AMYRIS, INC. - Quarter Report: 2018 June (Form 10-Q)

 

 

(In thousands, except shares and per share amounts)		June 30,  2018				December 31,  2017
Assets
Current assets:
Cash and cash equivalents		$	14,050			$	57,059
Restricted cash			1,846				2,994
Short-term investments			130				—
Accounts receivable, net of allowance of $642 as of June 30, 2018 and December 31, 2017			26,814				24,281
Unbilled receivable			12,683				9,340
Inventories			6,632				5,408
Prepaid expenses and other current assets			4,687				5,525
Total current assets			66,842				104,607
Property, plant and equipment, net			15,300				13,892
Unbilled receivable, noncurrent			9,747				7,940
Restricted cash, noncurrent			959				959
Recoverable taxes from Brazilian government entities			1,057				1,445
Other assets			24,747				22,640
Total assets		$	118,652			$	151,483
Liabilities, Mezzanine Equity and Stockholders' Deficit
Current liabilities:
Accounts payable		$	19,206			$	15,921
Accrued and other current liabilities			20,101				29,402
Deferred revenue			9,643				4,880
Debt, current portion			59,987				36,924
Related party debt, current portion			49,669				20,019
Total current liabilities			158,606				107,146
Long-term debt, net of current portion			43,642				61,893
Related party debt, net of current portion			18,104				46,541
Derivative liabilities			138,695				119,978
Other noncurrent liabilities			8,581				10,632
Total liabilities			367,628				346,190
Commitments and contingencies (Note 9)
Mezzanine equity:
Contingently redeemable common stock (Note 5)			5,000				5,000
Stockholders’ deficit:
Preferred stock - $0.0001 par value, 5,000,000 shares authorized as of June 30, 2018 and December 31, 2017, and 19,334 and 22,171 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively			—				—
Common stock - $0.0001 par value, 250,000,000 shares authorized as of June 30, 2018 and December 31, 2017; 50,340,680 and 45,637,433 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively			5				5
Additional paid-in capital			1,086,814				1,048,274
Accumulated other comprehensive loss			(42,818	)			(42,156	)
Accumulated deficit			(1,298,914	)			(1,206,767	)
Total Amyris, Inc. stockholders’ deficit			(254,913	)			(200,644	)
Noncontrolling interest			937				937
Total stockholders' deficit			(253,976	)			(199,707	)
Total liabilities, mezzanine equity and stockholders' deficit		$	118,652			$	151,483

		Six Months Ended June 30,
(In thousands)		2018				2017
Cash flows from operating activities
Net loss		$	(89,963	)		$	(36,751	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss (gain) from change in fair value of derivative liabilities			39,548				(38,115	)
Amortization of debt discount			6,587				7,637
Stock-based compensation			3,178				2,684
Depreciation and amortization			2,944				5,550
Loss (gain) on disposal of property, plant and equipment			942				(161	)
Loss on foreign currency exchange rates			271				63
Loss upon extinguishment of debt			26				3,528
Gain on extinguishment of derivative liability			(1,857	)			—
Gain on change in fair value of equity investment			(1,717	)			—
Receipt of equity in connection with collaboration arrangements revenue			—				(2,660	)
Changes in assets and liabilities:
Accounts receivable			(2,027	)			(3,509	)
Unbilled receivables			(5,150	)			—
Inventories			(1,313	)			409
Prepaid expenses and other assets			(1,072	)			(4,220	)
Accounts payable			2,681				(1,739	)
Accrued and other liabilities			(10,031	)			7,943
Deferred revenue			3,959				(838	)
Net cash used in operating activities			(52,994	)			(60,179	)
Cash flows from investing activities
Purchases of property, plant and equipment			(4,207	)			(264	)
Increase in short-term investments			(157	)			(85	)
Net cash used in investing activities			(4,364	)			(349	)
Cash flows from financing activities
Proceeds from issuance of debt			34,611				12,455
Proceeds from issuance of common stock upon exercise of warrants			14,549				—
Proceeds from issuance of common stock in private placement			1,416				—
Proceeds from exercises of ESPP purchases			270				—
Proceeds from exercises of common stock options			248				69
Principal payments on debt			(37,037	)			(24,372	)
Principal payments on capital leases			(593	)			(764	)
Payment of minimum employee taxes withheld upon net share settlement of restricted stock units			(185	)			(110	)
Proceeds from issuance of convertible preferred stock			—				50,661
Net cash provided by financing activities			13,279				37,939
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(78	)			7
Net decrease in cash, cash equivalents and restricted cash			(44,157	)			(22,582	)
Cash, cash equivalents and restricted cash at beginning of period			61,012				32,433
Cash, cash equivalents and restricted cash at end of the period		$	16,855			$	9,851
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents		$	14,050			$	5,078
Restricted cash, current			1,846				3,815
Restricted cash, noncurrent			959				958
Total cash, cash equivalents and restricted cash		$	16,855			$	9,851

1. Basis of Presentation and Summary of Significant Accounting Policies

 

Amyris, Inc. (Amyris or the Company) is a leading industrial biotechnology company that applies its technology platform to engineer, manufacture and sell high performance, natural, sustainably-sourced products into the Health & Wellness, Clean Beauty, and Flavors & Fragrances markets. The Company's proven technology platform enables the Company to rapidly engineer microbes and use them as catalysts to metabolize renewable, plant-sourced sugars into large volume, high-value ingredients. The Company's biotechnology platform and industrial fermentation process replace existing complex and expensive manufacturing processes. The Company has successfully used its technology to develop and produce six distinct molecules at commercial volumes.

 

The accompanying unaudited condensed consolidated financial statements of Amyris, Inc. should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 10-K, from which the condensed consolidated balance sheet as of December 31, 2017 is derived. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP), for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying condensed consolidated financial statements do not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

 

Liquidity

 

The Company has incurred significant operating losses since its inception and expects to continue to incur losses and negative cash flows from operations for at least the next 12 months following the issuance of these financial statements. As of June 30, 2018, the Company had negative working capital of $105.9 million, excluding cash and cash equivalents and short-term investments (compared to negative working capital of $59.6 million as of December 31, 2017), and an accumulated deficit of $1.3 billion.

