490 | ) | | — |
| | 261 |
| | (71,229 | ) |
June 30, 2013 | | 76,177,691 |
| | $ | 8 |
| | $ | 695,538 |
| | $ | (657,817 | ) | | $ | (16,892 | ) | | $ | (562 | ) | | $ | 20,275 |
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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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| | | | | | | |
| Six Months Ended June 30, |
| 2013 | | 2012 |
Operating activities | | | |
Net loss | $ | (71,229 | ) | | $ | (142,031 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | |
Depreciation and amortization | 8,491 |
| | 7,507 |
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Loss (gain) on disposal of property, plant and equipment | (38 | ) | | 181 |
|
Stock-based compensation | 9,178 |
| | 15,435 |
|
Amortization of debt discount | 1,061 |
| | — |
|
Provision for doubtful accounts | — |
| | 236 |
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Loss on purchase commitments and write-off of production assets | 8,423 |
| | 36,652 |
|
Change in fair value of derivative instruments | (719 | ) | | 1,215 |
|
Other noncash expenses | 213 |
| | 185 |
|
Changes in assets and liabilities: | | | |
Accounts receivable | (3,467 | ) | | 3,221 |
|
Inventories, net | 1,150 |
| | 130 |
|
Prepaid expenses and other assets | 1,098 |
| | (3,168 | ) |
Accounts payable | (1,912 | ) | | (9,074 | ) |
Accrued and other long-term liabilities and restructuring | (5,619 | ) | | (1,220 | ) |
Deferred revenue | 8,549 |
| | (271 | ) |
Deferred rent | (447 | ) | | (608 | ) |
Net cash used in operating activities | (45,268 | ) | | (91,610 | ) |
Investing activities | | | |
Purchase of short-term investments | (1,763 | ) | | (8,239 | ) |
Maturities of short-term investments | 334 |
| | — |
|
Sales of short-term investments | — |
| | 16,449 |
|
Change in restricted cash | (1 | ) | | (953 | ) |
Purchase of property, plant and equipment, net of disposals | (3,711 | ) | | (43,277 | ) |
Deposits on property, plant and equipment | — |
| | (2,088 | ) |
Net cash used in investing activities | (5,141 | ) | | (38,108 | ) |
Financing activities | | | |
Proceeds from issuance of common stock, net of repurchases | 167 |
| | 487 |
|
Proceeds from issuance of common stock in private placements, net of issuance costs | 19,980 |
| | 62,582 |
|
Principal payments on capital leases | (867 | ) | | (2,076 | ) |
Proceeds from debt issued | 2,645 |
| | 50,656 |
|
Proceeds from debt issued to related party | 10,000 |
| | — |
|
Principal payments on debt | (1,902 | ) | | (9,458 | ) |
Net cash provided by financing activities | 30,023 |
| | 102,191 |
|
Effect of exchange rate changes on cash and cash equivalents | 1,297 |
| | (1,112 | ) |
Net decrease in cash and cash equivalents | (19,089 | ) | | (28,639 | ) |
Cash and cash equivalents at beginning of period | 30,592 |
| | 95,703 |
|
Cash and cash equivalents at end of period | $ | 11,503 |
| | $ | 67,064 |
|
Amyris, Inc.
Condensed Consolidated Statements of Cash Flows—(Continued)
(In Thousands)
(Unaudited)
|
| | | | | | | |
| Six Months Ended June 30, |
| 2013 | | 2012 |
Supplemental disclosures of cash flow information: | | | |
Cash paid for interest | $ | 1,004 |
| | $ | 1,760 |
|
Cash paid for income taxes, net of refunds | $ | — |
| | $ | — |
|
Supplemental disclosures of noncash investing and financing activities: | | | |
Acquisitions of property, plant and equipment within accounts payable, accrued liabilities and notes payable | $ | 307 |
| | $ | 5,096 |
|
Financing of insurance premium under notes payable | $ | 147 |
| | $ | — |
|
Accrued offering cost of common stock in private placement | $ | (19 | ) | | $ | 92 |
|
Accrued issuance cost of convertible notes | $ | — |
| | $ | 40 |
|
Long-term deposits used for purchase of property, plant and equipment | $ | — |
| | $ | 11,052 |
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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 renewable hydrocarbon molecule called farnesene (Biofene®), 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 is focused initially on Brazilian sugarcane. 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 ("Amyris Fuels"). Nearly all of the Company's revenues through 2012 came from the sale of ethanol and reformulated ethanol-blended gasoline with substantially all of the remaining revenues coming from collaborations, government grants and sales of renewable products. In the third quarter of 2012, the Company transitioned out of the ethanol and reformulated ethanol-blended gasoline business. The Company does not expect to be able to replace much of the revenue lost in the near term as a result of this transition, particularly in 2013, while it continues its efforts to establish a renewable products business.
Beginning in March 2012, the Company initiated a plan to shift a portion of its production capacity from contract manufacturing facilities to a Company-owned plant that was then under construction. As a result, the Company evaluated its contract manufacturing agreements and recorded a loss of $30.4 million related to adverse purchase commitments, $10.0 million related to the write-off of facility modification costs and $5.5 million related to Company-owned equipment at contract manufacturing facilities in the year ended December 31, 2012. During the three and six months ended June 30, 2013, the Company recorded an additional loss of $8.4 million, which is included in the loss on purchase commitments and write-off of production assets related to a termination and settlement of an existing agreement with one of its contract manufacturers (see Note 8 Significant Agreements). The Company regularly monitors its plan related to production capacity, sales requirements and related cost structure. Changes to this plan may result in additional losses and impairment charges.
The Company's renewable products business strategy is to focus on the commercialization of specialty products while moving established commodity products into joint venture arrangements with leading industry partners. To commercialize its products, the Company must be successful in using its technology to manufacture its products at commercial scale and on an economically viable basis (i.e., low per unit production costs). The Company is building its experience producing renewable products at commercial scale. The Company's prospects are subject to risks, expenses and uncertainties frequently encountered by companies in this stage of development.
The Company expects to fund its operations for the foreseeable future with cash and investments currently on hand, with cash inflows from collaboration and grant funding, cash contributions from product sales, and with new debt and equity financing. The Company's planned 2013 working capital needs and its planned operating and capital expenditures for 2013 are dependent on significant inflows of cash from existing collaboration partners, as well as additional funding from new collaborations, and a pending convertible debt offering, and may also require additional funding from credit facilities or loans. The Company will continue to need to fund its research and development and related activities and to provide working capital to fund production, storage, distribution and other aspects of its business. The Company's operating plan contemplates capital expenditures of approximately $10.0 million in 2013 and the Company expects to continue to incur costs in connection with its existing contract manufacturing arrangements (see Note 6 Debt and Note 10 Stockholders' Equity).
Liquidity
The Company has incurred significant losses in each year since its inception and believes that it will continue to incur losses and negative cash flow from operations into at least 2014. As of June 30, 2013, the Company had an accumulated deficit of $657.8 million and had cash, cash equivalents and short term investments of $12.9 million. The Company has significant outstanding debt and contractual obligations related to purchase commitments, as well as capital and operating leases. As of June 30, 2013, the Company's debt, net of debt discount, totaled $107.2 million, of which $5.0 million matures within the next twelve months. In addition, the Company's debt agreements contain various covenants, including restrictions on the Company's business that could cause the Company to be at risk of defaults. Please refer to Note 5 Commitments and Contingencies and Note 6 Debt for further details regarding the Company's obligations and commitments.
In March 2013, the Company signed a collaboration agreement with Firmenich that included an annual collaboration funding component, and obtained a commitment letter from an existing stockholder with respect to additional convertible note funding of which $10.0 million was received in the second quarter of 2013 (see Note 8 Significant Agreements and Note 6 Debt), and the Company expects to use amounts received under these arrangements to fund its operations. The Company also received $20.0 million in funding through the sale of a convertible note in private placement under an existing funding agreement with a related party in July 2013 (see Note 17 Subsequent Events). Furthermore, the Company is expecting additional funding in 2013 from collaborations, a pending convertible debt offering, and potentially, other sources. In August 2013, the Company entered into an agreement with certain investors to sell up to $73.1 million in convertible promissory notes in private placements over a period of up to 24 months from the date of signing. This convertible note financing requires the Company to satisfy various conditions before the funding is available, and the offering is divided into two tranches (one for $42.6 million and one for $30.4 million), each with differing closing conditions. Of the total possible purchase price in the financing, $60.0 million would be paid in the form of cash ($35.0 million in the first tranche and up to $25.0 million in the second tranche) and $13.1 million would be paid by cancellation of outstanding promissory notes by an existing stockholder in connection with its exercise of pro rata rights ($7.6 million in the first tranche and $5.4 million in the second tranche). The financing is subject to timing and completion risks, including a requirement that the Company meet certain production milestones before the second tranche is available, and a requirement that the Company obtain stockholder approval prior to completing any closings in the transaction.
Though the Company expects to close its pending convertible note financing in September 2013, if there is any significant delay in such closing, it would likely need to secure additional short-term funding in September 2013. Such short-term funding may not be available on reasonable terms or at all. For example, in order to raise sufficient additional funds, we could be forced to issue further preferred and discounted equity, agree to onerous covenants, grant security interests in our assets, enter into collaboration and licensing arrangements that require us to relinquish commercial rights or grant licenses on terms that are not favorable to us, or any or all of these. If we are unable to secure sufficient short-term funding to bridge our operations to a delayed closing or fail to complete the pending convertible debt financing within the period covered by any such short-term funding, and fail to secure alternative funding to finance our operations, we would be forced to curtail our operations and cease most of our cash expenditures, which would have a material adverse effect on our ability to continue with our business plans and our status as a going concern.
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 Regulation S-X. 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 28, 2013. 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.
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 year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. 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.
Recent Accounting Pronouncements
In December 2011, the International Accounting Standards Board ("IASB") and the Financial Accounting Standards Board ("FASB") issued common disclosure requirements that are intended to enhance comparability between financial statements prepared on the basis of U.S. GAAP and those prepared in accordance with International Financial Reporting Standards ("IFRS"). In January 2013, the FASB issued an accounting standard update to limit the scope of the new balance sheet offsetting disclosures to derivative instruments, repurchase agreements, and securities lending transactions to the extent that they are offset in the financial statement or subject to an enforceable master netting arrangement or similar arrangement. While this guidance does not change existing offsetting criteria in U.S. GAAP or the permitted balance sheet presentation for items meeting the criteria, it requires an entity to disclose both net and gross information about assets and liabilities that have been offset and the related arrangements. Required disclosures under this new guidance should be provided retrospectively for all comparative periods presented. This new guidance is effective for fiscal years beginning on or after January 1, 2013, and interim periods within those years, which was the Company's first quarter of fiscal 2013. The adoption of this guidance did not have a material effect on the Company's consolidated financial statements.
