What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-28 compared with 2023-02-27 · 350 added, 370 removed, 1041 unchanged (41% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm ( BDO USA, LLP ;

San Jose, CA ;

Reports of Independent Registered Public Accounting Firm ( BDO USA, P.C.

San Francisco, CA ;

Consolidated Balance Sheets

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Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition

As described in Notes 2 and 3 to the consolidated financial statements, the Company recognizes revenue in a manner that best depicts the transfer of promised goods or services to the customer when control of the product or service is transferred to a customer.

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

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.

As described in Notes 2, 3 and 5 to the consolidated financial statements, the Company enters into contracts with customers that include enzyme supply, licensing, and collaborative research and development agreements.

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

The Company recognizes revenue in a manner that best depicts the transfer of promised goods or services to the customer when control of the product or service is transferred to a customer.

The Company 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, 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.

We identified the evaluation of management’s accounting for revenue from certain new and amended contracts with customers as a critical audit matter due to significant judgments and estimates involved in the identification 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.

Auditing these elements involved especially subjective and complex auditor judgments due to the nature and extent of audit effort required.

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, 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.

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

• Testing the design, implementation and operating effectiveness of internal controls relating to the Company's accounting for certain new and amended revenue contracts, including controls over 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 these contracts to test management's identification of significant terms for completeness, including the identification of distinct performance obligations, material rights and variable consideration.

• Evaluating the reasonableness and accuracy of management’s judgments and estimates used in identification and accounting for 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 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

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

/s/ BDO USA, P.C.

We have served as the Company's auditor since 2013.

San Jose, California

San Francisco, California

February 28, 2024

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

San Jose, California

/s/ BDO USA, P.C.

San Francisco, California

February 28, 2024

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Investment in non-marketable equity securities ($ 0 and $ 13,921 with a related party)

20,510 14,002

Right-of-use assets - Operating leases, net 13,137 39,263

Right-of-use assets - Finance leases, net — 17

Property and equipment, net 15,487 22,614

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Current portion of lease obligations - Operating leases 3,781 5,360

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

Deferred revenue 10,121 13,728

Total current liabilities 35,830 49,066

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Restructuring charges 3,284 3,167 —

Asset impairment and other charges 9,984 — —

Total costs and operating expenses 138,212 173,471 127,451

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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 )

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Non-employee stock-based compensation — — 2 — 2

Issuance of common stock, net of issuance costs of $ 721

3,080 1 7,931 — 7,932

Taxes paid related to net share settlement of equity awards ( 65 ) — ( 404 ) — ( 404 )

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Stock-based compensation 9,971 14,531 11,593

Provision for credit losses 4 342 40

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

Provision (recovery) for credit losses

Equity securities earned from research and development activities ($ 0 , ($ 1,245 ), and ($ 1,955 ) from a related party)

( 213 ) ( 1,245 ) ( 1,955 )

Unrealized gain on non-marketable securities ($ 0 , ($ 208 ), and ($ 983 ) from a related party)

— ( 208 ) ( 1,272 )

Asset impairment and other charges 9,984 — —

Impairment of investment in non-marketable securities 12,215 — —

Other non-cash items 4 ( 29 ) ( 19 )

Changes in operating assets and liabilities:

Financial assets ($ 0 , $ 0 and ($ 450 ) from a related party)

( 3,225 ) ( 9,156 ) ( 8,723 )

Financial assets 20,247 ( 3,225 ) ( 9,156 )

Inventories ( 656 ) ( 869 ) ( 196 )

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Proceeds from issuance of common stock in connection with public offering 8,652 — —

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

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

Costs incurred in connection with issuance of common stock at public offering ( 503 ) ( 42 ) ( 207 )

Taxes paid related to net share settlement of equity awards ( 404 ) ( 1,488 ) ( 1,206 )

Net cash provided by (used in) financing activities 8,167 ( 575 ) 3,767

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

Net decrease in cash, cash equivalents and restricted cash ( 49,329 ) ( 2,869 ) ( 31,922 )

Cash, cash equivalents and restricted cash at the beginning of the year 116,026 118,895 150,817

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and its subsidiaries on a consolidated basis.

We discover, develop and sell enzymes and other proteins that deliver value to our clients in a growing set of industries to commercialize an increasing number of novel enzymes, both as proprietary Codexis products and in partnership with our customers.

We report our financial results based on two reportable segments:

Performance Enzymes and Novel Biotherapeutics.

The segment information aligns with how the chief operating decision maker (CODM), who is our Chief Executive Officer (CEO), reviews and manages the business.

Business Update Regarding COVID-19

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.

We discover, develop, enhance, and commercialize novel, high performance enzymes and other classes of proteins leveraging our proprietary CodeEvolver ® directed evolution technology platform.

We previously managed our business as two business segments, Performance Enzymes and Novel Biotherapeutics.

During the fourth quarter of 2023, we made changes to the structure of our organization in connection with the restructuring of our business that we announced in July 2023, including the discontinuation of investment in certain development programs, primarily in our biotherapeutics business, consolidation of operations to our Redwood City, California headquarters, and headcount reduction.

In connection with these organizational structure changes, corresponding changes were made to how our business is managed, how results are reported internally and how our Chief Executive Officer (“CEO”), our chief operating decision maker, assesses performance and allocates resources.

As a result of these changes, our previous Performance Enzymes and Novel Biotherapeutics operating segments were combined into a single reportable segment.

Effective October 1, 2023, the Company's operations are managed and reported to the CEO on a consolidated basis.

The CEO assesses performance and allocates resources based on the consolidated results of operations.

We believe that these changes better align internal resources and external go to market activities in order to create a more efficient and effective organizational structure.

Under this new organizational and reporting structure, we managed our business as one reportable segment as of December 31, 2023.

Comparative prior period disclosures that reflected the previous two segments' information have been revised to conform to this change in our reportable segment.

Basis of Presentation and Summary of Significant Accounting Policies

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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, deferred revenue, 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 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.

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

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, molecular diagnostics, and other industrial markets.

Foreign Currency Translation

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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.

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

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

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Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration and other revenues and earnings in the period of adjustment.

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.

Our CodeEvolver ® technology platform 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 uses our technology.

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Stock-Based Compensation

We use the Black-Scholes-Merton option pricing model to estimate the fair value of options granted under our equity incentive plans.

We use the Black-Scholes-Merton option pricing model to estimate the fair value of stock options granted under our equity incentive plans and for our employee stock purchase plan ( “ ESPP ” ).

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.

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The estimated annual forfeiture rates for stock options, RSUs, PSUs, PBOs, and RSAs are based on historical forfeiture experience.

