What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-08-05 · 135 added, 133 removed, 555 unchanged (33% of the section changed)

3 unchanged sentences

(In Thousands, Except Per Share Amounts)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Current assets:

38 unchanged sentences

100,000 shares authorized;

65,494 shares and 65,109 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

65,613 shares and 65,109 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 562,811 552,083

6 unchanged sentences

(In Thousands, Except Per Share Amounts)

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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Total costs and operating expenses 45,106 35,439 129,846 92,565

Loss from operations ( 2,609 ) ( 4,486 ) ( 10,995 ) ( 13,641 )

Income (loss) from operations ( 10,636 ) 1,330 ( 21,631 ) ( 12,312 )

Interest income 436 41 618 424

Other income (expense), net ( 63 ) 23 ( 66 ) ( 63 )

Loss before income taxes ( 2,532 ) ( 4,257 ) ( 10,879 ) ( 13,322 )

Other income, net 216 983 150 920

Income (loss) before income taxes ( 9,984 ) 2,354 ( 20,863 ) ( 10,968 )

Provision for income taxes 8 110 125 121

Net loss $ ( 2,640 ) $ ( 4,265 ) $ ( 10,996 ) $ ( 13,333 )

Net loss per share, basic and diluted $ ( 0.04 ) $ ( 0.07 ) $ ( 0.17 ) $ ( 0.21 )

Weighted average common stock shares used in computing net loss per share, basic and diluted 65,288 64,434 65,193 64,363

Net income (loss) $ ( 9,992 ) $ 2,244 $ ( 20,988 ) $ ( 11,089 )

Net income (loss) per share, basic $ ( 0.15 ) $ 0.03 $ ( 0.32 ) $ ( 0.17 )

Net income (loss) per share, diluted $ ( 0.15 ) $ 0.03 $ ( 0.32 ) $ ( 0.17 )

Weighted average common stock shares used in computing net income (loss) per share, basic 65,426 64,628 65,271 64,452

Weighted average common stock shares used in computing net income (loss) per share, diluted 65,426 67,741 65,271 64,452

See accompanying notes to the unaudited condensed consolidated financial statements.

4 unchanged sentences

Capital Accumulated Deficit Total Stockholders' Equity

Three Months Ended June 30, 2022 Shares Amount

Balance as of April 1, 2022

Three Months Ended September 30, 2022 Shares Amount

Balance as of July 1, 2022

65,494 $ 6 $ 558,147 $ ( 398,694 ) $ 159,459

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Net loss — — — ( 9,992 ) ( 9,992 )

Balance as of June 30, 2022

Balance as of September 30, 2022

65,613 $ 6 $ 562,811 $ ( 408,686 ) $ 154,131

1 unchanged sentence

Capital Accumulated Deficit Total Stockholders' Equity

Three Months Ended June 30, 2021 Shares Amount

Balance as of April 1, 2021

Three Months Ended September 30, 2021 Shares Amount

Balance as of July 1, 2021

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

Exercise of stock options 210 — 1,022 — 1,022

Release of stock awards 42 — — — —

Employee stock-based compensation — — 2,955 — 2,955

Non-employee stock-based compensation — — 61 — 61

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

Net loss — — — ( 4,265 ) ( 4,265 )

Balance as of June 30, 2021

Net income — — — 2,244 2,244

Balance as of September 30, 2021

64,833 $ 6 $ 546,557 $ ( 377,508 ) $ 169,055

5 unchanged sentences

Capital Accumulated Deficit Total Stockholders' Equity

Six Months Ended June 30, 2022 Shares Amount

Nine Months Ended September 30, 2022 Shares Amount

Balance as of January 1, 2022

6 unchanged sentences

Net loss — — — ( 20,988 ) ( 20,988 )

Balance as of June 30, 2022

Balance as of September 30, 2022

65,613 $ 6 $ 562,811 $ ( 408,686 ) $ 154,131

1 unchanged sentence

Capital Accumulated Deficit Total Stockholders' Equity

Six Months Ended June 30, 2021 Shares Amount

Nine Months Ended September 30, 2021 Shares Amount

Balance as of January 1, 2021

6 unchanged sentences

Net loss — — — ( 11,089 ) ( 11,089 )

