What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-27 compared with 2022-02-28 · 281 added, 296 removed, 1130 unchanged (34% of the section changed)

17 unchanged sentences

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 28, 2022 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dat ed February 27, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

16 unchanged sentences

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

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

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

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

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

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

Auditing the evaluation of distinct performance obligations, determination and estimation of material

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

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

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

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

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

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

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

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

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

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

• Evaluating the reasonableness and accuracy of management’s judgments and estimates used in accounting for identified material rights.

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

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

• Evaluating the appropriateness of management’s allocation of the transaction price to the distinct performance obligation and determination of whether identified performance obligations meet the criteria for over-time revenue recognition.

/s/ BDO USA, LLP

11 unchanged sentences

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Report on Internal Control over Financial Reporting”.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

22 unchanged sentences

Restricted cash, current 521 579

Investment in non-marketable debt security — 1,000

Financial assets:

Accounts receivable 31,904 24,953

Contract assets ($ 0 and $ 450 from a related party)

Contract assets 2,116 4,557

Unbilled receivables 7,016 8,558

7 unchanged sentences

Investment in non-marketable equity securities ($ 13,921 and $ 12,713 with a related party)

20,510 14,002

Right-of-use assets - Operating leases, net 39,263 44,095

33 unchanged sentences

2022 2021 2020

Product revenue $ 70,657 $ 30,220 $ 29,465

Product revenue ($ 514 , $ 0 and $ 0 from a related party)

$ 116,676 $ 70,657 $ 30,220

Research and development revenue ($ 1,245 , $ 1,955 and $ 900 from a related party)

5 unchanged sentences

Selling, general and administrative 52,172 49,323 35,049

Restructuring charges 3,167 — —

Total costs and operating expenses 173,471 127,451 92,976

22 unchanged sentences

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

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

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

1 unchanged sentence

4,929 — 80,802 — 80,802

Short swing profit settlement — — 77 — 77

Net loss — — — ( 24,010 ) ( 24,010 )

5 unchanged sentences

Taxes paid related to net share settlement of equity awards ( 54 ) — ( 1,206 ) — ( 1,206 )

Issuance of common stock, net of issuance costs of $ 5,448

4,929 — 80,802 — 80,802

Net loss — — — ( 21,279 ) ( 21,279 )

15 unchanged sentences

Net loss $ ( 33,592 ) $ ( 21,279 ) $ ( 24,010 )

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 5,402 3,113 1,950

1 unchanged sentence

Stock-based compensation 14,531 11,593 7,728

Allowance for credit losses 342 40 —

Provision for credit losses 4 342 40

Equity securities earned from research and development activities from a related party ( 1,245 ) ( 1,955 ) ( 900 )

Unrealized gain on non-marketable securities (($ 983 ) from a related party)

Unrealized gain on non-marketable securities (($ 208 ) and ($ 983 ) from a related party)

( 208 ) ( 1,272 ) —

8 unchanged sentences

Other long-term liabilities ( 5,223 ) ( 4,147 ) ( 2,586 )

Deferred revenue ($ 245 , $ 0 and $ 0 to a related party)

Deferred revenue ($ 0 , $ 245 , $ 0 to a related party)

24,518 1,300 2,747

Net cash used in operating activities ( 14,267 ) ( 16,464 ) ( 12,560 )

Net cash provided by (used in) operating activities 11,284 ( 14,267 ) ( 16,464 )

Investing activities:

1 unchanged sentence

Proceeds from sale of property and equipment 29 36 —

Proceeds from sale of investment securities — — 62

Investment in non-marketable securities ($ 0 , ($ 7,630 ) and ($ 1,000 ) in a related party)

5 unchanged sentences

Costs incurred in connection with equity financing ( 42 ) ( 207 ) ( 5,448 )

Proceeds from issuance of common stock in connection with private offering — — 50,000

Payments of lease obligations - Finance leases — — ( 60 )

Recovery of short swing profit — — 77

Taxes paid related to net share settlement of equity awards ( 1,488 ) ( 1,206 ) ( 1,257 )

Net cash provided by financing activities 3,767 80,808 53,961

Net cash provided by (used in) financing activities ( 575 ) 3,767 80,808

Net increase (decrease) in cash, cash equivalents and restricted cash ( 2,869 ) ( 31,922 ) 58,596

23 unchanged sentences

Business Update Regarding COVID-19

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

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

economy and other economies worldwide.

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

In the United States, the impact of COVID-19, including Orders governing the operation of businesses during the pandemic, caused the temporary closure of our Redwood City, California facilities and disrupted our R&D operations in 2020 .

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

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

To date, we and our collaboration partners have been able to continue to supply our enzymes to our customers worldwide, however, there can be no guarantee this will continue.

Furthermore, our ability to provide future research and development ("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 year ended December 31, 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.

In March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide.

The spread of COVID-19 has affected segments of the global economy and may affect our operations, including the potential interruption of our supply chain.

We are monitoring this situation closely, and although operations have not been materially affected by the COVID-19 outbreak to date, the ultimate duration and severity of the outbreak and its impact on the economic environment and our business is uncertain.

As a result of the COVID-19 pandemic, we have received purchase orders from Pfizer Inc.

(“Pfizer”) for large quantities of our proprietary enzyme product, CDX-616, for use by Pfizer in the manufacture of a critical intermediate for its proprietary API, nirmatrelvir, used by Pfizer in combination with the API ritonavir, as its PAXLOVID™ (nirmatrelvir tablets;

ritonavir tablets) product for the treatment of COVID-19 infections in humans.

In July 2022, we entered into an Enzyme Supply Agreement with Pfizer Ireland Pharmaceuticals, a subsidiary of Pfizer, Inc.

(the “Pfizer Supply Agreement”), covering the manufacture, sale and purchase of CDX-616 for use by Pfizer in the manufacture of nirmatrelvir.

Under the terms of the Pfizer Supply Agreement, Pfizer paid us a fee of $ 25.9 million in August 2022 which is creditable against future orders of CDX-616 used to manufacture PAXLOVID™ .

Revenues in 2023 and in future years from our sales of CDX-616 to Pfizer and other potential customers (including sublicensees of Pfizer technology from The Medicine Patent Pool) are subject to a number of factors which are outside of our control and could reduce or eliminate our sales of CDX-616.

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

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

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

Basis of Presentation and Summary of Significant Accounting Policies

2 unchanged sentences

and its wholly-owned subsidiaries.

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

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

3 unchanged sentences

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

We regularly assess these estimates which primarily affect revenue recognition,

inventories, valuation of equity investments, goodwill arising out of business acquisitions, accrued liabilities, stock awards, and the valuation allowances associated with deferred tax assets.

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

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

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

Segment Reporting

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

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

Our CODM is our Chief Executive Officer.

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

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regula rly by the CODM, in deciding how to allocate resources, and in assessing performance.

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

We do not allocate or evaluate assets by segment.

1 unchanged sentence

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.

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

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

Foreign Currency Translation

3 unchanged sentences

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

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

Gains and losses realized from non-USD transactions, including intercompany balances not considered as permanent investments, are included in other expense in the accompanying consolidated statements of operations.

Revenue Recognition

30 unchanged sentences

We update the transaction price for expected consideration, subject to constraint, each reporting period if our estimates of future goods to be ordered by customers change.

Research and Development Revenues

Research and Development Revenue

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

We identify each performance obligation in our research and development agreements at contract inception.

We allocate the consideration to each distinct performance obligation based on the estimated SSP of each performance obligation.

We allocate the consideration to each distinct performance obligation based on the SSP of each performance obligation.

Performance obligations included in our research and services agreements typically include research and development services for a specified term, periodic reports and small samples of enzyme produced.

2 unchanged sentences

Thus, our performance obligations are generally satisfied over time as the service is performed.

