What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-06 compared with 2021-05-07 · 229 added, 124 removed, 567 unchanged (38% of the section changed)

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(In Thousands, Except Per Share Amounts)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Current assets:

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100,000 shares authorized;

64,488 shares and 64,283 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

64,623 shares and 64,283 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 542,519 536,516

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(In Thousands, Except Per Share Amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Product revenue $ 14,717 $ 4,504 $ 24,943 $ 9,604

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Interest income 206 57 382 323

Other expenses, net ( 88 ) ( 86 )

Other income (expense), net 23 13 ( 63 ) ( 72 )

Loss before income taxes ( 4,257 ) ( 6,037 ) ( 13,322 ) ( 13,684 )

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Capital Accumulated Deficit Total Stockholders' Equity

Three months ended March 31, 2021 Shares Amount

Three months ended June 30, 2021 Shares Amount

Balance as of April 1, 2021 64,488 $ 6 $ 539,220 $ ( 375,487 ) $ 163,739

Exercise of stock options 95 — 455 — 455

Release of stock awards 42 — — — —

Employee stock-based compensation — — 2,779 — 2,779

Non-employee stock-based compensation — — 65 — 65

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

Net loss — — — ( 4,265 ) ( 4,265 )

Balance as of June 30, 2021 64,623 $ 6 $ 542,519 $ ( 379,752 ) $ 162,773

Common Stock Additional

Capital Accumulated Deficit Total Stockholders' Equity

Three months ended June 30, 2020 Shares Amount

Balance as of April 1, 2020 59,017 $ 6 $ 449,121 $ ( 350,061 ) $ 99,066

Exercise of stock options 27 — 158 — 158

Release of stock awards 81 — — — —

Employee stock-based compensation — — 1,935 — 1,935

Non-employee stock-based compensation — — 4 — 4

Taxes paid related to net share settlement of equity awards — — ( 33 ) — ( 33 )

Net loss — — — ( 6,344 ) ( 6,344 )

Balance as of June 30, 2020 59,125 $ 6 $ 451,185 $ ( 356,405 ) $ 94,786

See accompanying notes to the unaudited condensed consolidated financial statements

Codexis, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(In Thousands)

Common Stock Additional

Capital Accumulated Deficit Total Stockholders' Equity

Six months ended June 30, 2021 Shares Amount

Balance as of January 1, 2021 64,283 6 536,516 ( 366,419 ) 170,103

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Net loss — — — ( 13,333 ) ( 13,333 )

Balance as of March 31, 2021 64,488 $ 6 $ 539,220 $ ( 375,487 ) $ 163,739

Balance as of June 30.

2021 64,623 $ 6 $ 542,519 $ ( 379,752 ) $ 162,773

Common Stock Additional

Capital Accumulated Deficit Total Stockholders' Equity

Three months ended March 31, 2020 Shares Amount

Six months ended June 30, 2020 Shares Amount

Balance as of January 1, 2020 58,877 $ 6 $ 447,920 $ ( 342,409 ) $ 105,517

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Employee stock-based compensation — — 4,104 — 4,104

Non-employee stock-based compensation — — 4 — 4

Taxes paid related to net share settlement of equity awards ( 84 ) — ( 1,040 ) — ( 1,040 )

Net loss — — — ( 13,996 ) ( 13,996 )

Balance as of March 31, 2020 59,017 $ 6 $ 449,121 $ ( 350,061 ) $ 99,066

Balance as of June 30, 2020 59,125 $ 6 $ 451,185 $ ( 356,405 ) $ 94,786

See accompanying notes to the unaudited condensed consolidated financial statements

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(Unaudited, in Thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities:

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Proceeds from sale of property and equipment 29 —

Investment in equity securities ( 630 ) ( 1,000 )

Net cash used in investing activities ( 4,945 ) ( 2,490 )

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Interest paid $ 3 $ 4

Income taxes paid $ — $ 5

Supplemental non-cash investing and financing activities:

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Assets received for research and development revenue earned $ 1,350 $ —

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets as of March 31, 2021 and 2020 to the total of the same such amounts shown above:

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets as of June 30, 2021 and 2020 to the total of the same such amounts shown above in the unaudited condensed consolidated statements of cash flows:

Cash and cash equivalents $ 129,506 $ 75,649

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Also in October 2017, we entered into a strategic collaboration agreement with Nestlé Health Science (“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.

In June 2020, we also entered into a Master Collaboration and Research Agreement (the “MAI Agreement”) with Molecular Assemblies, Inc ("MAI") 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 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 Executive Officer, also joined MAI’s board of directors.