In July 2012, the FASB issued an amended accounting standard update to simplify how entities test indefinite-lived intangible assets for impairment which improve consistency in impairment testing requirements among long-lived asset categories. The amended guidance permits an assessment of qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, then the amended guidance eliminates the requirement to perform quantitative impairment testing as outlined in the previously issued standards. The amended guidance is effective for fiscal years beginning after September 15, 2012; however, early adoption is permitted. This amended guidance did not have an impact on the Company's consolidated financial statements.
In February 2013, in connection with the accounting standard related to the presentation of the Statement of Comprehensive Income, the FASB issued an accounting standard update to improve the reporting of reclassifications out of accumulated other comprehensive income of various components. This guidance requires companies to present either parenthetically on the face of the financial statements or in the notes, significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification. This standard is effective for interim periods and fiscal years beginning after December 15, 2012, which was the Company's first quarter of fiscal 2013. The adoption of this guidance did not have a material effect on the Company's consolidated financial statements.
In July 2013, the FASB issued a new accounting standard update on the financial statement presentation of unrecognized tax benefits. The new guidance provides that a liability related to an unrecognized tax benefit would be presented as a reduction of a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. The new guidance becomes effective for the Company on January 1, 2014 and will be applied prospectively to unrecognized tax benefits that exist at the effective date with retrospective applications permitted. The Company is currently assessing the impact of this new guidance.
3. Fair Value of Financial Instruments
The inputs to the valuation techniques used to measure fair value are classified into the following categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
As of June 30, 2013, the Company’s financial assets and financial liabilities are presented below at fair value and were classified within the fair value hierarchy as follows (in thousands):
|
| | | | | | | | | | | | | | | |
| Level 1 | | Level 2 | | Level 3 | | Balance as of June 30, 2013 |
Financial Assets | | | | | | | |
Money market funds | $ | 1,797 |
| | $ | — |
| | $ | — |
| | $ | 1,797 |
|
Certificates of deposit | 1,412 |
| | — |
| | — |
| | 1,412 |
|
Total financial assets | $ | 3,209 |
| | $ | — |
| | $ | — |
| | $ | 3,209 |
|
Financial Liabilities | | | | | | | |
Loans payable(1) | $ | — |
| | $ | 19,841 |
| | $ | — |
| | $ | 19,841 |
|
Credit facilities(1) | — |
| | 9,124 |
| | — |
| | 9,124 |
|
Convertible notes(1) | — |
| | — |
| | 70,185 |
| | 70,185 |
|
Compound embedded derivative liability | — |
| | — |
| | 10,012 |
| | 10,012 |
|
Currency interest rate swap derivative liability | — |
| | 2,937 |
| | — |
| | 2,937 |
|
Total financial liabilities | $ | — |
| | $ | 31,902 |
| | $ | 80,197 |
| | $ | 112,099 |
|
______________
(1) These liabilities are carried on the consolidated balance sheet on a historical cost basis.
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. The fair values of money market funds are based on fair values of identical assets. The fair values of the loans payable, convertible notes, credit facilities and currency interest rate swaps are based on the present value of expected future cash flows and assumptions about current interest rates and the creditworthiness of the Company. Market risk associated with fixed and variable rate long-term debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates.
The carrying amounts of certain financial instruments, such as cash equivalents, accounts receivable, accounts payable, accrued liabilities and notes payable, approximate fair value due to their relatively short maturities, and low market interest rates, if applicable. The fair values of the loans payable, convertible notes and credit facilities are based on the present value of expected future cash flows and assumptions about current interest rates and the creditworthiness of the Company.
The following table provides a reconciliation of the beginning and ending balances for the compound embedded derivative liability measured at fair value using significant unobservable inputs (Level 3) (in thousands):
|
| | | |
| Compound Embedded Derivative Liability |
Balance at December 31, 2012 | $ | 7,894 |
|
Transfers in to Level 3 | 4,521 |
|
Total (gain) losses included in other income (expense), net | (2,403 | ) |
Balance at June 30, 2013 | $ | 10,012 |
|
The compound embedded derivative liability, which is included in other liabilities, represents the fair value of the equity conversion option and a "make-whole" provision relating to the outstanding senior unsecured convertible promissory notes issued to Total Energies Nouvelles Activites USA (f.k.a. Total Gas & Power USA SAS) ("Total") (see Note 6 Debt). There is no current observable market for this type of derivative and, as such, the Company determined the fair value of the embedded derivative using a Black-Scholes valuation model that combines expected cash outflows with market-based assumptions regarding risk-adjusted yields, stock price volatility, probability of a change of control and the trading information of the Company's common stock into which the notes are convertible. The Company marks the embedded derivative to market due to the conversion price not being indexed to the Company's own stock. Except for the "make-whole interest" provision included in the conversion option, which is only required to be settled in cash upon a change of control at the noteholder's option, the embedded derivative will be settled in either cash or shares. As of June 30, 2013, the Company had sufficient common shares to settle the conversion option in shares.
The Company’s financial assets and financial liabilities as of December 31, 2012 are presented below their fair value and were classified within the fair value hierarchy as follows (in thousands):
|
| | | | | | | | | | | | | | | |
| Level 1 | | Level 2 | | Level 3 | | Balance as of December 31, 2012 |
Financial Assets | | | | | | | |
Money market funds | $ | 15,847 |
| | $ | — |
| | $ | — |
| | $ | 15,847 |
|
Certificates of deposit | 757 |
| | — |
| | — |
| | 757 |
|
Total financial assets | $ | 16,604 |
| | $ | — |
| | $ | — |
| | $ | 16,604 |
|
Financial Liabilities | | | | | | | |
Notes payable(1) | $ | — |
| | $ | 1,676 |
| | $ | — |
| | $ | 1,676 |
|
Loans payable(1) | — |
| | 20,707 |
| | — |
| | 20,707 |
|
Credit facilities(1) | — |
| | 11,503 |
| | — |
| | 11,503 |
|
Convertible notes(1) | — |
| | — |
| | 62,522 |
| | 62,522 |
|
Compound embedded derivative liability | — |
| | — |
| | 7,894 |
| | 7,894 |
|
Currency interest rate swap derivative liability | — |
| | 1,367 |
| | — |
| | 1,367 |
|
Total financial liabilities | $ | — |
| | $ | 35,253 |
| | $ | 70,416 |
| | $ | 105,669 |
|
______________
(1) These liabilities are carried on the consolidated balance sheet on a historical cost basis.
Derivative Instruments
The Company’s derivative instruments included Chicago Board of Trade (CBOT) ethanol futures and Reformulated Blendstock for Oxygenate Blending (RBOB) gasoline futures. All derivative commodity instruments were recorded at fair value on the consolidated balance sheets. None of the Company’s derivative instruments were designated as a hedging instrument. Changes in the fair value of these non-designated hedging instruments were recognized in cost of products sold in the consolidated statements of operations. As of June 30, 2013, the Company had no outstanding derivative commodity instruments resulting from the Company's transition out of its ethanol and ethanol-blended gasoline business in the quarter ended September 30, 2012.
In June 2012, the Company entered into a loan agreement with Banco Pine S.A. under which the bank provided the Company with a short term loan of R$52.0 million (approximately US$25.6 million based on the exchange rate as of September 30, 2012, the time of the loan repayment) (the “Bridge Loan”). At the time of the Bridge Loan, the Company also entered into a currency interest rate swap arrangement with Banco Pine with respect to the repayment of R$22.0 million (approximately US$9.9 million based on the exchange rate of as of June 30, 2013). The swap arrangement exchanges the principal and interest payments under the Banco Pine loan of R$22.0 million entered into in July 2012 for alternative principal and interest payments that are subject to adjustment based on fluctuations in the foreign exchange rate between the U.S. dollar and Brazilian real. The swap has a fixed interest rate of 3.94%. Changes in the fair value of the swap are recognized in other income (expense), net in the consolidated statements of operations.
As of June 30, 2013, included in Other Liabilities is the Company's compound embedded derivative liability of $10.0 million and represents the fair value of the equity conversion option and a "make-whole" provision relating to the outstanding senior unsecured convertible promissory notes issued to Total (see Note 6 Debt).
Derivative instruments measured at fair value as of June 30, 2013 and December 31, 2012, and their classification on the consolidated balance sheets and consolidated statements of operations, are presented in the following tables (in thousands except contract amounts):
|
| | | | | | | | | | | | | | |
| | Asset/Liability as of |
| | June 30, 2013 | | December 31, 2012 |
Type of Derivative Contract | | Quantity of Contracts | | Fair Value | | Quantity of Contracts | | Fair Value |
Currency interest rate swap, included as net liability in other long term liability | | 1 |
| | $ | 2,937 |
| | 1 |
| | $ | 1,367 |
|
|
| | | | | | | | | | | | | | | | | |
Type of Derivative Contract | | Income Statement Classification | Three Months Ended June 30, | | Six Months Ended June 30, |
2013 | | 2012 | | 2013 | | 2012 |
| | | Gain (Loss) Recognized | | Gain (Loss) Recognized |
Regulated fixed price futures contracts | | Cost of products sold | $ | — |
| | $ | 462 |
| | $ | — |
| | $ | (258 | ) |
Currency interest rate swap | | Other income (expense), net | $ | (1,505 | ) | | $ | (1,215 | ) | | $ | (1,570 | ) | | (1,215 | ) |
4. Balance Sheet Components
Inventories
Inventories are stated at the lower of cost or market and consist of the following (in thousands):
|
| | | | | | | |
| June 30, | | December 31, |
| 2013 | | 2012 |
Raw materials | $ | 1,143 |
| | $ | 1,574 |
|
Work-in-process | 1,374 |
| | 1,771 |
|
Finished goods | 1,548 |
| | 2,689 |
|
Inventories, net | $ | 4,065 |
| | $ | 6,034 |
|
The Company evaluates the recoverability of its inventories based on assumptions about expected demand and net realizable value. If the Company determines that the cost of inventories exceeds its estimated net realizable value, the Company records a write-down equal to the difference between the cost of inventories and the estimated net realizable value. Cost is computed on a first-in, first-out basis. Inventory costs include transportation costs incurred in bringing the inventory to its existing location. The Company also evaluates the terms of its agreements with its suppliers and establishes accruals for estimated adverse purchase commitments as necessary, applying the same lower of cost or market approach that is used to value inventory.