Balance as of June 30, 2021

Balance as of September 30, 2021

64,833 $ 6 $ 546,557 $ ( 377,508 ) $ 169,055

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(In Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities:

Net loss $ ( 20,988 ) $ ( 11,089 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation 3,961 2,143

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Equity securities earned from research and development activities from a related party ( 1,245 ) ( 675 )

Unrealized gain on non-marketable securities ( 208 ) ( 1,033 )

Other non-cash items ( 29 ) ( 19 )

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Deferred revenue 3,750 880

Net cash used in operating activities ( 13,367 ) ( 14,735 )

Net cash provided by (used in) operating activities 6,367 ( 14,927 )

Investing activities:

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Interest paid $ 22 $ 6

Income taxes paid $ 100 $ 101

Supplemental non-cash investing and financing activities:

Capital expenditures incurred but not yet paid $ 128 $ 2,012

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, 2022 and 2021 to the total of the same such amounts shown above in the unaudited condensed consolidated statements of cash flows:

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets as of September 30, 2022 and 2021 to the total of the same such amounts shown above in the unaudited condensed consolidated statements of cash flows:

September 30,

Cash and cash equivalents $ 108,689 $ 119,189

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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 R&D services may continue to be impacted as a result of governmental orders ("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 and six months ended June 30, 2022.

Furthermore, our ability to provide future R&D services may continue to be impacted by 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 and nine months ended September 30, 2022.

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.

Should these disruptions escalate in the future, they may negatively and materially impact our business.

results of operations and financial condition.

Should these disruptions escalate in the future, they may negatively and materially impact our business, results of operations and financial condition.

Basis of Presentation and Summary of Significant Accounting Policies

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The condensed consolidated balance sheet at December 31, 2021 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, 2022 and 2021, are consistent with those discussed in Note 2 to the audited consolidated financial statements in the Company’s 2021 Annual Report on Form 10-K and are updated below as necessary.

The significant accounting policies used in preparation of the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2022 and 2021, are consistent with those discussed in Note 2 to the audited consolidated financial statements in the Company’s 2021 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, 2021.

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, 2022, results of our operations for the three and six months ended June 30, 2022 and 2021, changes in stockholders' equity for the three and six months ended June 30, 2022 and 2021, and cash flows for the six months ended June 30, 2022 and 2021.

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 September 30, 2022, results of our operations for the three and nine months ended September 30, 2022 and 2021, changes in stockholders' equity for the three and nine months ended September 30, 2022 and 2021, and cash flows for the nine months ended September 30, 2022 and 2021.

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

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Recently issued accounting pronouncements not yet adopted

There have been no other recent accounting pronouncements or changes in accounting pronouncements during the three and six months ended June 30, 2022, that are of significance or potential significance to us.

There have been no other recent accounting pronouncements or changes in accounting pronouncements during the three and nine months ended September 30, 2022, 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 June 30, 2022 Three Months Ended June 30, 2021

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021

Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total

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Total revenues $ 31,146 $ 3,324 $ 34,470 $ 32,584 $ 4,185 $ 36,769

Six Months Ended June 30, 2022 Six Months Ended June 30, 2021

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021

Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Contract assets $ 5,867 $ 4,557

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deferred revenue $ 9,840 $ 6,335

We had no asset impairment charges related to financial assets in the three and six months ended June 30, 2022 and 2021.

We had no asset impairment charges related to financial assets in the three and nine months ended September 30, 2022 and 2021.

The increase in contract assets was primarily due to increases in product revenue from contracts subject to over time revenue recognition.

The nominal decrease in unbilled receivables was primari ly due to the timing of billings.

T he decrease in deferred revenue was primarily due to timing of recognition of revenue.

The decrease in unbilled receivables was primari ly due to the timing of billings.

T he increase in deferred revenue was primarily due to the receipt of the $ 25.9 million fee from Pfizer in August 2022, pursuant to the terms of the Enzyme Supply Agreement (the “Pfizer Supply Agreement” ) that was executed in July 2022 , which was partially offset by the recognition of $ 19.4 million in contract assets relating to the same performance obligation within the same agreement.