The estimated fair value of stock options, RSUs and RSAs are expensed on a straight-line basis over the vesting term of the grant and the estimated fair value of PSUs and PBOs are expensed using an accelerated method over the term of the award once management has determined that it is probable that the performance objective will be achieved.

The estimated fair value of stock options, RSUs, RSAs and shares to be issued under the ESPP are expensed on a straight-line basis over the vesting term of the grant and the estimated fair value of PSUs and PBOs are expensed using an accelerated method over the term of the award once management has determined that it is probable that the performance objective will be achieved.

Compensation expense is recorded over the requisite service period based on management's best estimate as to whether it is probable that the shares awarded are expected to vest.

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

This balance is recorded as current restricted cash on the consolidated balance sheets of $ 0.5 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.

This balance is recorded as current restricted cash on the consolidated balance sheets of $ 0.5 million as of December 31, 2023 and 2022.

Pursuant to the terms of our lease agreements, we obtained letters of credit collateralized by cash deposit balances of $ 1.1 million and $ 1.5 million as of December 31, 2023 and 2022, respectively.

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

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

Cash and cash equivalents are invested through banks and other financial institutions in the United States, India, and the Netherlands.

Cash and cash equivalents are invested through banks and other financial institutions in the United States and India.

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

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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, 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.

As of December 31, 2023, we h ad four customers that accounted for 58 % of our ac counts receivable balance.

As of December 31, 2022, two customers accounted for 63 % 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.

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Laboratory equipment 5 years

Computer equipment and software 3 to 5 years

Computer equipment and software 3 years

Office equipment and furniture 5 years

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Impairment of Long-Lived Assets

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

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

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

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 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.

No impairment charges for long-lived assets were recorded during the years ended December 31, 2022, 2021 and 2020.

Investment in Non-Marketable Securities

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

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

For additional information on the impairment charge recorded for the year ended December 31, 2023, s ee Note 8, “Balance Sheets Details” and Note 13, “Commitments and Contingencies.” No impairment charges for long-lived assets were recorded during the year ended December 31, 2022.

Investment in Non-Marketable Equity Securities

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Gains and losses on these securities are recognized in other income (expense), net.

Investment in Non-Marketable Debt Securities

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.

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

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

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

We may value these securities based on significant recent arms-length transactions with sophisticated non-strategic unrelated new investors.

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 the estimated fair value of the debt or equity security compared to its carrying value.

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

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

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

For additional information on the impairment charge recorded for the year ended December 31, 2023, s ee Note 6, “Investments in Non-Marketable Securities.”

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

We test goodwill for impairment considering amongst other things, whether there have been sustained declines in our share price.

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

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

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

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

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

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

Goodwill had a carrying value of $ 2.5 million and $ 3.2 million as of December 31, 2023 and 2022, respectively.

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

The annual impairment test is completed using either:

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

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

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

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

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

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

During 2022, 2021 and 2020, we did not record impairment charges related to goodwill.

or a quantitative "Step 1" assessment, which determines the fair value.

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

Using a relative fair value allocation methodology for assets and liabilities, we compare the carrying amount of net assets and the goodwill to its fair value.

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

Any excess carrying amount of goodwill over its fair value is recognized as an impairment.

We recorded impairment charges related to goodwill of $ 0.8 million, nil , and nil for the years ended December 31, 2023, 2022, and 2021, respectively.

For additional information on the impairment charge recorded for the year ended December 31, 2023, s ee Note 8, “Balance Sheets Details.”

Lease Accounting

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

As of December 31, 2022, we maintain a full valuation allowance in all jurisdictions against the net deferred tax assets as we believe that it is more likely than not that the majority of deferred tax assets will not be realized.

As of December 31, 2023 and 2022, we maintain a full valuation allowance in all jurisdictions against the net deferred tax assets as we believe that it is more likely than not that the majority of deferred tax assets will not be realized.

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

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Any adjustment to the deferred tax asset valuation allowance would be recorded in the statements of operations for the periods in which the adjustment is determined to be required.

We account for uncertainty in income taxes as required by the provisions of ASU 2009-06, Income Taxes (Topic 740) Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities , which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements.

We account for uncertainty in income taxes as required by the provisions of Accounting Standards Update ( “ ASU ” ) 2009-06, Income Taxes (Topic 740) Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities , which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements.

The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.

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Recently adopted accounting pronouncements

In May 2021, FASB issued ASU No.

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

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

The standard also requires incremental financial statement disclosures.

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

The standard 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 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 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.

Aside from those recently issued accounting pronouncements not yet adopted and described below, there have not been any recent accounting pronouncements or changes in accounting pronouncements during the year ended December 31, 2023 that are of significance or potential significance to us.

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.

In December 2023, the Financial Accounting Standards Board ( “ FASB ” ) issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The amendments in the ASU are intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions.

This ASU is effective for public companies with annual periods beginning after December 15, 2024, with early adoption permitted.

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

In November 2023, FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

The amendments in the ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The standard should be applied retrospectively to all prior periods presented in the financial statements.

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

In October 2023, FASB issued ASU No.

2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative .

The amendments in the ASU are intended to amend certain disclosure and presentation requirements for a variety of topics within the Accounting Standards Codification ( “ ASC ”) .

These amendments align the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, as announced by the SEC.

The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date.

Early adoption is prohibited.

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

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 with 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 is as follows (in thousands):

Year Ended December 31, 2022

Performance Enzymes Novel Biotherapeutics Total

Major products and service:

Product revenue $ 116,676 $ — $ 116,676

Research and development revenue 9,936 11,978 21,914

Total revenues $ 126,612 $ 11,978 $ 138,590

Primary geographical markets:

$ 12,089 $ 4,911 $ 17,000

49,473 7,067 56,540

65,050 — 65,050

Total revenues $ 126,612 $ 11,978 $ 138,590

Disaggregated information is as follows (in thousands):

Year Ended December 31,

Performance Enzymes Novel Biotherapeutics Total

Major products and service:

Product revenue $ 70,657 $ — $ 70,657

Research and development revenue 19,858 14,239 34,097

Total revenues $ 90,515 $ 14,239 $ 104,754

Primary geographical markets:

2023 2022 2021

13,315 6,872 20,187

61,086 — 61,086

Total revenues $ 90,515 $ 14,239 $ 104,754

Year Ended December 31, 2020

Performance Enzymes Novel Biotherapeutics Total

Major products and service:

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Total revenues $ 70,143 $ 138,590 $ 104,754

For additional information regarding revenue disaggregated by geography, see Note 15, “Segment, Geographical and Other Revenue Information.