We utilize an appropriate method of measuring progress towards the completion of our performance obligations to determine the timing of revenue recognition.

For each performance obligation that is satisfied over time, we recognize revenue using a single measure of progress, typically based on hours incurred.

We utilize an appropriate method of measuring progress towards the completion of our performance obligations to determine the timing of revenue rec ognition.

For each performance obligation that is satisfied over time, we recognize revenue using a single measure of progress either based on hours incurred or based on stage of progress under the project.

Our contracts frequently provide customers with rights to use or access our products or technology, along with other promises or performance obligations.

1 unchanged sentence

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

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

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

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

4 unchanged sentences

Milestone payments that are not within our control or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received.

The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which we

recognize revenue as or when the performance obligations under the contract are satisfied.

The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied.

At the end of each subsequent reporting period, we re-evaluate the probability of achievement of such development milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price.

1 unchanged sentence

Our CodeEvolver ® platform technology transfer collaboration agreements typically include license fees, upfront fees, and variable consideration in the form of milestone payments, and sales or usage-based royalties.

We have recognized revenues from our platform technology transfer agreements over time as our customer learns to use our technology.

We have recognized revenues from our platform technology transfer agreements over time as our customer uses our technology.

For license agreements that include sales or usage-based royalty payments to us, we do not recognize revenue until the underlying sales of the product or usage has occurred.

14 unchanged sentences

Contract Costs

We recognize a non-current asset for the incremental costs of obtaining a contract with a customer if the entity expects to recover such costs.

Incremental costs are costs that would not have been incurred if the contract had not been obtained.

Examples of contract costs are commissions paid to sales personnel.

We recognize a non-current asset for the incremental costs of obtaining a contract with a customer if the entity expects to recover such costs and if those costs would not have been incurred if the contract had not been obtained, such as commissions paid to sales personnel.

We do not typically incur significant incremental costs because the compensation of our salespeople is not based on contracts closed but on a mixture of company goals, individual goals, and sales goals.

If a commission paid is directly related to obtaining a specific contract, our policy is to capitalize and amortize such costs on a systematic basis, consistent with the pattern of transfer of the good or service to which the asset relates.

Contract costs are reported in other non-current assets.

Contract costs are reported in other non-current assets and were not significant in any of the periods presented.

Cost of Product Revenue

1 unchanged sentence

Shipping costs are included in our cost of product revenue.

Such charges were not significant in any of the periods presented.

Fulfillment costs, such as shipping and handling, are recognized at a point in time and are included in cost of product sales.

Shipping costs were $ 3.0 million, $ 1.8 million, and $ 0.1 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Fulfillment costs, such as shipping and handling, are recognized at a point in time and are included in cost of product revenue.

Cost of Research and Development Services

Cost of research and development services related to services under research and development agreements approximate the research funding over the term of the respective agreements and is included in research and development expense.

services provided under license and platform technology transfer agreements are included in research and development expenses and are expensed in the periods in which such costs are incurred.

Costs of services provided under license and platform technology transfer agreements are included in research and development expenses and are expensed in the periods in which such costs are incurred.

Research and Development Expenses

3 unchanged sentences

Advertising costs are expensed as incurred and included in selling, general and administrative expenses in the consolidated statements of operations.

Advertising costs were $ 0.3 million, $ 0.3 million and $ 0.5 million in the years ended December 31, 2021, 2020 and 2019, respectively.

Advertising costs were $ 0.3 million for each of the years ended December 31, 2022, 2021 and 2020.

Stock-Based Compensation

1 unchanged sentence

The Black-Scholes-Merton option pricing model requires the use of assumptions, including the expected term of the award and the expected stock price volatility.

The expected term is based on historical exercise behavior on similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior.

The expected term is based on historical exercise behavior for similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior.

We use historical volatility to estimate expected stock price volatility.

2 unchanged sentences

Restricted Stock Units ("RSUs"), Restricted Stock Awards ("RSAs”) and performance-contingent restricted stock units ("PSUs”) are measured based on the fair market values of the underlying stock on the dates of grant.

Performance based options (“PBOs”) are measured using Black-Scholes-Merton option pricing model.

Performance based options ("PBOs") are measured using the Black-Scholes-Merton option pricing model.

The vesting of PBOs and PSUs awarded is conditioned upon the attainment of one or more performance objectives over a specified period and upon continued employment through the applicable vesting date.

13 unchanged sentences

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

This balance is recorded as current restricted cash on the consolidated balance sheets of $ 0.6 million as of December 31, 2021 and 2020.

Pursuant to the terms of a lease agreement for our Redwood City, CA facilities, we obtained a letter of credit collateralized by cash deposit balances of $ 1.1 million as of December 31, 2021 and 2020.

Pursuant to the terms of our new lease agreement for our San Carlos, CA facility, we also obtained a letter of credit collateralized by cash deposit balances of $ 0.5 million as of December 31, 2021.

This balance is recorded as current restricted cash on the consolidated balance sheets of $ 0.5 million and $ 0.6 million as of December 31, 2022 and 2021, respectively.

Pursuant to the terms of the lease agreements for our Redwood City and San Carlos facilities, we obtained letters of credit collateralized by cash deposit balances of $ 1.5 million as of December 31, 2022 and 2021.

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

18 unchanged sentences

We maintain an allowance for doubtful accounts based on the expected collectability of all financial assets, which takes into consideration an analysis of historical bad debts, specific customer creditworthiness and current economic trends.

As of December 31, 2021, we had one customer that accounted for 62 % of our accounts receivable balance.

As of December 31, 2020, three customers accounted for 70 % of our accounts receivable balance.

As of December 31, 2022, we h ad two customers that accounted for 63 % of our ac counts receivable balance.

As of December 31, 2021, one customer accounted for 62 % of our accounts receivable balance.

We believe the accounts receivable balances from our largest customers do not represent a significant credit risk, based on cash flow forecasts, balance sheet analysis, and past collection experience.

6 unchanged sentences

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

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

historical portfolio used to develop loss history.

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

2 unchanged sentences

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

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

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

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

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

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

Unbilled Receivable

25 unchanged sentences

If the comparison indicates that impairment exists, long-lived assets are written down to their respective fair values based on discounted cash flows.

management judgment is required in the forecast of future operating results that are used in the preparation of unexpected undiscounted cash flows.

Management judgment is required in the forecast of future operating results that are used in the preparation of undiscounted cash flows.

As of December 31, 2022 and 2021, there were no events or changes in circumstances which indicated that the carrying amount of our asset group might not be recoverable.

5 unchanged sentences

Investment in Non-Marketable Debt Securities

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

We measure available-for-sale investments in non-marketable debt securities a t fair value.

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

4 unchanged sentences

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

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

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

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

52 unchanged sentences

We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and may not accurately anticipate actual outcomes.

The Tax Reform Act of 1986 and similar state provisions limit the use of net operating loss (“NOL”) carryforwards in

certain situations where equity transactions result in a change of ownership as defined by Internal Revenue Code Section 382.

The Tax Reform Act of 1986 and similar state provisions limit the use of net operating loss (“NOL") carryforwards in certain situations where equity transactions result in a change of ownership as defined by Internal Revenue Code Section 382.

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

1 unchanged sentence

Recently adopted accounting pronouncements

In December 2019, the FASB issued ASU 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 .

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

The standard was adopted beginning January 1, 2021 on a retrospective basis.

The adoption of ASU 2019-12 did not have an impact on our consolidated financial statements and related disclosures.

In October 2020, the FASB issued ASU No.

2020-10, Codification Improvements .

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

We adopted the standard on January 1, 2021 and it had no impact on our consolidated financial statements and related disclosures.

Recently issued accounting pronouncements not yet adopted

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

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

In May 2021, FASB issued ASU No.