 

As of June 30, 2018, the Company's debt (including related party debt), net of deferred discount and issuance costs of $25.5 million, totaled $171.4 million, of which $109.7 million is classified as current and $23.2 million is mandatorily convertible into equity and within the control of the Company. The Company's debt service obligations through August 31, 2019 are $114.5 million, including $15.8 million of anticipated cash interest payments. The Company's debt agreements contain various covenants, including certain restrictions on the Company's business that could cause the Company to be at risk of defaults, such as restrictions on additional indebtedness and cross-default clauses. A failure to comply with the covenants and other provisions of the Company’s debt instruments, including any failure to make a payment when required, would generally result in events of default under such instruments, which could permit acceleration of such indebtedness. If such indebtedness is accelerated, it would generally also constitute an event of default under the Company’s other outstanding indebtedness, permitting acceleration of a substantial portion of the Company's outstanding indebtedness.

 

Cash and cash equivalents of $14.1 million as of June 30, 2018 are not sufficient to fund expected future negative cash flows from operations and cash debt service obligations through one year following the issuance of these financial statements. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements are issued. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company's ability to continue as a going concern will depend, in large part, on its ability to extend existing debt maturities by restructuring a majority of its convertible debt, which is uncertain and outside the control of the Company, in addition to the mandatory conversion of certain debt obligations into equity, which conversion is within the control of the Company. Further, the Company's operating plan for the next 12 months from the date of issuance of these financial statements contemplates a significant reduction in its net operating cash outflows as compared to the previous 12 months, resulting from (i) revenue growth from sales of existing and new products with positive gross margins, (ii) significantly increased royalty revenues (previously referred to as value share revenues), (iii) reduced cost of products sold as a percentage of renewable products revenue due to anticipated procurement and production efficiencies, and (iv) cash inflows from grants and collaborations. Finally, during the second half of 2018, the Company plans to obtain project financing for the construction of a new specialty ingredients manufacturing facility in Brazil. If the Company is unable to complete these actions, it expects to be unable to meet its operating cash flow needs and its obligations under its existing debt facilities. This could result in an acceleration of its obligation to repay all amounts outstanding under those facilities, and it may be forced to liquidate its assets or obtain additional equity or debt financing, which may not occur timely or on reasonable terms, if at all.

 

 

Significant Accounting Policies

 

Note 1, "Basis of Presentation and Summary of Significant Accounting Policies", to the audited consolidated financial statements in the 10-K includes a discussion of the significant accounting policies and estimates used in the preparation of the Company’s consolidated financial statements. Except as noted below for the adoption of Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”), Revenue from Contracts with Customers, and Accounting Standards Update (“ASU”) 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, there have been no material changes to the Company's significant accounting policies and estimates during the three and six months ended June 30, 2018.

 

Revenue Recognition

 

The Company recognizes revenue from the sale of renewable products, licenses of and royalties from intellectual property, and grants and collaborative research and development services. Revenue is measured based on the consideration specified in a contract with a customer and recognized when, or as, the Company satisfies a performance obligation by transferring control over a product or service to a customer. The Company generally does not incur costs to obtain new contracts. The costs to fulfill a contract are expensed as incurred.

 

The Company accounts for a contract when it has approval and commitment to perform from both parties, the rights of the parties are identified, payment terms are established, the contract has commercial substance and collectability of the consideration is probable. Changes to contracts are assessed for whether they represent a modification or should be accounted for as a new contract. The Company considers the following indicators among others when determining whether it is acting as a principal in the transaction and recording revenue on a gross basis: (i) the Company is primarily responsible for fulfilling the promise to provide the specified goods or service, (ii) the Company has inventory risk before the specified good or service has been transferred to a customer or after transfer of control to the customer and (iii) the Company has discretion in establishing the price for the specified good or service. If a transaction does not meet the Company's indicators of being a principal in the transaction, then the Company is acting as an agent in the transaction and the associated revenues are recognized on a net basis.

 

The Company’s significant contracts and contractual terms with its customers are presented in Note 10, "Significant Revenue Agreements" in Part II, Item 8 of the 10-K.

 

The Company recognizes revenue when control has passed to the customer. The following indicators are evaluated in determining when control has passed to the customer: (i) the Company has a right to payment for the product or service, (ii) the customer has legal title to the product, (iii) the Company has transferred physical possession of the product to the customer, (iv) the customer has the significant risk and rewards of ownership of the product and (v) the customer has accepted the product. The Company’s renewable products are delivered to customers from the Company’s facilities with shipping terms typically specifying F.O.B. shipping point.

 

Performance Obligations

 

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company's contracts may contain multiple performance obligations if a promise to transfer the individual goods or services is separately identifiable from other promises in the contracts and, therefore, is considered distinct. For contracts with multiple performance obligations, the Company determines the standalone selling price of each performance obligation and allocates the total transaction price using the relative selling price basis.

 

 

The following is a description of the principal goods and services from which the Company generates revenue.

 

Renewable Product Sales

 

Revenues from renewable product sales are recognized as a distinct performance obligation on a gross basis as the Company is acting as a principal in these transactions, with the selling price to the customer recorded net of discounts and allowances. Revenues are recognized at a point in time when control has passed to the customer, which typically is upon the renewable products leaving the Company’s facilities with the first transportation carrier. The Company, on occasion, may recognize revenue under a bill and hold arrangement, whereby the customer requests and agrees to purchase product but requests delivery at a later date. Under these arrangements, control transfers to the customer when the product is ready for delivery, which occurs when the product is identified separately as belonging to the customer, the product is ready for shipment to the customer in its current form, and the Company does not have the ability to direct the product to a different customer. It is at this point that we have right to payment, the customer obtains legal title, and the customer has the significant risks and rewards of ownership. The Company’s renewable product sales do not include rights of return. Returns are accepted only if the product does not meet product specifications and such nonconformity is communicated to the Company within a set number of days of delivery. The Company offers a two-year assurance-type warranty to replace squalane products that do not meet Company-established criteria as set forth in the Company’s trade terms. An estimate of the cost to replace the squalane products sold is made based on a historical rate of experience and recognized as a liability and related expense when the renewable product sale is consummated.