We recognized the following revenues (in thousands):

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

Three Months Ended September 30, Nine Months Ended September 30,

Revenue recognized in the period for:

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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 June 30, 2022.

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 June 30, 2022 (in thousands):

Remainder of 2022

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Total revenues $ 428 $ 1,174 $ 5,276 $ 2,962 $ 9,840

N et Loss per S hare

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

N et Income (Loss) per S hare

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

Diluted net income (loss) per share is computed by dividing net income (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.

Anti-Dilutive Securities

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):

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

The following table sets forth the computation of basic and diluted net income (loss) per share during the three and nine months ended September 30, 2022 and 2021 (in thousands, except per share amounts):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Net income (loss) $ ( 9,992 ) $ 2,244 $ ( 20,988 ) $ ( 11,089 )

Weighted average common stock shares used in computing net income (loss) per share, basic 65,426 64,628 65,271 64,452

Effect of dilutive shares — 3,113 — —

Weighted average common stock shares used in computing net income (loss) per share, diluted 65,426 67,741 65,271 64,452

Net income (loss) per share, basic $ ( 0.15 ) $ 0.03 $ ( 0.32 ) $ ( 0.17 )

Net income (loss) per share, diluted $ ( 0.15 ) $ 0.03 $ ( 0.32 ) $ ( 0.17 )

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Shares issuable under the Equity Incentive Plan 6,604 451 6,604 5,148

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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 income (expense), net.

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

In November 2020, we purchased convertible subordinated notes issued by Arzeda Corp.

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In July 2021, we converted the non-marketable debt security with a carrying value of $ 1.3 million into 207,070 shares of Series B-2 preferred stock of Arzeda Corp.

During the three and six months ended June 30, 2021, we recognized $ 0.2 million and $ 0.3 million, respectively, in interest income from interest earned on our investment in this debt security.

There were no investments in non-marketable debt securities as of June 30, 2022 and December 31, 2021.

During the three and nine months ended September 30, 2021, we recognized nil and $ 0.3 million, respectively, in interest income from interest earned on our investment in this debt security.

There were no investments in non-marketable debt securities as of September 30, 2022 and December 31, 2021.

Non-Marketable Equity Securities

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Non-marketable equity securities are measured at fair value on a non-recurring basis and classified within Level 2 in the fair value hierarchy because we estimate the fair value of these investments using the observable transaction price paid by third party investors for the same or similar security of the same issuers.

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 in the unaudited condensed consolidated statements of operations.

There was no remeasurement event for our investments in non-marketable equity securities that occurred during the three and six months ended June 30, 2022 and 2021.

We recognized no realized gains or losses during the three and six months ended June 30, 2022 and 2021.

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, net in the unaudited condensed consolidated statements of operations.

For the three months ended September 30, 2022, we recognized a $ 0.2 million unrealized gain in other income, net, and included as adjustment to the carrying value of our investment in MAI, for the remeasurement of the additional 1,587,049 shares of Series B preferred stock received as milestone payment during the three months ended September 30, 2022 based on the latest observed transaction price of MAI's preferred stock.

See Note 11 “Related Party Transactions” for additional information on our investment in MAI.

For the three months ended September 30, 2021, we recognized a $ 0.7 million unrealized gain in other income, net, due to an adjustment to the carrying value of our investment in MAI based on an analysis of observed transaction price from MAI's round of financing during the third quarter of 2021.

There wa s no re measurement event for our investments in MAI and in other non-marketable equity securities that occurred during the remainder of 2022 and 2021.

We recognized no realized gains or losses during the three and nine months ended September 30, 2022 and 2021.

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Molecular Assemblies, Inc.

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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):

June 30, 2022

September 30, 2022

Level 1 Level 2 Level 3 Total

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Money market funds $ 86,095 $ — $ — $ 86,095

During the three and six months ended June 30, 2022 and 2021, we did no t recognize any significant credit losses no r other-than-temporary impairment losses on non-marketable securities.

During the three and nine months ended September 30, 2022 and 2021, we did no t recognize any significant credit losses no r other-than-temporary impairment losses on non-marketable securities.

