What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-01 compared with 2020-02-28 · 652 added, 600 removed, 1054 unchanged (54% of the section changed)

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Consolidated Statements of Operations

Consolidated Statements of Comprehensiv e Loss

Consolidated Statements of Stockholders' Equity

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We have audited the accompanying consolidated balance sheets of Codexis, Inc.

(the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”).

(the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related Notes (collectively referred to as the “Consolidated Financial Statements”).

In our opinion, the Consolidated Financial Statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 28, 2020 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 1, 2021 expressed an unqualified opinion thereon.

Change in Accounting Principle

As discussed in Notes 2 and 13 to the consolidated financial statements, the Company has changed its accounting method for accounting for leases in fiscal year 2019 due to the adoption of Topic 842:

As discussed in Note 13 to the consolidated financial statements, the Company has changed its accounting method for accounting for leases in fiscal year 2019 due to the adoption of Topic 842:

Leases using a modified retrospective approach.

and changed its method for recognizing revenue in fiscal year 2018 due to the adoption of Topic 606:

Revenue from Contracts with Customers .

Basis for Opinion

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As described in Note 2 to the consolidated financial statements, the Company recognizes revenue in a manner that best depicts the transfer of promised goods or services to the customer, when control of the product or service is transferred to a customer.

The Company's contracts with customers include enzyme supply, licensing, and collaborative research and development

The majority of collaborative revenue contracts may contain multiple performance obligations and may contain up-front or annual license fees, fees for full time employee research and development services, contingent milestone payments upon achievement of contractual criteria, and royalty fees based on the licensees' product revenue or usage.

The Company's contracts with customers include enzyme supply, licensing, and collaborative research and development agreements.

Contracts with customers may contain multiple performance obligations and may contain up-front or annual

license fees, fees for full time employee research and development services, contingent milestone payments upon achievement of contractual criteria, and royalty fees based on the licensees' product revenue or usage.

The Company makes significant judgments in determining revenue recognition for customer contracts.

We identified management’s significant judgments and estimates related to revenue recognition for contracts with customers as a critical audit matter.

Auditing the evaluation of distinct performance obligations, determination and estimation of material rights, determination of standalone selling price, determination of the pattern of transfer of control for each distinct performance obligation and estimation of variable consideration required significant audit effort and auditor subjectivity in evaluating management's judgments and estimates.

Auditing the evaluation of distinct performance obligations, determination and estimation of material rights, determination of standalone selling prices, determination of the pattern of transfer of control for each distinct performance obligation and estimation of variable consideration required significant audit effort and auditor subjectivity in evaluating management's judgments and estimates.

The primary procedures we performed to address this critical audit matter included:

• Testing the design and operating effectiveness of internal controls related to the identification of distinct performance obligations and material rights, the determination of the timing of revenue recognition, estimation of standalone selling price, and the estimation of variable consideration.

• Examining a sample of revenue contracts and other source documents to test management's identification of significant terms for completeness, including the identification of distinct performance obligations, material rights and variable consideration, and sending confirmations to a sample of customers to confirm our understanding of the parties’ rights and obligations.

• Evaluating the reasonableness of management's estimates and assumptions used to assess stand-alone selling prices for new products and services and those products and services that are not sold separately.

• Testing the design and operating effectiveness of internal controls relating to the identification of distinct performance obligations and material rights, the determination of the timing of revenue recognition, the estimation of standalone selling prices, and the estimation of variable consideration.

• Examining a sample of revenue contracts and other source documents to test management's identification of significant terms for completeness, including the identification of distinct performance obligations, material rights and variable consideration including sending confirmations to a sample of customers to confirm our understanding of the parties’ rights and obligations.

• Assessing the reasonableness of management's estimates and assumptions used in determining stand-alone selling prices for new products and services and those products and services that are not sold separately.

• Evaluating the reasonableness of management’s judgments and estimates used to assess the stand-alone selling prices for new functional licenses when granted to customers as part of contracts containing multiple performance obligations.

• Evaluating the reasonableness and accuracy of management’s judgments and estimates used in accounting for identified material rights, including transactions accounted for under the alternative approach to estimating the standalone selling price of a material right.

This included testing management’s estimate of the expected consideration from the customer’s exercise of options.

• Evaluating the reasonableness of management’s judgments and estimates to calculate variable consideration, and the timing of recognizing the related revenue subject to any constraints.

This includes testing management’s estimates of the expected consideration from the customer’s exercise of options.

• Assessing the reasonableness of management’s judgments and estimates to calculate variable consideration, and the timing of recognizing the related revenue subject to any constraints.

• Evaluating the appropriateness of management’s determination of whether identified performance obligations meet the criteria for over-time revenue recognition, including whether certain products and services have alternative use.

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San Jose, California

February 28, 2020

March 1, 2021

Report of Independent Registered Public Accounting Firm

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2019 and the related notes, and our report dated February 28, 2020 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020 and the related Notes, and our report dated March 1, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

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San Jose, California

February 28, 2020

March 1, 2021

Codexis, Inc.

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Restricted cash, current 638 661

Accounts receivable, net of allowances of $ 34 at December 31, 2019 and 2018

Unbilled receivables, current 10,099 1,916

Investment in non-marketable debt security 1,000 —

Financial assets:

Accounts receivable 13,894 9,063

Contract assets 4,526 1,027

Unbilled receivables 10,942 10,099

Total financial assets 29,362 20,189

allowances ( 74 ) ( 34 )

Total financial assets, net 29,288 20,155

Inventories 964 371

Prepaid expenses and other current assets 3,416 2,520

Contract assets 1,027 35

Total current assets 184,423 114,205

Restricted cash 1,062 1,062

Equity securities — 588

Investment in non-marketable equity securities 1,450 —

Right-of-use assets - Operating leases, net 21,382 23,837

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Long-term lease obligations, Operating leases 22,324 24,951

Long-term lease obligations, Finance leases — 61

Lease incentive obligation, net of current portion — 35

Other long-term liabilities 1,271 1,230

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Codexis, Inc.

Consolidated Statements of Comprehensive Loss

(In Thousands)

Year Ended December 31,

2019 2018 2017

Net loss $ ( 11,935 ) $ ( 10,878 ) $ ( 22,996 )

Other comprehensive loss:

Unrealized loss on equity securities, net of tax — — ( 472 )

Other comprehensive loss — — ( 472 )

Total comprehensive loss $ ( 11,935 ) $ ( 10,878 ) $ ( 23,468 )

See Accompanying Notes to Consolidated Financial Statements

Codexis, Inc.

Consolidated Statements of Stockholders’ Equity

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Common Stock Additional

Capital Accumulated

Comprehensive

Income (Loss)

Income (Loss) Accumulated

Deficit Total

Stockholders’

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Issuance of common stock, net of issuance costs 4,313 — 37,317 — — 37,317

Total comprehensive loss — — — ( 472 ) ( 22,996 ) ( 23,468 )

Cumulative effect of change in accounting principles (1)

— — — 472 ( 4,531 ) ( 4,059 )

Net Loss — — — — ( 10,878 ) ( 10,878 )

December 31, 2018 54,065 5 386,775 — ( 330,474 ) 56,306

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Employee stock-based compensation — — 6,943 — — 6,943

Non-employee stock-based compensation — — 24 — — 24

Taxes paid related to net share settlement of equity awards ( 152 ) — ( 2,850 ) — — ( 2,850 )

Issuance of common stock, net of issuance costs 4,313 — 37,317 — — 37,317

Cumulative effect of change in accounting principles (1)

Issuance of common stock, net of issuance costs of $ 123

3,049 1 49,876 — — 49,877

Short swing profit settlement — — 77 — — 77

Net Loss — — — — ( 11,935 ) ( 11,935 )

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Employee stock-based compensation — — 7,622 — — 7,622

Non-employee stock-based compensation — — 106 — — 106

Taxes paid related to net share settlement of equity awards ( 103 ) — ( 1,257 ) — — ( 1,257 )

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4,929 — 80,802 — — 80,802

Short swing profit settlement — — 77 — — 77

Net Loss — — — — ( 24,010 ) ( 24,010 )

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Amortization expense - right-of-use assets - operating and finance leases 2,604 2,987 —

Loss on disposal of property and equipment — 8 9

Stock-based compensation 7,728 6,943 7,889

Loss on investment in equity securities 525 83 —

Gain from extinguishment of asset retirement obligation — — ( 207 )

Equity securities earned from research and development activities ( 900 ) — —

Other non-cash items 55 525 91

Changes in operating assets and liabilities:

Accounts receivable, net 2,522 960 ( 5,298 )

Unbilled receivables ( 7,397 ) ( 2,349 ) ( 353 )

Financial assets, net ( 8,723 ) ( 5,867 ) ( 1,424 )

Inventories ( 593 ) 217 447

Prepaid expenses and other current assets ( 1,412 ) ( 37 ) 157

Contract assets

( 992 ) ( 35 ) —

Other non-current assets 88 228 ( 44 )

Prepaid expenses and other assets ( 1,012 ) ( 1,324 ) 191

Accounts payable 101 ( 428 ) ( 524 )

Accrued compensation ( 269 ) 519 439

Other accrued liabilities 2,474 ( 17 ) 1,399

Accrued compensation and other accrued liabilities 6,175 2,205 502

Other long-term liabilities ( 2,586 ) ( 1,210 ) ( 904 )

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Proceeds from sale of investment securities — 62 —

Investment in non-marketable securities ( 2,000 ) — —

Net cash used in investing activities ( 5,748 ) ( 3,665 ) ( 2,766 )

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Supplemental non-cash investing and financing activities:

Equipment acquired under finance leases $ — $ — $ 862

Capital expenditures incurred but not yet paid $ 1,750 $ 140 $ 300

Assets received for research & development revenue earned $ 900 $ — $ —

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown above (in thousands):

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and its subsidiaries on a consolidated basis.

We discover, develop and sell proteins that deliver value to our clients in a growing set of industries.

We view proteins as a vast untapped source of value-creating materials, and we are using our proven technologies, which we have been continuously improving since our inception in 2002, to commercialize an increasing number of novel proteins, both as proprietary Codexis products and in partnership with our customers.

We are a pioneer in the harnessing of computational technologies to drive biology advancements.

We discover, develop and sell enzymes and other proteins that deliver value to our clients in a growing set of industries.

We view proteins as a vast, largely untapped source of value-creating products, and we are using our proven technologies, which we have been continuously improving since our inception in 2002, to commercialize an increasing number of novel enzymes, both as proprietary Codexis products and in partnership with our customers.

We are a pioneer in harnessing computational technologies to drive biology advancements.

Since 2002, we have made substantial investments in the development of our CodeEvolver ® protein engineering technology platform, the primary source of our competitive advantage.

Our technology platform is powered by proprietary, artificial intelligence-based, computational algorithms that rapidly mine our large and continuously growing library of protein variants’ performance attributes.

These computational outputs enable increasingly reliable predictions for next generation protein variants to be engineered, enabling delivery of targeted performance enhancements in a time-efficient manner.

In addition to its computational prowess, our CodeEvolver ® protein engineering technology platform integrates additional modular competencies, including robotic high-throughput screening and genomic sequencing, organic chemistry and process development which are all coordinated to create our novel protein innovations.

Our approach to developing commercially viable biocatalytic manufacturing processes begins by conceptually designing the most cost-effective and practical process for a targeted product.

We then develop optimized protein catalysts to enable that process design, using our CodeEvolver ® protein engineering platform technology.

Engineered protein catalyst candidates many thousands for each protein engineering project are then rapidly screened and validated in high throughput screening under relevant manufacturing operating conditions.

This approach results in an optimized protein catalyst enabling cost-efficient processes that typically are relatively simple to run in conventional manufacturing equipment.

This also allows for the efficient technical transfer of our process to our manufacturing partners.

Our technology platform is powered by proprietary, artificial intelligence-based, computational algorithms that rapidly mine the structural and performance attributes of our large and continuously growing library of protein variants.

These computational outputs enable increasingly reliable predictions for next generation protein variants to be engineered, enabling time- and cost-efficient delivery of the targeted performance enhancements.

In addition to its computational prowess, our CodeEvolver ® protein engineering technology platform integrates additional modular competencies, including robotic high-throughput screening and genomic sequencing, organic chemistry and bioprocess development which are all coordinated to rapidly innovate novel, fit-for-purpose products.

The core historical application of the technology has been in developing commercially viable biocatalytic manufacturing processes for more sustainable production of complex chemicals.

It begins by conceptually designing the most cost-effective and practical process for a targeted product.

We then develop optimized biocatalysts to enable the designed process, using our CodeEvolver ® platform.

Engineered biocatalyst candidates, numbering many thousands for each project, are then rapidly screened and validated using high throughput methods under process-relevant operating conditions.

This approach results in an optimized biocatalyst that enables cost-efficient processes that are relatively simple to run in conventional manufacturing equipment.

This also allows for efficient technical transfer of our processes to our manufacturing partners.

The successful embodiment of our CodeEvolver ® protein engineering technology platform in commercial manufacturing processes requires well-integrated expertise in a number of technical disciplines.

In addition to those directly involved in practicing our CodeEvolver ® protein engineering platform technology, such as molecular biology, enzymology, microbiology, cellular engineering, metabolic engineering, bioinformatics, biochemistry and high throughput analytical chemistry, our process development projects also involve integrated expertise in organic chemistry, chemical process development, chemical engineering, fermentation process development and fermentation engineering.

Our integrated, multi-disciplinary approach to biocatalyst and process development is a critical success factor for our company.

We initially commercialized our CodeEvolver ® protein engineering technology platform and products in the pharmaceuticals market, which remains a primary business focus.

Our customers, which include many large global pharmaceutical companies, use our technology, products and services in their manufacturing processes and process development.

We have also licensed our proprietary CodeEvolver ® protein engineering technology platform to global pharmaceutical companies so that they may in turn use this technology to engineer enzymes for their own businesses.

Most recently, in May 2019, we entered into a Platform Technology Transfer and License Agreement (the “Novartis CodeEvolver ® Agreement”) with Novartis Pharma AG (“Novartis”).

The Novartis CodeEvolver ® Agreement allows Novartis to use Codexis’ proprietary CodeEvolver ® protein engineering platform technology in the field of human healthcare.

As evidence of our strategy to extend our technology beyond pharmaceutical manufacturing, we have also used the technology to develop protein catalysts and industrial enzymes for use in a wider set of industrial markets.

These target industries consist of several large market verticals, including food and food ingredients, animal feed, consumer care, flavors, fragrances and agricultural chemicals.

In addition, we are using our technology to develop enzymes for customers using next generation sequencing ("NGS") and polymerase chain reaction ("PCR/qPCR") for in vitro molecular diagnostic and genomic research applications.

In December 2019, we entered into a license agreement to provide Roche with our first enzyme for this target market, Codexis’ EvoT4™ DNA ligase.

We have also begun using the CodeEvolver ® protein engineering technology platform to develop early stage, novel biotherapeutic product candidates, both for our customers and for our own business, most notably our lead program for the potential treatment of PKU in humans.

In addition to those competences directly integrated in our CodeEvolver ® protein engineering platform, such as molecular biology, enzymology, microbiology, cellular engineering, metabolic engineering, bioinformatics, biochemistry and high throughput analytical chemistry, our process development projects also involve integrated expertise in organic chemistry, chemical process development, chemical engineering, bioprocess development and fermentation engineering.

Our integrated, multi-disciplinary approach to product and process development is a critical success factor for the Company.

We initially commercialized our CodeEvolver ® protein engineering technology platform and products in the manufacture of small molecule pharmaceuticals, which remains a primary business focus.

Our customers, which include many large, global pharmaceutical companies, use our technology, products and services in their process development and in manufacturing.

Additionally, we have licensed our proprietary CodeEvolver ® protein engineering technology platform to global pharmaceutical companies enabling them to use this technology, in house, to engineer enzymes for their own businesses.

Most recently, in May 2019, we entered into a Platform Technology Transfer and License Agreement (the “Novartis CodeEvolver ® Agreement”) with Novartis.

The Novartis CodeEvolver ® Agreement (Codexis’ third such agreement with large pharma companies) allows Novartis to use our proprietary CodeEvolver ® protein engineering platform technology in the field of human healthcare.

As evidence of our strategy to extend our technology beyond pharmaceutical manufacturing, we have also used the technology to develop biocatalysts and enzyme products for use in a broader set of industrial markets, including several large verticals, such as food, feed, consumer care and fine chemicals.

In addition, we are using our technology to develop enzymes for various life science related applications, such as next generation sequencing (“NGS”) and polymerase chain reaction (“PCR/qPCR”) for in vitro molecular diagnostic and genomic research applications.

In December 2019, we entered into a license agreement to provide Roche Sequencing Solutions, Inc.

with our first enzyme for this target market:

the Company’s EvoT4™ DNA ligase.

In June 2020, we also entered into a Master Collaboration and Research Agreement with MAI (the “MAI Agreement”) pursuant to which we are leveraging our CodeEvolver ® platform technology to improve the DNA polymerase enzymes that are critical for enzymatic DNA synthesis.

Concurrently with the MAI Agreement, we entered into a Stock Purchase Agreement with Molecular Assemblies, Inc ("MAI") pursuant to which we purchased 1,587,050 shares of MAI's Series A preferred stock for

$ 1.0 million and, in connection with the transaction, John Nicols, our President and Chief Operating Officer, also joined MAI’s board of directors.

Approximately five years ago, we began using the CodeEvolver ® protein engineering technology platform to develop early stage, novel biotherapeutic product candidates, both in partnership with customers and for our own proprietary Codexis drug candidates.

Our first program was for the potential treatment of phenylketonuria ("PKU") in humans.

PKU is an inherited metabolic disorder in which the enzyme that converts the essential amino acid phenylalanine into tyrosine is deficient.

In October 2017, we entered into the Nestlé Agreement with Nestlé Health

Science to advance CDX-6114, our enzyme biotherapeutic product candidate for the potential treatment of PKU.

In October 2017, we entered into a Global Development, Option and License Agreement (the “Nestlé License Agreement”) with Societé des Produits Nestlé S.A., formerly known as Nestec Ltd.

(“Nestlé Health Science”) to advance CDX-6114, our enzyme biotherapeutic product candidate for the potential treatment of PKU.

In February 2019, Nestlé Health Science exercised its option to obtain an exclusive license to develop and commercialize CDX-6114.

Also in October 2017, we entered into the Nestlé SCA pursuant to which we and Nestlé Health Science are collaborating to leverage the CodeEvolver ® platform technology to develop other novel enzymes for Nestlé Health Science’s established Consumer Care and Medical Nutrition business areas.

In January 2020, we entered into a development agreement with Nestlé Health Science to advance a new lead candidate discovered under the Nestlé SCA, CDX-7108, into preclinical development and early clinical studies as a potential treatment for a gastro-intestinal disorder.

In parallel, the Nestlé SCA was extended through December 2021 to support the discovery of therapeutic candidates for additional disorders.

In March 2020, we entered into a Strategic Collaboration and License Agreement (“Takeda Agreement”) with Shire Human Genetic Therapies, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical Company Limited (“Takeda”), for the research and development of novel gene therapies for certain disease indications, including the treatment of lysosomal storage disorders and a blood factor deficiency.

Below are brief descriptions of our business segments:

Performance Enzymes

We initially commercialized our CodeEvolver ® protein engineering technology platform and products in the pharmaceuticals market, and to date this continues to be our largest market served.

We initially commercialized our CodeEvolver ® protein engineering technology platform and products in the manufacture of small molecule pharmaceuticals and, to date, this continues to be our largest market served.