See Note 14, "Subsequent Event" for additional information.

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

In April 2021, we purchased an additional 1,000,000 shares of MAI's Series A preferred stock for $ 0.6 million.

See Note 12 "Segment, Geographical and Other Revenue Information" for additional information.

Below are brief descriptions of our business segments:

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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.

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

Our first lead program was for the potential treatment of 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 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.

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 preclinical and early clinical studies a lead candidate targeting a gastrointestinal disorder, CDX-7108, discovered through the Nestlé SCA.

During 2021, 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 the fourth quarter of 2021.

Additionally, the parties are progressing three programs under the Nestlé SCA targeting different gastrointestinal disorders.

In March 2020, we entered into the Takeda Agreement pursuant to which we are collaborating to research and develop protein sequences for use in gene therapy products for certain disease indications in accordance with the respective program plans for Fabry Disease, Pompe Disease, and an undisclosed blood factor deficiency.

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Of these programs, the Fabry disease program is the most advanced, with multiple sequences, including CDX-6311, having been provided to Takeda.

In May 2021, Takeda elected to exercise their option to expand the collaboration into a fourth program for an undisclosed rare genetic disorder.

Business Update Regarding COVID-19

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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 minimal impact on revenue for the three months ended March 31, 2021.

We believe that these disruptions have had a minimal impact on revenue for the three and six months ended June 30, 2021.

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.

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In May 2020, we 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.

Additionally, we resumed 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.

The extent to which the COVID-19 pandemic may materially impact our financial condition, liquidity, or results of operations in the future is uncertain.

The near and long term impact of COVID-19 to our financial condition, liquidity, or results of operations in the future remains uncertain.

Although some of the Orders that were enacted to control the spread of COVID-19 were scaled back and the vaccine rollout has expanded, surges in the spread of COVID-19 due to the emergence of new more contagious variants or the ineffectiveness of the vaccines against such strains, may result in the reimplementation of certain Orders, which could adversely impact our business.

For additional information on the various risks posed by the COVID-19 pandemic, please read Item 1A.

Risk Factors included in this Quarterly Report on Form 10-Q.

Risk Factors included in our Annual Report on Form 10-K, for the fiscal year ended December 31, 2020, filed on March 1, 2021.

Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying Unaudited Condensed 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") for interim financial information and include all the information and notes required by GAAP for complete financial statements.

The accompanying Unaudited Condensed 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") for interim financial information but does not include all the information and notes required by GAAP for complete financial statements.

These interim Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2020.

The condensed consolidated balance sheet at December 31, 2020 has been derived from the audited consolidated financial statements at that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements.

The significant accounting policies used in preparation of the Unaudited Condensed Consolidated Financial Statements for the three months ended March 31, 2021 and 2020, are consistent with those discussed in Note 2 to the audited consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K and are updated below as necessary.

There have been no significant changes in our significant accounting policies or

critical accounting estimates since December 31, 2020.

The Unaudited Condensed Consolidated Financial Statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to present fairly our financial position as of March 31, 2021, results of our operations for the three months ended March 31, 2021 and 2020, changes in stockholders' equity for the three months ended March 31, 2021 and 2020, and cash flows for the three months ended March 31, 2021 and 2020.

The condensed consolidated balance sheet at

December 31, 2020 has been derived from the audited consolidated financial statements at that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements.

The significant accounting policies used in preparation of the Unaudited Condensed Consolidated Financial Statements for the three and six months ended June 30, 2021 and 2020, are consistent with those discussed in Note 2 to the audited consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K and are updated below as necessary.

There have been no significant changes in our significant accounting policies or critical accounting estimates since December 31, 2020.

Certain prior year amounts have been reclassified in the Unaudited Condensed Statements of Cash Flows to conform to the 2021 presentation, however these reclassifications had no effect on the reported results of of operations.

The Unaudited Condensed Consolidated Financial Statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to present fairly our financial position as of June 30, 2021, results of our operations for the three and six months ended June 30, 2021 and 2020, changes in stockholders' equity for the three and six months ended June 30, 2021 and 2020, and cash flows for the six months ended June 30, 2021 and 2020.

The interim results are not necessarily indicative of the results for any future interim period or for the entire year.

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and its wholly owned subsidiaries.

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

All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

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Financial Statement Exclusion

The total net loss in the Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020, is not different from the Unaudited Condensed Consolidated Statements of Comprehensive Loss for the same periods.