Property, Plant and Equipment, net
Property, plant and equipment, net is comprised of the following (in thousands):
|
| | | | | | | | | |
| | | June 30, | | December 31, |
| Useful Life | | 2013 | | 2012 |
Leasehold improvements | Lesser of remaining useful life or lease term | | $ | 39,118 |
| | $ | 39,290 |
|
Machinery and equipment | 7 - 15 Years | | 98,039 |
| | 105,162 |
|
Computers and software | 3 - 5 Years | | 8,442 |
| | 8,232 |
|
Furniture and office equipment | 5 years | | 2,458 |
| | 2,467 |
|
Buildings | 15 Years | | 6,789 |
| | 5,888 |
|
Vehicles | 5 years | | 499 |
| | 575 |
|
Construction in progress | | | 43,055 |
| | 45,372 |
|
| | | $ | 198,400 |
| | 206,986 |
|
Less: accumulated depreciation and amortization | | | (54,259 | ) | | (43,865 | ) |
Property, plant and equipment, net | | | $ | 144,141 |
| | $ | 163,121 |
|
The Company's first, purpose-built, large-scale Biofene production plant in southeastern Brazil commenced operations in December 2012. This plant is in Brotas in the state of São Paulo and is adjacent to an existing sugar and ethanol mill, Paraíso Bioenergia. The Company's construction in progress consists primarily of the upfront plant design and the initial construction of a second large-scale production plant in Brazil, located at the Usina São Martinho sugar and ethanol mill (also in the state of São Paulo).
Property, plant and equipment, net includes $3.4 million and $9.1 million of machinery and equipment and furniture and office equipment under capital leases as of June 30, 2013 and December 31, 2012, respectively. Accumulated amortization of assets under capital leases totaled $1.1 million and $4.1 million as of June 30, 2013 and December 31, 2012, respectively.
Depreciation and amortization expense, including amortization of assets under capital leases, was $4.1 million and $3.7 million for the three months ended June 30, 2013 and 2012, respectively, and was $8.5 million and $7.3 million for the six months ended June 30, 2013 and 2012, respectively.
The Company capitalizes interest costs incurred to construct plant and equipment. The capitalized interest is recorded as part of the depreciable cost of the asset to which it relates to and is amortized over the asset's estimated useful life. Interest cost capitalized as of June 30, 2013 and December 31, 2012 was R$1.1 million (approximately $0.5 million and $0.6 million based on the exchange rate as of June 30, 2013 and December 31, 2012, respectively).
Accrued and Other Current Liabilities
Accrued and other current liabilities are comprised of the following (in thousands):
|
| | | | | | | |
| June 30, | | December 31, |
| 2013 |
| 2012 |
Professional services | $ | 2,903 |
| | $ | 824 |
|
Accrued vacation | 2,481 |
| | 2,673 |
|
Payroll and related expenses | 4,006 |
| | 5,809 |
|
Tax-related liabilities | 707 |
| | 851 |
|
Deferred rent, current portion | 1,111 |
| | 1,448 |
|
Accrued interest | 1,302 |
| | 965 |
|
Contractual obligations to contract manufacturers, current | 9,275 |
| | 9,952 |
|
Customer advances | 372 |
| | 970 |
|
Other | 588 |
| | 918 |
|
Total accrued and other current liabilities | $ | 22,745 |
| | $ | 24,410 |
|
Other Liabilities
Other liabilities are comprised of the following (in thousands):
|
| | | | | | | |
| June 30, | | December 31, |
| 2013 | | 2012 |
Contractual obligations to contract manufacturers, non-current | $ | 2,000 |
| | $ | 4,000 |
|
Fair market value of swap obligations | 2,937 |
| | 1,367 |
|
Fair value of compound embedded derivative liability(1) | 10,012 |
| | 7,894 |
|
Tax-related liabilities(2) | 1,932 |
| | 1,609 |
|
Other(2) | 1,008 |
| | 1,063 |
|
Total other liabilities | $ | 17,889 |
| | $ | 15,933 |
|
______________
| |
(1) | The compound embedded derivative liability represents the fair value of the equity conversion feature and a "make-whole" feature related to the outstanding senior unsecured convertible promissory notes issued to Total. |
| |
(2) | Certain reclassifications of prior period amounts have been made to conform to the current period presentation. Such reclassifications did not change previously reported consolidated financial statements. |
5. Commitments and Contingencies
The Company leased certain facilities and financed certain of its equipment under operating and capital leases. Operating leases include leased facilities and capital leases included leased equipment (see Note 4 Balance Sheet Components). Rent expense under operating leases was approximately $1.4 million and $1.2 million respectively, for the three months ended June 30, 2013 and 2012, respectively, and was $2.1 million and $2.4 million for the six months ended June 30, 2013 and 2012, respectively.
On April 30, 2013, the Company entered into an amendment to its operating lease for its headquarters in Emeryville, California (the "Amendment"). The operating lease amendment provided for an extension of the lease term to May 2023, a modification of the base rent and elimination of the Company's loans and notes payable to the lessor of approximately $1.6 million (see Note 6 Debt). In addition, per the terms of the Amendment, the Company also received a rent credit of approximately $71,000 per month for the period June 2013 through December 2013 and a rent credit of approximately $42,000 per month for the full year 2014.
Future minimum payments under the Company's lease obligations as of June 30, 2013, are as follows (in thousands):
|
| | | | | | | | | | | |
Years ending December 31: | Capital Leases | | Operating Leases | | Total Lease Obligations |
2013 (Six Months) | $ | 549 |
| | $ | 3,009 |
| | $ | 3,558 |
|
2014 | 1,007 |
| | 6,108 |
| | 7,115 |
|
2015 | 289 |
| | 6,663 |
| | 6,952 |
|
2016 | — |
| | 6,685 |
| | 6,685 |
|
2017 | — |
| | 6,586 |
| | 6,586 |
|
Thereafter | — |
| | 39,009 |
| | 39,009 |
|
Total future minimum lease payments | 1,845 |
| | $ | 68,060 |
| | $ | 69,905 |
|
Less: amount representing interest | (103 | ) | | | |
|
|
Present value of minimum lease payments | 1,742 |
| | | |
|
Less: current portion | (1,014 | ) | | | |
|
|
Long-term portion | $ | 728 |
| | | |
|
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 June 30, 2013 and December 31, 2012.
The Company has a credit facility (“FINEP Credit Facility”) with a financial institution to finance a research and development project on sugarcane-based biodiesel (see Note 6 Debt). The FINEP Credit Facility provides for loans of up to an aggregate principal amount of R$6.4 million (approximately US$2.9 million based on the exchange rate as of June 30, 2013) 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 (approximately US$2.7 million based on the exchange rate as of June 30, 2013). Through December 31, 2012, the Company received all four disbursements after compliance with certain terms and conditions under the FINEP Credit Facility as described in more detail in Note 6. After the release of the first disbursement and prior to any subsequent drawdown from the FINEP Credit Facility, the Company provided bank letters of guarantee of R$3.3 million (approximately US$1.5 million based on the exchange rate as of June 30, 2013) through Banco ABC Brasil S.A. As of June 30, 2013, all available credit under this facility was fully drawn.
The Company has a credit facility (“BNDES Credit Facility”) with a financial institution to finance a production site in Brazil. This credit facility is collateralized by a first priority security interest in certain of the Company's equipment and other tangible assets totaling R$24.9 million (approximately US$11.2 million based on the exchange rate as of June 30, 2013). The Company is a parent guarantor for the payment of the outstanding balance under the BNDES Credit Facility. Additionally, the Company is required to provide a bank guarantee under the BNDES Credit Facility.
The Company has signed loan agreements and a security agreement where the Company pledged certain farnesene production assets as collateral (the fiduciary conveyance of movable goods) with each of Nossa Caixa and Banco Pine. Under the loan agreements, Banco Pine agreed to lend R$22.0 million and Nossa Caixa agreed to lend R$30.0 million as financing for capital expenditures relating to the Company's production facility in Brotas. The Company's total acquisition cost for the farnesene production assets pledged as collateral under these agreements is approximately R$68.0 million (approximately US$30.7 million based on the exchange rate as of June 30, 2013). The Company is a also a parent guarantor for the payment of the outstanding balance under these loan agreements.
The Company has an export financing agreement for approximately US$2.5 million (approximately R$5.0 million based on exchange rate as of March 18, 2013) for a 1 year-term to fund exports through March 2014. This loan is collateralized by future exports from the Company's subsidiary in Brazil.
Under an operating lease agreement for its office facilities in Brazil, which commenced on November 15, 2011, the Company is required to maintain restricted cash or letters of credit equal to 3 months of rent of approximately R$0.2 million (approximately US$0.1 million based on the exchange rate as of June 30, 2013) in the aggregate as a guarantee that the Company will meet its performance obligations under such operating lease agreement.
Purchase Obligations
As of June 30, 2013, the Company had $11.6 million in purchase obligations which included $10.9 million in non-cancelable contractual obligations and construction commitments, of which $4.0 million have been accrued as loss on purchase commitments.
On June 25, 2013, the Company and Tate & Lyle Ingredients Americas LLC (“Tate & Lyle”) entered into a Settlement Agreement, Termination Agreement and Mutual Release (the “Termination Agreement”) to terminate the parties’ November 2010 contract manufacturing agreement. Under the Termination Agreement, no further payments will be owed for the remaining term of the Contract Manufacturing Agreement (i.e., through 2016). As of June 30, 2013 the Company has an outstanding liability of $8.8 million pertaining to its obligation under the Termination Agreement. In July 2013, the Company paid $3.6 million of its obligation pertaining to the Termination Agreement.
Other Matters
Certain conditions may exist as of the date the financial statements are issued which may result in a loss to the Company but will only be recorded when one or more future events occur or fail to occur. The Company's management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against and by the Company or unasserted claims that may result in such proceedings, the Company's management evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
In May 2013, a securities class action complaint was filed against the Company and its CEO, John G. Melo, in the U.S. District Court for the Northern District of California. The complaint seeks unspecified damages on behalf of a purported class that would comprise all individuals who acquired the Company's common stock between April 29, 2011 and February 8, 2012. The complaint alleges securities law violations based on the Company's commercial projections during that period. The Company believes the complaint lacks merit, and intends to defend itself vigorously. Because the case is at a very early stage and no specific monetary demand has been made, it is not possible for us to estimate the potential loss or range of potential losses for the case.