Our customers, which include many large global pharmaceutical companies, use our technology, products and services in their manufacturing processes and process development.

We have also used the technology to develop customized enzymes for use in other industrial markets.

These markets consist of several large industrial verticals, including food and food ingredients, animal feed, consumer care, flavors, fragrances, and agricultural chemicals.

We also use our technology to develop enzymes for customers using NGS and PCR/qPCR for in vitro molecular diagnostic and molecular biology research applications.

These markets consist of several large industrial verticals, including food, feed, consumer care, and fine chemicals.

We also use our technology in the life sciences markets to develop enzymes for customers using NGS and PCR/qPCR for in vitro molecular diagnostic and molecular biology research applications, as well DNA/RNA synthesis and health monitoring applications.

Novel Biotherapeutics

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Similarly, we believe that we can deploy our platform technology to improve specific characteristics of a customer’s pre-existing biotherapeutic drug candidate, such as its activity, stability or immunogenicity.

Most notable is our lead program for the potential treatment of hyperphenylalaninemia (“HPA”) (also referred to as PKU) in humans.

Our first lead program was for the potential treatment of hyperphenylalaninemia (“HPA”) (also referred to as PKU) in humans.

PKU is an inherited metabolic disorder in which the enzyme that converts the essential amino acid phenylalanine into tyrosine is deficient.

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In July 2018, we announced that we had dosed the first subjects in a first-in-human Phase 1a dose-escalation trial with CDX-6114, which was conducted in Australia.

In November 2018, we announced top-line results from the Phase 1a study in healthy volunteers with CDX-6114.

In December 2018, Nestlé Health Science became obligated to pay us an additional $ 1.0 million within 60 days after the achievement of a milestone relating to formulation of CDX-6114.

In January 2019, we received notice from the FDA that it had completed its review of our IND for CDX-6114 and concluded that we may proceed with the proposed Phase 1b multiple ascending dose study in healthy volunteers in the United States.

The initiation of the trial triggered a $ 4.0 million milestone payment from Nestlé Health Science.

The $ 1.0 million milestone payment that was triggered by the achievement of a formulation relating to CDX-6114 was received in February 2019.

In January 2019, we received notice from the U.S.

Food and Drug Administration that it had completed its review of our investigational drug application for CDX-6114 and concluded that we may proceed with the proposed Phase 1b multiple ascending dose study in healthy volunteers in the United States.

In February 2019, Nestlé Health Science exercised its option to obtain an exclusive, worldwide, royalty-bearing, sub-licensable license for the global development and commercialization of CDX-6114 for the management of PKU.

In January 2020, we and Nestlé Health Science entered into a development agreement pursuant to which we and Nestlé Health Science are collaborating to advance a lead candidate targeting a gastro-intestinal disorder discovered through our Strategic Collaboration Agreement into pre-clinical and early clinical studies.

Concurrently, the Strategic Collaboration Agreement was extended through December 2021.

See Note 16, "Subsequent Events” in the notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K.

Using our CodeEvolver ® protein engineering platform technology, we have also developed a pipeline of other biotherapeutic drug candidates, all of which are in preclinical development.

As a result of the option exercise, we earned a milestone and recognized $ 3.0 million in revenues in the first quarter of 2019.

Upon exercising its option, Nestlé Health Science assumed all responsibilities for future clinical development and commercialization of CDX-6114.

In October 2017, we entered into the Nestlé SCA pursuant to which we and Nestlé Health Science are collaborating to leverage the CodeEvolver ® platform technology to develop other novel enzymes for Nestlé Health Science’s established Consumer Care and Medical Nutrition business areas.

In January 2020, we and Nestlé Health Science entered into a development agreement pursuant to which we and Nestlé Health Science are collaborating to advance into pre-clinical and early clinical studies a lead

candidate targeting a gastro-intestinal disorder, CDX-7108, discovered through the Nestlé SCA.

The Nestlé SCA was extended through December 2021.

During 2020, we, together with Nestlé Health Science, continued to advance CDX-7108 towards initiation of a Phase 1 clinical trial which we anticipate will begin in 2021.

Additionally, the parties initiated two new programs under the Nestlé SCA targeting a gastro-intestinal disorder.

Our most recent achievement in novel biotherapeutics came in March 2020, when we announced a strategic collaboration and license agreement with Takeda in which we will collaborate with Takeda to research and develop protein sequences for use in gene therapy products for certain disease indications.

Under the terms of the Takeda Agreement, we have agreed to generate novel gene sequences encoding protein variants designed to enhance efficacy as a result of increased activity, stability, and cellular uptake using our CodeEvolver ® protein engineering platform.

Takeda will combine these improved transgenes with its gene therapy capabilities to generate novel candidates for the treatment of rare genetic disorders.

We are currently collaborating on three initial programs for the treatment of Fabry disease, Pompe disease, and an undisclosed blood factor deficiency.

The Company is responsible for the creation of novel enzyme sequences for advancement as gene therapies into pre-clinical development.

Takeda is responsible for the pre-clinical and clinical development and commercialization of gene therapy products resulting from the collaboration programs.

Under the terms of the agreement, in addition to the three initial programs, Takeda may initiate up to four additional programs for separate target indications.

In March 2020, we began research and development activities under the program plans and received a $ 8.5 million one-time, non-refundable cash payment.

We expect to continue to make additional investments in our pipeline with the aim of advancing additional product candidates targeting other therapeutic areas.

For additional discussion of our business segments, see Note 15, “Segment, Geographical and Other Revenue Information.”

Business Update Regarding COVID-19

We are subject to risks and uncertainties as a result of the current COVID-19 pandemic.

The COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, communities and business operations, as well as the U.S.

economy and other economies worldwide.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and may not be accurately predicted, including the duration and severity of the pandemic and the extent and severity of the impact on our customers, new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.

To date, we and our collaboration partners have been able to continue to supply our enzymes to our customers worldwide.

However, we are dependent on our manufacturing and logistics partners and consequently, disruptions in operations of our partners and customers may affect our ability to supply enzymes to our customers.

Furthermore, our ability to provide future research and development (“R&D”) services will continue to be impacted as a result of governmental orders and any disruptions in operations of our customers with whom we collaborate.

We believe that these disruptions have had a negative impact on revenue for the year ended December 31, 2020, although we are unable to fully determine and quantify the extent to which this pandemic has affected the amount and timing of our total revenues.

The extent to which the pandemic may impact our business operations and operating results will continue to remain highly dependent on future developments, which are uncertain and cannot be predicted with confidence.

In the U.S., the impact of COVID-19, including governmental orders (“Orders”) governing the operation of businesses during the pandemic, caused the temporary closure of our Redwood City, California facilities and has disrupted our R&D operations.

R&D operations for several projects were temporarily suspended from mid-March 2020 through the end of April in accordance with these Orders.

In May 2020, we re-initiated limited R&D operations and have ramped up operations such that we are currently utilizing the majority of our normal R&D capacity while following county, state and federal COVID-19 guidance for the protection of our employees.

Additionally, we resumed small scale manufacturing at our Redwood City pilot plant in May 2020.

Our future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions and uncertain demand, and the impact of any initiatives or programs that we may undertake to address financial and operations challenges faced by our customers.

As of the date of issuance of our Consolidated Financial Statements, the extent to which the COVID-19 pandemic may materially impact our financial condition, liquidity, or results of operations in the future is uncertain.

Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and include the accounts of Codexis, Inc.

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and include the accounts of Codexis, Inc.

and its wholly-owned subsidiaries.

Certain prior year amounts have been reclassified to conform to 2020 presentation.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued guidance requiring implementation of a new impairment model applicable to financial assets measured at amortized cost which, among other things required that accounts receivable, contract assets, unbilled receivables and related allowances be reclassified as financial assets.

The results of the year ended December 31, 2020 reflect the adoption of the accounting standards including Accounting Standard Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments which added a new impairment model applicable to our financial assets measured at amortized cost.

See “Recently adopted accounting pronouncements” for details regarding the adoption of these standards.

The consolidated financial statements include the accounts of Codexis, Inc.

and its wholly owned subsidiaries.

All significant intercompany balances and transactions have been eliminated in consolidation.

Financial Statement Exclusion

The total net loss in the consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018 is not different from our consolidated comprehensive loss.

The consolidated financial statements exclude the consolidated statements of comprehensive loss for the years ended December 31, 2020, 2019 and 2018.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period.

We regularly assess these estimates which primarily affect revenue recognition, accounts receivable, inventories, the valuation of equity securities, goodwill arising out of business acquisitions, accrued liabilities, stock awards and the valuation allowances associated with deferred tax assets.

The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities.

We regularly assess these estimates which primarily affect revenue recognition, inventories, goodwill arising out of business acquisitions, accrued liabilities, stock awards, and the valuation allowances associated with deferred tax assets.

Actual results could differ from those estimates and such differences may be material to the consolidated financial statements.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, and may not be accurately predicted, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers, markets and economies.

Segment Reporting

We report two business segments, Performance Enzymes and Novel Biotherapeutics, which are based on our operating segments.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker ("CODM"), or decision making group, in deciding how to allocate resources, and in assessing performance.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker or decision making group (“CODM”), in deciding how to allocate resources, and in assessing performance.

Our CODM is our Chief Executive Officer.

Our business segments are primarily based on our organizational structure and our operating results as used by our CODM in assessing performance and allocating resources for our company.

Our business segments are primarily based on our organizational structure and our operating results as used by our CODM in assessing performance and allocating resources for the Company.

We do not allocate or evaluate assets by segment.

The Novel Biotherapeutics segment focuses on new opportunities in the pharmaceutical industry to discover or improve novel biotherapeutic drug candidates that will target human diseases that are in need of improved therapeutic interventions.

The Performance Enzymes segment consists of biocatalyst products and services with focus on pharmaceutical, food, molecular diagnostics, and other industrial markets.

Foreign Currency Translation

The United States dollar is the functional currency for our operations outside the United States.

Accordingly, nonmonetary assets and liabilities originally acquired or assumed in other currencies are recorded in United States dollars at the exchange rates in effect at the date they were acquired or assumed.

The USD is the functional currency for our operations outside the United States.

Accordingly, nonmonetary assets and liabilities originally acquired or assumed in other currencies are recorded in USD at the exchange rates in effect at the date they were acquired or assumed.

Monetary assets and liabilities denominated in other currencies are translated into United States dollars at the exchange rates in effect at the balance sheet date.

Translation adjustments are recorded in other expense in the consolidated statements of operations.

Gains and losses realized from non-U.S.

dollar transactions, including intercompany balances not considered as permanent investments, denominated in currencies other than an entity’s functional currency are included in other expense in the accompanying consolidated statements of operations.

Gains and losses realized from non-USD transactions, including intercompany balances not considered as permanent investments, denominated in currencies other than an entity’s functional currency are included in other expense in the accompanying consolidated statements of operations.

Revenue Recognition

Policy from January 1, 2018

On January 1, 2018, we adopted the provisions of ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)” and the related amendments (“ASC 606”).

The guidance provides a unified model to determine how revenue is recognized.

Our revenues are derived primarily from product revenue and collaborative research and development agreements.

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and (v) recognition of revenue when (or as) we satisfy each performance obligation.

The majority of our collaborative contracts contain multiple revenue streams such as up-front and/or annual license fees, fees for research and development services, contingent milestone payments upon achievement of contractual criteria, and royalty fees based on the licensees' product revenue or usage, among others.

The majority of our collaborative contracts contain multiple revenue streams such as upfront and/or annual license fees, fees for research and development services, contingent milestone payments upon achievement of contractual criteria, and royalty fees based on the licensees' product revenue or usage, among others.

We determine the stand-alone selling price (“SSP”) and allocate consideration to distinct performance obligations.

Typically, we base our SSPs on our historical sales.

If an SSP is not directly observable, then we estimate the SSP taking into consideration market conditions, forecasted sales, entity-specific

factors and available information about the customer.

If an SSP is not directly observable, then we estimate the SSP taking into consideration market conditions, forecasted sales, entity-specific factors and available information about the customer.

We estimate the SSP for license rights by using historical information if licenses have been previously sold to customers and for new licenses, we consider multiple methods, including a discounted cash flow method which includes the following key assumptions:

the development timelines, revenue forecasts, commercialization expenses, discount rate, and the probability of technical and regulatory success.

For licenses that have been previously sold to other customers, we use historical information to determine SSP.

We account for a contract with a customer when there is approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

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Product Revenue

Product revenue consist of sales of protein catalysts, pharmaceutical intermediates and Codex ® biocatalyst panels and kits.

Product revenue consist of sales of biocatalysts, pharmaceutical intermediates and Codex ® biocatalyst panels and kits.

A majority of our product revenue is made pursuant to purchase orders or supply agreements and is recognized at a point in time when the control of the product has been transferred to the customer typically upon shipment.

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If we determine that the customer cannot benefit from the license without our manufacturing capability, the license will be accounted for as combined with the other performance obligations.

If we determine that a license is distinct

and has significant standalone functionality, we would recognize revenues from a functional license at a point in time when the license is transferred to the customer, and the customer can use and benefit from it.

If we determine that a license is distinct and has significant standalone functionality, we would recognize revenues from a functional license at a point in time when the license is transferred to the customer, and the customer can use and benefit from it.

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Practical Expedients, Elections, and Exemptions

We used a practical expedient available under ASC 606 which permits us to consider the aggregate effect of all contract modifications that occurred before the beginning of the earliest period presented when identifying satisfied and unsatisfied performance obligations, transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.

We also used a practical expedient available under ASC 606 which permits us not to adjust the amount of consideration for the effects of a significant financing component if, at contract inception, the expected period between the transfer of promised goods or services and customer payment is one year or less.

We perform monthly services under our research and development agreements and we use a practical expedient available under ASC 606 permitting us to recognize revenue at the same time that we have the right to invoice our customer for monthly services completed to date.

We apply certain practical expedients available which permit us not to adjust the amount of consideration for the effects of a significant financing component if, at contract inception, the expected period between the transfer of promised goods or services and customer payment is one year or less.

We perform monthly services under our research and development agreements and we use a practical expedient permitting us to recognize revenue at the same time that we have the right to invoice our customer for monthly services completed to date.

We have elected to treat shipping and handling activities as fulfillment costs.

Additionally, we have elected to record revenue net of sales and other similar taxes.

Revenue Recognition Policy before January 1, 2018

The following is a description of our revenue recognition policy for periods prior to our adoption of ASC 606 on January 1, 2018.

We recognize revenue from the sale of our products, collaborative research and development agreements and revenue sharing arrangements.

Revenue is recognized when the related costs are incurred and the four basic criteria of revenue recognition are met:

(1) persuasive evidence of an arrangement exists;

(2) delivery has occurred or services have been rendered;

(3) the fee is fixed or determinable;

and (4) collectability is reasonably assured.

Where the revenue recognition criteria are not met, we defer the recognition of revenue by recording deferred revenue until such time that all criteria of revenue recognition are met.

We account for revenues from multiple element arrangements, such as license and platform technology transfer agreements in which a licensee may purchase several deliverables, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 605-25, “Multiple Element Arrangements.” For new or materially amended multiple element arrangements, we identify the deliverables at the inception of the arrangement and each deliverable within a multiple deliverable revenue arrangement is accounted for as a separate unit of accounting if both of the following criteria are met:

(1) the delivered item or items have value to the customer on a standalone basis and (2) for an arrangement that includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in our control.

Revenue allocated to each element is then recognized based on when the basic four revenue recognition criteria are met for each element.

Where a portion of non-refundable up-front fees or other payments received are allocated to continuing performance obligations under the terms of a collaborative arrangement, they are recorded as deferred revenue and recognized as revenue ratably over the term of our estimated performance period under the agreement or using the proportional performance method based on the ratio of the level of effort incurred to date compared to the total estimated level of effort required to complete our performance obligations under the agreement.

Determining the total estimated level of effort required to complete all performance obligations requires management judgment and estimation including assumptions regarding the number of internal hours required to complete the project and external effort incurred.

We determine the estimated performance periods, and they are periodically reviewed based on the progress of the related program.

The effect of any change made to an estimated performance period and, therefore, to revenue recognized, would occur on a prospective basis in the period that the change was made.

Product Sales

Product sales consist of sales of protein catalysts, pharmaceutical intermediates, and Codex® Biocatalyst Panels and Kits.

Product sales are recognized once passage of title and risk of loss has occurred and contractually specified acceptance criteria, if any, have been met, provided all other revenue recognition criteria have also been met.

Shipping and handling costs charged to customers are recorded as revenue.

Research and Development Revenues

Collaborative research and development agreements typically provide us with multiple revenue streams, including:

research services fees for full time employee (“FTE”) research services, up-front license fees, technology access, contingent payments upon achievement of contractual criteria, and royalty fees based on the licensee’s product sales or cost savings achieved by our customers.

We perform collaborative research and development activities as specified in each respective customer agreement.

Payments for services received are not refundable.

Certain research agreements are based on a contractual reimbursement rate per FTE working on the project.

We recognize revenue from research services as those services are performed over the contractual performance periods.

When up-front payments are combined with FTE services in a single unit of accounting, we recognize the up-front payments using the proportionate performance method of revenue recognition based upon the actual amount of research labor hours incurred relative to the amount of the total expected labor hours to be incurred by us, up to the amount of cash received.

In cases where the planned levels of research services fluctuate substantially over the research term, we are required to make estimates of the total hours required to perform our obligations.

We recognize research and development revenues from non-refundable, up-front license fees or technology access payments that are not dependent on any future performance by us when such amounts are earned.

If we have continuing obligations to perform under the arrangement, such fees are recorded as deferred revenues and recognized over the estimated period of continuing performance.

Estimated performance periods are periodically reviewed based on the progress of the related program.

The effect of any change made to an estimated performance period, and therefore to revenue recognized, would occur on a prospective basis in the period that the change was made.

A payment that is contingent upon the achievement of a substantive milestone is recognized in its entirety in the period in which the milestone is achieved.

A milestone is an event (i) that can only be achieved based in whole or in part on either our performance or on the occurrence of a specific outcome resulting from our performance, (ii) for which there is, as of the date the arrangement is entered into, substantive uncertainty that the event will be achieved and (iii) results in additional payments being due to us.

Milestones are considered substantive when the consideration earned from the achievement of the milestone (i) is commensurate with either our performance to achieve the milestone or the enhancement of the value of the item delivered as a result of a specific outcome resulting from its performance, (ii) relates solely to past performance and (iii) is reasonable relative to all deliverable and payment terms in the arrangement.

We recognize revenue from other contingent payments based on passage of time or when earned as the result of a customer’s performance in accordance with the contractual terms and when such payments can be reasonably estimated and collectability of such payments is reasonably assured.

We recognize revenue from royalties based on licensees’ sales of our products or products using our technologies.

Royalties are recognized as earned in accordance with the contract terms when royalties from licensees can be reasonably estimated and collectability is reasonably assured.

For the majority of our royalty revenue, estimates are made using notification of the sale of licensed products from the licensees.

We have elected to record revenue net of sales and other similar taxes.

Contract Assets

Contract assets include amounts related to our contractual right to consideration for completed performance obligations not yet invoiced.

The contract assets are reclassified to receivables when the rights become unconditional.

Contract assets are reclassified to receivables when the rights become unconditional.

Contract Liabilities

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The local legal requirements for liquidation required us to maintain our subsidiary's cash balance in an account managed by a legal trustee to satisfy our financial obligations.