 

Licenses and Royalties

 

Licensing of Intellectual Property: When the Company’s intellectual property licenses are determined to be distinct from the other performance obligations identified in the arrangement, revenue is recognized from non-refundable, up-front fees allocated to the license at a point in time when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For intellectual property licenses that are combined with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front-fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognized.

 

Royalties from Licensing of Intellectual Property: The Company earns royalties from the licensing of its intellectual property whereby the licensee uses the intellectual property to produce and sell its products to its customers and the Company shares in the profits.

 

When the Company’s intellectual property license is the only performance obligation, or it is the predominant performance obligation in arrangements with multiple performance obligations, the Company applies the sales-based royalty exception and revenue is estimated and recognized at a point in time when the licensee’s product sales occur. Estimates of sales-based royalty revenues are made using the most likely outcome method, which is the single amount in a range of possible amounts derived from the licensee’s historical sales volumes and sales prices of its products and recent commodity market pricing data and trends.

 

When the Company’s intellectual property license is not the predominant performance obligation in arrangements with multiple performance obligations, the royalty represents variable consideration and is allocated to the transaction price of the predominant performance obligation which generally is the supply of renewable products to the Company's customers. Revenue is estimated and recognized at a point in time when the renewable products are delivered to the customer. Estimates of the amount of variable consideration to include in the transaction price are made using the expected value method, which is the sum of probability-weighted amounts in a range of possible amounts determined based on the cost to produce the renewable product plus a reasonable margin for the profit share. The Company only includes an amount of variable consideration in the transaction price to the extent it is probable that a significant reversal in the cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Also, the transaction price is reduced for estimates of customer incentive payments payable by the Company for certain customer contracts.

 

 

Grants and Collaborative Research and Development Services

 

Collaborative Research and Development Services: The Company earns revenues from collaboration agreements with customers to perform research and development services to develop new molecules using the Company’s technology and to scale production of the molecules for commercialization and use in the collaborator’s products. The collaboration agreements generally include providing the Company's collaborators with research and development services and with licenses to the Company’s intellectual property to use the technology underlying the development of the molecules and to sell its products that incorporate the technology. The terms of the Company's collaboration agreements typically include one or more of the following: advance payments for the research and development services that will be performed, nonrefundable upfront license payments, milestone payments to be received upon the achievement of the milestone events defined in the agreements, and royalty payments upon the commercialization of the molecules in which the Company shares in the customer’s profits.

 

Collaboration agreements are evaluated at inception to determine whether the intellectual property licenses represent distinct performance obligations separate from the research and development services. If the licenses are determined to be distinct, the non-refundable upfront license fee is recognized as revenue at a point in time when the license is transferred to the licensee and the licensee is able to use and benefit from the license while the research and development service fees are recognized over time as the performance obligations are satisfied. The research and development service fees represent variable consideration. Estimates of the amount of variable consideration to include in the transaction price are made using the expected value method, which is the sum of probability-weighted amounts in a range of possible amounts. The Company only includes an amount of variable consideration in the transaction price to the extent it is probable that a significant reversal in the cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Revenue is recognized over time using either an input-based measure of labor hours expended or a time-based measure of progress towards the satisfaction of the performance obligations. The measure of progress is evaluated each reporting period and, if necessary, adjustments are made to the measure of progress and the related revenue recognized.

 

Collaboration agreements that include milestone payments are evaluated at inception to determine whether the milestone events are considered probable of achievement and estimates are made of the amount of the milestone payments to include in the transaction price using the most likely amount method which is the single amount in a range of possible amounts. If it is probable that a significant revenue reversal will not occur, the estimated milestone payment amount is included in the transaction price. Each reporting period, the Company re-evaluates the probability of achievement of the milestone events and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative basis, which would affect collaboration revenues in the period of adjustment.

 

The Company generally invoices its collaborators on a monthly or quarterly basis, or upon the completion of the effort or achievement of a milestone, based on the terms of each agreement. Deferred revenue arises from amounts received in advance of performing the research and development activities and is recognized as revenue in future periods as the performance obligations are satisfied.

 

Grants: The Company earns revenues from grants with government agencies to, among other things, provide research and development services to develop molecules using the Company’s technology, and create research and development tools to improve the timeline and predictability for scaling molecules from proof of concept to market by reducing time and costs. Grants typically consist of research and development milestone payments to be received upon the achievement of the milestone events defined in the agreements.

 

The milestone payments are evaluated at inception to determine whether the milestone events are considered probable of achievement and estimates are made of the amount of the milestone payments to include in the transaction price using the most likely amount method which is the single amount in a range of possible amounts. If it is probable that a significant revenue reversal will not occur, the estimated milestone payment amount is included in the transaction price. Each reporting period, the Company re-evaluates the probability of achievement of the milestone events and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative basis, which would affect collaboration revenues in the period of adjustment. Revenue is recognized over time using a time-based measure of progress towards the satisfaction of the performance obligations. The measure of progress is evaluated each reporting period and, if necessary, adjustments are made to the measure of progress and the related revenue recognized.

 

 

For descriptions of the Company's other significant accounting policies, see the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

 

Recent Accounting Pronouncements

 

(a) Recent Accounting Standards, Pronouncements or Updates Recently Adopted

 

In the six months ended June 30, 2018, the Company adopted these new accounting standards or updates:

 

Revenue Recognition The Company adopted ASC 606 with a date of initial application of January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition as detailed above in “Significant Accounting Policies”. The Company applied ASC 606 using the modified retrospective approach by recognizing the cumulative effect of initially applying ASC 606 to all contracts not completed as of the date of adoption as an adjustment to the opening balance of accumulated deficit at January 1, 2018. Therefore, the comparative information has not been adjusted and continues to be reported under the legacy revenue recognition guidance of ASC 605, "Revenue Recognition".

 

The Company applied ASC 606 using a practical expedient for contracts that were modified before the application date, which allowed us to determine an aggregate effect of all modifications that occurred before January 1, 2018, when determining the satisfied and unsatisfied performance obligations, the transaction price, and allocating that transaction price to the performance obligations instead of retrospectively restating the contracts for such contract modifications.