Contract Balances

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

As of December 31, 2023, we have $ 9.1 million of short-term unbilled receivables presented as unbilled receivables within current assets and $ 0.8 million of long-term unbilled receivables that is included within the other non-current assets line item in the consolidated balance sheets.

As of December 31, 2022, we had $ 7.0 million of short-term unbilled receivables presented as unbilled receivables within current asset.

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

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Product revenue $ 10,121 $ 140 $ 140 $ 360 $ 10,761

Research and development revenue 1,592 21 — — 1,613

Total revenues $ 13,728 $ 13,101 $ 140 $ 3,640 $ 30,609

Net Loss per Share

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2023 2022 2021

Shares issuable under the Equity Incentive Plan 7,442 5,215 5,348

Shares issuable under the Equity Incentive Plans and ESPP (1)

9,028 7,442 5,215

(1) Included 568,224 of anti-dilutive potential common shares from ESPP for the year ended December 31, 2023.

Collaborative Arrangements

GSK Platform Technology Transfer, Collaboration and License Agreement

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

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

We completed the transfer of the CodeEvolver ® protein engineering platform technology to GSK in April 2016 and all revenues relating to the technology transfer have been recognized as of April 2016.

In July 2014, we entered into a CodeEvolver ® Platform Technology Transfer, Collaboration and License agreement (the “GSK CodeEvolver ® Agreement”) with GSK.

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

We completed the transfer of the CodeEvolver ® technology platform to GSK in April 2016 and all revenues relating to the technology transfer have been recognized as of April 2016.

Depending upon GSK's successful application of the licensed technology, we have the potential to receive additional contingent payments that range from $ 5.8 million to $ 38.5 million per project.

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

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

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

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

In 2023, we received an additional milestone payment from GSK under the agreement.

We recognized research and development revenue of $ 1.3 million, nil , and $ 4.3 million in the years ended December 31, 2023, 2022, and 2021, respectively.

Merck Platform Technology Transfer and License Agreement

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

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 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.

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

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

We recognized research and development revenues of nil , $ 40 thousand, and $ 0.6 million in the years ended December 31, 2023, 2022 and 2021, respectively, for various research projects under our collaborative arrangement.

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

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

In January 2019, we 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 that expired in January 2022.

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

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.

No research and development revenues were recognized in the years ended December 31, 2023 and 2022.

We recognized $ 0.1 million in research and development revenues under the terms of the amendment in the year ended December 31, 2021.

Merck Sitagliptin Catalyst Supply Agreement

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

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

In September 2021, the Sitagliptin Catalyst Supply Agreement was amended to extend the agreement through December 2026.

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

In September 2021, the Sitagliptin Supply Agreement was amended to extend the agreement through December 2026.

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.

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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.

We recognized $ 4.4 million, $ 5.9 million and $ 9.8 million in product revenue under this agreement in the years ended December 31, 2023, 2022 and 2021, respectively.

This represented 6 %, 4 %, and 9 % of our total revenues in the years ended December 31, 2023, 2022 and 2021, respectively.

During the year ended December 31, 2023, we recorded revenue of $ 0.7 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.

These products will be shipped within the three-month period following the end of 2023.

Enzyme Supply Agreement

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

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

In 2023, due to the early termination of the enzyme supply agreement with the customer, we recognized $ 3.2 million of product revenue from the release of prior periods' product revenue deferrals and also recognized $ 1.3 million of product revenue as settlement fee pursuant to the enzyme supply agreement with the same customer.

As of December 31, 2023 and 2022, we had deferred revenue balances from the supply agreement of nil and $ 3.3 million.

Commercial Agreement

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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.

The commercial agreement with Tate & Lyle was terminated in 2023.

Global Development, Option and License Agreement and Strategic Collaboration Agreement

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Upon exercising its option, Nestlé Health Science made an option payment and assumed all responsibilities for future clinical development and commercialization of CDX-61 14.

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 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.

In October 2023, we provided notice pursuant to Nestlé License Agreement of our intent to abandon or transfer to Nestlé Health Science (at their option) the patents and patent applications related to CDX-6114 as of December 5, 2023, and Nestlé Health Science notified us that they did not exercise their right to assume responsibility of such patents and patent applications.

In October 2017, we entered into the Nestlé SCA pursuant to which we and Nestlé Health Science are collaborating to leverage the CodeEvolver ® 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 expired in December 2023, as we opted out of a renewal period 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 a lead candidate discovered through our Nestlé SCA, CDX-7108, targeting exocrine pancreatic insufficiency, into preclinical and early clinical studies.

We, together with Nestlé Health Science, initiated a Phase 1 clinical trial of CDX-7108 in the fourth quarter of 2021, and on February 23, 2023, we and Nestlé Health Science announced interim results.

In July 2023, we announced plans to discontinue our development support of CDX-7108.

Under the Nestlé SCA and the development agreement, we recognized $ 4.1 million , $ 7.1 million and $ 6.9 million in research and development revenue in the years ended December 31, 2023, 2022 and 2021, respectively.

Both the Nestlé SCA and the development agreement were terminated in January 2024 .

Acquisition Agreement

In December 2023 , we entered into an acquisition agreement (the “Acquisition Agreement”) with Nestlé Health Science , pursuant to which we agreed to assign our interests in CDX-7108 (including associated agreements and intellectual property rights) to Nestlé Health Science .

Under the terms of the Acquisition Agreement, Nestlé Health Science will be solely responsible for the continued development and commercialization of CDX-7108, including all associated costs, and Codexis will receive upfront payment, future potential milestone payments and net-sales based royalties.

We recognized research and development revenue of $ 5.0 million f or the year ended December 31, 2023 related to the Acquisition Agreement.

We received the $ 5.0 million upfront fee in January 2024.

Strategic Collaboration Agreement

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

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

We also received annual collaboration payments of $ 1.0 million each during the first through third anniversaries of the effective date of the Porton Agreement and are eligible to receive $ 1.0 million on the fourth anniversary of the effective date of the Porton Agreement.

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

We also received annual collaboration payments of $ 1.0 million each during the first through fourth anniversaries of the effective date of the Porton Agreement.

We completed the technical transfer in the fourth quarter of 2018 and recognized the related revenue in 2018.

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.

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.

The initial term of the Porton Agreement expired in April 2023 and was not renewed for an extended term.

We recognized research and development revenue related to the Porton Agreement of nil , $ 0.1 million and $ 1.1 million in the years ended December 31, 2023, 2022 and 2021, respectively.

Platform Technology Transfer and License Agreement

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

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

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").