This balance is recorded as current restricted cash on the consolidated balance sheets of $ 0.7 million at December 31, 2019 and as non-current restricted cash of $ 0.7 million at December 31, 2018.

Pursuant to the terms of a lease agreement for our Redwood City, CA facilities, we obtained a letter of credit collateralized by cash deposit balances of $ 1.1 million as of December 31, 2019 and $ 0.7 million at December 31, 2018.

This balance is recorded as current restricted cash on the consolidated balance sheets of $ 0.6 million as of December 31, 2020 and $ 0.7 million as of December 31, 2019.

Pursuant to the terms of a lease agreement for our Redwood City, CA facilities, we obtained a letter of credit collateralized by cash deposit balance s of $ 1.1 million as of December 31, 2020 and 2019.

These cash deposit balances are recorded as non-current restricted cash on the consolidated balance sheets.

See Note 13, “Commitments and Contingencies”.

See Note 13, “Commitments and Contingencies” in the Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K.

Fair Value Measurements

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Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable, contract assets, equity securities, and restricted cash.

Cash that is not required for immediate operating needs is invested principally in money market funds.

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Such deposits in those countries may be in excess of insured limits.

Accounts Receivable and Allowance for Doubtful Accounts

We currently sell primarily to pharmaceutical and fine chemicals companies throughout the world by the extension of trade credit terms based on an assessment of each customer's financial condition.

Financial Assets and Allowances

W e currently sell enzymes primarily to pharmaceutical and fine chemicals companies throughout the world by the extension of trade credit terms based on an assessment of each customer's financial condition.

Trade credit terms are generally offered without collateral and may include an insignificant discount for prompt payment for specific customers.

To manage our credit exposure, we perform ongoing evaluations of our customers' financial conditions.

In addition, accounts receivable includes amounts owed to us under our collaborative research and development agreements.

We recognize accounts receivable at invoiced amounts and we maintain a valuation allowance for doubtful accounts.

The allowances for doubtful accounts reflect our best estimates of probable losses inherent in the accounts receivable and contract assets’ balances.

We determine the allowances based on known troubled accounts, historical experience, and other currently available evidence.

Uncollectible accounts receivables are written off against the allowance for doubtful accounts when all efforts to collect them have been exhausted.

Recoveries are recognized when they are received.

Actual collection losses may differ from our estimates and could be material to our consolidated financial position, results of operations, and cash flows.

In addition, accounts receivable include amounts owed to us under our collaborative research and development agreements.

We recognize accounts receivable at invoiced amounts and we maintain a valuation allowance as follows:

Allowance for credit losses from January 1, 2020

O n and subsequent to January 1, 2020, our financial results reflect an impairment model (known as the “current expected credit loss model” or “CECL”) based on estimates and forecasts of future conditions requiring recognition of a lifetime of expected credit losses at inception on our financing receivables measured at amortized costs which is comprised of accounts receivable, contract assets, and unbilled receivables.

We have determined that our financing receivables share similar risk characteristics including:

(i) customer origination in the pharmaceutical and fine chemicals industry, (ii) similar historical credit loss pattern of customers (iii) no meaningful trade receivable differences in terms, (iv) similar historical credit loss experience and (v) our belief that the composition of certain assets are comparable to our historical portfolio used to develop loss history.

As a result, we measured the allowance for credit loss (“ACL”) on a collective basis.

Our ACL methodology considers how long the asset has been past due, the financial condition of the customers, which includes ongoing quarterly evaluations and assessments of changes in customer credit ratings, and other market data that we believe are relevant to the collectability of the assets.

Nearly all financing receivables are due from customers that are highly rated by major rating agencies and have a long history of no credit loss.

We derive our ACL by establishing an impairment rate attributable to assets not yet identified as impaired.

We derive our ACL by initially relying on our historical financing receivable loss rate which contemplates the full contractual life of the assets sharing similar risk characteristics, adjusted to reflect (i) the extent to which we have determined current conditions differ from the conditions that existed for the period over which historical loss information was evaluated and (ii) by taking into consideration the changes in certain macroeconomic historical and forecasted information.

We apply the ACL to past due financing receivables and record charges to the ACL as a provision to credit loss expense in the Statement of Operations.

Financing receivables we identify as uncollectible are also charged against the ACL.

We adjust the impairment rate to reflect the extent to which we have determined current conditions differ from the conditions that existed for the period over which historical loss information was evaluated.

Adjustments to historical loss information may be qualitative or quantitative in nature and reflect changes related to relevant data.

In the year ended December 31, 2020, inputs to our CECL forecast incorporated forward-looking adjustments associated with the COVID-19 pandemic which we believe are appropriate to incorporate due to the uncertainty of the economic impact on cash flows from our financial assets.

Allowance for credit losses before January 1, 2020

Prior to January 1, 2020, the allowances for doubtful accounts reflected our best estimates of probable losses inherent in our accounts receivable and contract assets balances.

The allowance determination was based on known troubled accounts, historical experience, and other currently available evidence.

Uncollectible accounts receivable were written off against the allowance for doubtful accounts when all efforts to collect them have been exhausted.

Recoveries were recognized when they were received.

Accounts Receivable

Trade credit terms are generally offered without collateral and may include an insignificant discount for prompt payment for specific customers.

To manage our credit exposure, we perform ongoing evaluations of our customers' financial conditions.

In addition, accounts receivable include amounts owed to us under our collaborative research and development agreements and we recognize accounts receivables at invoiced amounts.

Unbilled Receivable

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Impairment of Long-Lived Assets

Our tangible long-lived assets consist primarily of property and equipment.

We have not identified property and equipment by segment since these assets are shared or commingled.

We evaluate the carrying value of long-lived assets, including property and equipment, whenever events, changes in business circumstances or our planned use of long-lived assets indicate that their carrying amounts may not be fully recoverable or that their useful lives are no longer appropriate.

We evaluate the carrying values of long-lived assets, which include property and equipment and right-of-use assets, whenever events, changes in business circumstances or our planned use of long-lived assets indicate that their carrying amounts may not be fully recoverable or that their useful lives are no longer appropriate.

If these facts and circumstances exist, we assess for recovery by comparing the carrying values of long-lived assets with their future net undiscounted cash flows.

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No impairment charges for long-lived assets were recorded during the years ended December 31, 2020, 2019 and 2018.

Investment in Non-Marketable Securities

Investment in Non-Marketable Equity Securities

Our non-marketable equity securities are accounted for under the measurement alternative.

Under the measurement alternative, the carrying value of our non-marketable equity investments is adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment.

Adjustments are determined primarily based on a market approach as of the transaction date and are recorded as a component of other income (expense), net.

We measure investments in non-marketable equity securities without a readily determinable fair value using a measurement alternative that measures these securities at the cost method minus impairment, if any, plus or minus changes resulting from observable price changes on a non-recurring basis.

Gains and losses on these securities are recognized in other income and expenses.

Investment in Non-Marketable Debt Securities

We measure available-for-sale investments in non-marketable debt at fair value.

Unrealized gains and losses on these securities are recognized in other comprehensive income until realized.

Non-marketable debt securities are classified as available-for-sale securities.

We classify non-marketable debt securities as Level 3 in the fair value hierarchy because we estimate the fair value based on a qualitative analysis using the most recent observable transaction price and other significant unobservable inputs including volatility, rights, and obligations of the securities we hold.

Significant changes to the unobservable inputs may result in a significantly higher or lower fair value estimate.

We may value these securities based on significant recent arms-length transactions with sophisticated non-strategic unrelated new investors, providing the terms of these transactions are substantially similar to the terms between the company and us.

The impact of the difference in transaction terms on the market value of the investment may be difficult or impossible to quantify.

See Note 7, “ Fair Value Measurements” for additional details.

We evaluate both equity and debt securities for impairment when circumstances indicate that we may not be able to recover the carrying value.

We may impair these securities and establish an allowance for a credit loss when we determine that there has been an “other-than-temporary” decline in estimated fair value of the debt or equity security compared to its carrying value.

We calculate the estimated fair value of these securities using information from the investee, which may include:

• Audited and unaudited financial statements;

• Projected technological developments of the company;

• Projected ability of the company to service its debt obligations;

• If a deemed liquidation event were to occur;

• Current fundraising transactions;

• Current ability of the company to raise additional financing if needed;

• Changes in the economic environment which may have a material impact on the operating results of the company;

• Contractual rights, obligations or restrictions associated with the investment;

• Other factors deemed relevant by our management to assess valuation.

• The valuation may be reduced if the company's potential has deteriorated significantly.

If the factors that led to a reduction in valuation are overcome, the valuation may be readjusted.

Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired and is assigned to reporting units.

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If we conclude it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed.

In 2018, we reorganized our company into two business units that we determined to be operating segments.

As a result, for periods after January 1, 2018, we have two reporting units that reflect our operating segments and we test goodwill for impairment at the reporting unit level.

Prior to 2018, we had one operating segment and a single reporting unit.

In 2018, in order to assign the amount of goodwill to the two reporting units, we used a relative fair value allocation methodology that primarily relied on our estimates of revenue and future earnings for each reporting units.

Using the relative fair value allocation methodology, we have determined that approximately 76 % of goodwill is allocated to the Performance Enzymes segment and 24 % is allocated to the Novel Biotherapeutics segment.

As a result of the

calculation, $ 2.4 million of the goodwill was assigned to the Performance Enzymes segment and $ 0.8 million was assigned to the Novel Biotherapeutics segment.

The goodwill impairment test consists of a two-step process.

The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of each reporting unit to its carrying value.

Using the relative fair value allocation methodology for assets and liabilities used in both of our reporting units, we compared the allocated carrying amount of each reporting unit’s net assets and the assigned goodwill to its fair value.

If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired, and the second step of the impairment test is not required.

The second step, if required, compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill.

Implied fair value is the excess of the fair value of the reporting unit over the fair value of all identified or allocated assets and liabilities.

Any excess of the reporting unit’s carrying amount goodwill over the respective implied fair value is recognized as an impairment.

We test goodwill for impairment on an annual basis on the last day of the fourth fiscal quarter and, when specific circumstances dictate, between annual tests by first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

We manage our business as two reporting units and we test goodwill for impairment at the reporting unit level.

We allocated goodwill to the two reporting units using a relative fair value allocation methodology that primarily relied on our estimates of revenue and future earnings for each reporting unit.

Using the relative fair value allocation methodology, we have determined that approximately $ 2.4 million, or 76 %, of the goodwill allocated to the Performance Enzymes segment and $ 0.8 million, or 24 %, is assigned to the Novel Biotherapeutics segment.

We test goodwill for impairment for each reporting unit on an annual basis on the last day of the fourth fiscal quarter and, when

specific circumstances dictate, between annual tests by first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

During 2020, 2019 and 2018, we did no t record impairment charges related to goodwill.

We test for goodwill impairment as follows:

Goodwill impairment testing from January 1, 2020

We test for impairment annually on a reporting unit basis, on the last day of the fourth fiscal quarter, and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

The annual impairment test is completed using either:

a qualitative “Step 0” assessment based on reviewing relevant events and circumstances;

or a quantitative “Step 1” assessment, which determines the fair value of the reporting unit.

To the extent the carrying amount of a reporting unit is less than its estimated fair value, an impairment charge is recorded.

Using the relative fair value allocation methodology for assets and liabilities used in both of our reporting units, we compare the allocated carrying amount of each reporting unit’s net assets and the assigned goodwill to its fair value.

If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired.

Any excess of the reporting unit’s carrying amount of goodwill over its fair value is recognized as an impairment.

Since late 2019, the COVID-19 pandemic has spread worldwide.

The COVID-19 pandemic has caused a decline in global and domestic macroeconomic conditions, the general deterioration of the U.S.

economy and other economies worldwide, all of which may negatively impact our overall financial performance, driving a reduction in our cash flows.

We believe that the impact of the COVID-19 pandemic was a triggering event that gave rise to a qualitative goodwill impairment test in the second quarter ended June 30, 2020.

We also conducted a qualitative impairment assessment as of December 31, 2020, which included an evaluation of our cash flow projections to reflect the current economic environment, including the uncertainty surrounding the nature, timing, and extent of the impact of the pandemic in operating our business.

We determined that it was more likely than not that the fair value of each of the reporting units exceeded its respective carrying amount as of December 31, 2020.

Therefore, a quantitative impairment test of our goodwill at the reporting unit level was not required to be performed.

Goodwill impairment testing before January 1, 2020

Prior to January 1, 2020, the goodwill impairment test consisted of a two-step process.

The first step of the goodwill impairment test, used to identify potential impairment, compared the fair value of each reporting unit to its carrying value.

If the fair value of the reporting unit exceeded its carrying amount, goodwill of the reporting unit was considered not impaired, and the second step of the impairment test was not required.

The second step, if required, compared the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill.

Implied fair value was the excess of the fair value of the reporting unit over the fair value of all identified or allocated assets and liabilities.

Any excess of the reporting unit’s carrying amount goodwill over the respective implied fair value was recognized as an impairment.

Lease Accounting

Policy from January 1, 2019

Effective January 1, 2019, we adopted ASC 842, which established a right-of-use ("ROU") model requiring lessees to record a right-of-use ("ROU") asset and lease obligations on the balance sheet for all leases with terms longer than 12 months.

We determine if an arrangement is a lease at inception.

Where an arrangement is a lease we determine if it is an operating lease or a finance lease.

At lease commencement, we record a lease liability and corresponding right-of-use ("ROU") asset.

At lease commencement, we record a lease liability and ROU asset.

Lease liabilities represent the present value of our future lease payments over the expected lease term which includes options to extend or terminate the lease when it is reasonably certain those options will be exercised.

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ROU assets represent our right to control the use of the leased asset during the lease and are recognized in an amount equal to the lease liability for leases with an initial term greater than 12 months.

Over the lease term, we use the effective interest rate method to account for the lease liability as lease payments are made and the ROU asset is amortized to consolidated statement of operations in a manner that results in straight-line expense recognition.

Over the lease term, we use the effective interest rate method to account for the lease liability as lease payments are made and the ROU asset is amortized to the consolidated statement of operations in a manner that results in straight-line expense recognition.

We do not apply lease recognition requirements for short-term leases.

Instead, we recognize payments related to these arrangements in the consolidated statement of operations as lease costs on a straight-line basis over the lease term.

Policy before January 1, 2019

For periods prior to our adoption of ASC 842 on January 1, 2019, we recognize leases as either an operating lease or a capital lease (finance lease).

An operating lease records no asset or liability on the financial statements, the amount paid is expensed as incurred.

A capital lease is recorded as both an asset and a liability on our Consolidated Balance Sheets, generally at the present value of the rental payments.

We use the guidance provided by FASB to determine if a lease should be capitalized, and if any one of the criteria for capitalization is met, the lease is treated as a capital lease.

We use the liability method of accounting for income taxes, whereby deferred tax asset or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income.

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We make certain estimates and judgments in determining income tax expense for financial statement purposes.

These estimates and judgments occur in the calculation of tax credits, benefits and deductions and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenues and expenses for tax and financial statement purposes.

Significant changes to these estimates may result in an increase or decrease to our tax provision in a subsequent period.

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We have recorded a valuation allowance against these deferred tax assets in jurisdictions where ultimate realization of deferred tax assets is more likely than not to occur.

As of December 31,

2019, we maintain a full valuation allowance in all jurisdictions against the net deferred tax assets as we believe that it is more likely than not that the majority of deferred tax assets will not be realized.

As of December 31, 2020, we maintain a full valuation allowance in all jurisdictions against the net deferred tax assets as we believe that it is more likely than not that the majority of deferred tax assets will not be realized.

We make estimates and judgments about our future taxable income that are based on assumptions that are consistent with our plans and estimates.

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In the event we should experience such a change of ownership, utilization of our federal and state NOL carryforwards could be limited.

We recognized income tax provision of $ 17 thousand, income tax benefit of $ 37 thousand and income tax provision of $ 81 thousand for the years ended December 31, 2019, 2018 and 2017, respectively.

The provision for income taxes for 2019 was primarily due to the accrual of interest and penalties on historic uncertain tax positions.

We recognized income tax provision of $ 0.3 million, income tax provision of $ 17 thousand and income tax benefit of $ 37 thousand for the years ended December 31, 2020, 2019 and 2018, respectively.

The provision for income taxes for 2020 was primarily due to foreign withholding taxes on certain sales to a non-U.S.

The provision for income taxes in 2019 was primarily due to the accrual of interest and penalties on historic uncertain tax positions.

The benefit from income taxes in 2018 was primarily related to a net loss from our foreign operations and a reduction in the deferred tax liability for accrued future withholding taxes on dividends.

The provision for income taxes for 2017 was primarily related to taxes on foreign earnings and an increase in the deferred tax liability for accrued future withholding taxes on dividends.

We continue to maintain a full valuation allowance against our net deferred tax assets as we believe that it is more likely than not that the majority of our deferred tax assets will not be realized.

Changes to Tax Law

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), P.L.

116-136, was passed into law, amending portions of certain relevant US tax laws.

The CARES Act included a number of federal income tax law changes, including, but not limited to:

(i) permitting net operating loss carrybacks to offset 100% of taxable income for taxable years beginning before 2021, (ii) accelerating alternative minimum tax credit refunds, (iii) temporarily increasing the allowable business interest deduction from 30% to 50% of adjusted taxable income, and (iv) providing a technical correction for depreciation related to qualified improvement property.

The CARES Act had no impact on our consolidated financial statements.

Beginning in 2018, the global intangible low-taxed income (“GILTI”) provisions in the Tax Act required us to include, in our U.S.

income tax return, foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets.

Per guidance issued by the FASB, companies could either account for deferred taxes related to GILTI or treat tax arising from GILTI as a period cost.

Both were acceptable methods subject to an accounting policy election.

Per guidance issued by the FASB, companies can either account for deferred taxes related to GILTI or treat tax arising from GILTI as a period cost.

Both are acceptable methods subject to an accounting policy election.

At December 31, 2018, we finalized our policy and elected to use the period cost method for GILTI.

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In 2020, our company was not subject to BEAT as it did not meet the requirements to be subject to BEAT.

Accounting Pronouncements

Recently adopted accounting pronouncements

In May 2014, the FASB issued ASU 2014-09, " Revenue from Contracts with Customers (Topic 606)" , (“ASC 606”), amending revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted for public companies effective for annual and interim reporting periods beginning after December 15, 2016.

We have adopted the provisions of ASC 606 and the related amendments, effective January 1, 2018, using the modified retrospective transition method.

We recognized the cumulative effect of applying the new revenue standard and recognized a $4.1 million increase to the opening balance of the accumulated deficit at the beginning of 2018.

The comparative information has not been restated and continues to be reported under the accounting standards in effect for the period presented.