Accordingly, the Unaudited Condensed Consolidated Financial Statements exclude the Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2021 and 2020.

The net loss in the Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020, is not different from the Unaudited Condensed Consolidated Statements of Comprehensive Loss for the same periods.

Accordingly, the Unaudited Condensed Consolidated Financial Statements exclude the Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2021 and 2020.

Accounting Pronouncements

Recently adopted accounting pronouncements

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, Income Taxes (Topic 740):

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes which is intended to simplify various aspects related to accounting for income taxes.

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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 Unaudited Condensed Consolidated Financial Statements upon adoption.

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.

Unless otherwise discussed, we believe that the recently issued standards that are not yet effective will not have a material impact on our Unaudited Condensed Consolidated Financial Statements upon adoption.

In May 2021, FASB issued ASU No.

2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, a consensus of the Emerging Issues Task Force .

The standard establishes a principles-based framework in accounting for modifications of freestanding equity-classified written call options on the basis of the economic substance of the underlying transaction.

The standard also requires incremental financial statement disclosures.

The standard affects entities that present earnings per share in accordance with the guidance in Topic 260, Earnings Per Share.

The standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years with early adoption is permitted by applying the standard as of the beginning of the fiscal year that includes that interim period.

The standard may be adopted prospectively for modifications or exchanges occurring on or after the effective date.

We will evaluate modifications of equity-classified written call options to determine applicability of the standard on occurrence;

however, we believe that the adoption of ASU 2021-04 will have no impact on our Unaudited Condensed 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.

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

The standard may be adopted on a

modified retrospective or fully retrospective method of transition and on adoption, entities may irrevocably elect the fair value option in accordance with Subtopic 825-10, Financial Instruments—Overall, for any financial instrument that is a convertible security.

We believe that the effect of the adoption of ASU 2020-06 will have no impact on our Unaudited Condensed Consolidated Financial Statements and related disclosures.

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

The standard may be adopted on a modified retrospective or fully retrospective method of transition and on adoption, entities may irrevocably elect the fair value option in accordance with Subtopic 825-10, Financial Instruments—Overall, for any financial instrument that is a convertible security.

We believe that the adoption of ASU 2020-06 will have no impact on our Unaudited Condensed Consolidated Financial Statements and related disclosures.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

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

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

however, we believe that effects of the adoption of ASU 2020-04 will have no impact on our Unaudited Condensed Consolidated Financial Statements and related disclosures.

There have been no other recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2021, as compared to the recent accounting pronouncements described in herein, that are of significance or potential significance to us.

however, we believe that the adoption of ASU 2020-04 will have no impact on our Unaudited Condensed Consolidated Financial Statements and related disclosures.

There have been no other recent accounting pronouncements or changes in accounting pronouncements during the three and six months ended June 30, 2021, as compared to the recent accounting pronouncements described in herein, that are of significance or potential significance to us.

Revenue Recognition

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Segment information is as follows (in thousands):

Three months ended March 31, 2021 Three months ended March 31, 2020

Three months ended June 30, 2021 Three months ended June 30, 2020

Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total

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Total revenues $ 21,585 $ 3,868 $ 25,453 $ 7,506 $ 7,461 $ 14,967

Six months ended June 30, 2021 Six months ended June 30, 2020

Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total

Major products and service:

Product Revenue $ 24,943 $ — $ 24,943 $ 9,604 $ — $ 9,604

Research and development revenue 10,872 7,670 18,542 8,775 11,258 20,033

Total revenues $ 35,815 $ 7,670 $ 43,485 $ 18,379 $ 11,258 $ 29,637

Primary geographical markets:

$ 6,574 $ 4,199 $ 10,773 $ 4,171 $ 7,960 $ 12,131

8,979 3,471 12,450 5,987 3,298 9,285

20,262 — 20,262 8,221 — 8,221

Total revenues $ 35,815 $ 7,670 $ 43,485 $ 18,379 $ 11,258 $ 29,637

Contract Balances

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Contract assets $ 4,528 $ 4,526

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deferred revenue $ 5,479 $ 4,791

We had no asset impairment charges related to contract assets in the three months ended March 31, 2021 and 2020.

During the three months ended March 31, 2021, the increase in contract assets was primarily due to increases in product revenue from contracts subject to over time revenue recognition.

The increase in unbilled receivables were primarily due to the timing of billings.

The increase in deferred revenue was nominal compared to prior period.

During the three months ended March 31, 2020, decreases in contract assets were primarily due to contract assets that were subsequently invoiced as our right to consideration for goods and services became unconditional.