The Company is subject to disputes and claims that arise or have arisen in the ordinary course of business and that have not resulted in legal proceedings or have not been fully adjudicated. Such matters that may arise in the ordinary course of business are subject to many uncertainties and outcomes are not predictable with assurance. Therefore, if one or more of these legal disputes or claims resulted in settlements or legal proceedings that were resolved against the Company for amounts in excess of management’s expectations, the Company’s consolidated financial statements for the relevant reporting period could be materially adversely affected.
6. Debt
Debt is comprised of the following (in thousands):
|
| | | | | | | |
| June 30, | | December 31, |
| 2013 | | 2012 |
Credit facilities | $ | 10,357 |
| | $ | 12,409 |
|
Notes payable | — |
| | 1,572 |
|
Convertible notes | 25,000 |
| | 25,000 |
|
Related party convertible notes | 45,572 |
| | 39,033 |
|
Loans payable | 26,253 |
| | 26,150 |
|
Total debt | 107,182 |
| | 104,164 |
|
Less: current portion | (4,959 | ) | | (3,325 | ) |
Long-term debt | $ | 102,223 |
| | $ | 100,839 |
|
FINEP Credit Facility
In November 2010, the Company entered into a 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 (approximately US$2.9 million based on the exchange rate as of June 30, 2013) which is secured by a chattel mortgage on certain equipment of the Company as well as by bank letters of guarantee. As of December 31, 2012, all available credit under this facility was fully drawn.
Interest on loans drawn under this credit facility is fixed at 5% 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%, then the interest will be 5% plus a TJLP adjustment factor, otherwise the interest will be at 11% per annum. In addition, a fine of up to 10% shall apply to the amount of any obligation in default. Interest on late balances will be 1% interest per month, levied on the overdue amount. Payment of the outstanding loan balance is being made in 81 monthly installments, which commenced in July 2012 and extends through March 2019. Interest on loans drawn and other charges are paid on a monthly basis and commenced in March 2011. As of June 30, 2013 and December 31, 2012, the total outstanding loan balance under this credit facility was R$5.8 million (approximately US$2.6 million based on exchange rate as of June 30, 2013) and R$6.4 million (approximately US$3.1 million based on exchange rate as of December 31, 2012), respectively.
The FINEP Credit Facility contains the following significant terms and conditions:
| |
• | The Company would share with FINEP the costs associated with the FINEP Project. At a minimum, the Company would contribute from its own funds approximately R$14.5 million (approximately US$7.1 million based on the exchange rate as of December 31, 2012) of which R$11.1 million was to be contributed prior to the release of the second disbursement. As of December 31, 2012, all four disbursements were completed and for its part, the Company has fulfilled all of its cost sharing obligations; |
| |
• | After the release of the first disbursement, prior to any subsequent drawdown from the FINEP Credit Facility, the Company was required to provide bank letters of guarantee of up to R$3.3 million in aggregate (approximately US$1.5 million based on the exchange rate as of June 30, 2013). On December 17, 2012 and prior to release of the second disbursement on December 26, 2012, the Company obtained the required bank letter of guarantees from Banco ABC Brasil, S.A. |
| |
• | 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. |
BNDES Credit Facility
In December 2011, the Company entered into a credit facility ("BNDES Credit Facility”) in the amount of R$22.4 million (approximately US$10.1 million based on the exchange rate at June 30, 2013) with Banco Nacional de Desenvolvimento Econômico e Social ('BNDES”), a government owned bank headquartered in Brazil. This BNDES facility was extended as project financing for a production site in Brazil. The credit line is divided into an initial tranche for up to approximately R$19.1 million (approximately US$8.6 million based on the exchange rate at June 30, 2013) and an additional tranche of approximately R$3.3 million (approximately US$1.5 million based on the exchange rate at June 30, 2013) that becomes available upon delivery of additional guarantees. The credit line is available for 12 months from the date of the Credit Facility, subject to extension by the lender.
The principal of the loans under the BNDES Credit Facility is required to be repaid in 60 monthly installments, with the first installment due in January 2013 and the last due in December 2017. Interest was due initially on a quarterly basis with the first installment due in March 2012. From and after January 2013, interest payments are due on a monthly basis together with principal payments. The loaned amounts carry interest of 7% per annum. Additionally, there is a credit reserve charge of 0.1% on the unused balance from each credit installment from the day immediately after it is made available through its date of use, when it is paid.
The BNDES Credit Facility is collateralized by a first priority security interest in certain of the Company's equipment and other tangible assets totaling R$24.9 million (approximately US$11.2 million based on the exchange rate as of June 30, 2013). The Company is a parent guarantor for the payment of the outstanding balance under the BNDES Credit Facility. Additionally, the Company is required to provide a bank guarantee equal to 10.0% of the total approved amount (R$22.4 million in total debt) available under this Credit Facility. For advances of the second tranche (above R$19.1 million), the Company is required to provide additional bank guarantees equal to 90.0% of each such advance, plus additional Company guarantees equal to at least 130.0% of such advance. The BNDES Credit Facility contains customary events of default, including payment failures, failure to satisfy other obligations under this credit facility or related documents, defaults in respect of other indebtedness, bankruptcy, insolvency and inability to pay debts when due, material judgments, and changes in control of Amyris Brasil. If any event of default occurs, the Lender may terminate its commitments and declare immediately due all borrowings under the facility. As of June 30, 2013 and December 31, 2012 the Company had R$17.2 million (approximately US$7.8 million based on the exchange rate as of June 30, 2013) and R$19.1 million (approximately US$9.3 million based on the exchange rate as of December 31, 2012) in outstanding advances under the BNDES Credit Facility.
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 June 30, 2013 and December 31, 2012, a principal amount of zero and $1.6 million, respectively, was outstanding under these notes payable. During the three months ended June 30, 2013, as part of the Amendment entered into on April 30, 2013 to the Company's operating lease for its headquarters, the Company recorded the elimination of these notes payable as a lease incentive and recorded approximately $1.4 million to deferred rent liability in the consolidated balance sheet.
Convertible Notes
In February 2012, the Company completed the sale of senior unsecured convertible promissory notes in an aggregate principal amount of $25.0 million pursuant to a Securities Purchase Agreement, between the Company and certain investment funds affiliated with Fidelity Investments Institutional Services Company, Inc. The offering consisted of the sale of 3.0% senior unsecured convertible promissory notes with a March 1, 2017 maturity date and an initial conversion price equal to $7.0682 per share of the Company's common stock, subject to adjustment for proportional adjustments to outstanding common stock and anti-dilution provisions in case of dividends and distributions. As of June 30, 2013, the notes were convertible into an aggregate of up to 3,536,968 shares of common stock. The note holders have a right to require repayment of 101% of the principal amount of the notes in an acquisition of the Company, and the notes provide for payment of unpaid interest on conversion following such an acquisition if the note holders do not require such repayment. The securities purchase agreement and notes include covenants regarding payment of interest, maintaining the Company's listing status, limitations on debt, maintenance of corporate existence, and filing of SEC reports. The notes include standard events of default resulting in acceleration of indebtedness, including failure to pay, bankruptcy and insolvency, cross-defaults, material adverse effect clauses and breaches of the covenants in the securities purchase agreement and notes, with default interest rates and associated cure periods applicable to the covenant regarding SEC reporting. Furthermore, the senior unsecured convertible notes include restrictions on the amount of debt the Company is permitted to incur. The Company's total outstanding debt at any time cannot exceed the greater of $200.0 million or 50% of its consolidated total assets and its secured debt cannot exceed the greater of $125 million or 30% of its consolidated total assets. As of June 30, 2013 and December 31, 2012, a principal amount of $25.0 million and $25.0 million, respectively, was outstanding under these notes payable.
Related Party Convertible Notes
In July 2012, the Company entered into a further amendment of the collaboration agreement with Total that expanded Total's investment in the biofene collaboration, incorporated the development of certain joint venture products for use in diesel and jet fuel into the scope of the collaboration, provided a new structure for the research and development program and formation of the joint venture (the “Fuels JV”) to commercialize the products encompassed by the diesel and jet fuel research and development program (the “Program”) and changed the structure of the funding from Total to include a convertible debt mechanism.
The purchase agreement for the notes related to the funding from Total provides for the sale of an aggregate of $105.0 million in notes as follows:
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• | As part of an initial closing under the purchase agreement (which initial closing was completed in two installments), (i) on July 30, 2012, the Company sold a 1.5% Senior Unsecured Convertible Note Due 2017 to Total in the face amount of $38.3 million, including $15.0 million in new funds and $23.3 million in previously-provided diesel research and development funding by Total, and (ii) on September 14, 2012, the Company sold another note (in the same form) for $15.0 million in new funds from Total. |
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• | The purchase agreement provides that additional notes may be sold in subsequent closings in July 2013 (for cash proceeds to the Company of $30.0 million) and July 2014 (for cash proceeds to the Company of $21.7 million, which would be settled in an initial installment of $10.85 million payable at such closing and a second installment of $10.85 million payable in January 2015). |
The notes each have a March 1, 2017 maturity date and an initial conversion price equal to $7.0682 per share of the Company's common stock. The notes bear interest of 1.5% per annum (with a default rate of 2.5%), accruing from the date of funding and payable at maturity or on conversion or a change of control where Total exercises the right to require the Company to repay the notes. Accrued interest is canceled if the notes are canceled based on a “Go” decision. The agreements contemplate that the research and development efforts under the Program may extend through 2016, with a series of “Go/No Go” decisions by Total through such date tied to funding by Total.
The notes become convertible into the Company's common stock (i) within 10 trading days prior to maturity (if they are not canceled as described above prior to their maturity date), (ii) on a change of control of the Company, (iii) if Total is no longer the largest stockholder of the Company following a “No-Go” decision (subject to a six-month lock-up with respect to any shares of common stock issued upon conversion), and (iv) on a default by the Company. If Total makes a final “Go” decision, then the notes will be exchanged by Total for equity interests in the Fuels JV, after which the notes will not be convertible and any obligation to pay principal or interest on the notes will be extinguished. If Total makes a “No-Go” decision, outstanding notes will remain outstanding and become payable at maturity.