Impact on Financial Statements

In accordance with ASC 606, the disclosure of the impact of adoption to our consolidated statements of operations and balance sheets was as follows (in thousands, except per share amounts):

Year Ended December 31, 2018

As reported Adjustments Balances without adoption of ASC 606

Product Revenue $ 25,590 $ ( 3,422 ) $ 22,168

Research and development revenue 35,004 ( 1,609 ) 33,395

Total revenues 60,594 ( 5,031 ) 55,563

Costs and operating expenses:

Cost of product revenue 12,620 ( 285 ) 12,335

Research and development 29,978 ( 196 ) 29,782

Selling, general and administrative 29,291 — 29,291

Total costs and operating expenses 71,889 ( 481 ) 71,408

Loss from operations ( 11,295 ) ( 4,550 ) ( 15,845 )

Interest income 671 — 671

Other expenses ( 291 ) — ( 291 )

Loss before income taxes ( 10,915 ) ( 4,550 ) ( 15,465 )

Provision for (benefit from) income taxes ( 37 ) — ( 37 )

Net loss $ ( 10,878 ) $ ( 4,550 ) $ ( 15,428 )

Net loss per share, basic and diluted $ ( 0.21 ) $ ( 0.09 ) $ 0.30

Weighted average common shares used in computing net loss per share, basic and diluted 52,205 52,205

December 31, 2018

As reported Adjustments Balances without adoption of ASC 606

Accounts receivable $ 11,551 $ ( 1,253 ) $ 10,298

Unbilled receivables, current 1,916 ( 1,916 ) —

Contract assets 35 ( 35 ) —

Inventories 589 1 590

Unbilled receivables, non-current 786 ( 786 ) —

Other non-current assets 265 ( 42 ) 223

Other accrued liabilities 4,855 ( 520 ) 4,335

Deferred revenue - current 4,936 ( 1,574 ) 3,362

Deferred revenue - non-current 3,352 ( 1,445 ) 1,907

Stockholders' equity

Accumulated deficit ( 330,474 ) ( 492 ) ( 330,966 )

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2016-02, " Leases (Topic 842)" (“ASC 842”), which is intended to improve financial reporting of leasing transactions by requiring lessees to recognize leases on balance sheets and disclose key information about leasing arrangements.

Topic 842 was subsequently amended by ASU No.

2018-01, " Land Easement Practical Expedient for Transition to Topic 842 ";

ASU 2018-10, " Codification Improvements to ASC 842, Leases ";

and ASU 2018-11, "Leases (Topic 842):

Targeted Improvements.

" The standard establishes a right-of-use ("ROU") model that requires lessees to record a ROU asset and lease obligations on the balance sheet for all leases with terms longer than 12 months.

Leases are classified as either finance or operating, with classification affecting the pattern and classification of expense recognition in the condensed consolidated statement of operations.

We adopted the standard on January 1, 2019 using a modified retrospective approach and effective date method.

Upon adoption, for operating leases, we recognized $ 26.6 million of ROU assets and $ 27.6 million of lease obligations, which represents the present value of the lease payments discounted using our incremental borrowing rate ("IBR") of 6.6 %.

For finance leases, we recognized $ 0.5 million of ROU assets and $ 0.3 million of lease obligations which represents the present value of the lease payments discounted using weighted-average implicit rate of 5.0 %.

Right-of-use assets and lease obligations amounts recorded in our consolidated balance sheet on adoption of the standard on January 1, 2019 are more fully disclosed in Note 13, "Commitments and Contingencies ".

Practical Expedients, Elections, and Exemptions

On adoption of the standard, we elected the practical expedients permitted under the transition guidance of the new standard that retained the lease identification, lease classification and initial direct costs for any leases that existed prior to adoption of the standard.

We did not reassess whether any contracts entered into prior to adoption were leases or contain leases, or the lease classifications for any expired or existing leases.

In February 2018, the FASB issued ASU No.

2018-02, “I ncome Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ”.

This standard allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and requires certain disclosures about stranded tax effects and will be effective for us beginning January 1, 2019 and should be applied either in the period of adoption or retrospectively.

We adopted the standard in the first quarter of 2019, and the adoption had no impact on our consolidated financial statements and related disclosures.

In June 2018, the FASB issued ASU 2018-07, " Compensation-Stock Compensation (Topic 718):

Improvements to Non-employee Share-Based Payment Accounting ," which expands the scope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to non-employees for goods or services.

Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned.

The standard supersedes Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees .

The standard is effective for fiscal years beginning after December 15, 2018, with early adoption permitted.

We adopted the standard in the first quarter of 2019, and the adoption had no impact on our consolidated financial statements and related disclosures.

In July 2018, the FASB issued ASU 2018-09, " Codification Improvements ”, which represent changes to clarify, correct errors in, or make minor improvements to the Codification, eliminating inconsistencies and providing clarifications in current guidance.

The amendments in this standard include those made to:

Subtopic 220-10, I ncome Statement-Reporting Comprehensive Income-Overal l;

Subtopic 470-50, Debt-Modifications and Extinguishments;

Subtopic 480-10, Distinguishing Liabilities from Equity-Overal l;

Subtopic 718-740, C ompensation-Stock Compensation-Income Taxes ;

Subtopic 805-740, Business Combinations-Income Taxes ;

Subtopic 815-10, Derivatives and Hedging-Overall;

Subtopic 820-10, Fa ir Value Measurement-Overall ;

Subtopic 940-405, Financial Services-Brokers and Dealers-Liabilities ;

and Subtopic 962-325, Plan Accounting-Defined Contribution Pension Plans-Investments-Othe r.

The transition and effective date guidance is based on the facts and circumstances of each amendment.

Some of the amendments do not require transition guidance and will be effective upon issuance.

However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities.

We adopted subtopics under the standard that are applicable to us, including Subtopics 718-740 and 820-10 in the first quarter of 2019.

The adoption of this standard had no impact on our consolidated financial statements and related disclosures.

Recently issued accounting pronouncements not yet adopted

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by us as of the specified effective date.

Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

In June 2016, the FASB issued ASU 2016-13, " Financial Instruments - Credit Losses (Topic 326):

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which amends the FASB's guidance on the impairment of financial instruments.

The standard adds a new impairment model (known as the "current expected credit loss model") that is based on expected losses rather than incurred losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

We will be required to use a forward-looking expected credit loss model for our accounts receivables and contract assets.

The standard is effective for annual reporting periods beginning after December 15, 2019 (January 1, 2020 for calendar year entities).

The standard will be adopted upon the effective date for us beginning January 1, 2020.

Adoption of the standard will be applied using a prospective transition approach as of the effective date to align our credit loss methodology with the standard.

We have evaluated the impact of this standard in our consolidated financial statements, accounting policies and processes based on the current composition of our accounts receivable and contract assets, current economic conditions, forecasted macroeconomic conditions, and historical credit loss activity.

Based on our preliminary analysis and estimates, we do not expect the adoption will have a material impact on our consolidated financial statements;

however we expect to expand certain disclosures.

The ultimate impact on our consolidated financial statements will depend upon a number of factors, including current economic conditions, forecasted macroeconomic conditions, forecasts, and our accounts receivables and contract assets at the adoption date.

The standard adds a new impairment model, known as CECL, which replaces the probable loss model.

The CECL impairment model is based on estimates and forecasts of future conditions which requires recognition of a lifetime of expected credit losses at inception on financial assets measured at amortized costs.

Our financial assets consist of non-marketable debt and equity securities and financing receivable assets measured at amortized cost, comprised of accounts receivable, contract assets, and unbilled receivables .

We adopted the new standard in the first quarter of 2020 using a modified retrospective approach requiring a cumulative-effect adjustment to the opening accumulated deficit as of the date of adoption.

The ASU establishes a new valuation account “allowance for credit losses” replacing the “allowance for doubtful accounts” in the consolidated balance sheets, which is used to adjust the amortized cost basis of assets in presentation of the net amount expected to be collected.

The adoption required certain additional disclosures but had no other impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No.

2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairmen t." The amendments eliminate Step 2 from the goodwill impairment test.

The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount.

Simplifying the Test for Goodwill Impairment.

The amendment eliminates Step 2 from the goodwill impairment test.

The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit to its carrying amount.

An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value;

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In addition, income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable.

The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment, and if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.

The ASU eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment, and if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.

An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.

The standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted.

We will adopt the standard effective January 1, 2020.

We expect that the adoption of this standard will not have any impact our consolidated financial statements;

however we expect modification of certain disclosures.

We adopted the ASU in the first quarter of 2020 using a prospective approach.

The adoption required certain additional disclosures but had no impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

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The changes affect all companies that are required to include fair value measurement disclosures.

In general, the standard is effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019.

Early adoption is permitted.

We are currently evaluating the impact of adoption of the standard on our financial statements and related disclosures.

We do not expect the adoption of this standard will have a material impact on our consolidated financial statements and related disclosures.

The standard requires the use of the prospective method of transition for disclosures related to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop fair value measurements categorized within Level 3 of the fair value hierarchy, and narrative description of measurement uncertainty.

All other amendments in the standard are required to be adopted retrospectively.

We adopted the ASU in the first quarter of 2020 and the adoption had no impact on our consolidated financial statements nor on our related disclosures.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction Between Topic 808 and Topic 606 ." ASU 2018-18 provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard.

Clarifying the Interaction Between Topic 808 and Topic 606 .

ASU 2018-18 provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard.

The standard also provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants.

The standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

Early adoption is permitted.

We will adopt the standard in the first quarter of 2020 on a prospective basis.

The impact of this standard will be fact dependent, but we do not expect the adoption of this standard will have a material impact on our consolidated financial statements and related disclosures.

The ASU is to be applied retrospectively to the date of the initial application of Topic 606 which also requires recognition of the cumulative effect of applying the amendments as an adjustment to the opening balance of retained earnings of the later or the earliest annual period presented and the annual period inclusive of the initial application of Topic 606.

We adopted the ASU in the first quarter of 2020 and the adoption had no impact on our consolidated financial statements nor on our related disclosures.

Recently issued accounting pronouncements not yet adopted

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by us as of the specified effective date.

Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

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The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted.

The standard will be adopted upon the effective date for us beginning January 1, 2021.

The standard will be adopted upon the effective date for us beginning January 1, 2021 on a retrospective basis.

We believe that the adoption of ASU 2019-12 will have minimal impact on our consolidated financial Statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) :

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

The standard provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions in which the reference LIBOR or another reference rate are expected to be discontinued as a result of the Reference Rate Reform.

The standard is effective for all entities.

The standard may be adopted as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 through December 31, 2022, on a prospective basis.

We will evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to elect the optional expedients for contract modification;

however, we believe that the adoption of ASU 2020-04 will have minimal impact on our consolidated financial statements and related disclosures.

In August 2020, FASB issued ASU No 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) No.

2020-06 August 2020 Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , to reduce the complexity and to simplify the accounting for convertible debt instruments and convertible preferred stock, and the derivatives scope exception for contracts in an entity's own equity.

In addition, the guidance on calculating diluted earnings per share has been simplified and made more internally consistent.

The standard is effective the for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted for fiscal periods beginning after December 15, 2020.

The standard will be adopted by us beginning January 1, 2021.

Entities are allowed to adopt the standard using a either a modified retrospective method of transition or a fully retrospective method of transition.

We are currently evaluating the effects of the standard on our consolidated financial statements and related disclosures;

however, we believe that the adoption of ASU 2020-06 will have minimal impact on our consolidated financial statements and related disclosures.

In October 2020, the FASB issued ASU No.

2020-10, Codification Improvements .

ASU 2020-10 provides amendments to a wide variety of topics in the FASB’s Accounting Standards Codification, which applies to all reporting entities within the scope of the affected accounting guidance.

The standard is effective for annual periods beginning after December 15, 2020 with early adoption permitted.

The standard will be adopted upon the effective date for us beginning January 1, 2021 on a retrospective basis.

We are currently evaluating the effects of the standard on our consolidated financial statements and related disclosures, however we believe that the adoption of ASU 2020-10 will have no impact the our consolidated financial statements and related disclosures.

Revenue Recognition

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The following table provides information about disaggregated revenue from contracts with customers into the nature of the products and services, and geographic regions, and includes a reconciliation of the disaggregated revenue with reportable segments.

The geographic regions that are tracked are the Americas (United States, Canada, Latin America), EMEA (Europe, Middle East, Africa), and APAC (Australia, New Zealand, Southeast Asia, China).

The geographic regions that are tracked are the Americas (United States, Canada, and Latin America), EMEA (Europe, Middle East, and Africa), and APAC (Australia, New Zealand, Southeast Asia, and China).

Segment information for fiscal year 2020 is as follows (in thousands):

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Major products and service:

$ 26,685 $ — $ 26,685

Product Revenue $ 25,590 $ — $ 25,590

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Contract Balances

The following table presents changes in the contract assets, unbilled receivables, contract costs, and contract liabilities for the years ended December 31, 2019 and 2018 (in thousands):

Year Ended December 31, 2019

Beginning Balance Additions Deductions (1)

Ending Balance

Contract Assets $ 35 12,073 ( 11,081 ) $ 1,027

Unbilled receivables, current $ 1,916 13,014 ( 4,831 ) $ 10,099

Unbilled receivables, non-current (2)

$ 786 — ( 786 ) $ —

Contract Costs (2)

$ 42 — ( 42 ) $ —

Contract Liabilities:

Deferred Revenue $ 8,288 7,552 ( 13,796 ) $ 2,044

Year Ended December 31, 2018

Beginning Balance Additions Deductions (1)

Ending Balance

The following table presents balances of contract assets, unbilled receivables, contract costs, and contract liabilities (in thousands):

December 31, 2020 December 31, 2019

Contract assets $ 4,526 $ 1,027

Unbilled receivables, current $ — 2,908 ( 992 ) $ 1,916

Unbilled receivables, non-current (2)

$ — 786 — $ 786

Unbilled receivables $ 10,942 $ 10,099

Contract costs $ 90 $ —

$ 239 — ( 197 ) $ 42

Contract liabilities:

deferred revenue $ 4,791 $ 2,044

(1) The asset or liability balances are presented as a net position per contract and accordingly the deductions column includes the netting effect of presenting each contract on a net position basis as either a net liability or asset.

(2) Included in non-current assets in our consolidated balance sheets.

We recognize accounts receivable when we have an unconditional right to recognize revenue and have issued an invoice to the customer.

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payment is expected from the customer thereon.

Unbilled receivables are classified separately on the consolidated balance sheet as assets.

Unbilled receivables are classified separately on the consolidated balance sheets as assets.

We maintain a valuation allowance on accounts receivables and unbilled receivables.

Contract assets represent our right to recognize revenue for custom products with no alternate use and under binding non-cancellable purchase orders and are largely related to our procurement of product.

We recognize contract assets when we have a conditional right to recognize revenue.

The delivery pattern of certain of products occurs in advance of the invoicing process,

which generates contract assets.

The delivery pattern of certain of products occurs in advance of the invoicing process, which generates contract assets.

In addition, we recognize a contract asset related to milestones not eligible for royalty accounting when we assess it is probable of being achieved and there will be no significant reversal of cumulative revenues.

Contract assets are classified separately on the consolidated balance sheet as an asset and transferred to accounts receivable when our rights to payment become unconditional.

Contract assets are classified separately on the consolidated balance sheets as an asset and transferred to accounts receivable when our rights to payment become unconditional.

We maintain a valuation allowance on contract assets.

Contract liabilities, or deferred revenue, represent our obligation to transfer a product or service to the customer, and for which we have received consideration from the customer.

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Performance obligations satisfied from new activities in the period - contract revenue 68,225 62,449

Total revenue $ 68,458 $ 60,594

Total revenues $ 69,056 $ 68,458

Performance Obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

The estimated revenue does not include contracts with original durations of one year or less, amounts of variable consideration attributable to royalties, or contract renewals that are unexercised as of December 31, 2020.

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Net Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding, less RSAs subject to forfeiture.

Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding, less RSAs subject to forfeiture, plus all additional common shares that would have been outstanding, assuming dilutive potential common shares had been issued for other dilutive securities.

For all periods presented, diluted and basic net losses per share are identical since potential common shares are excluded from the calculation, as their effect was anti-dilutive.

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding, less restricted stock awards (“RSAs”) subject to forfeiture.

Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock shares outstanding, less RSAs subject to forfeiture, plus all additional common shares that would have been outstanding, assuming dilutive potential common stock shares had been issued for other dilutive securities.

For periods presented, diluted and basic net loss per share are identical since potential common stock shares are excluded from the calculation, as their effect was anti-dilutive.

Anti-Dilutive Securities

In periods of net loss, the weighted average number of shares outstanding related to potentially dilutive securities, prior to the application of the treasury stock method, are excluded from the computation of diluted net loss per common share because including such shares would have an anti-dilutive effect.

The following shares were not included in the computation of diluted net loss per share (in thousands):

In periods of net loss, the weighted average number of shares outstanding, prior to the application of the treasury stock method, excludes potentially dilutive securities from the computation of diluted net loss per common share because including such shares would have an anti-dilutive effect.

The following shares were not considered in the computation of diluted net loss per share because their effect was anti-dilutive (in thousands):

Year Ended December 31,

2020 2019 2018

Shares issuable under Equity Incentive Plan 4,763 6,339 6,882

Shares issuable under the Equity Incentive Plan 5,348 4,763 6,339

Collaborative Arrangements

GSK Platform Technology Transfer, Collaboration and License Agreement

In July 2014, we entered into a CodeEvolver ® protein engineering platform technology transfer collaboration and license agreement (the "GSK CodeEvolver ® Agreement") with GlaxoSmithKline ("GSK").

In July 2014, we entered into a CodeEvolver ® protein engineering platform technology transfer collaboration and license agreement (the “GSK CodeEvolver ® Agreement”) with GSK.

Pursuant to the terms of the agreement, we granted GSK a non-exclusive license to use the CodeEvolver ® protein engineering platform technology to develop novel enzymes for use in the manufacture of GSK's pharmaceutical and health care products.

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We are also eligible to receive royalties, based on net sales of GSK’s sales of licensed enzyme products, that are currently not being recognized.

In 2019, we received a $ 2.0 million milestone payment on the advancement of an enzyme developed by GSK using our CodeEvolver ® protein engineering platform technology, and we recognized research and development revenue of $ 2.0 million in the year ended December 31, 2019.

As of December 31, 2019 and 2018, we had no deferred revenue balances.

In 2019, we received a $ 2.0 million milestone payment relating to the advancement of an enzyme developed by GSK using our CodeEvolver ® protein engineering platform technology.

We recognized research and development revenue of nil , $ 2.0 million, and nil in the year ended December 31, 2020, 2019, and 2018, respectively.

Merck Platform Technology Transfer and License Agreement

In August 2015, we entered into a CodeEvolver ® platform technology transfer collaboration and license agreement (the “Merck CodeEvolver ® Agreement”) with Merck, Sharp & Dohme (“Merck”) which allows Merck to use the CodeEvolver ® protein engineering technology platform in the field of human and animal healthcare.

We received an up-front license fee upon execution of the Merck CodeEvolver ® Agreement and milestone payments in September 2015 and in September 2016, when we completed the transfer of the engineering platform technology.

We received an upfront license fee upon execution of the Merck CodeEvolver ® Agreement and milestone payments in September 2015 and in September 2016, when we completed the transfer of the engineering platform technology.

We recognized research and development revenues of $ 3.1 million, $ 4.0 million, and $ 4.1 million in the years ended December 31, 2020, 2019 and 2018, respectively, for various research projects under our collaborative arrangement.

We have the potential to receive payments of up to a maximum of $ 15.0 million for each commercial active pharmaceutical ingredient (“API”) that is manufactured by Merck using one or more novel enzymes developed by Merck using the CodeEvolver ® protein engineering technology platform.

The API payments, which are currently not recognized in revenue, are based on quantity of API developed and manufactured by Merck and will be recognized as usage-based royalties.

The API payments, which are currently not recognized in revenue, are based on the quantity of API developed and manufactured by Merck and will be recognized as usage-based royalties.

In October 2018, we entered into an amendment to the Merck CodeEvolver ® Agreement which amended certain licensing provisions and one exhibit.