Increases in unbilled receivables were primarily due to the timing of billings.

The increase in deferred revenue were primarily due to cash advances received in excess of revenue recognized.

We had no asset impairment charges related to financial assets in the three and six months ended June 30, 2021 and 2020.

Contract assets remained unchanged as of June 30, 2021 and December 31, 2020.

The increase in unbilled receivables was primarily due to the timing of billings.

The increase in deferred revenue was primarily due to cash advances received in excess of revenue recognized.

We recognized the following revenues (in thousands):

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

Revenue recognized in the period for:

2021 2020 2021 2020

Amounts included in contract liabilities at the beginning of the period:

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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 periods.

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 March 31, 2021.

The balances in the table below are partially based on judgments involved in estimating future orders from customers subject to the exercise of material rights pursuant to respective contracts as of March 31, 2021 (in thousands):

Remainder of 2021 2022 2023 2024 and Thereafter Total

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

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2021 2020 2021 2020

Shares issuable under the Equity Incentive Plan 5,366 5,289 5,366 5,289

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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.

In the three months ended March 31, 2021, we recognized $ 0.1 million in interest income from amortization of debt discount and interest earned on our investment in non-marketable debt security, and $ 68 thousand in other expenses, net, on the change in the fair value of an embedded bifurcated derivative.

We recognized no unrealized or realized gains or losses during the three months ended March 31, 2021.

We recognized no interest income, other expenses, and unrealized or realized gains or losses during the three months ended March 31, 2020.

Realized gains or losses are recorded as a component of other income (expense), net.

In the three and six months ended June 30, 2021, we recognized $ 0.2 million and $ 0.3 million, respectively, in interest income from amortization of debt discount and interest earned on our investment in non-marketable debt security, and $ 57.5 thousand in other income and $ 10.5 thousand in other expense , respectively, in other income (expense), net, on the change in the fair value of an embedded bifurcated derivative.

We recognized no unrealized or realized gains or losses during the three and six months ended June 30, 2021.

We recognized no interest income, other expenses, and unrealized or realized gains or losses during the three and six months ended June 30, 2020.

The following table presents balances of the adjusted cost and carrying value and fair value of non-marketable debt security by contractual maturity (in thousands):

March 31, 2021

June 30, 2021

Adjusted Cost and Carrying Value Fair Value

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Non-Marketable Equity Securities

Non-marketable equity securities are investments in privately held companies without readily determinable market values.

Non-marketable equity securities are investments in privately held companies without readily determinable market value.

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.

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 three months ended March 31, 2021 and 2020.

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 income (expense), net.

We recognized no unrealized or realized gain or losses during the three and six months ended June 30, 2021 and 2020.

The following table presents balances of the carrying value of non-marketable equity securities (in thousands):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Non-marketable equity securities $ 3,430 $ 1,450

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The following tables present the financial instruments that were measured at fair value on a recurring basis within the fair value hierarchy (in thousands):

March 31, 2021

June 30, 2021

Level 1 Level 2 Level 3 Total

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The fair value of non-marketable securities remeasured due to impairment would be classified within Level 3.

During the three months ended March 31, 2021 and 2020, we did no t recognize any significant credit losses no r other-than-temporary impairment losses on non-marketable securities.

During the three and six months ended June 30, 2021 and 2020, we did no t recognize any significant credit losses no r other-than-temporary impairment losses on non-marketable securities.

The carrying value of our non-marketable securities approximated fair value.

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Cash Equivalents

Cash equivalents as of March 31, 2021 and December 31, 2020, consisted of the following (in thousands):

March 31, 2021 December 31, 2020

Cash equivalents as of June 30, 2021 and December 31, 2020, consisted of the following (in thousands):

June 30, 2021 December 31, 2020

Adjusted Cost Estimated Fair Value Adjusted Cost Estimated Fair Value

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Average Contractual Maturities (in days) is not applicable.

As of March 31, 2021, the total cash and cash equivalents balance of $ 139.7 million was comprised of money market funds of $ 122.1 million and cash of $ 17.6 million held with major financial institutions.

As of June 30, 2021, the total cash and cash equivalents balance of $ 129.5 million was comprised of money market funds of $ 111.1 million and cash of $ 18.4 million held with major financial institutions.

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.

Inventories consisted of the following (in thousands):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Raw materials $ 49 $ 77

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Inventories $ 1,078 $ 964

Inventories includes reserves of $ 1.5 million as of June 30, 2021 and December 31, 2020.