3 unchanged sentences

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 have evaluated that the adoption of ASU 2021-04 will not have an impact on our consolidated financial statements and related disclosures.

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

The standard was adopted beginning January 1, 2022 on a prospective basis.

The adoption of ASU 2021-04 did not have an impact on our consolidated financial statements and related disclosures.

In August 2020, FASB issued ASU No.

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

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

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

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

The standard 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 have evaluated that the adoption of ASU 2020-06 will not have an impact on our consolidated financial statements and related disclosures.

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

The standard was adopted beginning January 1, 2022 on a modified retrospective basis.

The adoption of ASU 2020-06 did not have an impact on our 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 .

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

The standard is effective for all entities.

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

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

however, we believe that the adoption of ASU 2020-04 will have no significant impact on our consolidated financial statements and related disclosures.

The standard was adopted beginning January 1, 2022 on a prospective basis.

The adoption of ASU 2020-04 had no significant impact on our consolidated financial statements and related disclosures.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 , which extends the period of time preparers can utilize the reference rate reform guidance in Topic 848.

The standard was adopted upon its issuance on a prospective basis.

The adoption of ASU 2022-06 did not have an impact on our consolidated financial statements and related disclosures.

Recently issued accounting pronouncements not yet adopted

There have been no other recent accounting pronouncements or changes in accounting pronouncements during the year ended December 31, 2022 that are of significance or potential significance to us.

Revenue Recognition

Disaggregation of Revenue

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

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

Segment information for each of the fiscal years are as follows (in thousands):

Segment information is as follows (in thousands):

Year Ended December 31, 2022

43 unchanged sentences

Unbilled receivables are transferred to accounts receivable on issuance of an invoice.

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

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

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

1 unchanged sentence

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

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

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

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

2 unchanged sentences

We recognize a contract liability when we receive advance customer payments under development agreements for research and development services, upfront license payments, and from upfront customer payments received under product supply agreements.

Contract liabilities are classified as a liability on the consolidated balance sheet.

Contract liabilities are classified as a liability on the consolidated balance sheets.

Contract costs relate to incremental costs of obtaining a contract with a customer.

12 unchanged sentences

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 December 31, 2021.

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

21 unchanged sentences

In 2021, we received two additional milestone payments from GSK under the agreement.

We recognized research and development revenue of $ 4.3 million, nil , and $ 2.0 million in the years ended December 31, 2021, 2020, and 2019, respectively.

We recognized research and development revenue of nil , $ 4.3 million, and nil in the years ended December 31, 2022, 2021, and 2020, respectively.

Merck Platform Technology Transfer and License Agreement

1 unchanged sentence

In 2016, we completed the final phase in the transfer of CodeEvolver ® technology to Merck under the Merck CodeEvolver ® Agreement.

We recognized research and development revenues o f $ 0.6 million , $ 3.1 million, and $ 4.0 million in the years ended December 31, 2021, 2020 and 2019, respectively, for various research projects under our collaborative arrangement.

We recognized research and development revenues of $ 40 thousand, $ 0.6 million, and $ 3.1 million in the years ended December 31, 2022, 2021 and 2020, respectively, for various research projects under our collaborative arrangement.

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

1 unchanged sentence

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

In January 2019, we amended the Merck CodeEvolver ® Agreement to install certain CodeEvolver ® protein engineering technology upgrades into Merck’s platform license installation and maintain those upgrades for a multi-year term expiring in January 2022.

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

We recognized $ 0.1 million, $ 0.1 million and $ 0.9 million in research and development revenues under the terms of the amendment in 2021, 2020 and 2019 respectively.

The license installation was completed in 2019.

We recognized nil , $ 0.1 million and $ 0.1 million in research and development revenues under the terms of the amendment in 2022, 2021 and 2020 respectively.

Merck Sitagliptin Catalyst Supply Agreement

3 unchanged sentences

Effective as of January 2016, we and Merck amended the Sitagliptin Supply Agreement to prospectively provide for variable pricing based on the cumulative volume of sitagliptin enzyme purchased by Merck.

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

Under the alternative approach, we estimate the total expected consideration and allocate it proportionately with the expected sales.

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

We have previously determined that the variable pricing, which provides a discount based on the cumulative volume of sitagliptin enzyme purchased by Merck, provides Merck material rights and we recognized product revenues using the alternative method wherein we estimated the total expected consideration and allocated it proportionately with the expected sales.

Pursuant to the latest amendment of the Sitagliptin Supply Agreement, we have determined that the latest price per volume of sitagliptin enzyme to be purchased by Merck no longer provides Merck material rights, and as such we are recognizing product revenue based on contractually stated prices effective as of February 2022.

We recognized $ 5.9 million, $ 9.8 million and $ 13.4 million in product revenue under this contract for the years ended December 31, 2022, 2021 and 2020, respectively.

Revenues recognized by us under the Sitagliptin Supply Agreement comprised 4 %, 9 %, and 19 % of our total revenues for the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2021, we recorded revenue of $ 2.8 million from sitagliptin enzyme sales that were recognized over time based on the progress of the manufacturing process.

These products will be shipped within the six months period following the end of the quarter.

During the year ended December 31, 2022, we recorded revenue of $ 1.6 million from sitagliptin enzyme sales that were recognized over time based on the progress of the manufacturing process.

These products will be shipp ed in the first quarter of 2023.

Enzyme Supply Agreement

4 unchanged sentences

As of December 31, 2022 and 2021, we had deferred revenue balances from the supply agreement of $ 3.3 million and $ 2.6 million.

Research and Development Agreement

In March 2017, we entered into a multi-year research and development services agreement with Tate & Lyle Ingredients Americas LLC (“Tate & Lyle”) to develop enzymes for use in the manufacture of Tate & Lyle’s zero-calorie TASTEVA ® M Stevia sweetener.

Under the agreement, we received an upfront payment which was recognized ratably over the maximum term of the service period of 21 months.

Commercial Agreement

1 unchanged sentence

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

In November 2020, we

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

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

In the fourth quarter of 2020, we became eligible to receive a milestone payment of $ 0.4 million which we subsequently received in February 2021.

1 unchanged sentence

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

We received an upfront cash payment of $ 14.0 million in 2017 upon the execution of the Nestlé License Agreement, a $ 4.0 million milestone payment received in 2018 after dosing the first subjects in a first-in-human Phase 1a dose-escalation trial with CDX-6114, and a $ 1.0 million milestone payment received in 2019 upon achievement of a milestone relating to formulation of CDX-6114.

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

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

We recognized nil , $ 13 thousand and $ 1.9 million in research and development revenue in 2021, 2020 and 2019, respectively.

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

In February 2019, Nestlé Health Science exercised its option to obtain an exclusive, worldwide, royalty-bearing, sub-licensable license for the global development and commercialization of CDX-6114 for the management of PKU and made an option payment of $ 3.0 million which we recognized as research and development revenue in 2019.

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

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

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

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

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

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

The term of the Nestlé SCA has been extended throug h December 2022.

In January 2020, we entered into a development agreement with Nestlé Health Science pursuant to which we and Nestlé Health Science are collaborating to advance a lead candidate, CDX-7108, targeting a gastrointestinal disorder discovered through our Nestlé SCA into preclinical and early clinical studies.

During 2021, we, together with Nestlé Health Science, continued to advance CDX-7108 towards initiation of a Phase 1 clinical trial with the first subject being dosed in November 2021.

The term of the Nestlé SCA has been extended through December 2023 with an automatic renewal through December 2024.

In January 2020, we entered into a development agreement with Nestlé Health Science pursuant to which we and Nestlé Health Science are collaborating to advance CDX-7108, targeting a gastrointestinal disorder discovered through our Nestlé SCA, into preclinical and early clinical studies.