 

The cumulative effect of initially applying ASC 606 resulted in an increase to accumulated deficit at January 1, 2018 of approximately $0.8 million. The increase in accumulated deficit arose primarily from a $0.8 million increase of deferred revenue related to the effects of measuring and allocating the transaction price to the performance obligations under ASC 606 compared to the legacy guidance of ASC 605. The most significant change in accounting policy is the Company now estimates royalty revenues from licenses of the Company’s intellectual property and recognizes estimated royalty revenues at a point in time when the Company sells its renewable products to its customers (if the sales-based royalty exception does not apply) or when the licensee sells its products to its customer (if the sales-based royalty exception does apply). Also, the transaction price for royalty revenues is reduced for variable incentive payments that may be payable by the Company to customers.

 

The following table presents the amounts by which revenue is affected in the current reporting period by the application of ASC 606 as compared with the legacy guidance that was in effect before the accounting change. No other consolidated statements of operations financial statement line items were impacted by the adoption of ASC 606.

 

 

 

Financial Instruments In January 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which changes the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The Company adopted ASU 2016-01 on January 1, 2018 and, as a result, has changed its accounting policy to account for investments in equity securities (other than those accounted for using the equity method of accounting) at fair value with changes in fair value recognized in net income. The Company applied the modified retrospective approach by recognizing a $1.4 million cumulative effect adjustment as an increase to the opening balance of accumulated deficit at January 1, 2018 representing an unrealized loss measured as the difference between the fair value and the cost basis of the Company’s equity investments as of January 1, 2018 previously accounted for using the cost method of accounting.

 

Classification of Cash Flow Elements In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which affects the classification of certain cash receipts and cash payments on the statement of cash flows. ASU 2016-15 resulted in a change in cash flow classification of debt prepayment or extinguishment costs. Prior to the adoption of ASU 2016-15, the Company classified gains or losses upon extinguishment of debt as an operating activity in the statements of cash flows. ASU 2016-15 became effective January 1, 2018 on a retrospective basis. Upon the Company's adoption of ASU 2016-15, such gains or losses are now classified in statements of cash flows as a financing activity.

 

Restricted Cash in Statement of Cash Flows In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The accounting standard update became effective January 1, 2018 using a retrospective transition method for each period presented. Upon adoption, ASU 2016-18 has resulted in a change in the presentation of restricted cash in the statement of cash flows for current and prior periods presented.

 

Derecognition of Nonfinancial Assets In February 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which requires entities to apply certain recognition and measurement principles in ASC 606 when they derecognize nonfinancial assets, and in substance, nonfinancial assets, and the counterparty is not a customer. The guidance applies to: (1) contracts to transfer to a noncustomer a nonfinancial asset or group of nonfinancial assets, or an ownership interest in a consolidated subsidiary that does not meet the definition of a business and is not a not-for-profit activity; and (2) contributions of nonfinancial assets that are not a business to a joint venture or other noncontrolled investee. The accounting standard update became effective January 1, 2018 on a modified retrospective basis. Adoption of this ASU did not impact the Company's consolidated financial position, results of operations or cash flows.

 

Staff Accounting Bulletin No 118 - Tax Cuts and Jobs Act of 2017 On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Act) was signed into law, making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21%, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017.

 

Based on the Company’s current operations it is anticipated that the only significant current impact of the Act for the Company will be the reduction in the U.S. corporate tax rate. The Act reduces the corporate tax rate to 21 percent, effective January 1, 2018. In December 2017, Staff Accounting Bulletin No. 118 (SAB 118) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. As of June 30, 2018, due to the complexities of the new law, the Company has not yet completed its accounting for all the tax effects of the Tax Act, but has made a reasonable estimate of the effects on the Company's existing deferred tax balances. In all cases, the Company will continue to make and refine its calculations as additional analysis is completed. In addition, the Company's provisional estimate of the effects on its existing deferred tax balances may also be adjusted as the Company gains a more thorough understanding of the tax law during the one-year measurement period allowed under SAB 118. Additionally, the Act created a new requirement that certain income, referred to as "Global Intangible Low-Taxed Income" (GILTI) earned by controlled foreign corporations (CFCs) must be included currently in the gross income of the CFCs’ U.S. shareholder. The Company’s selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing its global income to determine whether it expects to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. As of June 30, 2018, the Company has not made a policy decision regarding whether to record deferred taxes on GILTI.

 

(b) Recent Accounting Standards Pronouncements or Updates Not Yet Effective as of Period End

 

Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), with fundamental changes as to how entities account for leases. Lessees will need to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. Additional disclosures for leases will also be required. The accounting standard update will be effective beginning in the first quarter of fiscal 2019 using a modified retrospective approach, which requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented. The Company is in the initial stages of evaluating the impact of the new standard on its accounting policies, processes and system requirements. The Company anticipates that the standard may have a material impact on the Company’s condensed consolidated balance sheets due to the requirement to recognize leased right-of-use assets and corresponding liabilities related to leases on the Company’s condensed consolidated balance sheets, but is still evaluating whether the standard might have a material impact on the Company’s other condensed consolidated financial statements.

 

Financial Instruments with "Down Round" Features In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): Accounting for Certain Financial Instruments with Down Round Features. The amendments of this ASU update the classification analysis of certain equity-linked financial instruments, or embedded features, with down round features, as well as clarify existing disclosure requirements for equity-classified instruments. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The accounting standard update will be effective beginning in the first quarter of fiscal 2019 using a modified retrospective approach. The Company is in the initial stages of evaluating the impact of the new standard on its consolidated financial statements.

 

Non-employee Stock-based Compensation In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which more closely aligns the accounting for employee and nonemployee stock-based compensation. Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. This accounting standard update will be effective beginning in the first quarter of fiscal 2019 using a modified retrospective approach. The Company anticipates that the new standard will not materially impact the Company's consolidated financial statements.

 

Use of Estimates

 

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates, and such differences may be material to the financial statements.