Property and Equipment, net

Property and equipment, net consisted of the following (in thousands):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Laboratory equipment $ 28,623 $ 25,468

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Depreciation expense included in the Unaudited Condensed Consolidated Statements of Operations was follows (in thousands):

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2021 2020 2021 2020

Depreciation Expense $ 716 $ 462 $ 1,375 $ 900

Goodwill had a carrying value of $ 3.2 million as of March 31, 2021 and December 31, 2020.

Goodwill had a carrying value of $ 3.2 million as of June 30, 2021 and December 31, 2020.

Other Accrued Liabilities

Other accrued liabilities consisted of the following (in thousands):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Accrued purchases $ 5,107 $ 7,170

Accrued professional and outside service fees 3,899 2,589

Other 240 513

Total $ 9,082 $ 10,272

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Stock Options

The option exercise price for incentive stock options must be at least 100 % of the fair value of our common stock on the date of grant and the option exercise price for non-statutory stock options is 85 % of the fair value of our common stock on the date of grant, as determined by the Board.

The option exercise price for incentive stock options must be at least 100 % of the fair value of our common stock on the date of grant and the option exercise price for non-statutory stock options is at least 85 % of the fair value of our common stock on the date of grant, as determined by the Board.

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.

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Restricted Stock Units ("RSUs")

We also grant employees RSUs, which generally vest over either a three year period with one-third of the shares subject to the RSUs vesting on each yearly anniversary of the vesting commencement date or over a four year period with 25 % of the shares subject to the RSU vesting on each yearly anniversary of the vesting commencement date, in each case contingent upon such employee’s continued service on such vesting date.

We also grant employees RSUs, which generally vest over either a three year period with 33 % of the shares subject to the RSUs vesting on each yearly anniversary of the vesting commencement date or over a four year period with 25 % of the shares subject to the RSU vesting on each yearly anniversary of the vesting commencement date, in each case contingent upon such employee’s continued service on such vesting date.

RSUs are generally subject to forfeiture if employment terminates prior to the release of vesting restrictions.

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If the performance goals are achieved at the superior level, the number of shares eligible to vest in respect of the PSUs would be equal to two times the number of PSUs granted and equal to the number of PBOs granted.

The number of shares issuable upon achievement of the performance goals at the levels between the threshold and target levels for the PSUs and PBOs or between the target level and superior levels for the PSUs would be

determined using linear interpolation.

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 2021, we awarded PSUs ("2021 PSUs") and PBOs ("2021 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, safety, and technology and strategic plan development.

As of March 31, 2021, we estimated that the 2021 PSUs and 2021 PBOs performance goals would be achieved at 100 % of the target level, and recognized expenses accordingly.

As of June 30, 2021, we estimated that the 2021 PSUs and 2021 PBOs performance goals would be achieved at 136 % and 68 % of the target level, respectively, and recognized expenses accordingly.

In 2020, we awarded PSUs ("2020 PSUs") and PBOs ("2020 PBOs"), each of which commenced 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.

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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, 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 vested in the first quarter of 2021, 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 vested in the first quarter of 2021, in each case, subject to the recipient’s continued service on each vesting date.

Stock-Based Compensation Expense

Stock-based compensation expense is included in the unaudited condensed consolidated statements of operations as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Research and development $ 597 $ 471 $ 1,074 $ 894

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The following table presents total stock-based compensation expense by security type included in the unaudited condensed consolidated statements of operations (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Stock options $ 682 $ 575 $ 1,347 $ 1,116

RSUs and RSAs 690 610 1,232 1,210

PSUs 573 296 1,043 627

PBOs 899 458 1,909 1,155

Total $ 2,844 $ 1,939 $ 5,531 $ 4,108

As of March 31, 2021, unrecognized stock-based compensation expense, net of expected forfeitures, was $ 5.3 million related to unvested stock options, $ 4.7 million related to unvested RSUs and RSAs, $ 2.0 million related to unvested PSUs, and $ 3.3 million related to unvested PBOs based on current estimates of the level of achievement.

Stock-based compensation expense for these awards will be recognized through the year of 2025.

As of June 30, 2021 , unrecognized stock-based compensation expense, net of expected forfeitures, was $ 4.8 million related to unvested stock options, $ 4.7 million related to unvested RSUs and RSAs, $ 1.9 million re lated to unvested PSUs, and $ 3.3 million related to unvested PBOs based on current estimates of the level of achievement.

Stock-based compensation ex pense for these awards will be recognized through the year o f 2025.