We, together with Nestlé Health Science, are continuing to advance CDX-7108 and initiated a Phase 1 clinical trial with the first subject being dosed in the fourth quarter of 2021.

The term of the development agreement has been extended through December 2023 with an automatic renewal through December 2024.

Under the Nestlé SCA and the development agreement, we recognized $ 7.1 million, $ 6.9 million and $ 7.9 million in research and development revenue for the years ended December 31, 2022, 2021 and 2020, respectively.

Strategic Collaboration Agreement

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

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

3 unchanged sentences

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

We recognized research and development revenue related to the Porton Agreement of $ 1.1 million, $ 1.1 million and nil in the years ended December 31, 2021, 2020 and 2019, respectively.

The initial term of the Porton Agreement will expire on April 22, 2023 and is not being renewed for an extended term.

We recognized research and development revenue related to the Porton Agreement of $ 0.1 million, $ 1.1 million and $ 1.1 million in the years ended December 31, 2022, 2021 and 2020, respectively.

Platform Technology Transfer and License Agreement

2 unchanged sentences

In July 2021, we announced the completion of the technology transfer period during which we transferred our CodeEvolver ® protein engineering platform technology to Novartis (the "Technology Transfer Period").

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

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

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

2 unchanged sentences

We completed the second technology milestone transfer under the agreement in 2020 and received a milestone payment of $ 4.0 million.

We have also received an aggregate of $ 5.0 million for the completion of the third technology milestone in 2021 In consideration for the continued disclosure and license of improvements to the technology and materials during a multi-year period that began on the conclusion of the Technology Transfer Period (“Improvements Term”), Novartis will pay Codexis annual payments over four years which amount to an additional $ 8.0 million in aggregate.

We have also received an aggregate of $ 5.0 million for the completion of the third technology milestone in 2021.

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

We received the first annual payment of $ 2.0 million in the fourth quarter of 2022.

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

1 unchanged sentence

Revenue allocated to improvements made during the Improvements Term are being recognized during the Improvement Term.

We recognized $ 1.6 million, $ 6.2 million and $ 11.3 million in research and development revenue in the year ended December 31, 2021, 2020 and 2019, respectively.

We rec ognized $ 1.0 million, $ 1.6 million and $ 6.2 million in research and development revenue in the year ended December 31, 2022, 2021 and 2020, respectively.

License Agreement

4 unchanged sentences

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

We recognized research and development fees of $ 0.9 million and $ 0.9 million for the years ended December 31, 2021 and 2020, respectively.

We recognized research and development fees of nil , $ 0.9 million and $ 0.9 million for t he years ended December 31, 2022, 2021 and 2020, respectively.

Strategic Collaboration and License Agreement

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

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

In March 2020, we entered into a Strategic Collaboration and License Agreement (the “Takeda Agreement”) with Takeda under which we are collaborating to research and develop protein sequences for use in gene therapy products for certain diseases (each, a "Field") in accordance with each applicable program plan (each, a “Program Plan”).

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

2 unchanged sentences

Pursuant to the Takeda Agreement, we are eligible to receive other payments that include (i) reimbursement of research and development fees and preclinical development milestones for the three initial programs of $ 10.5 million, in aggregate, and $ 3.4 million for the fourth program, (ii) clinical development and commercialization-based milestones, per target gene, of up to $ 104.0 million and (iii) tiered royalty payments based on net sales of applicable products at percentages ranging from the mid-single digits to low single-digits.

Revenue recognized relating to the functional licenses provided to Takeda was recognized at a point in time when the control of the license transferred to the customer.

We recognized research and development revenue related to the Takeda Agreement of $ 7.4 million and $ 13.2 million in the years ended December 31, 2021 and 2020, respectively.

Revenue relating to the functional licenses provided to Takeda was recognized at a point in time when the control of the license transferred to the customer.

We recognized research and development revenue related to the Takeda Agreement of $ 4.9 million, $ 7.4 million and $ 13.2 million in the years ended December 31, 2022, 2021, and 2020, respectively.

As of December 31, 2022 and 2021, we had deferred revenue balances of $ 0.9 million and $ 2.2 million, respectively.

Master Collaboration and Research Agreement and Stock Purchase Agreement

Master Collaboration and Research Agreement, Stock Purchase Agreement and Enzyme Supply Agreement

In June 2020, we entered into a Stock Purchase Agreement with MAI in which we purchased 1,587,050 shares of MAI's Series A preferred stock for $ 1.0 million.

In connection with the June 2020, transaction, John Nicols, our President and Chief Executive Officer, joined MAI’s board of directors.

In connection with the June 2020, transaction, John Nicols, our former President and Chief Executive Officer, joined MAI’s board of directors.

For additional information, see Note 14, "Related Party Transactions".

Concurrent with our initial equity investment, we entered into a Master Collaboration and Research Agreement with MAI (the “MAI Agreement”) in June 2020, 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 preferred stock.

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

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

We are eligible to earn such non-monetary payments over 14 months, and any such shares would be issued thirty days in arrears after each calendar quarter-end.

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

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

Concurrently with our initial equity investment, we entered into the MAI Agreement, pursuant to which we performed 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.

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

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

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

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

Those include:

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

We received 3,491,505 and 714,171 shares of MAI's Series A and B preferred stock and recognized $ 2.0 million and $ 0.9 million from these services in the years ended December 31, 2021 and 2020, respectively.

As contemplated in the MAI Agreement, we executed the Commercial License and Enzyme Supply Agreement with MAI (“MAI Supply Agreement”) in July 2022 following the completion of certain timelines specified in the SOW.

W e 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 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.

We recognized $ 1.2 million, $ 2.0 million and $ 0.9 million in research and development revenue from transactions with MAI in the years ended December 31, 2022, 2021 and 2020, respectively.

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

Pfizer purchase orders

In the first and second quarters of 2021, we began to receive purchase orders from Pfizer, Inc.

Pfizer markets, sells and distributes nirmatrelvir, in combination with the active pharmaceutical ingredient ritonavir, as its PAXLOVID™ (nirmatrelvir tablets;

ritonavir tablets) product, which received emergency use authorization by the U.S.

Food and Drug Administration (“FDA”) in late 2021 for the treatment of COVID-19 infections in humans.

We recognized product revenue of $ 34.5 million from the sale of quantities of CDX-616 enzyme products to Pfizer in 2021.

Revenues recognized by us from the sale to Pfizer comprised 33 % of our total revenues for the year ended December 31, 2021.

As of December 31, 2021, we recorded revenue and contract assets of $ 1.7 million from the sale of this enzyme product that were recognized over time based on the progress of the manufacturing process.

We received an aggregate of 1,587,049 , 3,491,505 and 714,171 shares of MAI's Series A and B preferred stock in the years ended December 31, 2022, 2021 and 2020, respectively.

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™ (“FES™”) technology.

We recognized $ 0.5 million in product revenue for the year ended December 31, 2022.

Pfizer Enzyme Supply Agreement

During 2021 and 2022, we received purchase orders from Pfizer, Inc.

(“Pfizer”) for large quantities of our proprietary enzyme product, CDX-616, for use by Pfizer in the manufacture of a critical intermediate for its proprietary active pharmaceutical ingredient, nirmatrelvir, used by Pfizer in combination with the active pharmaceutical ingredient ritonavir, as its PAXLOVID™ (nirmatrelvir tablets;

ritonavir tablets) product for the treatment of COVID-19 infections in humans.

We are a party to an Enzyme Supply Agreement with Pfizer Ireland Pharmaceuticals, a subsidiary of Pfizer (the “Pfizer Supply Agreement”), covering the manufacture, sale and purchase of CDX-616 for use by Pfizer in the manufacture of nirmatrelvir.

Under the terms of the Pfizer Supply Agreement, Pfizer paid us a fee of $ 25.9 million in August 2022 which was recorded as deferred revenue.