In January 2019, we entered into an amendment to the Merck CodeEvolver ® Agreement to install certain CodeEvolver ® protein engineering technology upgrades into Merck’s platform license installation and maintain those upgrades for a multi-year term.

We recognized $ 0.9 million in research and development revenues under the terms of the amendment in the year ended December 31, 2019.

As of December 31, 2019 and 2018 we had no deferred revenue balances.

The license installation was completed in 2019 and we recognized $ 0.9 million as license fee revenue accordingly under the amendment.

Pursuant to the agreement, Merck has options to future technology enhancements for a specified fee.

As of December 31, 2020, Merck has not exercised its option for technology enhancements.

We recognized $ 0.1 million and $ 0.9 million in research and development revenues under the terms of the amendment in 2020 and 2019, respectively.

Merck Sitagliptin Catalyst Supply Agreement

In February 2012, we entered into a five -year Sitagliptin Catalyst Supply Agreement (“Sitagliptin Catalyst Supply Agreement”) with Merck whereby Merck may obtain commercial scale enzyme for use in the manufacture of Januvia ® , its product based on

the active ingredient sitagliptin.

In February 2012, we entered into a five-year Sitagliptin Catalyst Supply Agreement (“Sitagliptin Catalyst Supply Agreement”) with Merck whereby Merck may obtain commercial scale enzyme for use in the manufacture of Januvia ® , its product based on the active ingredient sitagliptin.

In December 2015, Merck exercised its option under the terms of the Sitagliptin Catalyst Supply Agreement to extend the agreement for an additional five years through February 2022.

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Merck received a distinct, functional license to manufacture a portion of its demand beginning January 1, 2018, which we recognized as research and development revenue.

We recognized no research and development revenue in the year ended December 31, 2019.

We recognized research and development revenues of $ 1.3 million and $ 1.3 million of research and development revenues in the years ended December 31, 2018 and 2017, respectively.

We recognized no research and development revenues in the years ended December 31, 2020 and 2019 and $ 1.3 million of research and development revenues in the year ended December 31, 2018.

We have determined that the variable pricing, which provides a discount based on the cumulative volume of sitagliptin catalyst purchased by Merck, provides Merck material rights and we are recognizing product revenues using the alternative method.

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Pursuant to the terms of the Sitagliptin Catalyst Supply Agreement, Merck may purchase supply from us for a fee based on contractually stated prices.

Deferred revenues were offset against contract assets where the right of offset exists within the contract.

We recognized $ 15.1 million, $ 12.3 million and $ 9.0 million in the years ended December 31, 2019, 2018 and 2017, respectively, in product revenue under this agreement.

We recognized $ 13.4 million, $ 15.1 million and $ 12.3 million in product revenues for the years ended December 31, 2020, 2019 and 2018, respectively.

Revenues recognized by us under the Sitagliptin Catalyst Supply Agreement comprised 19 %, 22 %, and 22 % of our total revenues for the years ended December 31, 2020, 2019 and 2018, respectively.

The Sitagliptin Catalyst Supply Agreement will terminate in February 2022 unless extended and we have not received an amendment to extend the agreement.

Enzyme Supply Agreement

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We additionally have determined that the volume discounts under the supply agreement provides the customer material rights and we are recognizing revenues using the alternative method.

As of each of December 31, 2019 and 2018, we had deferred revenue from the supply agreement of $ 2.0 million.

As of December 31, 2020 and 2019, we had deferred revenue balances from the supply agreement of $ 2.0 million.

Research and Development Agreement

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During the second quarter of 2018, Tate & Lyle opted to obtain additional development services that we completed by June 30, 2018 and we earned milestone payments upon completion of the services.

We recognized $ 0.1 million , $ 7.1 million and $ 3.2 million in revenue in the years ended December 31, 2019, 2018, and 2017, respectively, in research and development services under the research and development services agreement.

As of December 31, 2019 and 2018, we had no deferred revenue balances.

We recognized nil , $ 0.1 million and $ 7.1 million in revenue in the years ended December 31, 2020, 2019 and 2018, respectively, in research and development services under the research and development services agreement.

Commercial Agreement

In April 2019, we entered into a multi-year commercial agreement with Tate & Lyle under which Tate & Lyle has received an exclusive license to use a suite of Codexis novel performance enzymes in the manufacture of Tate & Lyle’s zero-calorie stevia sweetener, TASTEVA ® M, and other stevia products.

Under the agreement, we will supply Tate & Lyle with its requirements for these enzymes over a multiple year period and receive royalties on stevia products.

In November 2020, we amended the commercial agreement based on Tate & Lyle's intent to use a specific Codexis novel performance enzyme in its production of TASTEVA ® M Stevia Sweetener and became eligible to receive milestone payments of up to $ 1.1 million.

In the fourth quarter of 2020, we became eligible to receive a milestone payment of $ 0.4 million, which we subsequently received in the fourth

quarter of 2020.

We recognized $ 0.2 million in revenue in the year ended December 31, 2020.

As of December 31, 2020, we had a deferred revenue balance of $ 0.2 million.

Global Development, Option and License Agreement and Strategic Collaboration Agreement

In October 2017, we entered into the Nestlé Agreement with Nestlé Health Science and, solely for the purpose of the integration and the dispute resolution clauses of the Nestlé Agreement, Nestlé Health Science S.A., to advance CDX-6114, our enzyme biotherapeutic product candidate for the potential treatment of PKU.

We received an upfront cash payment of $ 14.0 million in 2017 upon the execution of the Nestlé Agreement, a $ 4.0 million milestone payment after dosing the first subjects in a first-in-human Phase 1a dose-escalation trial with CDX-6114, and a $ 1.0 million milestone payment upon achievement of a milestone relating to formulation of CDX-6114.

The $ 4.0 million milestone payment that was triggered by the initiation of the trial was received in September 2018 and the $ 1.0 million milestone payment that was triggered by the achievement of a formulation relating to CDX-6114 was received in February 2019.

The upfront payment and the variable consideration relating to the progress payment of $ 4.0 million and milestone payment of $ 1.0 million are being recognized over time as the development work is being performed.

Revenue is being recognized using a single

measure of progress that depicts our performance in transferring control of the services, which is based on the ratio of level of effort incurred to date compared to the total estimated level of effort required to complete all performance obligations under the agreement.

We recognized development fees of $ 1.9 million, $ 9.9 million and $ 7.2 million in research and development revenue in 2019, 2018, and 2017, respectively.

We had deferred revenue related to the development fees attributed to the milestone payment and up-front fees of $ 13 thousand at December 31, 2019 and $ 1.9 million at December 31, 2018.

In October 2017, we entered into a Global Development, Option and License Agreement (the “Nestlé License Agreement”) with Société des Produits Nestlé (formerly known as Nestec Ltd.) (“Nestlé Health Science”) and, solely for the purpose of the integration and the dispute resolution clauses of the Nestlé License Agreement, Nestlé Health Science S.A., to advance CDX-6114, our enzyme biotherapeutic product candidate for the potential treatment of PKU.

We received an upfront cash payment of $ 14.0 million in 2017 upon the execution of the Nestlé License Agreement, a $ 4.0 million milestone payment after dosing the first subjects in a first-in-human Phase 1a dose-escalation trial with CDX-6114, and a $ 1.0 million milestone payment upon achievement of a milestone relating to formulation of CDX-6114.

The $ 4.0 million milestone payment that was triggered by the initiation of the trial was received in 2018 and the $ 1.0 million milestone payment that was triggered by the achievement of a formulation relating to CDX-6114 was received in February 2019.

The upfront payment and the variable consideration relating to the progress payment of $ 4.0 million and a milestone payment of $ 1.0 million were recognized over time as the development work was performed.

Revenue was recognized using a single measure of progress that depicted our performance in transferring control of the services, which was based on the ratio of level of effort incurred to date compared to the total estimated level of effort required to complete all performance obligations under the agreement.

We recognized $ 13 thousand, $ 1.9 million and $ 9.9 million in research and development revenue in 2020, 2019 and 2018, respectively.

Upon exercising its option, Nestlé Health Science assumed all responsibilities for future clinical development and commercialization of CDX-6114, with the exception of the completion of an extension study, CDX-6114-004, which was substantially completed in the fourth quarter of 2019.

Other potential payments from Nestlé Health Science to us under the Nestlé Agreement include (i) development and approval milestones of up to $ 85.0 million, (ii) sales-based milestones of up to $ 250.0 million in the aggregate, which aggregate amount is achievable if net sales exceed $ 1.0 billion in a single year, and (iii) tiered royalties, at percentages ranging from the middle single digits to low double-digits, of net sales of product.

In addition to the Nestlé Agreement, we and Nestlé Health Science concurrently entered into a Strategic Collaboration Agreement (the “Strategic Collaboration Agreement”) pursuant to which we and Nestlé Health Science will collaborate to leverage the CodeEvolver ® protein engineering technology platform to develop novel enzymes for Nestlé Health Science’s established Consumer Care and Medical Nutrition business areas.

Upon exercising its option, Nestlé Health Science assumed all responsibilities for future clinical development and commercialization of CDX-6114.

Other potential payments from Nestlé Health Science to us under the Nestlé License Agreement include (i) development and approval milestones of up to $ 85.0 million, (ii) sales-based milestones of up to $ 250.0 million in the aggregate, which aggregate amount is achievable if net sales exceed $ 1.0 billion in a single year, and (iii) tiered royalties, at percentages ranging from the middle single digits to low double-digits, of net sales of product.

In October 2017, we entered into the “Nestlé SCA pursuant to which we and Nestlé Health Science are collaborating to leverage the CodeEvolver ® protein engineering technology platform to develop novel enzymes for Nestlé Health Science’s established Consumer Care and Medical Nutrition business areas.

Under the Strategic Collaboration Agreement, we received an upfront payment of $ 1.2 million in 2017 and an incremental payment of $ 0.6 million in September 2018 for additional services.

We recognized research and development fees of $ 5.4 million, $ 3.6 million and $ 0.5 million in years ended December 31, 2019, 2018, and 2017, respectively.

We had deferred revenue balances of zero and $ 0.8 million at December 31, 2019 and December 31, 2018, respectively.

Concurrently, the Strategic Collaboration Agreement was extended through December 2021.

See Note 16, "Subsequent Events” in the notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K.

The Nestlé SCA has been extended through December 2021.

In January 2020, we entered into a development agreement with Nestlé Health Science pursuant to which we and Nestlé Health Science are collaborating to advance a lead candidate targeting a gastro-intestinal disorder discovered through our Nestlé SCA into pre-clinical and early clinical studies.

Under the Nestlé SCA and the development agreement, we recognized $ 7.9 million, $ 5.4 million and $ 3.6 million in research and development revenue in years ended December 31, 2020, 2019, and 2018, respectively.

Strategic Collaboration Agreement

In April 2018, we entered into the Porton Agreement with Porton to license key elements of Codexis’ biocatalyst technology for use in Porton’s global custom intermediate and API development and manufacturing business.

In April 2018, we entered into the Porton Agreement with Porton to license key elements of our biocatalyst technology for use in Porton’s global custom intermediate and API development and manufacturing business.

Under the Porton Agreement, we are eligible to receive annual collaboration fees and research and development revenues.

We received an initial collaboration fee of $ 0.5 million within 30 days of the effective date of the agreement and $ 1.5 million upon the first anniversary of the effective date of the agreement.

We received initial collaboration payments of $ 0.5 million and $ 0.5 million within 30 days of the effective date and on the first anniversary of the effective date of the Porton Agreement, respectively.

We also received annual collaboration payments of $ 1.0 million for each on the first and second anniversaries of the effective date of the Porton Agreement, respectively.

We are eligible to re ceive $ 1.0 million each annual collaboration payment on the third and fourth anniversaries of the effective date of the Porton Agreement, respectively .

We completed the technical transfer in the fourth quarter of 2018 and recognized $ 2.8 million in research and development revenue.

We recognized revenue related to the functional license provided to Porton at a point in time when control of the license was transferred to the customer.

As of December 31, 2019 and 2018, we had no deferred revenue balances.

Commercial Agreement

Under the agreement, we will supply Tate & Lyle with its requirements for these enzymes over a multiple year period and receive royalties on stevia products.

We recognized research and development revenue related to the Porton Agreement of $ 1.1 million, nil and $ 2.8 million in the years ended December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2020 and 2019, we had deferred revenue balances of $ 0.1 million and nil , respectively.

Platform Technology Transfer and License Agreement

In May 2019, we entered into a Platform Technology Transfer and License Agreement (the “Novartis CodeEvolver ® Agreement”) with Novartis Pharma AG (“Novartis”).

The Agreement allows Novartis to use Codexis’ proprietary CodeEvolver ® protein engineering platform technology in the field of human healthcare.

Under the Novartis CodeEvolver ® Agreement, we will transfer Codexis' proprietary CodeEvolver ® protein engineering platform technology to Novartis over approximately twenty months starting with the date on which we commence the technology transfer (the “Technology Transfer Period”).

As a part of this technology transfer, our company will provide to Novartis Codexis’ proprietary enzymes, proprietary protein engineering protocols and methods, and proprietary software algorithms.

In addition, teams of Codexis and Novartis

scientists will participate in technology training sessions and collaborative research projects at Codexis’ laboratories in Redwood City, California and at a designated Novartis laboratory in Basel, Switzerland.

In May 2019, we entered into a Platform Technology Transfer and License Agreement (the “Novartis CodeEvolver ® Agreement”) with Novartis.

The Agreement allows Novartis to use our proprietary CodeEvolver ® protein engineering platform technology in the field of human healthcare.

Under the Novartis CodeEvolver ® Agreement, we are transferring our proprietary CodeEvolver ® protein engineering platform technology to Novartis over approximately 25 months, starting with the date on which we commenced the technology transfer (the “Technology Transfer Period”).

As a part of this technology transfer, the Company provided to Novartis our proprietary enzymes, proprietary protein engineering protocols and methods, and proprietary software algorithms.

In addition, teams of the Company and Novartis scientists participated in technology training sessions and collaborative research projects at our laboratories in Redwood City, California and at a designated Novartis laboratory in Basel, Switzerland.

Upon completion of technology transfer, Novartis will have the CodeEvolver ® protein engineering platform technology installed at its designated laboratory.

Pursuant to the agreement, we received an upfront payment of $ 5.0 million shortly after the effective date of the Novartis CodeEvolver ® Agreement.

We are entitled to receive an additional $ 4.0 million subject to satisfactory completion of the second technology transfer milestone and an additional $ 5.0 million upon satisfactory completion of the third technology transfer milestone.

In consideration for the continued disclosure and license of improvements to the Codexis technology and materials during a multi-year period that begins on the conclusion of the Technology Transfer Period, Novartis will pay Codexis annual payments which amount to an additional $ 8.0 million.

Codexis also has the potential to receive quantity-dependent, usage payments for each API that is manufactured by Novartis using one or more enzymes that have been developed or are in development using the CodeEvolver ® protein engineering platform technology during the period that begins on the conclusion of the Technology Transfer Period and ends on the expiration date of the last to expire licensed patent.

These product-related usage payments, if any, will be paid by Novartis to Codexis for each quarter that Novartis manufactures API using a CodeEvolver ® -developed enzyme.

In the second quarter of 2020 we completed the second technology milestone transfer under the agreement and became eligible to receive a milestone payment of $ 4.0 million, which we subsequently received in July 2020.

We have also recognized $ 3.4 million for partial completion of the third technology milestone and we expect to receive payment in the first quarter of 2021.

Additionally, we are eligible to receive an additional $ 1.6 million upon satisfactory completion of the third technology transfer milestone.

In consideration for the continued disclosure and license of improvements to our technology and materials during a multi-year period that begins on the conclusion of the Technology Transfer Period (“Improvements Term”), Novartis will pay Codexis annual payments which amount to an additional $ 8.0 million.

The Company also has the potential to receive quantity-dependent, usage payments for each API that is manufactured by Novartis using one or more enzymes that have been developed or are in development using the CodeEvolver ® protein engineering platform technology during the period that begins on the conclusion of the Technology Transfer Period and ends on the expiration date of the last to expire licensed patent.

These product-related usage payments, if any, will be paid by Novartis to the Company for each quarter that Novartis manufactures API using a CodeEvolver ® -developed enzyme.

The usage payments will be based on the total volume of API produced using the CodeEvolver ® -developed enzyme.

These usage payments can begin in the clinical stage and will extend throughout the commercial life of each API.

Revenue for the combined initial license and technology transfer performance obligation, which is expected to occur over twenty months , is being recognized using a single measure of progress that depicts our performance in transferring control of the services, which is based on the ratio of level of effort incurred to date compared to the total estimated level of effort required to complete the performance obligation relating to the combined initial license and technology transfer.

Revenue for the combined initial license and technology transfer performance obligation, which is expected to occur over twenty-three months, is being recognized using a single measure of progress that depicts our performance in transferring control of the services, which is based on the ratio of level of effort incurred to date compared to the total estimated level of effort required to complete the performance obligation relating to the combined initial license and technology transfer.

Revenue allocated to future improvements will be recognized during the Improvement Term.

We recognized $ 11.3 million in research and development revenue in the year ended December 31, 2019 from the Novartis CodeEvolver ® Agreement.

As of December 31, 2019, we had no deferred revenue balance from Novartis.

We recognized $ 6.2 million and $ 11.3 million in research and development revenue in the year ended December 31, 2020 and 2019, respectively, from the Novartis CodeEvolver ® Agreement.

License Agreement

In December 2019, we entered a license agreement with Roche Sequencing Solutions, Inc.

(“Roche”) to provide Roche with Codexis’ EvoT4 DNA™ ligase high-performance molecular diagnostic enzyme.

(“Roche”) to provide Roche with our EvoT4 DNA™ ligase high-performance molecular diagnostic enzyme.

The royalty bearing license grants Roche worldwide rights to include the EvoT4 DNA™ ligase in its nucleic acid sequencing products and workflows.

Under the license agreement, we are to receive an initial collaboration fee payment of $ 750 thousand within 45 days of the effective date of the agreement and an additional $ 850 thousand within 60 days after the completion of technology transfer.

Under the license agreement, we received an initial collaboration fee payment of $ 0.8 million within 45 days of the effective date of the agreement, and we received an additional $ 0.9 million milestone after the completion of technology transfer in October 2020.

The agreement also contemplates milestone payments to Codexis upon the achievement of various development and commercialization events and royalty payments from commercial sales of the enzyme.

Cash Equivalents and Equity Securities

Cash equivalents at December 31, 2019 and cash equivalents and equity securities at December 31, 2018 consisted of the following (in thousands):

December 31, 2019

Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Estimated

Money market funds (1)

$ 71,248 $ — $ — $ 71,248 n/a

We recognized research and development fees of $ 1.1 million and nil in the years ended December 31, 2020 and 2019.

Strategic Collaboration and License Agreement

In March 2020, we entered into a Strategic Collaboration and License Agreement (the “Takeda Agreement”) with Shire Human Genetic Therapies, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical Co.

(“Takeda”) under which we are collaborating to research and develop protein sequences for use in gene therapy products for certain diseases (each, a “Field”) in accordance with each applicable program plan (each, a “Program Plan”).

In March 2020, we received an upfront nonrefundable cash payment of $ 8.5 million and we initiated activities under three Program Plans for Fabry Disease, Pompe Disease, and an undisclosed blood factor deficiency respectively (the “Initial Programs”).

We are primarily responsible for the research and development of protein sequences under the Program Plans (the “Protein Sequences”) and we are eligible to earn $ 15.4 million of research and development fees and pre-clinical milestone payments for the Initial Programs.