 

Reclassifications

 

Certain prior period amounts have been reclassified to conform to the current period presentation in the Company’s condensed consolidated financial statements and the accompanying notes to the condensed consolidated financial statements. The condensed consolidated statements of operations previously presented license fee revenue in combination with grants and collaborations revenue, and royalties (formerly referred to as “value share”) were previously presented in combination with renewable products revenue. Licenses and royalties revenue is presented as a separate line within the condensed consolidated statements of operations. The reclassifications reflect the growth in the Company’s business model of licensing its technology and earning royalties from customers utilizing the Company’s technology in the products it produces and sells. The reclassifications had no impact on total revenue.

 

In the statements of cash flows, the prior period has been restated to reflect accounting standards changes for reporting (i) restricted cash, and (ii) debt extinguishment costs, in statements of cash flows.

 

2. Balance Sheet Details

 

Accounts Receivable, Net

 

Accounts receivable, net is comprised of the following:

 

 

Inventories

 

Inventories are stated at the lower of cost or net realizable value and are comprised of the following:

 

 

Property, Plant and Equipment, Net

 

Property, plant and equipment, net is comprised of the following:

 

 

Property, plant and equipment, net includes $4.8 million and $4.2 million of machinery and equipment under capital leases as of June 30, 2018 and December 31, 2017, respectively. Accumulated amortization of assets under capital leases totaled $1.9 million and $1.6 million as of June 30, 2018 and December 31, 2017, respectively.

 

During the three and six months ended June 30, 2018, the Company capitalized $1.2 million and $1.6 million, respectively, of internal labor costs required to automate, integrate and ready certain laboratory and plant equipment for its intended use.

 

Depreciation and amortization expense, including amortization of assets under capital leases, was $1.4 million and $2.7 million for the three months ended June 30, 2018 and 2017, respectively, and $2.9 million and $5.6 million for the six months ended June 30, 2018 and 2017, respectively.

 

Other Assets

 

Other assets are comprised of the following:

 

 

Accrued and Other Current Liabilities

 

Accrued and other current liabilities are comprised of the following:

 

 

3. Fair Value Measurement

 

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

 

The following tables summarize assets and liabilities measured at fair value, and the respective fair value by input classification level within the fair value hierarchy:

 

 

There were no transfers between levels during the periods presented.

 

Equity Investment in SweeGen

 

The Company holds 850,115 unregistered shares of SweeGen, Inc. common stock received as payment in connection with a December 2016 revenue agreement between the Company and Phyto Tech Corp. (d/b/a Blue California). At June 30, 2018, the fair value of the shares was $3.6 million, determined based on the over-the-counter market (OTCMKTS) trading price of the SweeGen shares (Level 2). For the three and six months ended June 30, 2018, the Company recorded unrealized gains of $1.4 million and $1.7 million, respectively, for changes in fair value of the shares. The Company adopted ASU 2016-01 on January 1, 2018 and now accounts for its equity investment in SweeGen at fair value, with changes in fair value recognized in net income; see "Recent Accounting Pronouncements" in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” above. The fair value of the SweeGen shares is included in Other Assets in the condensed consolidated balance sheets.

 

Derivative Liabilities Recognized in Connection with the Issuance of Debt and Equity Instruments

 

The following table provides a reconciliation of the beginning and ending balances for the Company's derivative liabilities recognized in connection with the issuance of debt and equity instruments, measured at fair value using significant unobservable inputs (Level 3):

 

 

The derivative liabilities recognized in connection with the issuance of equity and debt instruments represent the fair value of the make-whole provisions of the Series A and B Preferred Stock as well as the cash and anti-dilution warrants issued concurrently with the Series A, B and D Preferred Stock (see Note 6, “Stockholders’ Deficit” in Part II, Item 8 of the 10-K), and conversion options, conversion price adjustment features and down round provisions associated with the R&D Note, Temasek Funding Warrant, Tranche Notes, 2014 144A Notes and 2015 144A Notes (see Note 4, “Debt” and Note 6, "Stockholders' Deficit" in Part II, Item 8 of the 10-K).

 

The market-based assumptions and estimates used in applying a Monte Carlo simulation approach and Black-Scholes-Merton option value approach for valuing the derivative liabilities in connection with debt and equity instruments include amounts in the following ranges and amounts:

 

 

The valuation of the embedded derivatives in connection with the issuance of debt and equity instruments and freestanding derivative instruments in connection with the issuance of equity instruments can be significantly affected by changes in valuation assumptions. For example, all other things being equal, a decrease/increase in the Company’s stock price, probability of change of control, credit spread, term to maturity/conversion or stock price volatility decreases/increases the valuation of the liabilities, whereas a decrease/increase in risk adjusted yields or risk-free interest rates increases/decreases the valuation of the liabilities. A third-party valuation specialist assisted in determining estimates of fair value.

 

See Note 6, "Stockholders' Deficit", for more information about the derecognition upon extinguishment of derivative liabilities in connection with the April 2018 warrants exercise.

 

Changes in Fair Value

 

Changes in the fair value of assets or liabilities measured at fair value on a recurring basis are recognized in “Gain (loss) from change in fair value of derivative instruments" in the condensed consolidated statements of operations.

 

Assets and Liabilities Recorded at Carrying Value

 

Financial Assets and Liabilities

 

The carrying amounts of certain financial instruments, such as cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities and low market interest rates, if applicable. Loans payable, credit facilities and convertible notes are recorded at carrying value, which is representative of fair value at the date of acquisition. The Company estimates the fair value of loans payable and credit facilities using observable market-based inputs (Level 2) and estimates the fair value of convertible notes based on rates currently offered for instruments with similar maturities and terms (Level 3). The fair values and carrying values of the Company's debt were as follows:

 

 

4. Debt

 

Net carrying amounts of debt are as follows:

 

 

During the six months ended June 30, 2018, aside from debt payments (including payments-in-kind), the following debt transactions occurred:

 

•

Senior Secured Loan Facility Repayment: On June 29, 2018, the Company repaid in full the $27.3 million outstanding principal balance owed under the Senior Secured Loan Facility.