Balance Sheets Details

Cash Equivalents

Cash equivalents as of June 30, 2022 and December 31, 2021, consisted of the following (in thousands):

June 30, 2022 December 31, 2021

Cash equivalents as of September 30, 2022 and December 31, 2021, consisted of the following (in thousands):

September 30, 2022 December 31, 2021

Adjusted Cost Estimated Fair Value Adjusted Cost Estimated Fair Value

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Average contractual maturities (in days) is not applicable.

As of June 30, 2022, the total cash and cash equivalents balance of $ 90.1 million consisted of money market funds of $ 67.2 million and cash of $ 22.9 million held with major financial institutions.

As of September 30, 2022, the total cash and cash equivalents balance of $ 108.7 million consisted of money market funds of $ 83.6 million and cash of $ 25.1 million held with major financial institutions.

As of December 31, 2021, the total cash and cash equivalents balance of $ 116.8 million consisted of money market funds of $ 86.1 million and cash of $ 30.7 million held with major financial institutions.

Inventories consisted of the following (in thousands):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Raw materials $ 49 $ 49

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Inventories $ 1,623 $ 1,160

Inventories are recorded net of reserves of $ 1.4 million as of June 30, 2022 and December 31, 2021.

Inventories are recorded net of reserves of $ 1.3 million and $ 1.4 million as of September 30, 2022 and December 31, 2021, respectively.

Property and Equipment, net

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Laboratory equipment $ 39,355 $ 33,101

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Depreciation expense included in both research and development expenses and selling, general and administrative expenses in the unaudited condensed consolidated statements of operations was as follows (in thousands):

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Depreciation expense $ 1,405 $ 768 $ 3,961 $ 2,143

Goodwill had a carrying value of $ 3.2 million as of June 30, 2022 and December 31, 2021.

Goodwill had a carrying value of $ 3.2 million as of September 30, 2022 and December 31, 2021.

Other Accrued Liabilities

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Accrued purchases $ 7,573 $ 6,755

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In the first quarter of 2022, we awarded PSUs ("2022 PSUs") and PBOs ("2022 PBOs"), each of which commence vesting based upon the achievement of various weighted performance goals, including total revenues, research and development revenue, product revenue (excluding sales of CDX-616 to Pfizer for its use in the manufacture of a critical intermediate for nirmatrelvir, an active pharmaceutical ingredient (API) in its PAXLOVID™ product), operating expenses excluding cost of product revenue, strategic performance enzyme deliverables, strategic biotherapeutics deliverables, organization and infrastructure upgrades, corporate developments, and significant events that can be publicly announced, subject to the recipient's continued service.

As of June 30, 2022, we estimated that the 2022 PSUs and 2022 PBOs performance goals would be achieved at 92 % and 46 % of the target level, respectively, and recognized stock-based compensation expenses accordingly.

As of September 30, 2022, we estimated that the 2022 PSUs and 2022 PBOs performance goals would be achieved at 97 % and 49 % o f the target level, respectively, and recognized stock-based compensation expenses accordingly.

In 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 total revenues, product revenue, performance enzymes pipeline advancements, biotherapeutics pipeline advancements, organization and infrastructure upgrades, and significant events that can be publicly announced.

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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Total $ 4,531 $ 3,016 $ 11,600 $ 8,547

As of June 30, 2022, unrecognized stock-based compensation expense, net of expected forfeitures, was $ 5.8 million related to unvested stock options, $ 8.4 million related to unvested RSUs and RSAs, $ 1.8 million related to unvested PSUs, and $ 3.5 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 2026.

In connection with the retirement of John Nicols, our former President and Chief Executive Officer, in August 2022, and the Transition and Separation Agreement between Mr.

Nicols and the Company effective as of July 26, 2022, certain supplementary modifications were made to Mr.

Nicols’ vested and unvested stock option and PBOs awards including voluntary forfeiture of certain unvested stock option and PBOs awards and the extension of the post-termination exercise period of certain vested stock option and PBOs awards.

During the three and nine months ended September 30, 2022 , we recorded a one-time, non-cash incremental compensation expense of $ 1.0 million, net of the required reversal of previously recognized stock-based compensation expenses attributed to unvested shares, in selling, general and administrative expenses related to these stock option award modifications.