Capital Stock

Exercise of Options

For the three months ended March 31, 2021 and March 31, 2020, we issued 118,437 and 5,333 shares, respectively, upon option exercises at a weighted-average exercise price of $ 10.33 and $ 7.31 per share, respectively, with net cash proceeds of $ 1.2 million and $ 39 thousand, respectively.

For the six months ended June 30, 2021 and June 30, 2020, we issued 212,631 and 32,749 shares, respectively, upon option exercises at a weighted-average exercise price of $ 8.03 and $ 6.03 per share, respectively, with net cash proceeds of $ 1.7 million and $ 0.2 million, respectively.

Equity Distribution Agreement

We filed a Registration Statement on Form S-3 with the SEC, under which we may sell common stock, preferred stock, debt securities, warrants, purchase contracts, and units from time to time in one or more offerings.

The registration statement became effective on May 7, 2021.

In May 2021, we entered into an Equity Distribution Agreement ("EDA") with Piper Sandler & Co ("PSC"), under which PSC, as our exclusive agent, at our discretion and at such times that we may determine from time to time, may sell over a three-year period from the execution of the EDA up to a maximum of $ 50.0 million of shares of our common stock.

Under the terms of the EDA, PSC may sell the shares at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended.

We are not required to sell any shares at any time during the term of the EDA.

The EDA will terminate upon the earlier of:

(i) the issuance and sale of all shares through PSC on the terms and conditions of the EDA, or (ii) the termination of the EDA in accordance with its terms.

Either party may terminate the EDA at any time upon written notification to the other party in accordance with the EDA, and upon such notification, the offering will terminate.

Under no circumstances shall any shares be sold pursuant to the EDA after the date which is three years after the registration statement is first declared effective by the SEC.

We agreed to pay PSC a commission of 3 % of the gross sales price of any shares sold pursuant to the EDA.

With the exception of certain expenses, we will pay PSC up to 8 % of the gross sales price of the shares sold pursuant to the EDA for a combined amount of commission and reimbursement of PSC's expenses and fees.

During the three and six months ended June 30, 2021, no shares of our common stock were issued pursuant to the EDA.

As of June 30, 2021, $ 50.0 million of shares remained available under the EDA.

Commitments and Contingencies

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We review the estimated obligation each reporting period and make adjustments if our estimates change.

We recorded asset retirement obligations of $ 0.2 million as of March 31, 2021 and December 31, 2020, which are included in other liabilities on the unaudited condensed consolidated balance sheets.

Accretion expense related to our asset retirement obligations was no minal in the three months ended March 31, 2021 and 2020.

We recorded asset retirement obligations of $ 0.2 million as of June 30, 2021 and December 31, 2020, which are included in other long-term liabilities in the unaudited condensed consolidated balance sheets.

Accretion expense related to our asset retirement obligations was nominal in the three and six months ended June 30, 2021 and 2020.

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 March 31, 2021 and December 31, 2020, and are recorded as non-current restricted cash on the unaudited condensed consolidated balance sheets.

The letter of credit is collateralized by deposit balances held by the bank in the amount of $ 1.1 million as of June 30, 2021 and December 31, 2020, and are recorded as non-current restricted cash on the unaudited condensed consolidated balance sheets.

We entered into a short-term office lease in San Carlos, California during the second quarter of 2021 and this lease will expire in April 2022.

Our remaining future commitment pursuant to this lease is $ 0.1 million as of June 30, 2021.

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 in February 2017, and term of the three-year lease was from February 2017 and expired in February 2020.

The lease became effective upon delivery of the equipment in February 2017, and the 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.

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 $ 0.3 million.

The effective term of the three-year lease was from May 2017 and expired in April 2020.

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Lease costs, amounts included in measurement of lease obligations and other information related to non-cancellable operating leases and finance leases were as follows (in thousands):

Three months ended March 31,

Finance lease amortization of right-of-use assets $ 26 $ 54

Three months ended June 30, Six months ended June 30,

2021 2020 2021 2020

Finance lease costs:

Amortization of right-of-use assets $ 27 $ 45 $ 53 $ 99

Interest on lease obligations — 1 — 1

Finance lease costs 27 46 53 100

Operating lease cost 1,033 1,032 2,065 2,100

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Weighted-average discount rate 6.6 %

Three months ended March 31,

Six months ended June 30,

Operating cash flows from operating leases $ 2,093 $ 774

Financing cash flows from finance leases $ — $ 60

As of March 31, 2021, our maturity analysis of annual undiscounted cash flows of the non-cancellable operating leases are as follows (in thousands):

As of June 30, 2021, our maturity analysis of annual undiscounted cash flows of the non-cancellable operating leases are as follows (in thousands):

Years ending December 31, Operating Leases

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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 for the additional allowance.