 

 

•

GACP Term Loan Facility: On June 29, 2018, the Company, certain of the Company’s subsidiaries and GACP Finance Co., LLC (GACP) entered into a Loan and Security Agreement (the LSA) to borrow $36.0 million (the GACP Term Loan Facility). The LSA also provides for an incremental secured term loan facility in an aggregate principal amount of up to $35.0 million (the Incremental GACP Term Loan Facility and, together with the GACP Term Loan Facility, the GACP Term Loan Facilities), subject to certain conditions and approvals, to fund the construction of a custom-built manufacturing facility in Brazil. The majority of the net proceeds from the GACP Term Loan Facility were used to repay all amounts outstanding under the Senior Secured Loan Facility between the Company and Stegodon. The remaining net proceeds were used on July 2, 2018 to repay amounts outstanding under the R&D Note at maturity.   Loans under the GACP Term Loan Facilities have a maturity date of July 1, 2021; provided, that if the Company has not (i) met certain financial conditions on or prior to January 7, 2019 or (ii) refinanced the 2015 144A Notes and 2014 144A Notes with indebtedness that has a maturity date which is later than July 1, 2021 or converted such notes into equity prior to January 12, 2019, then the maturity date will be January 12, 2019. The GACP Term Loan Facilities will amortize beginning on July 1, 2019 in quarterly installments equal to 2.5% of the original loan amounts, with the remaining principal balance payable on the maturity date. Loans under the GACP Term Loan Facilities will accrue interest at a rate per annum equal to the sum of (i) the greater of (A) the U.S. prime rate as reported in the Wall Street Journal and (B) 4.0%, plus (ii) 6.25%, payable monthly. The GACP Term Loan Facilities are guaranteed by the subsidiaries of the Company party to the LSA and collateralized by first-priority liens on substantially all the Company’s and such subsidiaries’ assets, including intellectual property, subject to certain exceptions. The LSA includes customary terms, covenants and restrictions, including mandatory prepayments upon the occurrence of certain events, including asset sales, casualty events, incurrence of additional indebtedness and borrowing base deficiencies, subject to certain exceptions and reinvestment rights. The LSA contains three financial covenants: minimum revenue, liquidity and asset coverage ratio.   The Company paid origination fees at closing equal to 4%, or $1.4 million, of the funded amount of the GACP Term Loan Facility and other closing costs totaling $0.2 million, plus an agency fee of $25,000 per quarter during the term of the GACP Term Loan Facilities. The $1.6 million of issuance costs will be amortized using the effective interest method over the expected 3-year loan term.

 

Future Minimum Payments

 

Future minimum payments under the Company's debt agreements as of June 30, 2018 are as follows:

 

 

5. Mezzanine Equity

 

Mezzanine equity is comprised of the following:

 

 

Mezzanine equity at June 30, 2018 and December 31, 2017 is comprised of proceeds from shares of common stock sold on May 10, 2016 to the Bill & Melinda Gates Foundation (Gates Foundation). In connection with the stock sale, the Company and the Gates Foundation entered into an agreement under which the Company agreed to expend an aggregate amount not less than the proceeds from the stock sale to develop a yeast strain that produces artemisinic acid and/or amorphadiene at a low cost and to supply such artemisinic acid and amorphadiene to companies qualified to convert artemisinic acid and amorphadiene to artemisinin for inclusion in artemisinin combination therapies used to treat malaria. If the Company defaults in its obligation to use the proceeds from the stock sale as set forth above or defaults under certain other commitments in the agreement, the Gates Foundation will have the right to request that the Company redeem, or facilitate the purchase by a third party, the shares then held by the Gates Foundation at a price per share equal to the greater of (i) the closing price of the Company’s common stock on the trading day prior to the redemption or purchase, as applicable, or (ii) an amount equal to $17.10 plus a compounded annual return of 10%.

 

6. Stockholders' Deficit

 

Warrants

 

In connection with various debt and equity transactions (see Note 4, "Debt" and Note 6, “Stockholders’ Deficit” in Part II, Item 8 of the 10-K), the Company has issued warrants exercisable for shares of common stock. The following table summarizes warrant activity for the six months ended June 30, 2018:

 

 

For the six months ended June 30, 2018, net proceeds were $14.5 million from the issuance of common stock upon exercise of 3,801,330 warrants.

 

Warrants Exercises and New Warrant Issuance

 

On April 12, 2018, certain holders of the May 2017 Warrants (see Note 6, “Stockholders’ Deficit” in Part II, Item 8 of the 10-K) exercised their May 2017 Cash Warrants to purchase 3,616,174 shares of common stock for net proceeds to the Company of $14.5 million and surrendered their May 2017 Dilution Warrants. Upon exercise of such May 2017 Cash Warrants and surrender of such May 2017 Dilution Warrants, certain derivative liabilities representing certain anti-dilution rights embedded in the May 2017 Warrants were effectively settled. Concurrent with the exercise of the May 2017 Cash Warrants and surrender of such May 2017 Dilution Warrants, the Company issued new warrants to these same holders to purchase 3,616,174 shares of common stock, exercisable at a price of $7.00 per share. The new warrants were fully exercisable upon issuance, with an expiration date of July 12, 2019. The new warrants do not provide the holders with anti-dilution protection. Consequently, the new warrants were treated as additional consideration to the May 2017 Warrant holders in exchange for their anti-dilution rights embedded in the original May 2017 Warrants. The Company used the Black-Scholes-Merton option pricing model to determine the fair value of the new warrants, which resulted in a fair value of $9.4 million. Black-Scholes-Merton input assumptions were as follows: volatility of 90%, risk-free rate of 2.16%, expected term of 1.25 years, expected dividend yield of $0, exercise price of $7.00, and Company stock price on issue date of $6.80. As a result of this exchange transaction, the Company recorded a $1.9 million net gain on the extinguishment of the related derivative liability during the three months ended June 30, 2018. This net gain was comprised of an $11.3 million gain on derecognition of the derivative liability and a $9.4 million loss on issuance of the new warrant.