The fee is creditable against future orders of CDX-616 used to manufacture PAXLOVID™ with shipment dates prior to December 31, 2023 and for fees associated with any new development and licensing agreements with Pfizer entered into prior to March 31, 2023 that are invoiced prior to December 31, 2023.

Up to 50% of any portion of the fee which has not been credited pursuant to credits granted under the preceding sentence is creditable against future orders of CDX-616 used to manufacture PAXLOVID™ with shipment dates prior to December 31, 2024.

In the fourth quarter of 2022, we and Pfizer agreed to adjust the terms of certain existing non-cancelable purchase orders of CDX-616 issued under the Pfizer Supply Agreement pursuant to which Pfizer will pay us $ 36.8 million in lieu of the delivery of certain quantities of CDX-616 under those purchase orders, thereby relieving both parties of further obligations under those p urchase orders.

We recognized $ 36.8 million in product revenue in 2022 for these existing orders that were invoiced in 2022, of which $ 19.8 million was collected in December 2022 and the remaining amount was included in accounts receivable as of December 31, 2022, as our right to payment became unconditional upon modification.

We expect to receive the $ 16.9 million in accounts receivable in the first quarter of 2023.

We recognized product revenue of $ 75.4 million and $ 34.5 million in the years ended December 31, 2022 and 2021, respectively, from the sale of quantities of CDX-616 to Pfizer.

Revenues recognized by us from sale of CDX-616 to Pfizer comprised 54 % and 33 % of our total revenues for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, we had $ 24.4 million in deferred revenue related to the $ 25.9 million fee received from Pfizer, net of $ 1.5 million of product revenue recognized from the fee during the year ended December 31, 2022.

We had nil and $ 1.7 million in contract assets as of December 31, 2022 and 2021, respectively.

Investments in Non-Marketable Securities

5 unchanged sentences

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

In November 2020, we purchased convertible subordinated notes issued by Arzeda Corp., an early-stage computational protein design company, for $ 1.0 million.

The investment was classified as available-for-sale non-marketable interest-bearing debt securities with a carrying value of $ 1.0 million as of December 31, 2020.

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 year ended December 31, 2021 , w e recognized $ 0.3 million in interest income from interest earned on our investment in this debt security.

There were no investments in non-marketable debt securities at December 31, 2021.

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

December 31, 2020

Adjusted Cost and Carrying Value Fair Value

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

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

(“Arzeda”), an early-stage computational protein design company, for $ 1.0 million and the investment was classified as available-for-sale non-marketable interest-bearing debt securities.

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.

During the year ended December 31, 2021, we recognized $ 0.3 million in interest income from interest earned on our investment in this debt security.

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

Non-Marketable Equity Securities

Our non-marketable equity securities are investments in privately held companies without readily determinable market value and primarily relate to our investments in MAI and Arzeda Corp.

These investments are accounted for under the measurement alternative and are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes for identical or similar security of the same issuer.

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 using the observable transaction price paid by third party investors for the same or similar security of the same issuers.

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

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 consolidated statements of operations.

For the year ended December 31, 2021, we recognized a $ 1.0 million unrealized gain in other income (expense), net, in the consolidated statements of operations, and included as adjustment to the carrying value of our investment in MAI based on an analysis of observed transaction price from MAI's recent round of financing during the third and fourth quarter of 2021.

There was no remeasurement event for our investment in MAI and Arzeda Corp that occurred during the remainder of 2021.

In March 2022, we entered into a Stock Purchase Agreement with seqWell Inc.

(“seqWell”), a privately held biotechnology company, pursuant to which we purchased 1,000,000 shares of seqWell's Series C preferred stock for $ 5.0 million.

For the year ended December 31, 2022, we recogniz ed a $ 0.2 million u nrealized 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 a milestone payment during the third quarter of 2022 based on the latest observed transaction price of MAI's preferred stock.

For the year ended December 31, 2021, we recognized a $ 1.0 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 the observed transaction price from MAI's round of financing during the third and fourth quarters of 2021.

See Note 14 “Related Party Transactions” for additional information on our investment in MAI.

Other than as disclosed above, there were no remeasurement events for our investments in MAI and other non-marketable equity securities in 2022 and 2021.

We recognized no realized gains or losses during the years ended December 31, 2022 and 2021.

The carrying value of our investment in MAI was $ 12.7 million and $ 1.5 million at December 31, 2021 and December 31, 2020 , respectively.

The carrying value of our investment in Arzeda Corp.

was $ 1.3 million at December 31, 2021 .

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

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

December 31, 2022 December 31, 2021

Non-marketable equity securities $ 14,002 $ 1,450

MAI $ 13,921 $ 12,713

seqWell 5,000 —

Arzeda 1,289 1,289

Other investments in non-marketable equity securities 300 —

Total non-marketable equity securities $ 20,510 $ 14,002

Fair Value Measurements

The following tables present the financial instruments that were measured at fair value on a recurring basis at December 31, 2021 and 2020 by level within the fair value hierarchy (in thousands):

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

December 31, 2022

3 unchanged sentences

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

Non-marketable debt security — — 1,000 1,000

Total $ 127,567 $ — $ 1,000 $ 128,567

During the years ended December 31, 2022 and 2021, we did no t recognize any significant credit losses no r other-than-temporary impairment losses on non-marketable securities.

8 unchanged sentences

Average contractual maturities (in days) is not applicable.

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.

As of December 31, 2022, the total cash and cash equivalents balance of $ 114.0 million consisted of money market funds of $ 77.3 million and cash of $ 36.7 million held w ith major financial institutions.

3 unchanged sentences

Finished goods 1,830 1,046

Inventories $ 1,160 $ 964

Total inventories $ 2,029 $ 1,160

Inventories are recorded net of reserves of $ 1.2 million and $ 1.4 million as of December 31, 2022 and December 31, 2021 respectively.

22 unchanged sentences

Other 932 676

Total other accrued liabilities

$ 15,279 $ 12,578

10 unchanged sentences

stock appreciation rights, and stock purchase rights to our employees, non-employee directors and consultants.

As of December 31, 2021, total shares remaining available for issuance under the 2019 Plan were 5.9 million shares.

As of December 31, 2022, total shares remaining available for issuance under the 2019 Plan were 2.8 million s hares.

Stock Options

9 unchanged sentences

Performance-contingent Restricted Stock Units ("PSUs") and Performance Based Options ("PBOs")

The compensation committee of the Board approved, solely in respect of non-executive employees, delegated to our Chief Executive Officer the authority to approve grants of PSUs.

The compensation committee of the Board also approved grants of PBOs and PSUs to our executives.

The compensation committee of the Board, solely in respect of non-executive employees, delegated to our Chief Executive Officer the authority to approve grants of PSUs.

The compensation committee of the Board also approves grants of PBOs and PSUs to our executives.

The PSUs and PBOs vest based upon both the successful achievement of certain corporate operating milestones in specified timelines and continued employment through the applicable vesting date.

6 unchanged sentences

Achievement below the threshold level would result in no shares being eligible to vest in respect of the PSUs and PBOs.

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

In 2022, we awarded PSUs ("2022 PSUs") and PBOs ("2022 PBOs"), each of which commence vesting based upon the achievement of various weighted performance go als, including finance and corporate strategy, performance enzymes and biotherapeutics deliverables, research plans, and organizational development.

As of December 31, 2022, we estimated that the 2022 PSUs and 2022 PBOs performance goals would be achieved at 85.0 % and 42.5 % of the target level, respectively, and recognized stock-based compensation 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.

In the first quarter of 2021, we determined that the 2020 PSUs and 2020 PBOs performance goals had been achieved at 88 % and 44 % of the target level, respectively, and recognized the 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.