In connection with the Private Placement that occurred on December 24, 2012, Total elected to participate in the Private Placement by exchanging approximately $5.0 million of its $53.3 million in senior unsecured convertible promissory notes then outstanding for 1,677,852 of the Company's common stock at $2.98 per share. As such, $5.0 million of the outstanding $53.3 million in senior unsecured convertible promissory notes was cancelled. The cancellation of the debt was treated as an extinguishment of debt in accordance with the guidance outlined in ASC 470-50.
On March 24, 2013, the Company entered into a letter agreement with Total under which Total agreed to waive its right to cease its participation in the parties' fuels collaboration at the July 2013 decision point and committed to proceed with the July 2013 funding tranche of $30.0 million (subject to the Company's satisfaction of the relevant closing conditions for such funding in the securities purchase agreement). As consideration for this waiver and commitment, the Company agreed to:
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• | Reduce the conversion price for the senior unsecured convertible promissory notes to be issued in connection with such funding from $7.0682 per share to a price per share equal to the greater of (i) the consolidated closing bid price of the Company's common stock on the date of the letter agreement, plus $0.01, and (ii) $3.08 per share, provided that the conversion price will not be reduced by more than the maximum possible amount permitted under the NASDAQ rules such that the new conversion price would require the Company to obtain stockholder consent; and |
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• | Grant Total a senior security interest in the Company's intellectual property, subject to certain exclusions and subject to release by Total when the Company and Total enter into final documentation regarding the establishment of the Fuels JV. |
In addition to the waiver by Total described above, Total also agreed that, at the Company's request and contingent upon the Company meeting its obligations described above, it would pay advance installments of the amounts otherwise payable at the July 2013 closing. Specifically, if the Company requested such advance installments, subject to certain closing conditions and delivery of certifications regarding the Company's cash levels, Total was obligated to fund $10.0 million no later than May 15, 2013, and an additional $10.0 million no later than June 15, 2013, with the remainder to be funded on the original July 2013 closing date.
On June 6, 2013, the Company sold and issued a 1.5% Senior Unsecured Convertible Note to Total in an aggregate principal amount of $10.0 million with a March 1, 2017 maturity date pursuant to the July 30, 2012 purchase agreement as discussed above. In accordance with the Letter Agreement dated March 24, 2013 this convertible note has a conversion price equal to $3.08 per
share of the Company's common stock. The Company did not request the initial $10.0 million advance, due no later than May 15, 2013, but did request the June advance (as described above), under which this convertible note was issued.
The conversion price of the notes is subject to adjustment for proportional adjustments to outstanding common stock and under anti-dilution provisions in case of certain dividends and distributions. Total has a right to require repayment of 101% of the principal amount of the notes in the event of a change of control of the Company and the notes provide for payment of unpaid interest on conversion following such a change of control if Total does not require such repayment. The purchase agreement and notes include covenants regarding payment of interest, maintenance of the Company's listing status, limitations on debt, maintenance of corporate existence, and filing of SEC reports. The notes include standard events of default resulting in acceleration of indebtedness, including failure to pay, bankruptcy and insolvency, cross-defaults, and breaches of the covenants in the purchase agreement and notes, with added default interest rates and associated cure periods applicable to the covenant regarding SEC reporting. Furthermore, the senior unsecured convertible notes include restrictions on the amount of debt the Company is permitted to incur. The Company's total outstanding debt at any time cannot exceed the greater of $200.0 million or 50% of its consolidated total assets and its secured debt cannot exceed the greater of $125.0 million or 30% of its consolidated total assets. As of June 30, 2013 and December 31, 2012, $45.6 million and $39.0 million, respectively, was outstanding under these convertible notes, net of debt discount of $12.7 million and $9.3 million, respectively.
Loans Payable
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 10.0% per annum and to be repaid over a period of 96 months. As of June 30, 2013 and December 31, 2012, a principal amount of zero and $177,000, respectively, was outstanding under the loan. During the three months ended June 30, 2013, as part of the Amendment entered into on April 30, 2013 to the Company's operating lease for its headquarters, the Company recorded the elimination of this loan payable as a lease incentive and recorded approximately $168,000 to deferred rent liability in the consolidated balance sheet.
In June 2012, the Company entered into a loan agreement with Banco Pine under which Banco Pine provided the Company with a short-term bridge loan of R$52.0 million (approximately US$25.6 million based on the exchange rate as of September 30, 2012, the time of loan repayment). The interest rate for the bridge loan was 0.4472% monthly (approximately 5.5% on an annualized basis). The principal and interest due under the bridge loan matured and were required to be repaid on September 19, 2012, subject to extension by Banco Pine. At the time of this bridge loan, the Company entered into a currency interest rate swap arrangement with the lender for R$22.0 million (approximately US$9.9 million based on the exchange rate as of June 30, 2013). The interest rate swap arrangement exchanged the principal and interest payments under the Banco Pine loan of R$22.0 million entered into in July 2012 for alternative principal and interest payments that were subject to adjustment based on fluctuations in the foreign exchange rate between the U.S. dollar and Brazilian real. The swap had a fixed interest rate of 3.94%. In July 2012, the Company repaid the outstanding bridge loan of R$52.0 million from Banco Pine.
In July 2012, the Company entered into a Note of Bank Credit and a Fiduciary Conveyance of Movable Goods agreements with each of Nossa Caixa and Banco Pine. Under these agreements, the Company's total acquisition cost for the farnesene production assets pledged as collateral was approximately R$68.0 million (approximately US$30.7 million based on the exchange rate as of June 30, 2013). The Company is also a parent guarantor for the payment of the outstanding balance under these loan agreements. Under such instruments, the Company could borrow an aggregate of R$52.0 million (approximately US$23.5 million based on the exchange rate as of June 30, 2013) as financing for capital expenditures relating to the Company's manufacturing facility in Brotas. Under the loan agreements, Banco Pine, agreed to lend R$22.0 million and Nossa Caixa agreed to lend R$30.0 million. The funds for the loans are provided by Banco Nacional de Desenvolvimento Econômico e Social ("BNDES"), but are guaranteed by the lenders. The loans have a final maturity date of July 15, 2022 and bear a fixed interest rate of 5.5% per year. The loans are also subject to early maturity and delinquency charges upon occurrence of certain events including interruption of manufacturing activities at Brotas for more than 30 days, except during sugarcane off-season. For the first two years that the loans are outstanding, the Company is required to pay interest only on a quarterly basis. After August 15, 2014, the Company is required to pay equal monthly installments of both principal and interest for the remainder of the term of the loans. As of June 30, 2013 and December 31, 2012, a principal amount of $23.5 million and $25.4 million, respectively, was outstanding under these loan agreements.
In October 2012, the Company entered into a loan payable agreement with a lender under which it borrowed $0.6 million to pay the insurance premiums of certain policies. The loan is payable in nine monthly installments of principal and interest. Interest accrues at a rate of 3.24% per annum. As of June 30, 2013 and December 31, 2012, the outstanding unpaid loan balance was zero and $0.4 million, respectively.
On March 18, 2013, the Company entered into an export financing agreement with Banco ABC Brasil S.A. ("ABC Bank") for approximately US$2.5 million (approximately R$5.0 million based on exchange rate as of March 18, 2013) for a 1 year-term
to fund exports through March 2014. This loan is collateralized by future exports from the Company's subsidiary in Brazil. As of June 30, 2013, the principal amount outstanding was US$2.5 million.
Letters of Credit
In June 2012, the Company entered into a letter of credit agreement for $1.0 million under which it provided a letter of credit to the landlord for its headquarters in Emeryville, California in order to cover the security deposit on the lease. The letter of credit is secured by a certificate of deposit. Accordingly, the Company has $1.0 million as restricted cash as of June 30, 2013 and December 31, 2012.
Future minimum payments under the debt agreements as of June 30, 2013 are as follows (in thousands):
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| | | | | | | | | | | | | | | |
Years ending December 31: | Related Party Convertible Debt | | Convertible Debt | | Loans Payable | | Credit Facility |
2013 (Six Months) | $ | — |
| | $ | 383 |
| | $ | 921 |
| | $ | 1,403 |
|
2014 | — |
| | 760 |
| | 5,287 |
| | 2,698 |
|
2015 | — |
| | 765 |
| | 4,069 |
| | 2,559 |
|
2016 | — |
| | 761 |
| | 3,912 |
| | 2,419 |
|
2017 | 62,187 |
| | 25,125 |
| | 3,750 |
| | 2,279 |
|
Thereafter | — |
| | — |
| | 15,150 |
| | 583 |
|
Total future minimum payments | 62,187 |
| | 27,794 |
| | 33,089 |
| | 11,941 |
|
Less: amount representing interest | (16,615 | ) | | (2,794 | ) | | (6,836 | ) | | (1,584 | ) |
Present value of minimum debt payments | 45,572 |
| | 25,000 |
| | 26,253 |
| | 10,357 |
|
Less: current portion | — |
| | — |
| | (2,783 | ) | | (2,176 | ) |
Noncurrent portion of debt | $ | 45,572 |
| | $ | 25,000 |
| | $ | 23,470 |
| | $ | 8,181 |
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7. Joint Ventures and Noncontrolling Interest
SMA Indústria Química
On April 14, 2010, the Company established SMA Indústria Química ("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.
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.
The joint venture agreements require the Company to fund the construction costs of the new facility and Usina São Martinho would reimburse the Company up to RS$61.8 million (approximately US$27.9 million based on the exchange rate as of June 30, 2013) of the construction costs after SMA commences production. Post commercialization, the Company would market and distribute Amyris renewable products and Usina São Martinho would sell feedstock and provide certain other services to SMA. The cost of the feedstock to SMA would be 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 would be 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 would be set to guarantee a break-even price to SMA plus an agreed upon return.
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.
The Company has a 50% ownership interest in SMA. The Company has identified SMA as a variable interest entity ("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, the Company directs the design and construction activities, as well as production and distribution. In addition, the Company 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.
Novvi
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 a joint venture to focus on the worldwide development, production and commercialization of base oils made from Biofene for the automotive, commercial and industrial lubricants markets (the "Original JV Agreement"). The parties originally envisioned operating their joint venture through Novvi S.A., a Brazilian entity jointly owned by Cosan and Amyris Brasil.