In May 2019, we entered into the Novartis CodeEvolver ® Agreement with Novartis.

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

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

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.

Novartis has now installed the CodeEvolver ® protein engineering platform technology at its designated laboratory.

Novartis has now installed the CodeEvolver ® technology platform at its designated laboratory.

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

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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.

Revenue for the combined initial license and technology transfer performance obligation was recognized using a single measure of progress that depicted our performance in transferring control of the services.

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

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.

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 (the “Improvements Term”), Novartis will pay Codexis annual payments over four years which amount to an additional $ 8.0 million in aggregate.

We received an aggregate of $ 4.0 million for the first two annual payments in 2022 and 2023.

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 ® technology platform during the period beginning on the conclusion of the Technology Transfer Period and ending on the expiration date of the last to expire licensed patent.

Revenue for the combined initial license and technology transfer performance obligation was recognized overtime based on hours incurred.

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

We rec ognized $ 1.1 million , $ 1.0 million and $ 1.6 million in research and development revenue in the years ended December 31, 2023, 2022 and 2021, respectively.

License Agreement

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

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

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

(“Roche”) to provide Roche with our evolved T4 DNA ligase high-performance molecular diagnostic enzyme.

The royalty bearing license grants Roche worldwide rights to include the evolved T4 DNA ligase in its nucleic acid sequencing products and workflows.

Under the license agreement, we received an initial collaboration fee payment of $ 0.8 million within 45 days of the effective date of the agreement, and we received an additional $ 0.9 million milestone payment after the completion of technology transfer in October 202 0.

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 nil , $ 0.9 million and $ 0.9 million for t he years ended December 31, 2022, 2021 and 2020, respectively.

In February 2024, we entered into a new license agreement with Roche granting them rights to our newly engineered DNA ligase, superseding our prior agreement in December 2019 for our evolved T4 DNA ligase.

We are eligible to receive an aggregate of mid-single digit millions in upfront and technical milestones payments.

No research and development revenues were recognized in the years ended December 31, 2023 and 2022.

We recognized research and development fees of $ 0.9 million in the year ended December 31, 2021.

Strategic Collaboration and License Agreement

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").

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”), pursuant to which we have collaborated with Takeda to research and develop protein sequences for use in gene therapy products for certain diseases in accordance with each applicable program plan.

On execution of the Takeda Agreement, we received an upfront non-refundable 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”).

In May 2021, Takeda elected to exercise its option to initiate an additional program for a certain undisclosed rare genetic disorder;

as a result we received the option exercise fee during the third quarter of 2021.

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.

We completed the research and development services relating to the fourth program with Takeda during the second quarter of 2023.

Pursuant to the Takeda Agreement, we are eligible to receive other payments that include ( i) clinical development and commercialization-based milestones, per target gene, of up to $ 104.0 million and (ii) tiered royalty payments based on net sales of applicable products at percentages ranging from the mid-single digits to low single-digits.

Takeda announced in April 2023 the discontinuation of these development programs.

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 $ 2.0 million, $ 4.9 million and $ 7.4 million in the years ended December 31, 2023, 2022, and 2021, respectively.

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

As of December 31, 2023 and 2022, we had deferred revenue balances of nil and $ 0.9 million, respectively.

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

(“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 former President and Chief Executive Officer, joined MAI’s board of directors.

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

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.

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

Concurrently with our initial equity investment, we entered into the MAI Agreement, pursuant to which we performed services utilizing our CodeEvolver ® technology platform 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.

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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.

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 MAI Series B preferred stock.

Pursuant to the MAI Agreement, we recognized $ 1.2 million and $ 2.0 million in research and development revenue from transactions with MAI in the years ended December 31, 2022 and 2021, respectively.

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

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

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™ (“FES™”) technology.

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

We recognized $ 0.2 million and $ 0.5 million in product revenue in the years ended December 31, 2023 and 2022, respectively .

Pfizer Enzyme Supply Agreement

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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.

We are a party to 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 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.

Pursuant to the agreement, 90 % of the fee ($ 23.3 million) is creditable against (i) future orders of CDX-616 used to manufacture its PAXLOVID™ with shipment dates prior to December 31, 2023, and (ii) fees associated with

any new development and licensing agreements with Pfizer entered into prior to April 4, 2023.

On March 31, 2023, we entered into a license agreement whereby Pfizer utilized a portion of the $ 23.3 million credit towards a license to develop future product candidates, for which we recognized $ 5.0 million as non-cash research and development revenue in the second quarter of 2023.

Pfizer's ability to utilize the credit under item (i) above expired on December 31, 2023, and under item (ii) above expired on April 4, 2023.

We also recognized $ 2.0 million of non-cash research and development revenue, and credited against the $ 25.9 million fee, for other services provided to Pfizer during the year ended December 31, 2023.

Up to 50 % of any portion of the $ 25.9 million which has not been credited under items (i) and (ii) is creditable against future orders of CDX-616 used to manufacture PAXLOVID™ with shipment dates in 2024.

During the fourth quarter of 2023, and pursuant to the Pfizer Supply Agreement, we released the prior year deferrals for the unused portion of the retainer fee that is not creditable beyond 2023 and we recognized product revenue of $ 8.2 million in the year ended December 31, 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.

Product revenues recognized by us from the Pfizer Supply Agreement represented 12 %, 54 %, and 33 % of our total revenues for the years ended December 31, 2023, 2022, and 2021 respectively.

As of December 31, 2023 and 2022, we had $ 9.5 million and $ 24.4 million, respectively, in deferred revenue related to the $ 25.9 million fee received from Pfizer.

Investments in Non-Marketable Securities

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Non-Marketable Equity Securities

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

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

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

Non-marketable equity securities are measured at fair value on a non-recurring basis and classified within Level 2 in the fair value hierarchy when 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.

The fair value of non-marketable equity securities are classified within Level 3 when we estimate fair value using unobservable inputs such as when we remeasure due to impairment and we use discount rates, market data of comparable companies, and rights and obligations of the securities the Company holds, among others.

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.

In November 2023, the 207,070 shares of Arzeda’s Series B preferred stock were converted into 41,414 common stock pursuant to the Stock Purchase Agreement.

In March 2023, we purchased an additional 985,545 shares of Series B preferred stock for $ 0.8 million in MAI, a privately held life sciences company .

As of December 31, 2023 , we held an aggregate of 19,277,914 shares of MAI's Series A and B preferred stock that we have earned or purchased from MAI.

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

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.

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

In March 2023, we entered into a Master Collaboration Agreement and Research Agreement with seqWell (the “seqWell Agreement”), pursuant to which we are providing research and experimental screening and protein engineering activities in exchange for compensation in the form of additional shares of seqWell's common stock.