In the first quarter of 2022, we determined that the 2021 PSUs and 2021 PBOs performance goals had been achieved at 146 % and 73 % of the target level, respectively, and recognized stock-based compensation expenses accordingly.

Accordingly, 50 % of the shares underlying the 2021 PSUs and PBOs vested in the first quarter of 2022 and 50 % of the shares underlying the 2021 PSUs and PBOs will vest in the first quarter of 2023, in each case, subject to the recipient’s continued service on each vesting date.

In 2019, we awarded PSUs ("2019 PSUs") and PBOs ("2019 PBOs"), each of which commenced vesting based upon the achievement of various weighted performance goals, including sustained revenue and performance enzyme growth, strategic advancement of biotherapeutics, cash balance and strategic plan development.

In the first quarter of 2020, we determined that the 2019 PSUs and 2019 PBOs performance goals had been achieved at 84 % and 42 % of the target level, respectively, and recognized the stock-based compensation 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 total revenues, performance enzyme segment gross margin, major new biotherapeutics publicity events, strategic performance enzyme and biotherapeutics deliverables, and strategic plan development.

In the first quarter of 2021, we determined that the 2020 PSUs and 2020 PBOs performance goals had been achieved at 88 % and 44 % of the target level, respectively, and recognized stock-based compensation expenses accordingly.

Accordingly, 50 % of the shares underlying the 2020 PSUs and PBOs vested in the first quarter of 2021 and 50 % of the shares underlying the 2020 PSUs and PBOs vested in the first quarter of 2022, in each case, subject to the recipient’s continued service on each vesting date.

3 unchanged sentences

2022 2021 2020

Costs of product revenue $ 452 $ 224 $ 104

Research and development $ 3,907 $ 2,663 $ 1,843

9 unchanged sentences

Total $ 14,531 $ 11,593 $ 7,728

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, 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 year ended December 31, 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.

Grant Award Activities:

1 unchanged sentence

We estimated the fair value of stock options using the Black-Scholes-Merton option-pricing model based on the date of grant.

The following summarizes the weighted-average assumptions used to estimate the fair value of employee and non-employee stock options granted:

The following summarizes the weighted-average assumptions used to estimate the fair value of employee stock options granted:

Year Ended December 31,

4 unchanged sentences

Expected dividend yield 0.0 % 0.0 % 0.0 %

No stock options were granted to non-employees for services during year ended December 31, 2022.

The following summarizes the weighted-average assumptions used to estimate the fair value of 9,000 and 76,000 shares of stock options granted to non-employees for services valued at $ 0.1 million and $ 0.4 million during the years ended December 31, 2021 and 2020 respectively:

5 unchanged sentences

The weighted average grant date fair value per share of non-employee stock options granted respectively in 2021 and 2020 was $ 11.29 and $ 5.04 .

The Company did no t grant shares of stock options to non-employees during the year ended December 31, 2019.

The following tables summarizes stock option activities:

Shares Weighted

Exercise Price Per Share

The following tables summarize s stock option activities:

Shares Weighted Average

Exercise Price

(In Thousands)

12 unchanged sentences

Outstanding at December 31, 2022 4,250 $ 8.88

Shares Weighted

Exercise Price Per Share Weighted

Contractual Term Aggregate Intrinsic

Shares Weighted Average

Exercise Price

Per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic

(In Thousands) (In Years) (In Thousands)

4 unchanged sentences

The total intrinsic value of options exercised in 2022, 2021 and 2020 were $ 3.1 million, $ 14.9 million and $ 1.8 million, respectively.

As of December 31, 2021, there was $ 4.4 million of unrecognized stock-based compensation, net of expected forfeitures, related to unvested stock options, which we expect to recognize over a weighted average period of 2.4 years.

As of December 31, 2022, the re was $ 8.1 million of unrecognized stock-based compensation, net of expected forfeitures, related to unvested stock options, which we expect to recognize over a weighted average period of 3.4 years.

Restricted Stock Awards ("RSAs")

1 unchanged sentence

Shares Weighted Average

Grant Date Fair Value

(In Thousands)

2 unchanged sentences

Vested ( 35 ) $ 17.18

Forfeited/Expired ( 4 ) $ 17.18

Non-vested balance at December 31, 2020 96 $ 11.44

5 unchanged sentences

Non-vested balance at December 31, 2022 181 $ 8.45

The total fair value, as of the vesting date, of RSAs vested in fiscal 2021, 2020 and 2019 were $ 1.3 million, $ 0.4 million and $ 1.0 million respectively.

The total fair value, as of the vesting date, of RSAs vested in fiscal years 2022, 2021 and 2020 were $ 0.5 million, $ 1.3 million and $ 0.4 million respectively.

As of December 31, 2022, there was $ 0.8 million of unrecognized stock-based compensation cost related to non-vested RSAs, which we expect to recognize over a weighted average period of 1.4 years.

2 unchanged sentences

Shares Weighted Average

Grant Date Fair Value

(In Thousands)

12 unchanged sentences

Non-vested balance at December 31, 2022 518 $ 18.15

The total fair value, as of the vesting date, of RSUs vested in fiscal 2021, 2020 and 2019 were $ 1.8 million, $ 2.1 million and $ 4.1 million respectively.

The total fair value, as of the vesting date, of RSUs vested in fiscal years 2022, 2021 and 2020 were $ 1.8 million , $ 1.8 million and $ 2.1 million respectively.

As of December 31, 2022, there was $ 5.2 million of unrecognized stock-based compensation cost related to non-vested RSUs, which we expect to recognize over a weighted average period of 1.9 years.

2 unchanged sentences

Shares Weighted Average

Grant Date Fair Value

(In Thousands)

16 unchanged sentences

We estimated the fair value of PBOs using the Black-Scholes-Merton option-pricing model based on the date of grant.

The following summarize the ranges of weighted-average assumptions used to estimate the fair value of employee stock options granted:

The following summarize the weighted-average assumptions used to estimate the fair value of PBOs granted:

Year Ended December 31,

4 unchanged sentences

Expected dividend yield 0.0 % 0.0 % 0.0 %

The following tables summarizes PBO activities:

Shares Weighted Average Grant Date Fair Value Per Share

The following tables summarizes PBOs activities:

Shares Weighted Average

Grant Date Fair Value

(In Thousands)

1 unchanged sentence

Granted 689 $ 6.37

Exercised ( 422 ) $ 3.17

Forfeited/Expired ( 389 ) $ 6.42

1 unchanged sentence

Granted 433 $ 12.23

Exercised ( 35 ) $ 9.02

Forfeited/Expired ( 118 ) $ 12.23

1 unchanged sentence

Granted 733 $ 9.89

Exercised ( 35 ) $ 9.02

Forfeited/Expired ( 747 ) $ 8.29

Outstanding at December 31, 2022 1,826 $ 4.70

Shares Weighted

Exercise Price Per Share Weighted

Shares Weighted Average

Exercise Price

Per Share Weighted Average

Contractual Term Aggregate Intrinsic

2 unchanged sentences

Vested and expected to vest at December 31, 2022 1,808 $ 11.85 5.7 $ 40

The total fair value of exercised PBOs for 2021, 2020 and 2019, was $ 0.3 million, nil and $ 1.3 million, respectively.

The total fair value of e xercised PBOs for 2022, 2021 and 2020, was nil , $ 0.3 million and nil , respectively.

As of December 31, 2022, there was $ 0.4 million of unrecognized stock-based compensation cost related to non-vested PBOs, which we expect to recognize over a weighted average period of 1.0 years.

1 unchanged sentence

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.

We filed a shelf 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.

9 unchanged sentences

During the year ended December 31, 2022, no shares of our common stock were issued pursuant to the EDA.

As of December 31, 2021, $ 50.0 million of shares remained available for sale under the EDA.