As of September 30, 2022, unrecognized stock-based compensation expense, net of expected forfeitures, was $ 6.7 million related to unvested stock options, $ 7.5 million related to unvested RSUs and RSAs, $ 2.9 million related to unvested PSUs, and $ 1.7 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 2026.

Capital Stock

Exercise of Options

For the six months ended June 30, 2022 and June 30, 2021, we issued 174,600 and 212,631 shares, respectively, upon option exercises at a weighted-average exercise price of $ 2.47 and $ 8.03 per share, respectively, with net cash proceeds of $ 0.4 million and $ 1.7 million, respectively.

For the nine months ended September 30, 2022 and September 30, 2021, we issued 252,100 and 422,964 shares, respectively, upon option exercises at a weighted-average exercise price of $ 2.43 and $ 6.45 per share, respectively, with net cash proceeds of $ 0.6 million and $ 2.7 million, respectively.

Equity Distribution Agreement

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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, 2022, no shares of our common stock were issued pursuant to the EDA.

As of June 30, 2022, $ 50.0 million worth of shares remained available for sale under the EDA.

During the three and nine months ended September 30, 2022, no shares of our common stock were issued pursuant to the EDA.

As of September 30, 2022, $ 50.0 million worth of shares remained available for sale under the EDA.

Commitments and Contingencies

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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 June 30, 2022 and December 31, 2021, 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 September 30, 2022 and December 31, 2021, and are recorded as non-current restricted cash on the unaudited condensed consolidated balance sheets.

In January 2021, we entered into a lease agreement with ARE-San Francisco No.

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

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

Our remaining future commitment pursuant to this lease is nil as of June 30, 2022.

We are required to restore certain areas of the Redwood City and San Carlos facilities that we are renting to their original form.

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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 0.5 million an d $ 0.4 million as of June 30, 2022 and December 31, 2021, respectively, which are included in other liabilities on 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, 2022 and 2021.

We recorded asset retirement obligations of $ 0.5 million an d $ 0.4 million as of September 30, 2022 and December 31, 2021, respectively, which are included in other liabilities on the unaudited condensed consolidated balance sheets.

Accretion expense related to our asset retirement obligations was nominal in the three and nine months ended September 30, 2022 and 2021.

Lease and other information

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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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Weighted-average discount rate 5.4 %

Six Months Ended June 30,

Nine Months Ended September 30,

Operating cash flows from operating leases $ 4,658 $ 3,145

As of June 30, 2022, our maturity analysis of annual undiscounted cash flows of the non-cancellable operating leases are as follows (in thousands):

As of September 30, 2022, 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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Future minimum payments reflect amounts that we expect to pay including potential obligations under services agreements subject to risk of cancellation by us (in thousands):

Other Commitment Agreement Type Agreement Date Future Minimum Payment

Development and manufacturing services agreements Various $ 3,970

Facility maintenance agreement January 2022 1,450

Payments Due by Period

Total 2022 (Remaining 3 Months) 2023 2024 2025 and Thereafter

Development and manufacturing services agreements $ 2,866 $ 1,770 $ 991 $ 105 $ —

Facility maintenance agreement 1,608 — 1,608 — —

Total other commitments $ 4,474 $ 1,770 $ 2,599 $ 105 $ —

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Advances made under the Revolving Line of Credit bear interest at a variable annual rate equal to the greater of (i) 4.25 % or (ii) the sum of (A) the prime rate plus (B) 1.00 %.

As of June 30, 2022 and December 31, 2021, we have not drawn from the Credit Facility.

As of September 30, 2022 and December 31, 2021, we have not drawn from the Credit Facility.

Our obligations under the Credit Facility are secured by a lien on substantially all of our personal property other than our intellectual property.

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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 June 30, 2022, we were in compliance with the covenants for the Credit Facility.

As of September 30, 2022 and December 31, 2021, we were in compliance with the covenants for the Credit Facility.

Legal Proceedings

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The terms of the settlement are not material to the business or the results of operations of the Company.

We are currently not a party to any material pending litigation of other material proceedings.

Indemnifications

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In June 2020, 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.

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

In connection with the transaction, Mr.