Under the Original JV Agreement and related agreements, the Company and Cosan each owned 50% of Novvi S.A. and each party would share equally any costs and any profits ultimately realized by Novvi S.A. The joint venture agreement had an initial term of 20 years from the date of the Original JV 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. The Shareholders' Agreement had 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 Novvi S.A. Since its formation, the Novvi S.A. had minimal operating activities while the Company and Cosan continued to determine and finalize the strategy and operating activities of Novvi S.A. Upon determination by the Company and Cosan that the joint venture be operated out of a US entity, the operating activities of Novvi S.A. ceased. The Company has identified that Novvi S.A. is a VIE and determined that the power to direct activities, which most significantly impact the economic success of the joint venture, is equally shared between the Company and Cosan. Accordingly, the Company is not the primary beneficiary and therefore accounts for its investment in Novvi S.A. under the equity method of accounting.
On March 26, 2013, the Company, Amyris Brasil and Cosan entered into a termination agreement to terminate the Original JV Agreement. In addition, Amyris Brasil agreed to sell, its 50% ownership in Novvi S.A. for approximately R$22,000 which represented the current value of its 50% equity ownership in Novvi S.A., a now-dormant company, to Cosan. Upon the consummation of the transaction with the shares transferring from Amyris Brasil to Cosan, the Shareholders Agreement of Novvi S.A. dated June 3, 2011 automatically terminated.
In September 2011, the Company and Cosan US, Inc. (“Cosan U.S.”) formed Novvi LLC, a U.S. entity that is jointly owned by the Company and Cosan U.S. On March 26, 2013 the Company and Cosan U.S. entered into agreements to (i) expand their base oils joint venture to also include additives and lubricants and (ii) operate their joint venture exclusively through Novvi LLC (“Novvi”). Specifically, the parties entered into an Amended and Restated Operating Agreement for Novvi, which sets forth the governance procedures for Novvi and the joint venture and the parties' initial contribution. The Company also entered into an IP License Agreement with Novvi under which the Company granted Novvi (i) an exclusive (subject to certain limited exceptions for the Company), worldwide, royalty-free license to develop, produce and commercialize base oils, additives, and lubricants derived from Biofene for use in automotive and industrial lubricants markets and (ii) a non-exclusive, royalty free license, subject to certain conditions, to manufacture Biofene solely for its own products. In addition, both the Company and Cosan U.S. granted Novvi certain rights of first refusal with respect to alternative base oil and additive technologies that may be acquired by the Company or Cosan U.S. during the term of the IP License Agreement. Under these agreements, the Company and Cosan U.S. will each own 50% of Novvi and each party will share equally in any costs and any profits ultimately realized by the joint venture. Novvi is governed by a six member Board of Managers, three from each investor who will appoint the Officers of Novvi who will be responsible for carrying out the daily operating activities of Novvi as directed by the Board of Managers. The IP License Agreement has an initial term of 20 years from the date of the agreement, subject to standard early termination provisions such as uncured material breach or a party's insolvency. Under the terms of the Amended and Restated Operating Agreement for initial contribution, Cosan U.S. is obligated to fund its 50% ownership share of Novvi in cash in the amount of $10.0 million and the Company is obligated to fund its 50% ownership share of Novvi through the granting of an IP License to develop, produce and
commercialize base oils, additives, and lubricants derived from Biofene for use in the automotive, commercial and industrial lubricants markets which has been agreed upon by Cosan U.S. and Amyris valued at $10.0 million. On March 26, 2013, the Company measured its initial contribution of IP to Novvi at the Company's carrying value of the licenses granted under the IP License Agreement, which was zero. Additional funding requirements to finance the ongoing operations of Novvi are expected to happen through revolving credit or other loan facilities provided by unrelated parties (i.e. such as financial institutions); cash advances or other credit or loan facilities provided by the Company and Cosan U.S. or their affiliates; or additional capital contributions by the Company and Cosan U.S.
The Company has identified Novvi as a VIE and determined that the power to direct activities, which most significantly impact the economic success of the joint venture (i.e. continuing research and development, marketing, sales, distribution and manufacturing of Novvi products), is equally shared between the Company and Cosan. Accordingly, the Company is not the primary beneficiary and therefore accounts for its investment in Novvi under the equity method of accounting. The Company will continue to reassess its primary beneficiary analysis of Novvi if there are changes in events and circumstances impacting the power to direct activities that most significantly affect Novvi's economic success. Under the equity method, the Company's share of profits and losses are to be included in “Income (loss) from equity method investments, net” in the consolidated statements of operations. During the three and six months ended June 30, 2013, the Company recorded no amounts for its share of Novvi's net loss as the carrying amount of the Company's investment in Novvi was zero and losses in excess of the carrying amount are offset by the accretion of the Company's share in the basis difference resulted from the parties' initial contribution. For the three months ended June 30, 2013 and 2012, the Company recorded $0.1 million and $0.9 million, respectively, and $2.6 million and $0.9 million for the six months ended June 30, 2013 and 2012, respectively, of revenue from the research and development activities that it has performed on behalf of Novvi.
Glycotech
In January 2011, the Company entered into a production service agreement ("Agreement") with Glycotech, whereby Glycotech is to provide process development and production services for the manufacturing of various Company products at its leased facility in Leland, North Carolina. The Company products to be manufactured by Glycotech will be owned and distributed by the Company. Pursuant to the terms of the agreement, the Company is required to pay the manufacturing and operating costs of the Glycotech facility which is dedicated solely to 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 the Company. On the same date as the production service agreement, the Company also entered into a right of first refusal agreement with the lessor of 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 agreed 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. 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 Glycotech's economic performance. In addition, the Company is required to fund 100% of 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 June 30, 2013, 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. As of June 30, 2013, the assets include $22.8 million in property, plant and equipment and $4.1 million in other assets, and $0.5 million in current assets. The liabilities include $0.2 million in accounts payable and accrued current liabilities and $0.2 million in loan obligations by Glycotech to its shareholders that are non-recourse to the Company. The creditors of each consolidated VIE have recourse only to the assets of that VIE.
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| | | | | | | |
| June 30, | | December 31, |
(In thousands) | 2013 | | 2012 |
Assets | $ | 27,405 |
| | $ | 29,564 |
|
Liabilities | $ | 477 |
| | $ | 355 |
|
The change in noncontrolling interest for the six months ended June 30, 2013 and 2012 is summarized below (in thousands):
|
| | | | | | | |
| 2013 | | 2012 |
Balance at January 1 | $ | (877 | ) | | $ | (240 | ) |
Foreign currency translation adjustment | 54 |
| | 168 |
|
Gain (loss) attributable to noncontrolling interest | 261 |
| | (677 | ) |
Balance at June 30 | $ | (562 | ) | | $ | (749 | ) |
8. Significant Agreements
Tate & Lyle Termination Agreement
On June 25, 2013, the Company and Tate & Lyle entered into a Settlement Agreement, Termination Agreement and Mutual Release (the “Termination Agreement”) to terminate the parties’ November 2010 contract manufacturing agreement (the “Contract Manufacturing Agreement”). The Termination Agreement resolves all outstanding issues that had arisen in connection with the Company’s relationship with Tate & Lyle.
The Contract Manufacturing Agreement had secured manufacturing capacity for farnesene through 2016 at Tate & Lyle’s facility in Decatur, Illinois. The Contract Manufacturing Agreement included a base monthly payment regardless of level of production at Tate & Lyle’s facility in addition to a variable amount based on volume. With the Company’s commencement of production at its farnesene facility located in Brazil, the Company determined that maintaining the Contract Manufacturing Agreement was no longer desired from a cost and operational perspective. The Company had no production at the Tate & Lyle facility since the first quarter of 2013.
Pursuant to the Termination Agreement, the Company is required to make four payments to Tate & Lyle, totaling approximately $8.8 million, of which $3.6 million is to satisfy outstanding obligations and $5.2 million is in lieu of additional payments otherwise owed under the Contract Manufacturing Agreement. These four payments are due under the Termination Agreement between July 17, 2013 and December 16, 2013, and such payments are deemed to be in full satisfaction of all amounts otherwise owed under the Contract Manufacturing Agreement. Under the Termination Agreement, no further payments will be owed for the remaining term of the Contract Manufacturing Agreement (i.e., through 2016). As a result, the Company recorded a loss of $8.4 million which is included in the loss on purchase commitments and write-off of production assets and consisted of an impairment charge of $6.7 million relating to Company-owned equipment at Tate & Lyle, a $2.7 million write- off of an unamortized portion of equipment costs funded by the Company for Tate & Lyle, offset by a reversal of $1.0 million provision for loss on fixed purchase commitments. As of June 30, 2013 the Company has an outstanding liability of $8.8 million pertaining to its obligation under the Termination Agreement. In July 2013, the Company paid $3.6 million of its obligation pertaining to the Termination Agreement (see Note 17 Subsequent Events).
IFF Joint Development and License Agreement
On April 23, 2013, the Company entered into a joint development and license agreement with International Flavors & Fragrances Inc. ("IFF"). Under the terms of the multi-year agreement, IFF and the Company will jointly develop certain fragrance ingredients. IFF will have exclusive rights to these fragrance ingredients for applications in the flavors and fragrances field, and the Company will have exclusive rights in other fields. IFF and the Company will share in the economic value derived from these ingredients. The joint development and license agreement provides for up to $6.0 million in funding by IFF to the Company during the first phase of the collaboration, of which $4.5 million is based on achievement of certain milestones. As of June 30, 2013 the Company has recorded deferred revenue of $1.5 million pertaining to this agreement.
Firmenich Master Collaboration Agreement
On March 13, 2013, the Company entered into a Master Collaboration Agreement (the “Agreement”) with Firmenich to establish a collaboration for the development and commercialization of multiple renewable flavors and fragrances ("F&F") compounds. Under this Agreement, except for rights granted under preexisting collaboration relationships, the Company is granting Firmenich exclusive access for such compounds to specified Company intellectual property for the development and commercialization of F&F products in exchange for research and development funding and a profit sharing arrangement. The Agreement supersedes and expands a prior collaboration agreement between the Company and Firmenich.
The Agreement provides annual, up-front funding to the Company by Firmenich of $10.0 million for each of the first three years of the collaboration. The initial payment of $10.0 million was received by the Company on March 27, 2013 of which $2.9 million was recognized as revenue for the three and six months ended June 30, 2013. The Agreement contemplates additional funding by Firmenich on a discretionary basis and up to $5.0 million over three milestone payments from Firmenich to the Company. Under the Company's revenue recognition policy for milestone payments, for arrangements that 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. As these milestones are defined or modified after the initial contract date, they could possibly still be substantive milestones and accounted for under the milestone method assuming that they meet all of the criteria.