As of December 31, 2022, $ 50.0 million worth of shares remained available for sale under the EDA.

Public Offerings

1 unchanged sentence

We received gross proceeds of $ 86.3 million, net of underwriting discounts and commissions of $ 5.2 million and direct offering expenses of $ 0.3 million for net proceeds of $ 80.8 million.

Private Placement

In June 2019, we entered into a Securities Purchase Agreement with an affiliate of Casdin Capital, LLC ("Casdin") pursuant to which we issued and sold to Casdin 3,048,780 shares of our common stock at a purchase price of $ 16.40 per share.

After deducting issuance costs of $ 0.1 million from the Private Offering, our net proceeds were $ 49.9 million.

The Private Offering was exempt from registration pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) the Securities Act, and Regulation D under the Securities Act.

In January 2005, we implemented a 401(k) Plan covering certain employees.

2 unchanged sentences

We may make matching or other contributions to the 401(k) Plan on behalf of eligible employees.

We recorded employer matching contributions expense of $ 1.1 million, $ 0.8 million, and $ 0.7 million in the years ended December 31, 2021, 2020, and 2019, respectively.

Our loss before provision for (benefit from) income taxes were as follows (in thousands):

We recorded employer matching contributions expense o f $ 1.6 million, $ 1.1 million, and $ 0.8 million in the years ended December 31, 2022, 2021, and 2020, respectively.

Our loss before provision for income taxes were as follows (in thousands):

Year Ended December 31,

3 unchanged sentences

Loss before provision for income taxes $ ( 33,316 ) $ ( 21,090 ) $ ( 23,671 )

The tax provision for the year ended December 31, 2022 consists primarily of current year state and foreign income taxes.

The tax provision for the years ended December 31, 2021 and 2020 consists primarily of taxes attributable to foreign operations.

33 unchanged sentences

Capital losses 413 26

R&D Capitalization 16,502 —

Unrealized gain/loss 1 418

6 unchanged sentences

Right-of-use assets ( 8,624 ) ( 10,373 )

Property and Equipment ( 736 ) —

Other ( 263 ) ( 314 )

5 unchanged sentences

Accordingly, the net deferred tax assets in all our jurisdictions have been fully reserved by a valuation allowance.

The net valuation allowance increased by $ 9.6 million during the year ended December 31, 2021, increased by $ 6.4 million during the year ended December 31, 2020, and increased by $ 6.5 million during the year ended December 31, 2019.

The net valuation allowance increased by $ 9.4 million d uring the year ended December 31, 2022, increased by $ 9.6 million during the year ended December 31, 2021, and increased by $ 6.4 million during the year ended December 31, 2020.

At such time as it is determined that it is more likely than not that the deferred tax assets are realizable, the valuation allowance will be reduced.

7 unchanged sentences

Tax credits, state $ 17,168 Do not expire

Net operating losses, foreign $ — Various

federal and California tax laws include substantial restrictions on the utilization of NOLs and tax credit carryforwards in the event of an ownership change of a corporation.

5 unchanged sentences

In instances where a valuation allowance is established against current year losses, income from other sources is considered when determining whether sufficient future taxable income exists to realize the deferred tax assets.

In 2014, we determined that the undistributed earnings of our India subsidiary will be repatriated to the United States, and accordingly, we have provided a deferred tax liability totaling $ 23 thousand and $ 32 thousand as of December 31, 2021 and 2020 respectively, for local taxes that would be incurred upon repatriation.

We apply the provisions of ASC 740 to account for uncertain income taxes.

In 2014, we determined that the undistributed earnings o f our India subsidiary will be repatriated to the United States, and accordingly, we have provided a deferred tax liability totaling $ 16 thousand and $ 23 thousand as of December 31, 2022 and 2021 respectively, for local taxes that would be incurred upon repatriation.

We apply the provisions of ASC 740 to account for uncertain income tax es.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

5 unchanged sentences

Balance at end of year $ 18,571 $ 15,261 $ 12,683

We recognize interest and penalties as a component of our income tax expense.

We recognize interest and penalties as a co mponent of our income tax expense.

Total interest and penalties recognized in the consolidated statements of operations were $ 42 thousand, $ 61 thousand and $ 39 thousand in 2022, 2021 and 2020, respectively.

2 unchanged sentences

We do not expect any material changes to our uncertain tax positions within the next 12 months.

We are not subject to examination by United States federal or state tax authorities for years prior to 2002 and foreign tax authorities for years prior to 2014.

We are not subject t o examination by United States federal or state tax authorities for years prior to 2002 and foreign tax authorities for years prior to 2014.

Commitments and Contingencies

2 unchanged sentences

Our lease agreement with MetLife ("RWC Lease") includes approximately 28,200 square feet of space located at 200 and 220 Penobscot Drive, Redwood City, California (the "200/220 Penobscot Space") and approximately 37,900 square feet of space located at 400 Penobscot Drive, Redwood City, California (the "400 Penobscot Space") (the 200/220 Penobscot Space and the 400 Penobscot Space are collectively referred to as the "Penobscot Space"), and approximately 11,200 square feet of space located at 501 Chesapeake Drive, Redwood City, California (the "501 Chesapeake Space").

Until the end of January 2020, we also leased approximately 29,900 square feet of space located at 101 Saginaw Drive, Redwood City, California (the “Saginaw Space”).

During January 2020, we subleased approximately 26,500 square feet of the Saginaw Space to Minerva Surgical, Inc.

The lease and sublease for the Saginaw Space both expired at the end of January 2020.

During the period from February 1, 2020 through April 30, 2020, we subleased approximately 3,400 square feet at 101 Saginaw Drive from Minerva Surgical, Inc.

The sublease expired at the end of April 2020.

We entered into the initial lease with MetLife for our facilities in Redwood City in 2004 and the RWC Lease has been amended multiple times since then to adjust the leased space and terms of the Lease.

5 unchanged sentences

The letter of credit is collateralized by deposit balances held by the bank in the amount of $ 1.1 million as of December 31, 2022 and 2021, and are recorded as non-current restricted cash on the 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 $ 40 thousand as of December 31, 2021.

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.

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

63, LLC (“ARE”) to lease a portion of a facility comprising approximately 36,593 rentable square feet in San Carlos, California to serve as additional office and research and development laboratory space (the “San Carlos Space”).

The budget provided a net tenant improvement allowance of $ 6.3 million and an additional allowance of up to $ 2.7 million.

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 $ 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.

We commenced occupancy of the San Carlos Space in December 2021 and recognized the right of use asset and the corresponding operating lease liability.

63, LLC ("ARE") to lease a portion of a facility consisted of approximately 36,593 rentable square feet in San Carlos, California to serve as additional office and research and development laboratory space (the "San Carlos Space").

The lease has a 10 -year term from the lease commencement date of November 30, 2021 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 and is recorded as non-current restricted cash on the consolidated balance sheets.

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

4 unchanged sentences

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 for the years ended December 31, 2021, 2020 and 2019 were as follows (in thousands):

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):

Year Ended December 31,

10 unchanged sentences

(2) The Company had no variable lease costs.

Amounts included in measurement of lease obligations:

Amounts included in measurement of lease obligations (in thousands):

Year Ended December 31,

7 unchanged sentences

exchange for lease liabilities $ — $ — $ —

Operating Lease Finance Lease

Operating Lease

Other information:

7 unchanged sentences

Lease obligations $ 43,638

Reconciliation of operating lease liabilities as shown within the audited consolidated balance sheets:

Current portion of lease obligations - Operating leases $ 5,360

Long-term lease obligations - Operating leases 38,278

Total operating lease liabilities $ 43,638

Other Commitments

2 unchanged sentences

Service agreements are primarily for the development of manufacturing processes and certain studies.

Commitments under service agreements are subject to cancellation at our discretion which may require payment

of certain cancellation fees.