In addition to our initial equity investment and the shares we have received under the seqWell Agreement, in September 2023, we purchased an additional 88,256 shares of seqWell's Series C-1 preferred stock and 44,128 common stock warrants for $ 0.4 million.

We received 205,279 shares of seqWell's common stock from research and development services with seqWell and we recognized $ 0.2 million in research and development revenue from these services in the year ended December 31, 2023.

As of December 31, 2023, we held an aggregate of 1,088,256 shares of Series C and C-1 preferred stock, 205,279 shares of common stock and 44,128 of common stock warrants that we have earned or purchased from seqWell.

For the year ended December 31, 2023, we recognized an impairment charge of $ 12.2 million and included this as adjustment to the carrying value of our investments in seqWell, Arzeda and MAI.

This adjustment, which is presented within other income (expense), net in the consolidated statements of operations, included the write-down of the carrying value of our investment in seqWell by $ 3.0 million during the third quarter of 2023 to its estimated fair value as determined based on valuation methods using the recent transaction price of similar preferred stock securities issued by seqWell and adjusted for the rights and obligations of the preferred stock securities the Company holds.

The $ 1.2 million of impairment charge on our investment in Arzeda is related to the write-down to its estimated fair value based on the latest observed transaction price of Arzeda's preferred stock securities issued during the fourth quarter of 2023 and the subsequent conversion of our existing Series B preferred stock into Arzeda's common stock during the fourth quarter of 2023.

The other $ 8.0 million of impairment charge represents the difference between the estimated fair value and carrying value of our investment in MAI as of December 31, 2023 based on quantitative and qualitative analysis.

This analysis involved use of judgment, estimates and assumptions, such as the near-term prospects of the investee in the market in which it operates, evaluation of the investee’s financial condition in relation to its outstanding obligations, and probabilities of securing additional capital through various alternative scenarios.

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.

Other than as disclosed above, there were no remeasurement events for our investments in non-marketable equity securities in 2023 and 2022 .

We recognized no realized gains or losses during the years ended December 31, 2023 and 2022.

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Total inventories $ 2,685 $ 2,029

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

Prepaid expenses and other current assets

As of December 31, 2023, prepaid expenses and other current assets consists of prepaid expenses of $ 4.6 million and other current assets of $ 0.6 million.

As of December 31, 2022, prepaid expenses and other current assets consists of prepaid expenses of $ 4.8 million and other current assets of $ 0.7 million.

Property and Equipment, net

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(2) Construction in progress includes equipment received but not yet placed into service pending installation.

In July 2023, we announced our plan to consolidate operations from our San Carlos facility to our headquarters in Redwood City.

As part of this plan, we entered into agreements to sell certain laboratory equipment located in our San Carlos facility through an asset auction and as part of the lease assignment of the San Carlos Space to Vaxcyte (see further discussion at Note 13, “Commitments and Contingencies”).

These certain items of laboratory equipment met the assets held for sale criteria and were sold during the fourth quarter of 2023.

Using a fair value estimate based of Level 3 inputs in the fair value hierarchy, the Company determined that the carrying value of these assets exceeds fair value less costs to sell, which resulted in a write-down o f $ 1.5 million, presented within the asset impairment and other charges line item in the consolidated statements of operations in the year ended December 31, 2023 .

During the year ended December 31, 2023, the Company recorded a n on-cash impairment charge of $ 4.7 million associated with the San Carlos facility leasehold improvements.

For additional information, see Note 13, “Commitments and Contingencies.”

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

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Depreciation expense $ 5,518 $ 5,402 $ 3,113

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

Goodwill at beginning of period

$ 3,241 $ 3,241

Impairment ( 778 ) —

Goodwill at end of period

$ 2,463 $ 3,241

Goodwill was previously allocated to each of the Company's reporting units.

In July 2023, we announced a restructuring of our business and that we are discontinuing investment in certain development programs, primarily in Novel Biotherapeutics.

As a result of this plan, the Company determined that a triggering event had occurred that required an interim goodwill impairment test during the third quarter of 2023.

The fair value estimate used in the interim goodwill impairment test was primarily based on Level 3 inputs in the fair value hierarchy.

Based on the results of the impairment evaluation, the Company determined that the goodwill within the Novel Biotherapeutics reporting unit was impaired, which resulted in a non-cash impairment charge of $ 0.8 million to write off all of the associated goodwill.

The impairment charge is recorded within the asset impairment and other charges in the condensed consolidated statements of operation in the year ended December 31, 2023 .

Goodwill had a carrying value of $ 2.5 million and $ 3.2 million as of December 31, 2023 and 2022, respectively.

Other Accrued Liabilities

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

Accrued purchases $ 10,852 $ 6,755

Accrued professional and outside service fees $ 2,330 $ 3,495

Accrued purchases 1,402 10,852

Other 1,003 932

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Equity Incentive Plans

In 2019, our board of directors (the "Board") and stockholders approved the 2019 Incentive Award Plan (the "2019 Plan").

In January 2023, our board of directors (the “Board”) approved the 2022 Employment Inducement Award Plan (the “2022 Inducement Plan”) which provides for the grant of non-qualified stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance awards, other stock awards and dividend equivalents to eligible employees with respect to an aggregate of up to 2,000,000 shares of our common stock.

In June 2023, the 2022 Inducement Plan was terminated upon the approval of an amendment to the Company's 2019 Incentive Award Plan (the “2019 Plan”) at the annual meeting of the Company's stockholders (the “Annual Meeting”) in June 2023.

In 2019, the Board and stockholders approved the 2019 Plan.

The 2019 Plan superseded and replaced in its entirety our 2010 Equity Incentive Plan (the “2010 Plan”) which was effective in March 2010, and no further awards will be granted under the 2010 Plan;

however, the terms and conditions of the 2010 Plan will continue to govern any outstanding awards thereunder.

The 2019 Plan provides for the grant of stock options, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock awards ("RSAs"), restricted stock units ("RSUs"), performance-contingent restricted stock units ("PSUs"), performance-based options ("PBOs"), other stock or cash-based awards and dividend equivalents to eligible employees and consultants of the Company or any parent or subsidiary, as well as members of the Board.

The number of shares of our common stock available for issuance under the 2019 Plan is equal to the sum of (i) 7,897,144 shares and (ii) any shares subject to awards granted under the 2010 Plan that were outstanding as of April 22, 2019 and thereafter terminate, expire, lapse or are forfeited;

provided that no more than 14,000,000 shares may be issued upon the exercise of incentive stock options ("ISOs").