The terms include an initial annualized base rent of approximately $ 2.5 million, subject to scheduled 3 % annual rent increases, an annualized additional allowance payment of approximately $ 0.4 million, 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 $0.5 million security deposit in the form of a letter of credit.

The terms include an initial annualized base rent of $ 2.5 million, subject to scheduled 3 % annual rent increases, an annualized additional allowance

payment of $ 0.4 million, plus certain operating expenses.

The lease has a 10 -year term from the lease commencement date with one option to extend the term for an additional period of 5 years.

We have provided ARE with a $ 0.5 million security deposit in the form of a letter of credit.

We have the right to sublease the facility, subject to landlord consent.

determined that the lease commencement date is in November 2021 at which point we will record a right of use asset and a corresponding lease liability.

We determined that the lease commencement date is in November 2021 at which point we will record a right of use asset and a corresponding lease liability.

An estimated maturity analysis of the annual undiscounted cash flows of the lease is as follows (in thousands):

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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.

As of March 31, 2021 and December 31, 2020, we have not drawn from the Credit Facility.

As of June 30, 2021 and December 31, 2020, we have not drawn from the Credit Facility.

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.

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A failure to comply with these covenants could permit the lender to exercise remedies against us and the collateral securing the Credit Facility, including foreclosure of our properties securing the Credit Facilities and our cash.

As of March 31, 2021, we were in compliance with the covenants for the Credit Facility.

As of June 30, 2021, we were in compliance with the covenants for the Credit Facility.

The Credit Facility allows for interest-only payments on the Term Debt through November 1, 2022.

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Concurrently with our initial equity investment, we entered into the MAI Agreement with MAI, 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.

We recognized $ 0.1 million and nil in research and development revenue from transactions with MAI in the three months ended March 31, 2021 and 2020, respectively.

We received 1,428,342 shares and nil of MAI's Series A preferred stock from research and development services we provided to MAI in the three months ended March 31, 2021 and 2020, respectively.

We have 3,729,563 shares of MAI's Series A preferred stock from the inception to date.

The carrying value of our investment in MAI Series A preferred stock was $ 2.4 million and $ 1.5 million at March 31, 2021 and December 31, 2020, respectively.

We had nil and $ 0.5 million in contract asset due from MAI for services rendered as of March 31, 2021 and December 31, 2020, respectively.

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

In April 2021, we purchased an additional 1,000,000 shares of MAI's Series A preferred stock for $ 0.6 million.

We recognized $ 0.3 million and $ 0.5 million in research and development revenue from transactions with MAI in the three and six months ended June 30, 2021, respectively, and we recognized no revenue from research and development service transactions with MAI in the three and six months ended June 30, 2020.

We received 714,171 and 1,428,342 shares of MAI's Series A preferred stock from research and development services we provided to MAI in the three and six months ended June 30, 2021, respectively, and no shares of MAI's Series A preferred stock from research and development services in the three and six months ended June 30, 2020.

As of June 30, 2021, we have 5,443,734 shares of MAI's Series A preferred stock since executing the Stock Purchase Agreement with MAI.

The carrying value of our investment in MAI Series A preferred stock was $ 3.4 million and $ 1.5 million at June 30, 2021 and December 31, 2020, respectively.

We had $ 0.4 million and nil in deferred revenue as of June 30, 2021 and December 31, 2020, respectively, and nil and $ 0.5 million in contract asset due from MAI for services rendered as of June 30, 2021 and December 31, 2020, respectively.

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

AstraZeneca PLC

1 unchanged sentence

We sold biocatalyst products to AstraZeneca PLC and its controlled purchasing agents and contract manufacturers.

We recognized $ 0.1 million of revenue from transactions with AstraZeneca and its controlled purchasing agents and contract manufacturers for the three months ended March 31, 2020 and through the date of Ms.

Cheng’s departure from our board of director.

As of March 31, 2021 and December 31, 2020, we had nominal and no receivables from AstraZeneca PLC and its controlled purchasing agents and contract manufacturers from related party transactions, respectively.

We recognized $ 20 thousand and $ 0.1 million of revenue from transactions with AstraZeneca and its controlled purchasing agents and contract manufacturers for the three and six months ended June 30, 2020, respectively, and through the date of Ms.