Takeda has the right, but not the obligation, to develop, manufacture and commercialize gene

therapy products that include nucleic acid sequences that encode the Protein Sequences (“Products”) at their expense.

Takeda has the right to a certain number of additional disease indications (“Reserved Target Indications”) for a limited period in which Takeda may initiate a Program Plan for one or more Reserved Target Indications (“Additional/Option Program,” with Initial Programs, the “Programs”), provided, (a) if Takeda elects to initiate an Additional/Option Program while the parties are collaborating on three other Programs at the time of such election, or (b) if Takeda elects to initiate an Additional/Option Program using the last remaining Reserved Target Indication, then Takeda must pay us an option exercise fee to initiate such Additional/Option Program.

We will own all rights to the Protein Sequences and corresponding nucleic acid sequences and related intellectual property rights and Takeda will own all rights to Products and related intellectual property rights.

We granted to Takeda an exclusive, worldwide, royalty-bearing, sublicensable license to use the Protein Sequences and their corresponding nucleic acid sequences to develop, manufacture and commercialize the applicable Products in the applicable Field.

We also granted to Takeda a limited non-exclusive, worldwide, sublicensable license (a) to research the Protein Sequences within or outside the applicable Fields and (b) to research the Products outside of the applicable Fields, which such rights exclude Takeda's right to perform any Investigational New Drug-enabling activities.

The licenses to research the Protein Sequences expire after a pre-determined period of time.

The term of the Takeda Agreement begins on the Effective Date and continues on a Product-by-Product and country-by-country basis, until the expiration of Takeda’s obligation to pay royalties to the Company with respect to that Product in that country.

The Takeda Agreement expires in its entirety upon the expiration of Takeda’s obligation to pay royalties to the Company with respect to the Products in all countries worldwide.

Subject to the terms of the Takeda Agreement, and after the first anniversary of the Effective Date with respect to the Initial Programs or after the first anniversary of confirmation of the applicable Program Plan by the parties with respect to the Additional/Option Programs, Takeda may terminate a Program upon specified prior written notice to the Company.

Subject to the terms of the Takeda Agreement, Takeda may terminate the Takeda Agreement, at will, on a Product-by-Product basis upon specified prior written notice to the Company and the Takeda Agreement in its entirety upon specified prior written notice to the Company.

Subject to the terms of the Takeda Agreement, Takeda may terminate the Takeda Agreement on a Product-by-Product basis for safety reasons upon specified prior written notice to the Company.

Either party may terminate the Takeda Agreement for an uncured material breach by the other party, or the other party’s insolvency or bankruptcy.

We are eligible to receive certain development and commercialization milestone payments up to $ 100.0 million per target gene, the modulation of which would lead to the treatment of the disease indications by the applicable Product.

We are also eligible to receive tiered royalties based on net sales of Products at percentages ranging from the middle-single digits to low single-digits.

We recognized research and development revenue related to the Takeda Agreement of $ 13.2 million in the year ended December 31, 2020.

As of December 31, 2020, we had a deferred revenue balance of $ 1.5 million from Takeda.

Master Collaboration and Research Agreement and Stock Purchase Agreement

In June 2020, we entered into a Stock Purchase Agreement with Molecular Assemblies, Inc.

(“MAI”) pursuant to which we purchased 1,587,050 shares of MAI's Series A preferred stock for $ 1.0 million.

In connection with the transaction, John Nicols, our President and Chief Operating Officer, also joined MAI’s board of directors.

Concurrently with our initial equity investment, we entered into a Master Collaboration and Research Agreement with MAI (the “MAI Agreement”), pursuant to which we are performing services utilizing our CodeEvolver ® protein engineering platform technology to improve DNA polymerase enzymes in exchange for compensation in the form of additional shares of MAI's Series A preferred stock.

Based on these services, the Company is eligible to earn additional shares of MAI's Series A preferred stock.

MAI will combine its advanced chemistries with our enzymes to drive the process to commercialization.

We are eligible to earn such non-monetary payments over ten to thirteen months , and any such shares would be issued thirty days in arrears after each calendar quarter-end.

We are also eligible to receive amounts for bonuses, targets and milestones on achievement of timeline and project goals specified in the statement of work ("SOW").

Payments for bonuses, targets and milestones on achievement of timeline and project goals are to be issued thirty days after the Company provides notification of completion.

Under the MAI Agreement, we will have the right to use and sell the engineered enzymes to third parties for any purpose other than for the synthesis of native DNA.

Under the MAI Agreement, we would make a $ 0.5 million payment to MAI upon our achievement of a milestone of $ 5.0 million in aggregate commercial sales to third parties of the engineered enzymes or any product incorporating or derived from the engineered enzymes for any purpose other than the synthesis of native DNA.

The MAI Agreement contemplates that we and MAI will enter into a Commercialization and Enzyme Supply Agreement (the “CESA”) within six months following the completion of certain timelines specified in the SOW.

In addition, we and MAI have agreed pursuant to the MAI Agreement to certain terms to be contained within the CESA in the event that the CESA becomes executed in the future.

Those include:

(a) that MAI would receive an exclusive license to use the DNA polymerase enzymes engineering by us under the MAI Agreement in the synthesis of native DNA and a non-exclusive license to use these enzymes for research and development on the synthesis of non-native DNA, and (b) we would become the exclusive manufacturer of these enzymes for MAI, its affiliates and licensees.

We received 714,171 shares of MAI's Series A preferred stock from research and development services in the year ended December 31, 2020, and recognized $ 0.9 million from these services with MAI in the year ended December 31, 2020.

At December 31, 2020, we had $ 0.5 million in contract asset due from MAI for services rendered.

Payment for the services rendered was subsequently received in form of additional MAI Series A preferred stock in the first quarter of 2021.

Investments in Non-Marketable Securities

Non-Marketable Debt Securities

We classify non-marketable debt securities, which are accounted for as available-for-sale, within Level 3 in the fair value hierarchy because we estimate the fair value based on a qualitative analysis using the most recent observable transaction price and other significant unobservable inputs including volatility, rights, and obligations of the securities we hold.

We determine gains or losses on the sale or extinguishment of non-marketable debt securities using a specific identification method.

Unrealized gains and losses on non-marketable debt securities are recorded as a component of other comprehensive loss until realized.

Realized gains or losses are recorded as a component of other expenses, net.

We recognized no unrealized or realized gains or losses during the year ended December 31, 2020.

As of December 31, 2020 and 2019, the fair value of non-marketable debt securities was $ 1.0 million and nil , respectively.

As of December 31, 2020, the adjusted cost, carrying value and fair value of non-marketable debt securities is the following (in thousands):

December 31, 2020

Adjusted Cost Gross Unrealized Gains (3) Gross Unrealized Losses (3) Estimated

Money market funds (1)

$ 31,225 $ — $ — $ 31,225 n/a

Common shares of CO 2 Solutions (2)

563 25 — 588 n/a

Total $ 31,788 $ 25 $ — $ 31,813

(1) Money market funds are classified in cash and cash equivalents on our consolidated balance sheets.

(2) Common shares of CO 2 Solutions are classified in equity securities on our consolidated balance sheets.

As of December 31, 2019, the total cash and cash equivalents balance of $ 90.5 million was comprised of money market funds of $ 71.2 million and cash of $ 19.3 million held with major financial institutions worldwide.

As of December 31, 2018, the total cash and cash equivalents balance of $ 53.0 million was comprised of money market funds of $ 31.2 million and cash of $ 21.8 million held with major financial institutions worldwide.

In December 2009, we purchased 10,000,000 common shares of CO 2 Solutions, a company based in Quebec, Canada, whose shares are publicly traded in Canada on TSX Venture Exchange.

Our purchase represented approximately 16.6 % of CO 2 Solutions’ total common shares outstanding at the time of investment and was made in a private placement subject to a four -month statutory resale restriction.

This restriction expired on April 15, 2010.

Our investment in CO 2 Solutions is recorded at its fair value.

See Note 7, “Fair Value Measurements.”

In the third quarter of 2019, we sold 1.3 million common shares of our investment in CO 2 Solutions and received proceeds of $ 0.1 million.

In addition, we also reviewed our investment in the common shares of CO 2 Solutions in conjunction with CO 2 Solutions' announcement to file under the Bankruptcy and Insolvency Act (Canada), concurrent with the suspension in trading of its equity securities.

We assessed the fair market value of the investment given no available observable market pricing and concluded to write down the investment to zero .

We recognized an unrealized loss of $ 0.5 million and $ 84 thousand related to our investment in CO 2 Solutions in other expense, in the consolidated statements of operations for the years ended December 31, 2019, and 2018, respectively.

By contractual maturity:

Adjusted Cost and Carrying value Fair Value

Non-marketable debt securities due in 1 year or less $ 1,000 $ 1,000

There were no investments in non-marketable debt securities at December 31, 2019.

Non-Marketable Equity Securities

Non-marketable equity securities are investments in privately held companies without readily determinable market values.

The fair value of non-marketable equity securities that have been remeasured due to impairment are classified within Level 3.

We adjust the carrying value of non-marketable equity securities which have been remeasured during the period and recognize resulting gains or losses as a component of other expenses, net.

We recognized no unrealized or realized gain or losses during the year ended December 31, 2020.

At December 31, 2020 and 2019, the carrying value of non-marketable equity securities is the following (in thousands):

Non-marketable equity securities $ 1,450 $ —

Fair Value Measurements

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Money market funds $ 127,567 $ — $ — $ 127,567

Non-marketable debt securities $ — $ — $ 1,000 $ 1,000

Total $ 127,567 $ — $ 1,000 $ 128,567

December 31, 2019

Money market funds $ 71,248 $ — $ — $ 71,248

Common shares of CO2 Solutions 588

$ 31,813 $ — $ — $ 31,813

We determine the fair value of Level 1 and Level 2 assets using quoted prices in active markets for identical assets.

We estimated the fair value of our investment in 10,000,000 common shares of CO 2 Solutions using the market value of common shares as determined by trading on the TSX Venture Exchange, and we classified our investment in CO 2 Solutions within the fair value hierarchy as Level using the quoted prices in an active market to determine the fair value.

In the third quarter of 2019, we assessed the fair market value of our investment in the common shares of CO 2 Solutions and given no available observable market pricing on the TSX Venture Exchange due to CO 2 Solutions declaring bankruptcy and the market halting its trading activity, wrote down the investment to zero .

See Note 6, "Cash Equivalents and Equity Securities" for more information on the investment in common shares of CO 2 Solutions.

In 2019, we recognized an unrealized loss of $ 0.5 million in other expense in the Consolidated Statements of Operations.

There were no investments in non-marketable debt and equity securities at December 31, 2019.

The fair value of non-marketable securities remeasured due to impairment would be classified within level 3.

During the year ended December 31, 2020, we did no t recognize any significant other-than-temporary impairment losses.

After the adoption of ASU 2016-13, we did no t recognize any significant credit losses.

Balance Sheets Details

Accounts receivable

The following is a summary of activity in our allowance for doubtful accounts for the periods presented (in thousands):

Cash Equivalents

Cash equivalents at December 31, 2020 and 2019 consisted of the following (in thousands):

December 31, 2020 December 31, 2019

Adjusted Cost Estimated Fair Value Adjusted Cost Estimated Fair Value

Money market funds (1) (2)

$ 127,567 $ 127,567 $ 71,248 $ 71,248

Allowance - beginning of period $ ( 34 ) $ ( 34 ) $ ( 421 )

Write-offs and other (1)

Allowance - end of period $ ( 34 ) $ ( 34 ) $ ( 34 )

(1) The change in allowance for doubtful accounts was mainly related to the write-off of receivables from a foreign customer.

(1) Money market funds are classified in cash and cash equivalents on our consolidated balance sheets.

(2) Average Contractual Maturities (in days) is not applicable.

As of December 31, 2020, the total cash and cash equivalents balance of $ 149.1 million was comprised of money market funds of $ 127.6 million and cash of $ 21.5 million held with major financial institutions worldwide.

Inventories consisted of the following (in thousands):

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Property and equipment, net $ 9,675 $ 6,282

(1) Fully depreciated laboratory equipment with a cost of $ 1.0 million and $ 0.3 million were retired during the year ended December 31, 2019 and 2018, respectively.

(1) Fully depreciated property and equipment with a cost of $ 1.8 million and $ 1.0 million we re ret ired during the years ended December 31, 2020 and 2019, respectively.

(2) Construction in progress includes equipment received but not yet placed into service pending installation.

Depreciation expense included in the consolidated statements of operations as follows (in thousands):

Year Ended December 31,

2020 2019 2018

Depreciation expense $ 1,950 $ 1,570 $ 1,147

Goodwill had a carrying value of approximately of $ 3.2 million as of December 31, 2020 and 2019.

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Accrued professional and outside service fees 2,589 1,802

Deferred rent — 343

Lease incentive obligation — 425

Other 513 352

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Equity Incentive Plans

In June 2019, our board of directors (the "Board") and stockholders approved the 2019 Incentive Award Plan (the "2019 Plan").

In 2019, our board of directors (the “Board”) and stockholders approved the 2019 Incentive Award Plan (the “2019 Plan”).

The 2019 Plan superseded and replaced in its entirety our 2010 Equity Incentive Plan (the “2010 Plan”) which was effective in March 2010, and no further awards will be granted under the 2010 Plan;

however, the terms and conditions of the 2010 Plan will continue to govern any outstanding awards thereunder.

The 2010 Plan provided for the grant of incentive stock options, non-statutory stock options, restricted stock units ("RSUs"), restricted stock awards ("RSAs"), performance-contingent restricted stock units ("PSUs"), performance based options ("PBOs"), stock appreciation rights, and stock purchase rights to our employees, non-employee directors and consultants.

The 2010 Plan provided for the grant of incentive stock options, non-statutory stock options, restricted stock units (“RSUs”), restricted stock awards (“RSAs”), performance-contingent

restricted stock units (“PSUs”), performance based options (“PBOs”), stock appreciation rights, and stock purchase rights to our employees, non-employee directors and consultants.

The number of shares of our common stock available for issuance under the 2019 Plan is equal to the sum of (i) 7,897,144 shares and (ii) any shares subject to awards granted under the 2010 Plan that were outstanding as of April 22, 2019 and thereafter terminate, expire, lapse or are forfeited;

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In June 2019, 8.1 million shares authorized for issuance under the 2019 Plan were registered under the Securities Act of 1933, as amended (the “Securities Act”).

The 2019 Plan provided for the grant of stock options, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock or cash based awards and dividend equivalents to eligible employees and consultants of the Company or any parent or subsidiary, as well as members of the Board.

The 2019 Plan provides for the grant of stock options, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock or cash based awards and dividend equivalents to eligible employees and consultants of the Company or any parent or subsidiary, as well as members of the Board.

As of December 31, 2020, total shares remaining available for issuance under the 2019 Plan were approximately 6.8 million shares.

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If, at the time of a grant, the optionee directly or by attribution owns stock possessing more than 10 % of the total combined voting power of all of our outstanding capital stock, the exercise price for these options must be at least 110 % of the fair value of the underlying common stock.

Stock options granted to employees generally have a maximum term of 10 years and vest over 4 years from the date of grant, of which 25 % vest at the end of one year, and 75 % vest monthly over the remaining three years.

Stock options granted to employees generally have a maximum term of ten years and vest over four years from the date of grant, of which 25 % vest at the end of one year , and 75 % vest monthly over the remaining three years .

We may grant options with different vesting terms from time to time.

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Achievement below the threshold level would result in no shares being eligible to vest in respect of the PSUs and PBOs.

In the first quarter of 2019, we awarded PSUs ("2019 PSUs") and PBOs ("2019 PBOs"), each of which commenced vesting based upon the achievement of various weighted performance goals, including sustained revenue and performance enzyme growth, strategic advancement of biotherapeutics, cash balance and strategic plan development.

In 2020, we awarded PSUs (“2020 PSUs”) and PBOs (“2020 PBOs”), each of which commence vesting based upon the achievement of various weighted performance goals, including corporate revenue, performance enzyme segment gross margin, major new biotherapeutics publicity events, strategic performance enzyme and biotherapeutics deliverables, and strategic plan development.

As of December 31, 2020, we estimated that the 2020 PSUs and 2020 PBOs performance goals would be achieved at 88 % of the target level, and recognized expenses accordingly.

In the first quarter of 2018, we awarded PSUs ("2018 PSUs") and PBOs ("2018 PBOs"), each of which commenced vesting based upon the achievement of various weighted performance goals, including core business revenue growth, cash balance, new licensing collaborations, new research and development service revenue arrangements, technology advancement and novel therapeutic enzymes advancement.

In 2019, we awarded PSUs (“2019 PSUs”) and PBOs (“2019 PBOs”), each of which commenced vesting based upon the achievement of various weighted performance goals, including sustained revenue and performance enzyme growth, strategic advancement of biotherapeutics, cash balance and strategic plan development.

In the first quarter of 2020, we determined that the 2019 PSUs and 2019 PBOs performance goals had been achieved at 84 % of the target level, and recognized expenses accordingly.

Accordingly, one-half of the shares underlying the 2018 PSUs and PBOs vested in the first quarter of 2019 and one-half of the shares underlying the 2018 PSUs and PBOs will vest in the first quarter of 2020, in each case subject to the recipient’s continued service on each vesting date.

In 2017, we awarded PSUs ("2017 PSUs") and PBOs ("2017 PBOs"), each of which commenced vesting based upon the achievement of various weighted performance goals, including revenue growth, fundraising, service revenue, new platform license revenue, and strategic advancement.

In the first quarter of 2018, we determined that the 2017 PSU and PBO performance goals had been achieved at 134.2 % of the target level, and recognized expenses accordingly.

Accordingly, one-half of the shares underlying the 2017 PSUs and PBOs vested in the first quarter of 2018 and one-half of the shares underlying the 2017 PSUs and PBOs vested in the first quarter of 2019, in each case subject to the recipient’s continued service on each vesting date.

Accordingly, 50 % of the shares underlying the 2019 PSUs and PBOs vested in the first quarter of 2020 and 50 % of the shares underlying the 2019 PSUs and PBOs will vest in the first quarter of 2021, in each case subject to the recipient’s continued service on each vesting date.

In 2018, we awarded PSUs (“2018 PSUs”) and PBOs (“2018 PBOs”), each of which commenced vesting based upon the achievement of various weighted performance goals, including core business revenue growth, cash balance, new licensing collaborations, new research and development service revenue arrangements, technology advancement and novel therapeutic enzymes advancement.

In the first quarter of 2019, we determined that the 2018 PSUs and 2018 PBOs performance goals had been achieved at 118 % of the target level, and recognized expenses accordingly.

Accordingly, 50 % of the shares underlying the 2018 PSUs and PBOs vested in the first quarter of 2019 and in the first quarter of 2020, respectively, in each case subject to the recipient’s continued service on each vesting date.

Stock-Based Compensation Expense:

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We estimated the fair value of stock options using the Black-Scholes-Merton option-pricing model based on the date of grant.

The following summarize the ranges of weighted-average assumptions used to estimate the fair value of employee stock options granted:

The following summarizes the weighted-average assumptions used to estimate the fair value of employee and non-employee stock options granted:

Year Ended December 31,

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Expected dividend yield 0.0 % 0.0 % 0.0 %

In October 2017, we granted an option to purchase 11,100 shares of common stock to a non-employee as compensation for services valued at $ 48 thousand with the following assumptions used to estimate the fair value of non-employee stock options:

(i) volatility rate at 60.6 %, risk-free interest rate of 2.4 % and (ii) no expected dividend yield.