In addition, the Agreement contemplates that the parties will mutually agree on a supply price for each compound and share product margins from sales of each compound on a 70/30 basis (70% for Firmenich) until Firmenich receives $15.0 million more than the Company in the aggregate, after which the parties will share 50/50 in the product margins on all compounds. The Company also agreed to pay a one-time success bonus of up to $2.5 million to Firmenich for outperforming certain commercialization targets. Firmenich's eligibility to receive the one-time success bonus commences upon the first sale of the first Firmenich product.
The Agreement does not impose any specific research and development commitments on either party after year six, but if the parties mutually agree to perform development after year six, the Agreement provides that the parties will fund it equally.
Under the Agreement, the parties jointly select target compounds, subject to final approval of compound specifications by Firmenich. During the development phase, the Company is required to provide labor, intellectual property and technology infrastructure and Firmenich is required to contribute downstream polishing expertise and market access. The Agreement provides that the Company will own research and development and strain engineering intellectual property, and Firmenich will own blending and, if applicable, chemical conversion intellectual property. Under certain circumstances such as the Company's insolvency, Firmenich gains expanded access to the Company's intellectual property. Following development of F&F compounds under the Agreement, the Agreement contemplates that the Company will manufacture the initial target molecules for the compounds and Firmenich will perform any required downstream polishing and distribution, sales and marketing.
9. Goodwill and Intangible Assets
The following table presents the components of the Company's intangible assets (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | |
| | | June 30, 2013 | | December 31, 2012 |
| Useful Life in Years | | Gross Carrying Amount | Accumulated Amortization | Net Carrying Value | | Gross Carrying Amount | Accumulated Amortization | Net Carrying Value |
In-process research and development | Indefinite | | $ | 8,560 |
| $ | — |
| $ | 8,560 |
| | $ | 8,560 |
| $ | — |
| $ | 8,560 |
|
Acquired licenses and permits | 2 | | 772 |
| (772 | ) | — |
| | 772 |
| (740 | ) | 32 |
|
Goodwill | Indefinite | | 560 |
| — |
| 560 |
| | 560 |
|
| 560 |
|
| | | $ | 9,892 |
| $ | (772 | ) | $ | 9,120 |
| | $ | 9,892 |
| $ | (740 | ) | $ | 9,152 |
|
The following table presents the activity of intangible assets for the six months ended June 30, 2013 (in thousands):
|
| | | | | | | | | | | | | | | | | | | | |
| | December 31, 2012 | | | | | | | | June 30, 2013 |
| | Net Carrying Value | | Additions | | Adjustments | | Amortization | | Net Carrying Value |
In-process research and development | | $ | 8,560 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 8,560 |
|
Acquired licenses and permits | | 32 |
| | — |
| | — |
| | (32 | ) | | — |
|
Goodwill | | 560 |
| | — |
| | — |
| | — |
| | 560 |
|
| | $ | 9,152 |
| | $ | — |
| | $ | — |
| | $ | (32 | ) | | $ | 9,120 |
|
The intangible assets acquired through the Draths Corporation acquisition on October 6, 2011 of in process research and development of $8.6 million and goodwill of $0.6 million are treated as indefinite lived intangible assets until completion or abandonment of the projects, at which time the assets will be amortized over the remaining useful life or written-off, as appropriate. If the carrying amount of the assets is greater than the measures of fair value, impairment is considered to have occurred and a write-down of the asset is recorded. Any finding that the value of its intangible assets has been impaired would require the Company to write-down the impaired portion, which could reduce the value of its assets and reduce (increase) its net income (loss) for the year in which the related impairment charges occur.
Acquired licenses and permits are amortized using a straight-line method over its estimated useful life. Amortization expense for this intangible was zero and $97,000 for the three months ended June 30, 2013 and 2012, respectively and was $32,000 and $193,000 for the six months ended June 30, 2013 and 2012, respectively. As of June 30, 2013, acquired licenses and permits were fully amortized.
10. Stockholders’ Equity
February 2012 Private Placement
In February 2012, the Company completed a private placement of 10,160,325 shares of its common stock at a price of $5.78 per share for aggregate proceeds of $58.7 million. In connection with this private placement, the Company entered into an agreement with an investor to purchase additional shares of the Company's common stock for an additional $15.0 million by March 2013 upon satisfaction by the Company of criteria associated with the commissioning of the Company's production plant in Brotas. This was satisfied by the investor through a $10.0 million investment in a private placement completed by the Company in December 2012 and subsequently, through a $5.0 million investment in a private placement completed by the Company in March 2013.
May 2012 Private Placement
In May 2012, the Company completed a private placement of 1,736,100 shares of its common stock at a price of $2.36 per share for aggregate proceeds of $4.1 million.
December 2012 Private Placement
In December 2012, the Company completed a private placement of its common stock for the issuance of 14,177,849 shares of its common stock at a price of $2.98 per share for aggregate proceeds of $37.2 million and the cancellation of $5.0 million worth of outstanding senior unsecured convertible promissory notes previously issued by the Company. Shares totaling 1,677,852 were issued to Total in exchange for this cancellation. Net cash received for this private placement as of December 31, 2012 was $22.2 million and the remaining $15.0 million of proceeds was received in January 2013. In connection with this private placement, the Company entered into a Letter of Agreement, dated December 24, 2012 with an investor under which the Company acknowledged that the investor's initial investment of $10.0 million in December 2012 represented partial satisfaction of the investor's preexisting contractual obligation to fund $15.0 million by March 31, 2013 upon satisfaction by the Company of criteria associated with the commissioning of the Company's production plant in Brotas.
In January 2013, the Company received $15.0 million in proceeds from a private placement offering that closed in December 2012. Consequently, the Company issued 5,033,557 shares of the 14,177,849 shares of the Company's common stock.
Biolding Follow-on Investment
In March 2013, the Company completed a private placement of 1,533,742 shares of its common stock at a price of $3.26 per share for aggregate proceeds of $5.0 million. This private placement represented the final tranche of Biolding's preexisting contractual obligation to fund $15.0 million upon satisfaction by the Company of certain criteria associated with the commissioning of a production plant in Brazil.
Evergreen Shares for 2010 Equity Plan and 2010 ESPP
On January 23, 2013, the Company's Board of Directors approved the additional shares which will be available for issuance under the 2010 Equity Plan and the 2010 ESPP. These shares represent an automatic increase in the number of shares available for issuance under the 2010 Equity Plan and the 2010 ESPP of 3,435,483 and 687,096, respectively, equal to 5% and 1%, respectively of 68,709,660 shares, the total outstanding shares of the Company’s common stock as of December 31, 2012. This automatic increase was effective as of January 1, 2013. Shares available for issuance under the 2010 Equity Plan and 2010 ESPP were initially registered on a registration statement on Form S-8 filed with the Securities and Exchange Commission on October 1, 2010 (Registration No. 333-169715). The Company filed registration statements on Form S-8 on March 28, 2013 and May 20, 2013 with respect to the shares added by the automatic increase on January 1, 2013.
11. Stock-Based Compensation
The Company’s stock option activity and related information for the six months ended June 30, 2013 was as follows:
|
| | | | | | | | | | | | | | |
| | | Number Outstanding | | Weighted - Average Exercise Price | | Weighted - Average Remaining Contractual Life (Years) | | Aggregate Intrinsic Value |
| | | | | | | | | (in thousands) |
Outstanding - December 31, 2012 | | 8,946,592 |
| | $ | 9.07 |
| | 7.5 | | $ | 954 |
|
| Options granted | | 1,616,105 |
| | $ | 2.87 |
| |
| |
|
| Options exercised | | (158,966 | ) | | $ | 0.98 |
| |
| |
|
| Options cancelled | | (1,600,431 | ) | | $ | 9.59 |
| |
| |
|
Outstanding - June 30, 2013 | | 8,803,300 |
| | $ | 7.99 |
| | 7.45 | | $ | 388 |
|
| | | | | | | | |
Vested and expected to vest after June 30, 2013 | | 8,162,316 |
| | $ | 8.19 |
| | 7.31 | | $ | 364 |
|
Exercisable at June 30, 2013 | | 4,121,741 |
| | $ | 9.98 |
| | 5.81 | | $ | 228 |
|
The aggregate intrinsic value of options exercised under all option plans was $0.1 million and $0.1 million for the three months ended June 30, 2013 and 2012, respectively and was $0.3 million and $0.7 million for the six months ended June 30, 2013 and 2012, respectively, determined as of the date of option exercise.
The Company’s restricted stock units ("RSUs") and restricted stock activity and related information for the six months ended June 30, 2013 was as follows:
|
| | | | | | | | | | |
| | RSUs | | Weighted Average Grant-Date Fair Value | | Weighted Average Remaining Contractual Life (Years) |
Outstanding - December 31, 2012 | 2,550,799 |
| | $ | 7.92 |
| | 1.3 |
|
| Awarded | 1,016,000 |
| | $ | 2.85 |
| | — |
|
| Vested | (613,619 | ) | | $ | 6.06 |
| | — |
|
| Forfeited | (182,664 | ) | | $ | 4.23 |
| | — |
|
Outstanding - June 30, 2013 | 2,770,516 |
| | $ | 4.20 |
| | 1.26 |
|
Expected to vest after June 30, 2013 | 2,414,032 |
| | $ | 4.20 |
| | 1.21 |
|
The following table summarizes information about stock options outstanding as of June 30, 2013:
|
| | | | | | | | | | | | | | | |
| 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—$2.76 | 1,053,612 |
| | 8.52 | | $ | 2.54 |
| | 250,328 |
| | $ | 1.98 |
|
$2.81—$2.83 | 26,800 |
| | 9.80 | | $ | 2.83 |
| | — |
| | $ | — |
|
$2.87—$2.87 | 962,000 |
| | 9.93 | | $ | 2.87 |
| | — |
| | $ | — |
|
$2.89—$3.05 | 921,948 |
| | 9.51 | | $ | 2.99 |
| | 153,339 |
| | $ | 3.04 |
|
$3.12—$3.83 | 237,025 |
| | 8.30 | | $ | 3.29 |
| | 40,388 |
| | $ | 3.21 |
|
$3.86—$3.86 | 1,157,506 |
| | 8.12 | | $ | 3.86 |
| | 391,969 |
| | $ | 3.86 |
|
$3.93—$3.93 | 893,923 |
| | 4.20 | | $ | 3.93 |
| | 893,923 |
| | $ | 3.93 |
|
$4.06—$9.32 | 1,145,195 |
| | 5.94 | | $ | 6.08 |
| | 840,954 |
| | $ | 6.22 |
|
$10.44—$16.00 | 1,086,335 |
| | 6.32 | | $ | 15.29 |
| | 673,675 |
| | $ | 15.38 |
|
$16.50—$30.17 | 1,318,956 |
| | 6.98 | | $ | 22.51 |
| | 877,165 |
| | $ | 22.15 |
|
$0.10—$30.17 | 8,803,300 |
| | 7.45 | | $ | 7.99 |
| | 4,121,741 |
| | $ | 9.98 |
|
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 June 30, | | Six Months Ended June 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Research and development | $ | 1,049 |
| | $ | 1,558 |
| | $ | 2,296 |
| | $ | 3,071 |
|
Sales, general and administrative | 3,936 |
| | 7,356 |
| | 6,882 |
| | 12,364 |
|
Total stock-based compensation expense | $ | 4,985 |
| | $ | 8,914 |
| | $ | 9,178 |
| | $ | 15,435 |
|
As of June 30, 2013, there were unrecognized compensation costs of $19.8 million related to stock options, and the Company expects to recognize those costs over a weighted average period of 2.91 years. As of June 30, 2013, there were unrecognized compensation costs of $6.6 million related to RSUs, and the Company expects to recognize those costs over a weighted average period of 1.83 years.