Nicols, our former President and Chief Executive 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 leveraging our CodeEvolver ® protein engineering platform technology to improve the DNA polymerase enzymes that are critical for enzymatic DNA synthesis.

Under the MAI Agreement, 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 and B preferred stock which are valued based on the observed transaction price of similar securities of MAI issued to third parties .

We completed the R&D service with MAI pursuant to the MAI Agreement during the first quarter of 2022.

In December 2021, we received the primary milestone payment pursuant to the MAI Agreement of $ 1.0 million in the form of an additional 1,587,049 shares of Series B preferred stock.

Upon execution of the Commercial License and Enzyme Supply Agreement with MAI (“MAI Supply Agreement”) in July 2022, we received the commercialization and enzyme supply agreement milestone payment pursuant to the MAI Agreement of $ 1.0 million in the form of an additional 1,587,049 shares of Series B preferred stock.

In addition to our initial equity investment and the shares we have received under the MAI Agreement, in April 2021, we purchased an additional 1,000,000 shares of MAI's Series A preferred stock for $ 0.6 million and in September 2021, we purchased 9,198,423 shares of MAI's Series B preferred stock for $ 7.0 million.

We recognized nil and $ 0.2 million i n research and development revenue from transactions with MAI in the three and six months ended June 30, 2022 , respectively, and we recognized $ 0.3 million and $ 0.5 million in research and development service transactions with MAI in the three and six months ended June 30, 2021, respectively .

We recei ved nil shares of MAI's Series A and B preferred stock from research and development services we provided to MAI in the three and six months ended June 30, 2022 , and we received 714,171 and 1,428,342 shares of MAI's Series A and B preferred stock from research and development services we provided to MAI in the three and six months ended June 30, 2021, respectively.

As of June 30, 2022 we have 16,705,320 shares of MAI's Series A and B preferred stock that we have earned or purchased since executing the Stock Purchase Agreement with MAI.

During the second quarter of 2022, we sold certain enzyme products to MAI pursuant to the purchase order we received from MAI during the quarter.

We recognized $ 0.1 million in product revenue from transactions with MAI in the three and six months ended June 30, 2022, respectively.

The carrying value of our investment in MAI Series A and B preferred stock was $ 12.7 million as of June 30, 2022 and December 31, 2021.

We h ad nil and $ 0.2 million in deferred revenue from MAI as of June 30, 2022 and December 31, 2021 respectively.

Payment for the services rendered was received in the form of additional shares of MAI's Series A and Series B preferred stock.

On August 2, 2022, we announced that we had executed a Commercial License and Enzyme Supply Agreement with MAI ( “MAI Supply Agreement”) that will enable MAI to utilize an evolved terminal deoxynucleotidyl transferase (TdT) enzyme in MAI’s Fully Enzymatic Synthesis™ (or FES™) technology.

We recognized $ 1.0 million and $ 1.2 million in research and development revenue from transactions with MAI in the three and nine months ended September 30, 2022, respectively, and we recognized $ 0.2 million and $ 0.7 million in research and development service transactions with MAI in the three and nine months ended September 30, 2021, respectively.

Payment for the R&D services rendered under the MAI Agreement was received in the form of additional shares of MAI's Series A and Series B preferred stock.

We received an aggregate of 1,587,049 shares of MAI's Series A and B preferred stock in the three and nine months ended September 30, 2022 and we received an aggregate of 476,114 and an aggregate of 1,904,456 shares of MAI's Series A and B preferred stock in the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022 we hold an aggregate of 18,292,369 shares of MAI's Series A and B preferred stock that we have earned or purchased since executing the Stock Purchase Agreement with MAI.

In April 2022, we received a purchase order from MAI for the delivery of certain enzyme products to MAI in 2022.

In July 2022, we and MAI executed the MAI Supply Agreement that will enable MAI to utilize an evolved terminal deoxynucleotidyl transferase (TdT) enzyme in MAI’s Fully Enzymatic Synthesis™ (or FES™) technology.

We recognized $ 0.2 million and $ 0.4 million in product revenue in the three and nine months ended September 30, 2022, respectively.

The carrying value of our investment in MAI Series A and B preferred stock was $ 13.9 million and $ 12.7 million as of September 30, 2022 and December 31, 2021, respectively (s ee Note 6 “Fair Value Measurements”) .