 

 

At Market Issuance Sales Agreement

 

On March 8, 2016, the Company entered into an At Market Issuance Sales Agreement (the ATM Sales Agreement) with FBR Capital Markets & Co. and MLV & Co. LLC (the Agents) under which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $50.0 million (the ATM Shares) from time to time through the Agents, acting as its sales agents, under the Company's Registration Statement on Form S-3 (File No. 333-203216), effective April 15, 2015. Sales of the ATM Shares through the Agents may be made by any method that is deemed an "at the market offering" as defined in Rule 415 under the Securities Act of 1933, as amended, including by means of ordinary brokers' transactions at market prices, in block transactions, or as otherwise agreed by the Company and the Agents. The Company will pay the applicable Agent a commission rate of up to 3.0% of the gross proceeds from the sale of any ATM Shares sold through such Agent under the ATM Sales Agreement. The ATM Sales Agreement includes no commitment by other parties to purchase ATM Shares the Company offers for sale.

 

During the three and six months ended June 30, 2018, the Company issued and sold 191,639 and 205,168 shares of common stock under the ATM Sales Agreement, at average prices of $6.91 and $6.90 per share, respectively, resulting in total net proceeds to the Company of $1.4 million. The ATM Sales Agreement expired on April 15, 2018, and as a result, zero remained available for issuance under the ATM Sales Agreement as of June 30, 2018.

 

7. Variable-interest Entities and Unconsolidated Investments

 

Consolidated Variable-interest Entity

 

The table below reflects the carrying value of the Aprinnova JV's (see Note 7, “Variable-interest Entities and Unconsolidated Investments” in Part II, Item 8 of the 10-K) assets and liabilities, for which the Company is the primary beneficiary at June 30, 2018:

 

 

The Aprinnova JV's creditors have recourse only to the assets of the Aprinnova JV.

 

During the three and six months ended June 30, 2018 and 2017, there was no activity in noncontrolling interest.

 

Unconsolidated Investments

 

The Company's unconsolidated investments are summarized as follows:

 

 

8. Net Loss per Share Attributable to Common Stockholders

 

For the three months ended June 30, 2017 and the six months ended June 30, 2018 and June 30, 2017, basic net loss per share attributable to common stockholders was the same as diluted net loss per share attributable to common stockholders because the inclusion of all potentially dilutive securities outstanding was antidilutive. For the three months ended June 30, 2018, income was allocated to participating Series B and Series D preferred shares, as they participate in profits. As the adjustments to net income due to the presumed conversion of dilutive securities created a net loss position for the three months ended June 30, 2018 on a diluted basis, there was no allocation to participating securities for diluted EPS, as the participating securities do not participate in losses.

 

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders:

 

 

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share of common stock because including them would have been antidilutive:

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2018				2017				2018				2017
Period-end stock options to purchase common stock			5,424,330				997,275				5,424,330				997,275
Convertible promissory notes (1)			5,695,615				6,270,734				8,390,819				6,270,734
Period-end common stock warrants			18,177,362				16,871,700				24,341,772				16,871,700
Period-end restricted stock units			5,211,584				666,336				5,211,584				666,336
Period-end preferred stock			4,053,905				-				4,053,905				-
Total potentially dilutive securities excluded from computation of diluted net loss per share			38,562,796				24,806,045				47,422,410				24,806,045

______________

 

(1)

The potentially dilutive effect of convertible promissory notes was computed based on conversion ratios in effect as of the respective period end dates. A portion of the convertible promissory notes issued carries a provision for a reduction in conversion price under certain circumstances, which could potentially increase the dilutive shares outstanding. Another portion of the convertible promissory notes issued carries a provision for an increase in the conversion rate under certain circumstances, which could also potentially increase the dilutive shares outstanding.

 

9. Commitments and Contingencies

 

Commitments

 

Future minimum payments under the Company's lease obligations as of June 30, 2018 are as follows (in thousands):

 

 

Guarantor Arrangements

 

In November 2010, the Company entered into the FINEP Credit Facility to finance a research and development project on sugarcane-based biodiesel; see Note 4, "Debt" in Part II, Item 8 of the 10-K. The FINEP Credit Facility is guaranteed by a chattel mortgage on certain equipment of the Company. The Company's total acquisition cost for the equipment under this guarantee as of June 30, 2018 and December 31, 2017 was R$6.0 million (US$1.6 million and US$1.8 million, respectively) based on exchange rates at each date.

 

Contingencies

 

The Company has levied indirect taxes on sugarcane-based biodiesel sales that took place several years ago by Amyris Brasil Ltda. (see Note 13, “Divestiture” in Part II, Item 8 of the 10-K) to customers in Brazil, based on advice from external legal counsel. In the absence of definitive rulings from the Brazilian tax authorities on the appropriate indirect tax rate to be applied to such product sales, the actual indirect rate to be applied to such sales could differ from the rate the Company levied.

 

The Company and a number of the Company’s current officers and directors are parties to four separate purported shareholder derivative complaints based on allegedly misleading statements and/or omissions made in connection with the Company’s securities filings (the Derivative Complaints). The Derivative Complaints seek to recover, on the Company's behalf, unspecified damages purportedly sustained by the Company and also seek a series of changes to the Company’s corporate governance policies, restitution to the Company from the individual defendants, and an award of attorneys’ fees. Two of the Derivative Complaints were filed in the U.S. District Court for the Northern District of California (together, the Federal Derivative Cases). On December 21, 2017, the defendants filed a motion to dismiss the Federal Derivative Cases, which was granted on March 9, 2018. On March 29, 2018, the plaintiffs filed an amended complaint, and on May 4, 2018 the defendants filed a motion to dismiss the amended complaint. On July 23, 2018, the court granted defendants’ motion to dismiss the amended complaint with prejudice and entered judgment in favor of the defendants. The remaining two Derivative Complaints were filed in the Superior Court for the State of California and are in the initial pleadings stage. The Company believes the Derivative Complaints lack merit and intends to continue to defend itself vigorously. Given the early stage of these proceedings, it is not yet possible to reliably determine any potential liability that could result from this matter. See Part II, Item 1, “Legal Proceedings” in this Quarterly Report on Form 10-Q for more details.