The 2010 Plan provided for the grant of incentive stock options, non-statutory stock options, RSUs, RSAs, PSUs, PBOs, stock appreciation rights, and stock purchase rights to our employees, non-employee directors and consultants.

The 2019 Plan provides for the grant of stock options, including incentive stock options and non-qualified stock options, stock appreciation rights, RSA, RSUs, performance-contingent restricted stock units (“PSUs”), performance based options (“PBOs”), other stock or cash based awards and dividend equivalents to eligible employees and consultants of the Company or any parent or subsidiary, as well as members of the Board.

The number of shares of our common stock that were initially available for issuance under the 2019 Plan is equal to the sum of (i) 7,897,144 shares, and (ii) any shares subject to awards granted under the 2010 Plan that were outstanding as of April 22, 2019 and thereafter terminate, expire, lapse or are forfeited.

In June 2019, 8.1 million shares authorized for issuance under the 2019 Plan were registered under the Securities Act of 1933, as amended (the “Securities Act”).

The 2010 Plan provided for the grant of incentive stock options, non-statutory stock options, RSUs, RSAs, PSUs, PBOs,

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

In April 2023, the Board approved an amendment to the 2019 Plan (the “2019 Amended Plan”) which became effective upon stockholders' approval at the Annual Meeting in June 2023.

The 2019 Amended Plan included the (i) increase in the number of shares available by 8,000,000 shares, such that an aggregate of 15,897,144 shares are reserved for issuance under the 2019 Amended Plan and any shares subject to awards granted under the 2010 Plan, and (ii) increase in the number of shares that may be granted as incentive stock options under the 2019 Amended Plan such that an aggregate of 22,000,000 shares of common stock may be granted as incentive stock options under the 2019 Amended Plan.

As of December 31, 2023, total shares remaining available for issuance under the 2019 Plan were 9.1 million s hares.

Employee Stock Purchase Plan

In April 2023, the Board approved an employee stock purchase plan (the “ESPP”) which became effective upon approval at the Annual Meeting in June 2023.

The ESPP allows eligible employees of the Company to purchase shares of our common stock through payroll deductions over 24 -month offering periods.

The per share purchase price will be the lower of 85 % of the closing trading price per share of our common stock on the first trading date of an offering period in which a participant is enrolled or 85 % of the closing trading price per share on the purchase date.

Participant purchases are limited to a maximum of $ 25,000 of fair value of our stock per calendar year.

The Company is authorized to grant up to 2,000,000 shares of common stock under the ESPP.

The first offering period of the ESPP commenced in December 2023 and as of December 31, 2023, the Company had not issued any shares of common stock under the ESPP.

We recognized $ 25 thousand of stock-based compensation expenses related to the ESPP in the year ended December 31, 2023.

Stock Options

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

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.

In prior years, the compensation committee of the Board approved grants of PBOs and PSUs to our executives, and solely in respect of non-executive employees, delegated to our CEO the authority to approve grants of PSUs.

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.

When the performance goals are deemed to be probable of achievement for these types of awards, recognition of stock-based compensation expense commences.

Once the number of shares eligible to vest is determined, those shares vest in two equal installments with 50 % vesting upon achievement and the remaining 50 % vesting on the first anniversary of achievement, in each case, subject to the recipient’s continued service through the applicable vesting date.

Once the number of shares eligible to vest is determined, those shares vest in two equal installments with 50 % vesting upon achievement, as determined by the compensation committee of the Board, and the remaining 50 % vesting on the first anniversary of achievement, in each case, subject to the recipient’s continued service through the applicable vesting date.

If the performance goals are achieved at the threshold level, the number of shares eligible to vest in respect of the PSUs and PBOs would be equal to half the number of PSUs granted and one-quarter the number of shares underlying the PBOs granted.

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

No PSUs and PBOs were granted in 2023.

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 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.

In the first quarter of 2023, the compensation committee of the Board determined that the 2022 PSUs and 2022 PBOs performance goals had been achieved at 85.0 % and 42.5 % of the target level, respectively, and recognized stock-based compensation expenses accordingly.

Accordingly, 50 % of the shares underlying the 2022 PSUs and PBOs vested in the first quarter of 2023 and 50 % of the shares underlying the 2022 PSUs and PBOs will vest in the first quarter of 2024, in each case, subject to the recipient’s continued service on each vesting date.

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 2021, we awarded PSUs (“2021 PBOs”) and PBOs (“2021 PBOs”), each of which commence vesting based upon the determination of the compensation committee of the Board of the achievement of various weighted performance goals, including total revenues, product revenue, performance enzymes pipeline advancements, biotherapeutics pipeline advancements, organization and infrastructure upgrades, and significant events that can be publicly announced.

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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:

The following summarizes the weighted-average assumptions used to estimate the fair value of 50,000 , nil , and 9,000 shares of stock options granted to non-employees for services valued at $ 0.1 million, nil , and $ 0.1 million during the years ended December 31, 2023, 2022, and 2021 respectively:

Year Ended December 31,

2023 2022 2021

Expected life (years) 5.8 0.0 5.6

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Expected dividend yield 0.0 % 0.0 % 0.0 %

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 weighted average grant date fair value per share of non-employee stock options granted respectively in 2023, 2022, and 2021 was $ 1.05 , nil and $ 11.29 , respectively.

The following tables summarize s stock option activities:

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Non-vested balance at December 31, 2022 667 $ 9.41

Granted 686 $ 9.55

Vested ( 315 ) $ 11.02

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

No PBOs were granted to employees for their services during the year ended December 31, 2023.

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

Year Ended December 31,

2022 2021 2020

Expected life (years) 5.6 5.5

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Granted 433 $ 12.23

Exercised ( 35 ) $ 9.02

Forfeited/Expired ( 118 ) $ 12.23

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Granted 733 $ 9.89

Exercised ( 35 ) $ 9.02

Forfeited/Expired ( 747 ) $ 8.29

Outstanding at December 31, 2022 1,826 $ 4.70

Granted 733 $ 9.89

Forfeited/Expired ( 178 ) $ 9.73

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Vested and expected to vest at December 31, 2023 1,646 $ 11.06 4.5 $ —

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.

The total fair value of e xercised PBOs for 2023, 2022 and 2021, was nil , nil , and $ 0.3 million, respectively.

As of December 31, 2023, there was $ 15.9 thousand of unrecognized stock-based compensation cost related to non-vested PBOs, which we expect to recognize over a weighted average period of 0.2 years.

Employee Stock Purchase Plan (“ESPP”)

The fair value of shares to be issued under the ESPP is computed using the Black-Scholes-Merton option pricing model at the commencement of the offering period.