The option vested over a period of six months with one-sixth of total number of shares subject to the option vesting on each one month anniversary of the grant date.

During the years ended December 31, 2019 and December 31, 2018, we did no t grant any options to purchase shares of common stock to non-employees.

The following summarizes the weighted-average assumptions used to estimate the fair value of 76,000 shares of stock options granted to non-employees during the year ended December 31, 2020 for services valued at $ 0.4 million:

Expected life (years) 5.4

Volatility 51.6 %

Risk-free interest rate 0.4 %

Expected dividend yield 0.0 %

The weighted average grant date fair value per share of non-employee stock options granted in 2020 was $ 5.04 .

The Company did no t grant shares of stock options to non-employees during the years ended December 31, 2019 and 2018.

The following tables summarizes stock option activities:

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Outstanding at December 31, 2018 4,112 $ 4.81

( 772 ) $ 5.56

Granted 406 $ 20.68

Exercised ( 1,045 ) $ 4.50

Forfeited/Expired ( 326 ) $ 11.01

( 340 ) $ 6.66

Outstanding at December 31, 2019 3,147 $ 6.31

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Vested and expected to vest at December 31, 2020 3,279 $ 6.96 5.3 $ 48,786

The weighted average grant date fair value per share of stock options granted in 2019, 2018 and 2017 were $ 10.77 , $ 5.34 and $ 2.51 , respectively.

The weighted average grant date fair value per share of employee stock options granted in 2020, 2019 and 2018 were $ 6.03 , $ 10.77 and $ 5.34 , respectively.

The total intrinsic value of options exercised in 2020, 2019 and 2018 were $ 1.8 million, $ 13.6 million and $ 7.6 million, respectively.

As of December 31, 2019, there was $ 3.7 million of unrecognized stock-based compensation cost related to non-vested options, which we expect to recognize over a weighted average period of 2.39 years.

As of December 31, 2020, there was $ 4.1 million of unrecognized stock-based compensation, net of expected forfeitures, related to unvested stock options, which we expect to recognize over a weighted average period of 2.4 years.

Restricted Stock Awards (RSAs)

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Shares Weighted Average

(In Thousands)

Non-vested balance at December 31, 2017 159 $ 4.68

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Non-vested balance at December 31, 2018 55 $ 12.83

( 151 ) $ 4.71

Non-vested balance at December 31, 2018 55 $ 12.83

Granted 40 $ 17.18

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Non-vested balance at December 31, 2019 35 $ 17.18

Granted 96 $ 11.44

Vested ( 35 ) $ 17.18

Non-vested balance at December 31, 2020 96 $ 11.44

The total fair value, as of the vesting date, of RSAs vested in fiscal 2020, 2019 and 2018 were $ 0.4 million, $ 1.0 million and $ 2.1 million respectively.

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Forfeited/Expired

( 30 ) $ 4.12

Non-vested balance at December 31, 2018 348 $ 5.66

( 290 ) $ 4.09

Granted 72 $ 19.19

Vested ( 210 ) $ 5.03

Forfeited/Expired ( 9 ) $ 13.60

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( 495 ) $ 7.16

Forfeited/Expired

( 27 ) $ 3.65

Non-vested balance at December 31, 2018 240 $ 7.48

Granted 95 $ 14.98

Vested ( 200 ) $ 6.58

Forfeited/Expired

( 15 ) $ 15.58

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Expected dividend yield 0.0 % 0.0 % 0.0 %

The following table summarizes PBO activities:

The following tables summarizes PBO activities:

Number of Shares Weighted Average Grant Date Fair Value Per Share

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Outstanding at December 31, 2017 1,720 $ 2.54

Granted 1,720 $ 2.54

Outstanding at December 31, 2017 1,720 $ 2.54

Exercised ( 84 ) $ 2.54

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Outstanding at December 31, 2019 1,260 $ 4.75

( 389 ) $ 6.42

Outstanding at December 31, 2020 1,560 $ 5.05

Shares Weighted

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Vested and expected to vest at December 31, 2020 1,510 $ 9.54 7.2 $ 18,567

The total fair value of exercised PBOs were $ 1.3 million for 2019, $ 0.2 million for 2018 and zero for 2017.

The total fair value of exercised PBOs wer e nil for 2020, $ 1.3 million for 2019 and $ 0.2 million for 2018.

As of December 31, 2020, there was $ 1.1 million of unrecognized stock-based compensation cost related to non-vested PBOs, which we expect to recognize over a weighted average period of 0.5 years.

Capital Stock

Private Offering

In June 2019, we entered into a Securities Purchase Agreement with an affiliate of Casdin Capital ("Casdin") pursuant to which we issued and sold to Casdin 3,048,780 shares of our common stock ("Shares") at a purchase price of $ 16.40 per share.

Public Offerings

In December 2020, we completed an underwritten public offering in which we issued and sold 4,928,572 shares of our common stock, par value $ 0.0001 per share, at a public offering price of $ 17.50 per share.

We received gross proceeds of $ 86.3 million, net of underwriting discounts and commissions of $ 5.2 million and direct offering expenses of $ 0.3 million for net proceeds of $ 80.8 million.

In April 2018, we completed an underwritten public offering of 4,312,500 shares of our common stock, par value $ 0.0001 per share, at a public offering price of $ 9.25 per share.

We received net proceeds after deducting the underwriting discounts and commissions and estimated offering expenses of approximately $ 37.3 million.

Private Placement

In June 2019, we entered into a Securities Purchase Agreement with an affiliate of Casdin Capital, LLC (Casdin) pursuant to which we issued and sold to Casdin 3,048,780 shares of our common stock at a purchase price of $ 16.40 per share.

After deducting issuance costs of $ 0.1 million from the Private Offering, our net proceeds were $ 49.9 million.

On November 6, 2019, we filed a prospectus supplement to our registration statement on Form S-3ASR (File No.

333-228693) registering the resale of the Shares.

In June 2019, we also entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with Casdin.

Pursuant to the Registration Rights Agreement, we agreed, subject to certain conditions, to prepare and file a registration statement with the Securities and Exchange Commission (the “SEC”) within 180 days after the closing of the Private Offering, if we are a “well known seasoned issuer” at such time (210 days if we are not then a “well known seasoned issuer”) for purposes of registering the resale of the Shares and any shares of common stock issued as a dividend or other distribution with respect to the Shares (collectively, the “Securities”).

We further agreed, among other things, to indemnify the selling holders under the registration statement from certain losses, claims, damages and liabilities and to pay all fees and expenses (excluding underwriting discounts and selling commissions) incident to the performance of, or compliance with, our obligations under the Registration Rights Agreement.

On November 6, 2019, we filed a prospectus supplement to our registration statement on Form S-3ASR (File No.

333-228693), registering the resale of the Securities.

Public Offering

In April 2018, we completed an underwritten public offering of 4,312,500 shares of our common stock, including the exercise in full by the underwriters of their option to purchase 562,500 of our shares, at a public offering price of $ 9.25 per share.

After deducting the underwriting discounts and commissions and estimated offering expenses, net proceeds were approximately $ 37.3 million.

The Private Offering was exempt from registration pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) the Securities Act, and Regulation D under the Securities Act.

In January 2005, we implemented a 401(k) Plan covering certain employees.

Currently, all of our United States based employees over the age of 18 are eligible to participate in the 401(k) Plan.

Under the 401(k) Plan, eligible employees may elect to reduce their current compensation up to a certain annual limit and contribute these amounts to the 401(k) Plan.

Under the 401(k) Plan, eligible employees may elect

to reduce their current compensation up to a certain annual limit and contribute these amounts to the 401(k) Plan.

We may make matching or other contributions to the 401(k) Plan on behalf of eligible employees.

We recorded employer matching contributions expense of $ 0.8 million, $ 0.7 million, and $ 0.6 million in the years ended December 31, 2020, 2019, and 2018, respectively.

Our loss before provision (benefit for) income taxes was as follows (in thousands):

Our loss before provision for (benefit from) income taxes was as follows (in thousands):

Year Ended December 31,

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Current provision (benefit):

Federal $ — $ — $ —

State $ 5 $ 5 $ 5

Foreign 342 18 ( 13 )

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Deferred provision (benefit):

Federal — — —

Foreign ( 8 ) ( 6 ) ( 29 )

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Provision for (benefit from) income taxes $ 339 $ 17 $ ( 37 )

Reconciliation of the provision for income taxes calculated at the statutory rate to our provision for (benefit from) income taxes is as follows (in thousands):

Reconciliation of the provision for (benefit from) income taxes calculated at the statutory rate to our provision for (benefit from) income taxes is as follows (in thousands):

Year Ended December 31,

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Change in valuation allowance 6,359 6,561 4,301

Change in statutory tax rate — — 34,100

Provision for (benefit from) income taxes $ 339 $ 17 $ ( 37 )

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Net deferred tax liabilities $ ( 32 ) $ ( 40 )

ASC Topic 740 requires that the tax benefit of NOLs, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on our ability to generate sufficient taxable income within the carryforward period.

ASC 740 requires that the tax benefit of NOLs, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on our ability to generate sufficient taxable income within the carryforward period.

Because of our history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not more likely than not to be realized and, accordingly, has provided a valuation allowance against our deferred tax assets.

Accordingly, the net deferred tax assets in all our jurisdictions have been fully reserved by a valuation allowance.

The net valuation allowance increased by $ 6.5 million during the year ended December 31, 2019, increased by $ 5.2 million during the year ended December 31, 2018;

and decreased by $ 20.4 million during the year ended December 31, 2017.

The net valuation allowance increased by $ 6.4 million during the year ended December 31, 2020, increased by $ 6.5 million during the year ended December 31, 2019, and increased by $ 5.2 million during the year ended December 31, 2018.

At such time as it is determined that it is more likely than not that the deferred tax assets are realizable, the valuation allowance will be reduced.

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Income tax expense or benefit from continuing operations is generally determined without regard to other categories of earnings, such as discontinued operations and other comprehensive income.

An exception is provided in ASC Topic 740 when there is aggregate income from categories other than continuing operations and a loss from continuing operations in the current year.

An exception is provided in ASC 740 when there is aggregate income from categories other than continuing operations and a loss from continuing operations in the current year.

In this case, the tax benefit allocated to continuing operations is the amount by which the loss from continuing operations reduces the tax expenses recorded with respect to the other categories of earnings, even when a valuation allowance has been established against the deferred tax assets.

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subsidiaries’ undistributed earnings as of December 31, 2020 as the remaining foreign jurisdictions are in an accumulative loss position.

We apply the provisions of ASC Topic 740 to account for uncertain income taxes.

We apply the provisions of ASC 740 to account for uncertain income taxes.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

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Total interest and penalties recognized in the consolidated statement of operations was $ 39 thousand, $ 32 thousand and $ 37 thousand, respectively, in 2020, 2019 and 2018.

Total penalties and interest recognized in the balance sheet was $ 0.4 million and $ 0.4 million, respectively, in 2019 and 2018.

The total unrecognized tax benefits that, if recognized currently, would impact our company’s effective tax rate were $ 0.3 million and $ 0.3 million as of December 31, 2019 and 2018, respectively.

Total penalties and interest recognized in the balance sheet was $ 0.4 million in 2020 and 2019.

The total unrecognized tax benefits that, if recognized currently, would impact our company’s effective tax rate were $ 0.3 million as of December 31, 2020 and 2019.

We do not expect any material changes to our uncertain tax positions within the next 12 months.

We are not subject to examination by United States federal or state tax authorities for years prior to 2002 and foreign tax authorities for years prior to 2013.

In December 2017, the SEC issued Staff Accounting Bulletin No.

In December 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin No.

118 (“SAB 118”), which provided a measurement period of up to one year from the enactment date of the Tax Cuts and Jobs Act of 2017 (the “Act”) for companies to complete the accounting for the Tax Act and its related impacts.

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the impact of the Transition Tax, the revaluation of deferred tax assets and liabilities to reflect the 21% corporate tax rate, the impact to the aforementioned items on state income taxes.

We completed our accounting for the income tax effects under the Tax Cuts and Jobs Act (the "Act") that are relevant to the Company and required to be recorded and disclosed pursuant to FASB ASC 740, Income Taxes.

Accordingly, any and all provisional amounts previously recorded in accordance with SEC Staff Accounting Bulletin No.

118 were adjusted to reflect their final amounts.

We completed our accounting for the income tax effects under the Tax Cuts and Jobs Act (the “Act”) that are relevant to the Company and required to be recorded and disclosed pursuant to ASC 740.

Accordingly, any and all provisional amounts previously recorded in accordance with SAB 118 were adjusted to reflect their final amounts.

Beginning in 2018, the global intangible low-taxed income (“GILTI”) provisions in the Tax Act required us to include, in our U.S.

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Both are acceptable methods subject to an accounting policy election.

At December 31, 2018, we finalized our policy and have elected to use the period cost method for GILTI.

At December 31, 2018, we finalized our policy and elected to use the period cost method for GILTI.

In 2020, we did not incur any GILTI inclusion as our foreign subsidiaries generated losses.

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Our headquarters are located in Redwood City, California, where we occupy approximately 77,300 square feet of office and laboratory space in four buildings within the same business park of Metropolitan Life Insurance Company (“MetLife”).

Our lease (“Lease”) with MetLife includes approximately 28,200 square feet of space located at 200 and 220 Penobscot Drive, Redwood City, California (the “Penobscot Space”), approximately 37,900 square feet of space located at 400 Penobscot Drive, Redwood City, California (the “Building 2 Space”), approximately 11,200 square feet of space located at 501 Chesapeake Drive, Redwood City, California (the “501 Chesapeake Space”), and approximately 29,900 square feet of space located at 101 Saginaw Drive, Redwood City, California (the “Saginaw Space”).

We entered into the initial lease with MetLife for a portion of this space in 2004 and the lease has been amended multiple times since then to adjust space and terms of the lease "(Lease").

In February 2019, we have entered into an Eighth Amendment to the Lease ( the “Eighth Amendment”) with MetLife with respect to the Penobscot Space, the Building 2 Space and the 501 Chesapeake Space to extend the term of the Lease for additional periods.

Pursuant to the Eighth Amendment, the term of the lease of the Penobscot Space and the Building 2 Space has been extended through May 2027.

Our Lease agreement with MetLife ("RWC Lease") includes approximately 28,200 square feet of space located at 200 and 220 Penobscot Drive, Redwood City, California (the “200/220 Penobscot Space”) and approximately 37,900 square feet of space located at 400 Penobscot Drive, Redwood City, California (the “400 Penobscot Space”) (the 200/220 Penobscot Space and the 400 Penobscot Space are collectively referred to as the “Penobscot Space”), and approximately 11,200 square feet of space located at 501 Chesapeake Drive, Redwood City, California (the “501 Chesapeake Space”).

Until the end of January 2020, we also leased approximately 29,900 square feet of space located at 101 Saginaw Drive, Redwood City, California (the “Saginaw Space”).

During the period January 1, 2020 through January 31, 2020, we subleased approximately 26,500 square feet of the Saginaw Space to Minerva Surgical, Inc.

The lease and sublease for the Saginaw Space both expired at the end of January 2020.

During the period from February 1, 2020 through April 30, 2020, we subleased approximately 3,400 square feet at 101 Saginaw Drive from Minerva Surgical, Inc.

The sublease expired at the end of April 2020.

We entered into the initial lease with MetLife for our facilities in Redwood City in 2004 and the RWC lease has been amended multiple times since then to adjust the leased space and terms of the Lease.

In February 2019, we entered into an Eighth Amendment to the Lease (the “Eighth Amendment”) with MetLife with respect to the Penobscot Space and the 501 Chesapeake Space to extend the term of the Lease for additional periods.

Pursuant to the Eighth Amendment, the term of the lease of the Penobscot Space has been extended through May 2027.

The lease term for the 501 Chesapeake Space has been extended to May 2029.

We have two consecutive options to extend the term of the lease for the Penobscot Space, the Building 2 Space and the 501 Chesapeake Space for an additional period of five years per option.

Our lease on the Saginaw Space will expire on January 30, 2020.

In October 2019, we entered into a sub-sublease with Minerva Surgical, Inc.

with respect to the Saginaw Space for approximately 3,400 square feet from February 2020 for three months .

Our sublease of approximately 26,500 square feet of the Saginaw Space to a subtenant will end on January 2020.

Our sublease of approximately 13,000 square feet of the Penobscot Space to a different subtenant ended in November 2019.

We have one (1) option to extend the term of the lease for the Penobscot Space for five ( 5 ) years, and one (1) separate option to extend the term of the lease for the 501 Chesapeake Space for five ( 5 ) years.

We incurred $ 3.6 million of capital improvement costs related to the facilities leased from MetLife through December 31, 2012.

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The reimbursements were recorded once cash was received.

Prior to the adoption of ASC 842, we recorded the reimbursements as liabilities on the consolidated balance sheets and amortized the reimbursements on a straight line basis over the term of the lease as a reduction in rent expense.

On adoption of ASC 842, lease incentive obligations were reclassified on the balance sheet as an operating lease right-of-use assets.

Rent expense for the Redwood City properties is recognized on a straight-line basis over the term of the lease.

At December 31, 2018, lease incentive obligations was $ 0.5 million.

In those fiscal periods prior to January 1, 2019, we recorded reimbursements from the landlord for tenant improvements as liabilities in the consolidated balance sheets and we amortized the reimbursements on a straight line basis over the term of the RWC Lease as a reduction to rent expense.

On January 1, 2019 we adopted ASU 2016-02 and related amendments, Leases (Topic 842) (“ASC 842”), which provided a new basis of accounting for leases.

Under the provisions of ASC 842, we reclassified lease incentive obligations as operating lease right-of-use assets in the consolidated balance sheets.

Rent expense for the Redwood City properties is recognized on a straight-line basis over the term of the RWC Lease.

We are required to restore certain areas of the Redwood City facilities that we are renting to their original form.

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Accretion expense related to our asset retirement obligations was nominal in 2020 and 2019.

Pursuant to the terms of the lease agreement, we exercised our right to deliver a letter of credit in lieu of a security deposit.

The letter of credit is collateralized by deposit balances held by the bank in the amount of $ 1.1 million and $ 0.7 million as of December 31, 2019 and 2018, respectively, and are recorded as non-current restricted cash on the consolidated balance sheets.

Pursuant to the terms of the RWC Lease, we exercised our right to deliver a letter of credit in lieu of a security deposit.

The letter of credit is collateralized by deposit balances held by the bank in the amount of $ 1.1 million as of December 31, 2020 and 2019, and are recorded as non-current restricted cash on the consolidated balance sheets.

Finance Leases

In December 2016, we entered into a three-year financing lease agreement with a third party supplier for the purchase of laboratory equipment that was partially financed through a finance lease of approximately $ 0.4 million.

The lease became effective upon delivery of the equipment, which occurred in February 2017, and the term of the lease was three years from the effective date.

The lease became effective upon delivery of the equipment, in February 2017 and term of the three-year lease was from February 2017 and expired in February 2020.

This financing agreement was accounted for as a finance lease due to bargain purchase options at the end of the lease.

In April 2017, we entered into a three-year financing lease agreement with a third party supplier for the purchase of information technology equipment for approximately $ 0.3 million.

The effective date of the lease was May 19, 2017 and the term of the lease was three years.

Adoption of ASC 842

On January 1, 2019, we adopted ASC 842, using a modified retrospective approach and effective date method per adoption of ASU 2018-11.