Cheng’s departure from our board of directors.

As of June 30, 2021 and December 31, 2020, we had no receivables from AstraZeneca PLC and its controlled purchasing agents and contract manufacturers from related party transactions, respectively.

Segment, Geographical and Other Revenue Information

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The following table provides financial information by our reportable business segments along with a reconciliation to consolidated income (loss) before income taxes (in thousands):

Three months ended March 31, 2021 Three months ended March 31, 2020

Three months ended June 30, 2021 Three months ended June 30, 2020

Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total

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Loss before income taxes $ ( 4,257 ) $ ( 6,037 )

Six months ended June 30, 2021 Six months ended June 30, 2020

Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total

Product revenue $ 24,943 $ — $ 24,943 $ 9,604 $ — $ 9,604

Research and development revenue 10,872 7,670 18,542 8,775 11,258 20,033

Total revenues 35,815 7,670 43,485 18,379 11,258 29,637

Costs and operating expenses:

Cost of product revenue 8,536 — 8,536 4,240 — 4,240

Research and development (1)

11,502 11,799 23,301 10,693 10,415 21,108

Selling, general and administrative (1)

5,988 1,221 7,209 4,720 1,213 5,933

Total segment costs and operating expenses 26,026 13,020 39,046 19,653 11,628 31,281

Income (loss) from operations $ 9,789 $ ( 5,350 ) 4,439 $ ( 1,274 ) $ ( 370 ) ( 1,644 )

Corporate costs (2)

( 16,335 ) ( 11,042 )

Unallocated depreciation and amortization ( 1,426 ) ( 998 )

Loss before income taxes $ ( 13,322 ) $ ( 13,684 )

(1) Research and development expenses and selling, general and administrative expenses exclude depreciation and amortization of finance leases.

(2) Corporate costs include unallocated selling, general and administrative expense, interest income, and other income and expenses.

(2) Corporate costs include unallocated selling, general and administrative expenses, interest income, and other income (expense), net.

The following table provides stock-based compensation expense included in income (loss) from operations (in thousands):

Three months ended March 31,

Three months ended June 30,

Performance Enzymes Novel Biotherapeutics Corporate cost Total Performance Enzymes Novel Biotherapeutics Corporate cost Total

Stock-based compensation $ 1,115 $ 257 $ 1,472 $ 2,844 $ 741 $ 252 $ 946 $ 1,939

Six months ended June 30,

Performance Enzymes Novel Biotherapeutics Corporate cost Total Performance Enzymes Novel Biotherapeutics Corporate cost Total

Stock-based compensation $ 2,109 $ 495 $ 2,927 $ 5,531 $ 1,496 $ 494 $ 2,118 $ 4,108

Significant Customers

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Percentage of Total Revenues for the

Three Months Ended March 31,

Three months ended June 30, Six months ended June 30,

2021 2020 2021 2020

Customer A 15 % * 10 % *

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Customer E * 38 % 10 % 27 %

Customer F * 12 % * 11 %

Customer G * * * 13 %

* Percentage was less than 10%

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Percentage of Accounts Receivables as of

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Customer A 20 % *

Customer H 15 % *

Customer B 15 % *

Customer D 14 % 32 %

Customer F 12 % *

Customer E 10 % *

Customer G * 25 %

Customer F * 13 %

* Percentage was less than 10%

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Geographic revenues are identified by the location of the customer and consist of the following (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Americas $ 5,844 $ 6,906 $ 10,773 $ 12,131

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Identifiable long-lived assets by location was as follows (in thousands):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

United States $ 31,424 $ 31,176

Identifiable goodwill by reporting unit was as follows (in thousands):

As of March 31, 2021 and December 31, 2020

As of June 30, 2021 and December 31, 2020

Performance Enzymes Novel Biotherapeutics Total

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The following table summarizes the financial assets allowance for credit losses (in thousands):

Three months ended March 31,

June 30, 2021 December 31, 2020

Allowance for credit losses $ 74 74

The following tables summarize accounts receivable by aging category (in thousands):

March 31, 2021

June 30, 2021

Current 31-60 Days 61-90 Days 91 Days and over Total balance

3 unchanged sentences

Accounts receivable $ 13,398 $ 489 $ 7 $ — $ 13,894

Subsequent Event

In April 2021, we purchased an additional 1.0 million shares of MAI's Series A preferred stock for $ 0.6 million.

For additional information, Note 5, " Investments in Non-Marketable Securities" and Note 11, " Related Party Transactions."

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-Q

Item 1. Financial Statements