We had nil and $ 0.2 million in deferred revenue from MAI as of September 30, 2022 and December 31, 2021 respectively.

Segment, Geographical and Other Revenue Information

13 unchanged sentences

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):

Three Months Ended June 30, 2022 Three Months Ended June 30, 2021

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 September 30, 2022 Three Months Ended September 30, 2021

Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total

13 unchanged sentences

Unallocated depreciation and amortization ( 1,405 ) ( 794 )

Loss before income taxes $ ( 2,532 ) $ ( 4,257 )

Six Months Ended June 30, 2022 Six Months Ended June 30, 2021

Income (loss) before income taxes $ ( 9,984 ) $ 2,354

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021

Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total

15 unchanged sentences

(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 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 June 30,

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

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

Three Months Ended September 30,

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

Stock-based compensation $ 1,382 $ 414 $ 2,735 $ 4,531 $ 1,228 $ 272 $ 1,516 $ 3,016

Six Months Ended June 30,

Nine Months Ended September 30,

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

3 unchanged sentences

Percentage of Total Revenues for the

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

2 unchanged sentences

Customer C 13 % * * 10 %

Customer D * * * 17 %

Customer E * * * 10 %

* Percentage was less than 10%

1 unchanged sentence

Percentage of Accounts Receivables as of

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Customer A 21 % 62 %

Customer B 16 % *

Customer D 14 % *

Geographical Information

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

4 unchanged sentences

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

United States $ 63,812 $ 65,457

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

As of June 30, 2022 and December 31, 2021

As of September 30, 2022 and December 31, 2021

Performance Enzymes Novel Biotherapeutics Total

2 unchanged sentences

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

Three and Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Balance at beginning of period $ 109 $ 74 $ 416 $ 74

4 unchanged sentences

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

June 30, 2022

September 30, 2022

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

3 unchanged sentences

Accounts receivable $ 22,697 $ 536 $ 569 $ 1,151 $ 2,256 $ 24,953

Subsequent Events

On July 14, 2022, the Company entered into an Enzyme Supply Agreement, effective as of October 30, 2021, with Pfizer Inc.

(the “Pfizer Supply Agreement”), covering the manufacture, sale and purchase of the Company's proprietary enzyme product, CDX-616, for use by Pfizer in the manufacture of nirmatrelvir, an API in its PAXLOVID™ (nirmatrelvir tablets;

ritonavir tablets) antiviral therapeutic, which is currently authorized for emergency use by the FDA for the treatment of mild to moderate COVID-19.

In addition to defining terms under which Pfizer has and will continue to purchase quantities of CDX-616 from the Company, Pfizer will, pursuant to the terms of the Pfizer Supply Agreement, pay Codexis a retainer fee of $ 25.9 million which we received in August 2022 , which is being paid in lieu of certain existing orders for delivery of the CDX-616 enzyme product in early 2023, which have been cancelled.

The retainer fee is creditable against future orders of CDX-616 used to manufacture PAXLOVID™ and for fees associated with any new development and licensing agreements with Pfizer entered into prior to December 31, 2022.

On July 18, 2022, Codexis' Board of Directors appointed Dr.

Stephen Dilly, a current Board member, as the Company's new president and chief executive officer, effective August 9, 2022.

Dilly succeeds John Nicols, our current president and chief executive officer, who notified the Board of his intention to retire from these roles effective August 8, 2022.

In connection with the appointment of Dr.

Dilly as president and chief executive officer, the Board reconstituted its Audit Committee and appointed Byron Dorgan, Chair of the Board, as a member of the Audit Committee to fill the seat previously held by Dr.

On July 18, 2022, the Company and Mr.

Nicols entered into a Transition and Separation Agreement, pursuant to which Mr.

Nicols will continue to serve as the Company's president and chief executive officer through August 8, 2022, at which time he will retire from the Company and will be employed thereafter as a strategic advisor through August 7, 2024, unless Mr.

Nicols' employment terminate sooner in accordance with the Transition and Separation Agreement.

The Transition and Separation Agreement provides for Mr.

Nicols to continue to serve as a member of the Board through the 2023 annual meeting of the Company’s stockholders.

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