 

The Company is subject to disputes and claims that arise or have arisen in the ordinary course of business and that have not resulted in legal proceedings or have not been fully adjudicated. Such matters that may arise in the ordinary course of business are subject to many uncertainties and outcomes are not predictable with reasonable assurance and therefore an estimate of all the reasonably possible losses cannot be determined at this time. Therefore, if one or more of these legal disputes or claims resulted in settlements or legal proceedings that were resolved against the Company for amounts in excess of management's expectations, the Company's consolidated financial statements for the relevant reporting period could be materially adversely affected.

 

10. Revenue Recognition and Contract Assets and Liabilities

 

Disaggregation of Revenue

 

The following table presents revenue by major product and service, as well as by primary geographical market, based on the location of the customer:

 

 

 

Significant Revenue Agreements

 

In connection with significant revenue agreements (also see Note 10, “Significant Revenue Agreements” in Part II, Item 8 of the 10-K), the Company recognized the following revenues for the three and six months ended June 30, 2018 and 2017:

 

 

 

Contract Assets and Liabilities

 

When a contract results in revenue being recognized in excess of the amount the Company has invoiced or has the right to invoice to the customer, a contract asset is recognized. Contract assets are transferred to accounts receivable, net when the rights to the consideration become unconditional. Contract assets are presented as Unbilled Receivables on the consolidated balance sheets.

 

Contract liabilities consist of payments received from customers, or such consideration that is contractually due, in advance of providing the product or performing services such that control has not passed to the customer. Contract liabilities are presented as deferred revenue on the consolidated balance sheets.

 

 

Trade receivables related to revenue from contracts with customers are included in accounts receivable on the consolidated balance sheets, net of the allowance for doubtful accounts. Trade accounts receivable are recorded at the point of renewable product sale or in accordance with the contractual payment terms for licenses and royalties, and grants and collaborative research and development services for the amount payable by the customer to the Company for sale of goods or the performance of services.

 

Contract Balances

 

The following table provides information about unbilled receivables, deferred revenue, and accounts receivable from contracts with customers:

 

 

⁽¹⁾     As of June 30, 2018 and December 31, 2017, deferred revenue, noncurrent is presented in Other Noncurrent Liabilities in the consolidated balance sheets because of its insignificance.

 

Unbilled receivables, current, as of June 30, 2018 relate to satisfied performance obligations that the Company has not invoiced to the customer and, as of December 31, 2017, primarily relate to the Company’s right to consideration from DSM for minimum future royalties which the Company received cash of $9,250,000 during the three months ended June 30, 2018. Unbilled receivables, noncurrent, relate to the Company’s right to consideration from DSM for minimum future royalties. The Company’s right to cash receipt for these minimum royalty amounts occurs on or before December 31, 2019.

 

Deferred revenue, current increased by $4.8 million at June 30, 2018 resulting from a $0.8 million increase upon adoption of ASC 606 on January 1, 2018 plus the net amount of collaboration and royalty revenues invoiced in excess of amounts recognized as revenue, less $3.3 million of revenue recognized during the six months ended June 30, 2018 that was included in deferred revenue at the beginning of the period.

 

Remaining Performance Obligations

 

The following table provides information regarding the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) based on the Company's existing agreements with customers as of June 30, 2018.

 

 

In accordance with the disclosure provisions of ASC 606, the table above excludes estimated future revenues for performance obligations that are part of a contract that has an original expected duration of one year or less or a performance obligation with variable consideration that is recognized using the sales-based royalty exception for licenses of intellectual property. Additionally, approximately $12.4 million of estimated future revenue is excluded from the table above, as that amount represents constrained variable consideration.

 

11. Related Party Transactions

 

Related Party Debt

 

See Note 4. Debt, for related party debt balances as of June 30, 2018 and December 31, 2017.

 

Related Party Accounts Receivable and Unbilled Receivables

 

Related party accounts receivable and unbilled receivables as of June 30, 2018 and December 31, 2017 were as follows:

 

 

Related Party Joint Ventures

 

See Note 7, "Variable-interest Entities and Unconsolidated Investments" above and in Part II, Item 8 of the 10-K for information about the Company's:

 

•

Aprinnova joint venture with Nikko, and

•

TAB joint venture with Total

 

12. Stock-based Compensation

 

The Company’s stock option activity and related information for the six months ended June 30, 2018 was as follows:

 

 

 

The Company’s restricted stock units (RSUs) activity and related information for the six months ended June 30, 2018 was as follows:

 

 

Stock-based compensation expense related to options and RSUs granted to employees and non-employees during the three and six months ended June 30, 2018 and 2017 was allocated to research and development expense and sales, general and administrative expense as follows:

 

 

As of June 30, 2018, there was unrecognized compensation expense of $36.0 million related to stock options and RSUs. The Company expects to recognize this expense over a weighted-average period of 3.7 years.

 

The fair value of employee stock options was estimated using the following weighted-average assumptions:

 

 

In May 2018, shareholders approved amendments to the Company's 2010 Equity Incentive Plan (EIP) to (i) increase the number of shares of common stock available for grant and issuance thereunder by 9 million shares and (ii) increase the annual per-participant award limit thereunder to 4 million shares.

 

Also in May 2018, shareholders approved an amendment to the Company's 2010 Employee Stock Purchase Plan (ESPP) to increase the maximum number of shares of common stock that may be issued over the term of the ESPP by 1 million shares.

 

In May 2018, the Company granted its chief executive officer performance-based stock options (PSOs) to purchase 3,250,000 shares. PSOs are equity awards with the final number of PSOs that may vest determined based on the Company’s performance against pre-established EBITDA milestones and Amyris stock price milestones. The EBITDA milestones are measured from the grant date through December 31, 2021, and the stock price milestones are measured from the grant date through December 31, 2022. The PSOs vest in four tranches contingent upon the achievement of both the EBITDA milestones and stock price milestones for each respective tranche, and the chief executive officer’s continued employment with the Company. Over the measurement periods, the number of PSOs that may be issued and the related stock-based compensation expense that is recognized is adjusted upward or downward based upon the probability of achieving the EBITDA milestones. Depending on the probability of achieving the EBITDA milestones and stock price milestones and certification of achievement of those milestones for each vesting tranche by the Company’s Board of Directors or Compensation Committee, the PSOs issued could be from zero to 3,250,000 stock options, with an exercise price of $5.08 per share.