Stock-based compensation cost for RSUs is measured based on the closing fair market value of the Company's common stock on the date of grant. Stock-based compensation cost for stock options and employee stock purchase plan rights is estimated at the grant date and offering date, respectively, based on the fair-value using the Black-Scholes option pricing model. The fair value of employee stock options is being amortized on a straight-line basis over the requisite service period of the awards. The fair value of employee stock options was estimated using the following weighted-average assumptions:
|
| | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Expected dividend yield | — | % | | — | % | | — | % | | — | % |
Risk-free interest rate | 1.2 | % | | 1.1 | % | | 1.2 | % | | 1.1 | % |
Expected term (in years) | 6.1 |
| | 6.0 |
| | 6.1 |
| | 6.0 |
|
Expected volatility | 82 | % | | 76 | % | | 82 | % | | 76 | % |
The fair value of nonemployee stock options was estimated using the following weighted-average assumptions:
|
| | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Expected dividend yield | — | % | | — | % | | — | % | | — | % |
Risk-free interest rate | 1.7 | % | | 1.4 | % | | 1.5 | % | | 1.6 | % |
Expected term (in years) | 6.1 |
| | 7.2 |
| | 6.4 |
| | 7.2 |
|
Expected volatility | 82 | % | | 76 | % | | 83 | % | | 76 | % |
12. Related Party Transactions
February 2012 Private Placement
In February 2012, the Company completed a private placement of 10,160,325 shares of its common stock at a price of $5.78 per share for aggregate proceeds of $58.7 million pursuant to a securities purchase agreement, among the Company and existing certain investors, including Total and Maxwell (Mauritius) Pte Ltd, each a beneficial owner of more than 5% of the Company's existing common stock at the time of the transaction. In addition, members of the Company's Board of Directors and certain parties related to such directors participated in the offering.
May 2012 Private Placement
In May 2012, the Company completed a private placement of 1,736,100 shares of its common stock at a price of $2.36 per share for aggregate proceeds of $4.1 million pursuant to a series of Common Stock Purchase Agreements, among the Company and members of the Company's Board of Directors and certain parties related to such directors.
Biolding Follow-on Investment
In March 2013, the Company completed a private placement of 1,533,742 shares of its common stock to an existing stockholder, Biolding Investment SA ("Biolding"), at a price of $3.26 per share for aggregate proceeds of $5.0 million. This private placement represented the final tranche of Biolding's preexisting contractual obligation to fund $15.0 million upon satisfaction by the Company of certain criteria associated with the commissioning of a production plant in Brazil.
Letter Agreement with Total
As of March 24, 2013, the Company entered into a letter agreement with Total under which Total agreed to waive its right to cease its participation in our fuels collaboration at the July 2013 decision point and committed to proceed with the July 2013 funding tranche of $30.0 million (subject to the Company's satisfaction of the relevant closing conditions for such funding in the securities purchase agreement). As consideration for this waiver and commitment, the Company agreed to:
| |
• | Reduce the conversion price for the senior unsecured convertible promissory notes to be issued in connection with such funding from $7.0682 per share to a price per share equal to the greater of (i) the consolidated closing bid price of the Company's common stock on the date of the letter agreement, plus $0.01, and (ii) $3.08 per share, provided that the conversion price will not be reduced by more than the maximum possible amount permitted under the NASDAQ rules such that the new conversion price would require the Company to obtain stockholder consent; and |
| |
• | Grant Total a senior security interest in the Company's intellectual property, subject to certain exclusions and subject to release by Total when the Company and Total enter into final documentation regarding the establishment of the Fuels JV. |
In addition to the waiver by Total described above, Total also agreed that, at the Company's request and contingent upon the Company meeting its obligations described above, it would pay advance installments of the amounts otherwise payable at the July 2013 closing. Specifically, if the Company requests such advance installments, subject to certain closing conditions and delivery of certifications regarding the Company's cash levels, Total is obligated to fund $10.0 million no later than May 15, 2013, and an additional $10.0 million no later than June 15, 2013, with the remainder to be funded on the original July 2013 closing date.
On June 6, 2013, the Company sold and issued a 1.5% Senior Unsecured Convertible Note to Total in an aggregate principal amount of $10.0 million with a March 1, 2017 maturity date pursuant to the July 30, 2012 purchase agreement as discussed above. In accordance with the Letter Agreement dated March 24, 2013 this convertible note has a conversion price equal to $3.08 per share of the Company's common stock. The Company did not request the initial $10.0 million advance, due no later than May 15, 2013, but did request the June advance (as described above), under which this convertible note was issued.
13. Income Taxes
For the three months ended June 30, 2013 and 2012, the Company recorded a provision for income taxes of $246,000 and $249,000, respectively, and a provision for income taxes of $482,000 and $493,000, respectively, for the six months ended June 30, 2013 and 2012. The provision for income taxes for the six months ended June 30, 2013 and 2012 consisted of an accrual of Brazilian withholding tax on an intercompany interest liability. Other than the above mentioned provision for income tax, no additional provision for income taxes has been made, net of the valuation allowance, due to cumulative losses since the commencement of operations.
As of June 30, 2013, the US Internal Revenue Service has completed its audit of the Company for tax year 2008 which concluded that there were no adjustments resulting from the audit. While the statutes are closed for tax year 2008, the US federal tax carryforwards (net operating losses and tax credits) may be adjusted by the Internal Revenue Service in the year in which the carryforward is utilized.
On January 2, 2013, the President signed into law the American Taxpayer Relief Act of 2012, or ATRA. Under prior law, a taxpayer was entitled to a research tax credit for qualifying amounts incurred through December 31, 2011. The ATRA extends the research credit for two years for qualified research expenditures incurred through the end of 2013. The extension of the research credit is retroactive and includes amounts incurred after 2011. The benefit of the reinstated credit did not impact the income statement in the period of enactment, which is the first quarter of 2013, as the research and development credit carryforwards are offset by a full valuation allowance.
14. Segment Information
The chief operating decision maker for the Company is the chief executive officer. The chief executive officer reviews financial information presented on a consolidated basis, accompanied by information about revenue by geographic region, for purposes of allocating resources and evaluating financial performance. The Company has one business activity comprised of research and development and sales of fuels and farnesene-derived products and there are no segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated unit level. Accordingly, the Company has determined that it has a single reportable segment and operating segment structure.
Revenues by geography are based on the location of the customer. The following tables set forth revenue and long-lived assets by geographic area (in thousands):
Revenues
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
United States | $ | 4,458 |
| | $ | 16,596 |
| | $ | 10,022 |
| | $ | 42,902 |
|
Brazil | 1,259 |
| | 813 |
| | 2,077 |
| | 1,688 |
|
Europe | 4,005 |
| | 1,395 |
| | 4,230 |
| | 3,333 |
|
Asia | 1,127 |
| | 459 |
| | 2,389 |
| | 809 |
|
Total | $ | 10,849 |
| | $ | 19,263 |
| | $ | 18,718 |
| | $ | 48,732 |
|
Long-Lived Assets
|
| | | | | | | |
| June 30, | | December 31, |
| 2013 | | 2012 |
United States | $ | 58,562 |
| | $ | 70,273 |
|
Brazil | 83,794 |
| | 90,982 |
|
Europe | 1,785 |
| | 1,866 |
|
Total | $ | 144,141 |
| | $ | 163,121 |
|
15. Comprehensive Income (Loss)
Comprehensive income (loss) represents all changes in stockholders’ equity except those resulting from investments or contributions by stockholders. The Company’s 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 comprehensive loss for all periods presented.
The components of accumulated other comprehensive loss are as follows (in thousands):
|
| | | | | | | |
| June 30, 2013 | | December 31, 2012 |
Foreign currency translation adjustment, net of tax | $ | (16,892 | ) | | $ | (12,807 | ) |
Total accumulated other comprehensive loss | $ | (16,892 | ) | | $ | (12,807 | ) |
16. 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, using the treasury stock method or the as converted method, as applicable. For all periods presented, basic net loss per share was the same as diluted net loss per share because the inclusion of all potentially dilutive securities outstanding was anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss 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 June 30, | | Six Months Ended June 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Numerator: | | | | | | | |
Net loss attributable to Amyris, Inc. common stockholders | $ | (38,876 | ) | | $ | (46,806 | ) | | $ | (71,490 | ) | | $ | (141,354 | ) |
Denominator: | | | | | | | |
Weighted-average shares of common stock outstanding used in computing net loss per share of common stock, basic and diluted | 75,959,228 |
| | 57,442,834 |
| | 74,640,314 |
| | 53,828,541 |
|
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.51 | ) | | $ | (0.81 | ) | | $ | (0.96 | ) | | $ | (2.63 | ) |
The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have been anti-dilutive:
|
| | | | | |
| Three and Six Months Ended June 30, |
| 2013 | | 2012 |
Period-end stock options to purchase common stock | 8,803,300 |
| | 9,190,218 |
|
Convertible promissory notes | 13,617,144 | |