Commitments under service agreements are subject to cancellation at our discretion which may require payment of certain cancellation fees.

The timing of completion of service arrangements is subject to variability in estimates of the time required to complete the work.

1 unchanged sentence

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

Manufacture and supply agreement with expected future payment date of December 2022 April 2016 $ 101

Development and manufacturing services agreements September 2019 2,469

Facility maintenance agreement September 2021 1,475

Payments Due by Period

Total 2023 2024 and Thereafter

Development and manufacturing services agreements $ 3,093 $ 2,938 $ 155

Facility maintenance agreement 2,249 2,249 —

Total other commitments $ 5,342 $ 5,187 $ 155

1 unchanged sentence

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.

In September 2021, we entered into the Ninth Amendment to the Credit Facility whereby we may draw on the Term Debt and the Revolving Line of Credit at any time prior to December 31, 2021 and October 1, 2024, respectively.

The right to take draws on the Term Debt expired on December 31, 2021 and no amounts were drawn under the Credit Facility as of December 31, 2021.

On October 1, 2024, loans drawn under the Revolving Line of Credit terminate.

The right to take draws on the Term Debt expired on December 31, 2021.

On October 1, 2024, loans drawn, if any, under the Revolving Line of Credit terminate.

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

As of December 31, 2022 and 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.

1 unchanged sentence

The Credit Facility's financial covenants restrict the ability of the Company to transfer collateral, incur additional indebtedness, engage in mergers or acquisitions, pay dividends or make other distributions, make investments, create liens, sell assets, or sell certain assets held at foreign subsidiaries.

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 Facility and our cash.

At December 31, 2021, we were in compliance with the covenants for the Credit Facility.

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

Legal Proceedings

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

We may be involved in legal actions in the ordinary course of business, including inquiries and proceedings concerning business practices and intellectual property infringement, employee relations and other claims.

We will recognize a loss contingency in the condensed consolidated financial statements when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated.

We will disclose any loss contingencies that do not meet both conditions if there is a reasonable possibility that a material loss may have been incurred.

Gain contingencies are not recorded until they are realized.

In April 2022, we reached a settlement resolving a non-material dispute involving the Company's trademark.

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

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

Indemnifications

8 unchanged sentences

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.

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.

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

In September 2021, we purchased 9,198,423 shares of MAI's Series B preferred stock for $ 7.0 million.

fourth quarter of 2021, we became eligible to receive the primary milestone payment of $ 1.0 million which we received in the form of additional of 1,587,049 Series B preferred stock during December 2021.

We recognized $ 2.0 million and $ 0.9 million in research and development revenue from transactions with MAI in the years ended December 31, 2021 and 2020, respectively.

We received 3,491,505 and 714,171 shares of MAI's Series A and B preferred stock from research and development services we provided to MAI for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, 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.

The carrying value of our investment in MAI Series A and B preferred stock was $ 12.7 million and $ 1.5 million at December 31, 2021 and 2020, respectively.

We had $ 0.2 million and nil in deferred revenue as of December 31, 2021 and 2020, respectively, and nil and $ 0.5 million in contract assets due from MAI for services rendered as of December 31, 2021 and 2020, respectively.

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

For additional information, see Note 5, "Collaborative Arrangements".

AstraZeneca PLC

Cheng, who served as a member of our board of directors until June 2020, joined AstraZeneca PLC as Executive Vice President, Operations and Information Technology in June 2015.

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

We recognized $ 0.1 million of revenue in 2020, through the date of Ms.

Cheng's departure from our board of directors.

As of December 31, 2020, we had no receivables from AstraZeneca PLC and its controlled purchasing agents and contract manufacturers that was generated during the related party period.

In connection with the transaction, Mr.

Nicols, our former President and Chief Executive Officer, also joined MAI’s board of directors.

W e 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 recogniz ed $ 1.2 million , $ 2.0 million and $ 0.9 million in research and development revenue from transactions with MAI in the years ended December 31, 2022, 2021 and 2020, 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 , 3,491,505 and 714,171 shares of MAI's Series A and B preferred stock for the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2022, we hold an aggregate 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 $ 0.5 million in product revenue for the year ended December 31, 2022.

The carrying value of our investment in MAI's Series A and B preferred stock was $ 13.9 million and $ 12.7 million at December 31, 2022 and 2021, respectively.

We had nil a nd $ 0.2 million in deferred revenue as of December 31, 2022 and 2021, respectively .

Segment, Geographical and Other Revenue Information

5 unchanged sentences

We report corporate-related expenses such as legal, accounting, information technology, and other costs that are not otherwise included in our reportable business segments as "corporate costs." All items not included in income (loss) from operations are excluded from the business segments.

All of our long lived assets are located in the United States.

We manage our assets on a total company basis, not by business segment, as the majority of our operating assets are shared or commingled.

17 unchanged sentences

14,724 2,421 17,145 12,105 2,755 14,860

Restructuring charges 1,708 966 2,674 — — —

Total segment costs and operating expenses 80,251 53,157 133,408 57,454 32,974 90,428

5 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 expense, interest income, and other income (expense), net.

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

Year Ended December 31, 2021 Year Ended December 31, 2020

15 unchanged sentences

Loss before income taxes $ ( 21,090 ) $ ( 23,671 )

(1) For the years ended December 31, 2020 and 2019, research and development expenses and selling, general and administrative expenses exclude depreciation and amortization of finance leases.

(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 (expense), net.

15 unchanged sentences

Customer D * * 11 %

Customer E * * 23 %

* Percentage was less than 10%

Customers that each accounted for 10% or more of accounts receivable balances as of the periods presented as follows:

Customers that each accounted for 10% or more of accounts receivable balances as of the periods presented are as follows:

As of December 31,

Customer A 53 % 62 %

Customer B * 32 %

Customer D 10 % *

Customer E * 25 %

* Percentage was less than 10%

7 unchanged sentences

Total revenues $ 138,590 $ 104,754 $ 69,056

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

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

United States $ 61,877 $ 65,457

Identifiable goodwill was as follows (in thousands):`

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

December 31, 2022 December 31, 2021

2 unchanged sentences

Allowance for Credit Losses

The following summarizes the receivables allowance for credit losses (in thousands):

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

2022 2021 2020

1 unchanged sentence

Provision for credit losses 54 342 40

Write-offs ( 257 ) — —

Recoveries collected ( 50 ) — —

Balance at end of period $ 163 $ 416 $ 74

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

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

December 31, 2022

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

Current 31-60 Days 61-90 Days 91 Days and Over Total over 31 Days Total Balance

Accounts receivable $ 28,896 $ 1,747 $ 469 $ 792 $ 3,008 $ 31,904

December 31, 2021

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

Current 31-60 Days 61-90 Days 91 Days and Over Total over 31 Days Total Balance

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

Restructuring Charges

In November 2022, we announced a plan for a workforce reduction of approximat ely 18 % of our total employee to realign and optimize our workforce requirements in alignment with our refined corporate strategy.

During the year ended December 31, 2022, we recorded a restructuring charge of $ 3.2 million related to severance, bonus and other termination benefits in connection with the workforce reduction.

As of December 31, 2022, we have accrued $ 1.2 million as a current liability within accrued compensation on our consolidated balance sheets and is expected to be paid in the first quarter of 2023.

We do not expect to record any significant future charges related to the restructuring plan.

Subsequent Events

On January 23, 2023, we announced the appointment of Sriram Ryali as our new Chief Financial Officer, effective immediately.

In connection with Mr.

Ryali's appointment as Chief Financial Officer, Ross Taylor ceased to serve as our Chief Financial Officer and principal financial and accounting officer, effective as of January 23, 2023.

Taylor will provide transition and advisory services on an as-needed basis until March 6, 2023.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data