The following summarizes the weighted-average assumptions used to estimate the fair value of ESPP for the initial offering period:

Year Ended December 31,

Expected life (years) 0.4

Volatility 89.6 %

Risk-free interest rate 5.3 %

Expected dividend yield 0.0 %

Capital Stock

Equity Distribution Agreement

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.

In May 2021, we filed a Registration Statement on Form S-3 with the SEC, that automatically became effective upon its filing, 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.

On February 27, 2023, we filed a post-effective amendment to that Registration Statement on Form S-3.

Pursuant to that post-effective amendment, we registered an aggregate $ 200.0 million of securities.

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

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

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

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

Public Offerings

In December 2020, we completed an underwritten public offering in which we issued and sold 4.9 million shares of our common stock, par value $ 0.0001 per share, at a public offering price of $ 17.50 per share.

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

During the year ended December 31, 2023, 3,079,421 shares of our common stock were issued and sold pursuant to the EDA.

During the year ended December 31, 2023, we received gross proceeds of $ 8.7 million or $ 7.9 million in net proceeds after PSC's commissions and direct offering expenses of $ 0.7 million.

As of December 31, 2023, $ 41.3 million of shares remained available for sale under the EDA.

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

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

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Loss before provision for income taxes $ ( 76,171 ) $ ( 33,316 ) $ ( 21,090 )

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.

The tax provision for the years ended December 31, 2023 and 2022 consists primarily of current year state and foreign income taxes.

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

The components of the provision for income taxes are as follows (in thousands):

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Reserves and accruals 2,774 2,487

Depreciation — 514

Property and Equipment 457 —

Intangible assets 532 866

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R&D Capitalization 26,821 16,502

Unrealized gain/loss 1 418

Lease liability 3,608 9,586

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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 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.

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 as of December 31, 2023 and 2022, for local taxes that would be incurred upon repatriation.

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

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Operating Leases

Our headquarters are located in Redwood City, California, where we occupy approximately 77,300 square feet of office and laboratory space in multiple buildings within the same business park of Metropolitan Life Insurance Company ("MetLife").

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”).

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The letter of credit is collateralized by deposit balances held by the bank in the amount of $ 1.1 million as of December 31, 2023 and 2022, 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 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 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.

We are expensing the asset retirement obligation over the terms of the respective leases.

The lease had 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.

In July 2023, we announced our plan to consolidate operations from our San Carlos facility to our headquarters in Redwood City.

On September 1, 2023, the Company entered into an Assignment and Assumption of Lease (the “Assignment Agreement”) with Vaxcyte, Inc.

(“Vaxcyte”) to assign to Vaxcyte all of the Company’s right, title and interest in, under and to the San Carlos Space and the Lease Agreement, dated as of January 29, 2021.

On September 6, 2023, the Company, Vaxcyte and ARE entered into a Consent to Assignment and First Amendment (the “Consent”) pursuant to which ARE consented to the Assignment Agreement and the assignment by the Company and the assumption by Vaxcyte of the Company’s interest as tenant in the lease and agreed to release the Company from all of its obligations under the lease that accrue from and after the assignment.

Under the Assignment Agreement, the Company prepaid to ARE (i) the base rent, as defined in the lease agreement, and (ii) certain amounts payable to ARE in connection with tenant improvements completed by ARE pursuant to the lease, which a mounted to $ 3.1 million .

We provided ARE with a $ 0.5 million security deposit in the form of a letter of credit, which was released in November 2023 following the effectiveness of the lease assignment on October 1, 2023.

As a result of the Assignment Agreement, the Company remeasured the lease obligation for the San Carlos Space as $ 3.1 million, or the present value of the remaining lease payments, which consist of the remaining rent through the effectiveness of the lease assignment and certain amounts payable to ARE pursuant to the Assignment Agreement, and wrote off the remaining lease liability of $ 19.6 million and the corresponding right of use asset balance.

Simultaneously, the Company determined that indicators of impairment existed because the lease assignment will impact the utilization of the related right of use assets and leasehold improvements in the San Carlos Space, and therefore performed a recoverability test by estimating future undiscounted net cash flows expected to be generated from the use of these assets.

As there were no substantial future cash inflows associated with these assets, the carrying values of these assets were deemed unrecoverable.

As a result, the Company recognized a non-cash impairment charge of $ 7.7 million, of which $ 4.7 million is related to leasehold improvements and $ 3.0 million for the right of use assets, presented within the asset impairment and other charges line item in the consolidated statements of operations in the year ended December 31, 2023.

The tables below show the balance of right-of-use assets and lease obligations as of January 1, 2023 and the balance as of December 31, 2023, including the changes during the period (in thousands):

Right-of-use Assets - Operating Lease, net

Right-of-use assets - Operating leases, net, at January 1, 2023

Amortization of right-of-use assets ( 4,405 )

Additions 898

Remeasurement due to lease modification ( 19,622 )

Impairment ( 2,997 )

Right-of-use assets - Operating leases, net, at December 31, 2023

Lease Obligations - Operating Leases

Lease obligations - Operating leases, net, at January 1, 2023

Lease payments ( 9,897 )

Interest accretion 1,905

Remeasurement due to lease modification ( 19,622 )

Lease obligations - Operating leases, net, at December 31, 2023

We are required to restore certain areas of the Redwood City facility that we are renting to its original form.

We are expensing the asset retirement obligation over the term of the Redwood City lease.

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

As a result of the lease assignment for the San Carlos Space, discussed further above, we wrote off the related asset retirement obligation of $ 0.2 million in 2023.

We recorded asset retirement obligations of $ 0.3 million and $ 0.5 million as of December 31, 2023 and 2022, respectively, which are included in other liabilities on the consolidated balance sheets.

Accretion expense related to our asset retirement obligations was nominal in 2022 and 2021.

Accretion expense related to our asset retirement obligations was nominal in the years ended December 31, 2023 and 2022.

Lease and other information

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2023 2022 2021

Amortization of right-of-use assets $ 18 $ 106 $ 152

Interest on lease obligations — — 1

Finance lease costs $ — $ 18 $ 106

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Short-term lease costs (1)

Sublease income — — ( 55 )

Total lease cost (2)

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Operating cash flows from operating leases $ 9,897 $ 6,506 $ 4,197

Operating cash flow from finance leases $ — $ — $ 1

Financing cash flows from finance leases $ — $ — $ 60

Non-cash activity:

Operating Lease - Right-of-use assets obtained in exchange for lease liabilities $ — $ — $ 25,445

Finance Lease - Right-of-use assets obtained in

exchange for lease liabilities $ — $ — $ —

Operating Lease

Other information:

Weighted-average remaining lease term (in years) 7.1 years

Weighted-average remaining lease term (in years) 3.8

Weighted-average discount rate 6.6 %

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Total 2024 2025 and Thereafter

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

Facility maintenance agreement $ 701 $ 701 $ —

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

Credit Facility

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.