We completed the full analysis by January 2019 and we evaluated the ROU assets and lease obligations using the incremental borrowing rate (IBR) at December 31, 2018 because the implicit rate is not readily determinable in the lease agreement.

Upon adoption of ASC 842, all existing leases were classified as either operating leases or finance leases.

All existing leases that were classified as capital leases in accordance with Topic 840 were reclassified as finance leases.

We recorded $ 26.6 million of ROU assets and $ 27.6 million of lease obligations for operating leases, and $ 0.5 million of ROU assets and $ 0.3 million of lease obligations for finance leases in the balance sheet in the first quarter of 2019.

The following table shows the reconciliation of ROU assets and lease obligations, with balances reflecting the adoption of ASC 842, related to both operating leases and finance leases and gives effect to the modified retrospective adoption and effective date method under the lease guidance on January 1, 2019 (in thousands):

Operating Leases Finance Leases

Right-of-use assets, Balance at December 31, 2018 $ — $ —

Changes in the period:

Right-of-use assets created upon adoption of ASC 842 26,617 493

Right-of-use assets, balance at January 1, 2019 $ 26,617 $ 493

Lease obligations, balance at December 31, 2018 $ — $ —

Changes in the period:

Lease obligations created upon adoption of ASC 842 27,562 302

Lease obligations, balance at January 1, 2019 $ 27,562 $ 302

Lease related costs under non-cancellable finance leases and operating leases under non-cancellable subleases were as follows (in thousands):

December 31, 2019

Finance lease costs:

The effective term the three-year lease was from May 2017 and expired in April 2020.

Lease costs, amounts included in measurement of lease obligations and other information related to non-cancellable operating leases and finance leases for the year ended December 31, 2020 and 2019 were as follows (in thousands):

Year Ended December 31,

Amortization of right-of-use assets $ 152 $ 217

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Operating lease cost 3,879 4,556

Short-term lease costs (1)

Sublease income ( 55 ) ( 957 )

Total lease cost (2)

All short-term lease costs are related to leases with a lease term of one month or less.

Lease costs for the year ended December 31, 2019 as compared to years ended December 31, 2018 and 2017 reflected the effects of adopting the provisions of ASC 842 which provided a new basis of accounting for leases during fiscal year 2019.

Operating lease costs were $ 3.2 million and $ 3.2 million for the years ended December 31, 2018 and 2017, respectively, partially offset by sublease income of $ 1.1 million and $ 1.4 million for the years ended December 31, 2018 and 2017 respectively.

Finance lease payments were $ 0.3 million and $ 0.2 million for the years ended December 31, 2018 and 2017, respectively.

Other information related to non-cancellable finance leases and operating leases under non-cancellable subleases for the year ended December 31, 2019 were as follows (in thousands, except discount rate and lease term):

$ 4,024 $ 3,826

(1) Short-term lease costs on leases with terms of over one month and less than one year.

(2) The Company had no variable lease costs.

Lease costs for the years ended December 31, 2020 and 2019 as compared to year ended December 31, 2018 reflected the effects of adopting the provisions of ASC 842 which provided a new basis of accounting for leases in 2019.

Operating lease costs were $ 3.2 million for the year ended December 31, 2018, partially offset by sublease income of $ 1.1 million.

Finance lease payments were $ 0.3 million for the year ended December 31, 2018.

Amounts included in measurement of lease obligations:

Year Ended December 31,

Operating cash flows from operating leases $ 2,816 $ 3,279

Operating cash flow from finance leases $ 1 $ 10

Financing cash flows from finance leases $ 60 $ 242

Non-cash activity:

Operating Lease - Right-of-use assets obtained in exchange for lease liabilities $ — $ 26,617

Finance Lease - Right-of-use assets obtained in exchange for lease liabilities $ — $ 493

Operating Lease Finance Lease

Other information:

Operating Leases Finance Leases

Weighted-average remaining lease term (in years) 7.7 years 0.3 years

Weighted-average remaining lease term (in years) 5.5 years —

Weighted-average discount rate 6.6 % 5.0 %

Cash paid for amounts included in measurement of lease obligations:

Operating cash flows $ 3,279 $ 10

Financing cash flows $ — $ 242

Non-cash activity:

Right-of-use assets obtained in exchange for lease liabilities $ 26,617 $ 493

As of December 31, 2019, under ASC 842, our maturity analyses of annual undiscounted cash flows of the non-cancellable finance and operating leases are as follows (in thousands):

Years ending December 31, Finance Leases Operating Leases

2020 $ 60 $ 2,816

As of December 31, 2020, our maturity analyses of annual undiscounted cash flows of the non-cancellable operating leases are as follows (in thousands):

Years ending December 31, Operating Leases

Thereafter 8,626

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Lease obligations $ 24,951

(1) Operating Lease minimum payments have not been reduced by future minimum sublease rentals of $ 0.1 million to be received under

non-cancellable subleases.

In October 2019, we entered into a sub-sublease with Minerva Surgical, Inc.

with respect to the Saginaw Space for the period beginning February 2020 for three months for a short-term lease commitment of $ 47 thousand.

As of December 31, 2018, under ASC 840, maturity analysis of annual undiscounted cash flows of the non-cancellable capital and operating leases as follows (in thousands):

Years ending December 31, Capital Leases Operating Leases

2019 $ 252 $ 3,280

Total minimum lease payments (1)

amount representing interest ( 10 )

Present value of capital lease obligations 303

current portion ( 242 )

Long-term portion of capital leases $ 61

(1) Minimum payments have not been reduced by future minimum sublease rentals of $ 0.9 million to be received under non-cancellable subleases.

Subsequent Event

In the first quarter of 2021, we entered into a lease agreement with ARE-San Francisco No.

63, LLC (“ARE”) to lease a portion of a facility comprising approximately 36,593 rentable square feet in San Carlos, California to serve as additional office and research and development laboratory space (the “San Carlos Space”).

We expect to commence occupancy of the San Carlos Space in November 2021 once tenant improvements are substantially completed by ARE in accordance with the construction plan.

For additional information and a maturity analyses of the estimated annual undiscounted cash flows of the operating lease, see Note 17, “Subsequent Events”

Other Commitments

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Credit Facility

In June 30, 2017, we entered into a credit facility (the “Credit Facility”) consisting of term loans (“Term Debt”) up to $ 10.0 million, and advances (“Advances”) under a revolving line of credit (“Revolving Line of Credit”) up to $ 5.0 million with an accounts receivable borrowing base of 80 % of eligible accounts receivable.

In June 30, 2017, we entered into a credit facility (the “Credit Facility”) with Western Alliance Bank consisting of term loans (“Term Debt”) up to $ 10.0 million, and advances (“Advances”) under a revolving line of credit (“Revolving Line of Credit”) up to $ 5.0 million with an accounts receivable borrowing base of 80 % of eligible accounts receivable.

At December 31, 2020 and 2019, we have not drawn from the Credit Facility.

We may draw on the Revolving Line of Credit at any time prior to the September 30, 2020 maturity date.

On October 1, 2023, loans drawn under the Term Debt mature and the Revolving Line of Credit terminates.

Loans made under the Term Debt bears interest through maturity at a variable rate based on the LIBOR plus 3.60 %.

Advances under the Revolving Line of Credit bear interest at a variable annual rate equal to the greater of (i) 1.00 % above the prime rate and (ii) 5.00 %.

We may draw on the Term Debt and the Revolving Line of Credit at any time prior to October 1, 2021 and October 1, 2024, respectively.

On October 1, 2024 loans drawn under the Term Debt mature and the Revolving Line of Credit terminate.

Loans made under the Term Debt bear interest through maturity equal to the greater of (i) 3.75 % or (ii) the sum of (A) Index Rate (prime rate published in the Money Rates section of the Western Edition of The Wall Street Journal plus (B) 0.50 %.

Advances made under the Revolving Line of Credit bear interest at a variable annual rate equal to the equal to the greater of (i) 4.25 % or (ii) the sum of (A) the prime rate plus (B) 1.0 %.

Our obligations under the Credit Facility are secured by a lien on substantially all of our personal property other than our intellectual property.

The Credit Facility includes a number of customary covenants and restrictive financial covenants including meeting minimum product revenues levels and maintaining certain minimum cash levels with the lender.

The Credit Facility includes a number of customary covenants and restrictive financial covenants including meeting minimum product revenue levels and maintaining certain minimum cash levels with the lender.

The Credit Facility’s financial covenants restrict the ability of the Company to transfer collateral, incur additional indebtedness, engage in mergers or acquisitions, pay dividends or make other distributions, make investments, create liens, sell assets, or sell certain assets held at foreign subsidiaries.

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We may elect to prepay in full the Term Debt and Advances under the Revolving Line of Credit at any time.

Prepayments of Term Debt and early termination of the Revolving Line of Credit are subject to prepayment and final payment fees are as follows:

Term Debt Revolving Line of Credit

Through and including the first anniversary of the funding date of the first Term Debt drawn 2.0 %

After the first anniversary of the funding date of the first Term Debt drawn and before the maturity date 1.0 %

On the earliest to occur of the maturity date, the acceleration of Term Debt drawn or prepayment of Term Debt drawn 5.5 %

Through and including the first anniversary of the closing date 3.0 %

After the first anniversary of the closing date through and including the second anniversary of the closing date 2.0 %

After the second anniversary of the closing date through and including the third anniversary of the closing date 1.0 %

Legal Proceedings

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There were no accruals for expenses related to indemnification issues for any periods presented.

Impact of COVID-19

We are subject to risks and uncertainties as a result of the current COVID-19 pandemic.

The COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, communities and business operations, as well as the U.S.

economy and other economies worldwide.

To date, we and our collaboration partners have been able to continue to supply our enzymes to our customers worldwide.

R&D operations for several projects were temporarily suspended from mid-March 2020 through the end of April in accordance with these Orders.

In May 2020, we initiated limited R&D operations and have gradually ramped up operations such that we are currently utilizing the majority of our normal R&D capacity.

Additionally, we resumed small scale manufacturing at our Redwood City pilot plant in May 2020.

As of the date of issuance of these consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact our financial condition, liquidity, or results of operations in the future is uncertain.

Related Party Transactions

Molecular Assemblies, Inc.

In June 2020, we entered into a Stock Purchase Agreement with Molecular Assemblies, Inc.

(“MAI”) pursuant to which we purchased 1,587,050 shares of MAI's Series A preferred stock for $ 1.0 million.

In connection with the transaction,

John Nicols, our President and Chief Executive Officer, also joined MAI’s board of directors.

We received 714,171 shares of MAI's Series A preferred stock from research and development services with MAI and we recognized $ 0.9 million in research and development revenue from these services with MAI in the year ended December 31, 2020.

Our investment in MAI Series A preferred stock was $ 1.5 million at December 31, 2020.

At December 31, 2020, we had $ 0.5 million in contract asset due from MAI for services rendered.

Payment for the services rendered was subsequently received in the form of additional MAI Series A preferred stock in the first quarter of 2021.

For addition information, see Note 5, "Collaborative Arrangements."

In November 2020, we entered into the SynBio Innovation Accelerator (“Accelerator”) collaboration with Casdin Capital, LLC ("Casdin").

The Accelerator is an informal collaboration with no commitment, designed to invest in the bio-production space to stimulate innovation which may deliver products leveraging the engineering technology and operational capability of Codexis and the resources, network and investment processes of Casdin, a shareholder with greater than a 5% ownership in Codexis' publicly traded common stock.

The first Accelerator investment was in an available-for-sale non-marketable interest-bearing debt securities which are convertible subordinated notes issued by Arzeda Corp., an early-stage computational protein design company.

The cost to acquire and the carrying value of the investment as of December 31, 2020 was $ 1.0 million.

For additional information, see Note 7, “Fair Value Measurements.”

AstraZeneca PLC

Cheng, a member of our board of directors, joined AstraZeneca PLC as Executive Vice President, Operations and Information Technology in June 2015.

We sell biocatalyst products to AstraZeneca PLC and its controlled purchasing agents and contract manufacturers.

We recognized $ 1.0 million, $ 0.6 million and $ 0.1 million for the years ended December 31, 2019, 2018 and 2017, respectively, from transactions with AstraZeneca PLC and its controlled purchasing agents and contract manufacturers.

At December 31, 2019 and 2018, we had $ 0.3 million and $ 0.2 million of receivables from AstraZeneca PLC and its controlled purchasing agents and contract manufacturers, respectively.

Cheng, who served as a member of our board of directors until June 2020, joined AstraZeneca PLC as Executive Vice President, Operations and Information Technology in June 2015.

We sold biocatalyst products to AstraZeneca PLC and its controlled purchasing agents and contract manufacturers.

We recognized $ 0.1 million of revenue in 2020 through the date of Ms.

Cheng’s departure from our board of directors.

We recognized $ 1.0 million and $ 0.6 million of revenue from transactions with AstraZeneca in the years ended December 30, 2019 and 2018, respectively.

At December 31, 2020 and 2019, we had nil

and $ 0.3 million of related party receivables from AstraZeneca PLC and its controlled purchasing agents and contract manufacturers, respectively.

Settlement of Short Swing Profit Claim

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We have also developed a pipeline of other biotherapeutic drug candidates, which are in preclinical development, and in which we expect to continue to make additional investments with the aim of advancing additional product candidates targeting other therapeutic areas.

In March 2020 we entered into the Takeda Agreement with Takeda under which we will research and develop protein sequences for use in gene therapy products for certain diseases.

Factors considered in determining the two reportable segments of the Company include the nature of business activities, the management structure directly accountable to our CODM for operating and administrative activities, availability of discrete financial information and information presented to the Board of Directors.

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This provides the CODM with more meaningful segment profitability reporting to support operating decisions and allocate resources.

The following table provides financial information by our reportable business segments along with a reconciliation to consolidated loss before income taxes (in thousands):

The following tables provide financial information by our reportable business segments along with a reconciliation to consolidated loss before income taxes (in thousands):

Year Ended December 31, 2020 Year Ended December 31, 2019

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Loss before income taxes $ ( 11,918 ) $ ( 10,915 )

(1) Research and development expenses and Selling, general and administrative expenses exclude depreciation.

(1) For the year ended December 31, 2019, research and development expenses and selling, general and administrative expenses exclude depreciation and amortization of finance leases.

For the year ended December 31, 2018, research and development expenses and selling, general and administrative expenses exclude depreciation.

(2) Corporate costs include unallocated selling, general and administrative expense, interest income, and other income and expenses.

The following table provides stock-based compensation expense included in income (loss) from operations by segment (in thousands):

Year Ended December 31, 2019 Year Ended December 31, 2018 Year Ended December 31, 2017

Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total

Stock-based compensation $ 2,303 $ 695 $ 2,998 $ 2,591 $ 338 $ 2,929 $ 2,306 $ 208 $ 2,514

Stock-based compensation expense included in corporate services were $ 3.9 million, $ 5.0 million and $ 4.6 million for the years ended December 31, 2019, December 31, 2018 and December 31, 2017, respectively.

The following table provides stock-based compensation expense included in income (loss) from operations (in thousands):

Years Ended December 31,

2020 2019 2018

Performance Enzymes $ 2,970 $ 2,303 $ 2,591

Novel Biotherapeutics 768 695 338

Corporate cost 3,990 3,945 4,960

Total $ 7,728 $ 6,943 $ 7,889

Significant Customers

Customers that each contributed 10% or more of our total revenues were as follows:

Customers that each accounted for 10% or more of our total revenues were as follows:

Percentage of Total Revenues

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Merck 26 % 28 % 29 %

Novartis 23 % * 14 %

Nestlé Health Science 11 % 15 % 22 %

Novartis * 23 % *

Tate & Lyle * * 13 %

Takeda Pharmaceutical Co.

* Percentage was less than 10%

Customers that each accounted for 10% or more of our accounts receivable balance for the period presented were as follows:

Customers that each accounted for 10% or more of accounts receivable balances as of the periods presented as follows:

Percentage of Accounts Receivables

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Novartis 25 % *

Kyorin Pharmaceutical Co Ltd * 16 %

* Percentage was less than 10%

Geographic Information

Geographical Information

Geographic revenues are identified by the location of the customer and consist of the following (in thousands):

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Total revenues $ 69,056 $ 68,458 $ 60,594

Identifiable long-lived assets by location and goodwill by reporting unit as of year-end were as follows (in thousands):

Long-lived assets

Identifiable long-lived assets by location was as follows (in thousands):

United States $ 31,176 $ 30,387

Identifiable goodwill was as follows (in thousands):`

Year Ended December 31, 2020 Year Ended December 31, 2019

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Goodwill $ 2,463 $ 778 $ 3,241 $ 2,463 $ 778 $ 3,241

Allowance for Credit Losses

The following summarizes the financing receivables allowance for credit losses (in thousands):

Year Ended December 31, 2020

Beginning Balance, January 1, 2020 $ 34

Current year provision 40

Ending Balance, December 31, 2020 $ 74

The following tables below summarizes accounts receivable by aging category (in thousands):

December 31, 2020

31-60 Days 61-90 Days 91 Days and over Total over 31 Days Current Total balance

Accounts receivable $ 688 $ 7 $ 27 $ 722 $ 13,172 $ 13,894

December 31, 2019

31-60 Days 61-90 Days 91 Days and over Total over 31 Days Current Total balance

Accounts receivable $ 191 $ 8 $ 62 $ 261 $ 8,802 $ 9,063

Subsequent Events

Nestlé Health Science Development Agreement to develop CDX-7108

Concurrently, the Strategic Collaboration Agreement was extended through December 2021.

See Note 5, "Collaborative Agreements" regarding the Strategic Collaboration Agreement.

In the first quarter of 2021, we entered into a lease agreement with ARE-San Francisco No.

We expect to commence occupancy of the San Carlos Space in November 2021 once tenant improvements are substantially completed by ARE in accordance with the construction plan.

The construction plan includes Codexis-specific improvements necessary for operations at the lease commencement date.

The budget provides a net tenant improvement allowance of $ 6.3 million plus an additional allowance of up to $ 2.7 million.

If we use the additional allowance, ARE will have an enforceable right to payment by us in the form of equal monthly additional rent payments at a certain interest rate through the lease term.

The useful life of improvements made under the additional allowance are the lesser of useful life or lease term.

The terms include an initial annualized base rent of approximately $ 2.5 million which are subject to scheduled 3 % annual rent increases, plus certain operating expenses.

The lease has a 10-year term with one option to extend the term for an additional period of 5 years.

We have provided ARE with an approximately $ 0.4 million security deposit in the form of a letter of credit.

We have the right to sublease the facility, subject to landlord consent.

An estimated maturity analyses of the annual undiscounted cash flows of the operating lease is as follows (in thousands):

Years ending December 31, Operating lease

Thereafter 17,690

Total minimum lease payments 27,969

imputed interest 5,328

Lease obligations $ 22,641

Selected Quarterly Financial Data (Unaudited)

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(3) PSUs, PBOs, and cash bonus awards are granted to certain employees and executives and are subject to our performance in achieving pre-determined criteria approved by our board of directors.

Based on the actual achievement of the annual goals, we updated the calculation of the annual expense in the fourth quarter which resulted in true-up adjustments of approximately $(0.9) million in 2019 and $(0.5) million in 2018, primarily in selling, general and administrative expense.

Based on the actual achievement of the annual goals, we updated the calculation of the annual expense in the fourth quarter which resulted in estimate revisions of approximately $(0.1) million in 2020 and $(0.9) million in 2019, primarily in selling, general and administrative expense.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data