On 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.

The right to take draws on the Term Debt expired on December 31, 2022.

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.

The Credit Facility includes a number of customary covenants and restrictive financial covenants including meeting minimum product revenue levels and maintaining certain minimum cash levels with the lender.

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

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

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

In March 2023, we terminated the Credit Facility with Western Alliance Bank.

On February 13, 2024, we entered into the Loan Agreement with Innovatus.

See further discussion at Note 18, “Subsequent Events.”

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 recognize a loss contingency in the 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.

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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.

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

Indemnifications

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Molecular Assemblies, Inc.

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, 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 June 2020, we entered into a Stock Purchase Agreement with MAI, a privately held life sciences company, pursuant to which we purchased 1,587,050 shares of MAI's Series A preferred stock for $ 1.0 million.

Nicols, our former President and CEO until August 2022, also joined MAI’s board of directors in June 2020 and remained on MAI's board until September 2023.

Concurrently with our initial equity investment, we entered into a Master Collaboration and Research Agreement with MAI (the “MAI Agreement”), pursuant to which performed services utilizing our CodeEvolver ® technology platform 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 that MAI issued to third parties.

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

In 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 .

Revenues recognized from transactions with MAI in the year ended December 31, 2023, and subsequent to the related party period which ended in August 2022, are included in the consolidated statement of operations.

We recogniz ed $ 1.2 million and $ 2.0 million in research and development revenue pursuant to the MAI Agreement in the years ended December 31, 2022 and 2021, respectively.

We recognized $ 0.5 million in product revenue from transactions with MAI in the year ended December 31, 2022 and during the related party period.

Segment, Geographical and Other Revenue Information

Segment Information

We manage our business as two business segments:

Performance Enzymes and Novel Biotherapeutics.

Our chief operating decision maker ("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.

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.

Our CODM does not review asset information by business segment in assessing performance or allocating resources, and accordingly, we do not report asset information by business segment.

Factors considered in determining the two reportable segments of the Company include the nature of business activities, the management structure directly accountable to our CODM for operating and administrative activities, availability of discrete financial information and information presented to the Board of Directors.

Our CODM regularly reviews our segments and the approach provided by management for performance evaluation and resource allocation.

Operating expenses that directly support the segment activity are allocated based on segment headcount, revenue contribution or activity of the business units within the segments, based on the corporate activity type provided to the segment.

The expense allocation excludes certain corporate costs that are separately managed from the segments.

This provides the CODM with more meaningful segment profitability reporting to support operating decisions and allocate resources.

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

Year Ended December 31, 2022 Year Ended December 31, 2021

Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total

Product revenue $ 116,676 $ — $ 116,676 $ 70,657 $ — $ 70,657

Research and development revenue 9,936 11,978 21,914 19,858 14,239 34,097

Total revenues 126,612 11,978 138,590 90,515 14,239 104,754

Costs and operating expenses:

Cost of product revenue 38,033 — 38,033 22,209 — 22,209

Research and development (1)

25,786 49,770 75,556 23,140 30,219 53,359

Selling, general and administrative (1)

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

Income (loss) from operations $ 46,361 $ ( 41,179 ) 5,182 $ 33,061 $ ( 18,735 ) 14,326

Corporate costs (2)

( 33,080 ) ( 32,201 )

Depreciation and amortization ( 5,418 ) ( 3,215 )

Loss before income taxes $ ( 33,316 ) $ ( 21,090 )

(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 and restructuring charges, interest income, and other income (expense), net.

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

Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total

Product revenue $ 70,657 $ — $ 70,657 $ 30,220 $ — $ 30,220

Research and development revenue 19,858 14,239 34,097 17,886 20,950 38,836

Total revenues 90,515 14,239 104,754 48,106 20,950 69,056

Costs and operating expenses:

Cost of product revenue 22,209 — 22,209 13,742 — 13,742

Research and development (1)

23,140 30,219 53,359 20,923 21,705 42,628

Selling, general and administrative (1)

12,105 2,755 14,860 9,597 2,355 11,952

Total segment costs and operating expenses 57,454 32,974 90,428 44,262 24,060 68,322

Income (loss) from operations $ 33,061 $ ( 18,735 ) 14,326 $ 3,844 $ ( 3,110 ) 734

Corporate costs (2)

( 32,201 ) ( 22,306 )

Depreciation and amortization ( 3,215 ) ( 2,099 )

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

(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.

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

Year Ended December 31,

2022 2021 2020

Performance Enzymes $ 6,035 $ 5,047 $ 3,296

Novel Biotherapeutics 903 1,100 768

Corporate cost 7,593 5,446 3,664

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

We previously managed our business as two business segments, Performance Enzymes and Novel Biotherapeutics.

In connection with these organizational structure changes, corresponding changes were made to how our business is managed, how results are reported internally and how our CEO, our chief operating decision maker, assesses performance and allocates resources.

As a result of these changes, our previous Performance Enzymes and Novel Biotherapeutics operating segments were combined into a single reportable segment.

Effective October 1, 2023, the Company's operations are managed and reported to the CEO on a consolidated basis.

The CEO assesses performance and allocated resources based on the consolidated results of operations.

We believe that these changes better align internal resources and external go to market activities in order to create a more efficient and effective organizational structure.

Under this new organizational and reporting structure, we managed our business as one reportable segment as of December 31, 2023.

Comparative prior period disclosures that reflected the previous two segments' information have been revised to conform to this change in our reportable segment.

Significant Customers

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Customer C * * 11 %

Customer D * * 11 %

* Percentage was less than 10%

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Customer A * 53 %

Customer B * 10 %

Customer C 12 % *

Customer D 21 % *

Customer E 13 % *

Customer F 12 % *

* Percentage was less than 10%

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2023 2022 2021

Americas $ 17,000 $ 23,481 $ 24,352

EMEA 56,540 20,187 19,257

APAC 65,050 61,086 25,447

$ 13,733 $ 17,000 $ 23,481

22,907 56,540 20,187

33,503 65,050 61,086

Total revenues $ 70,143 $ 138,590 $ 104,754

(1) United States revenue was $ 13.7 million, $ 17.0 million, and $ 23.4 million, for the years ended December 31, 2023, 2022, and 2021, respectively.

(2) Ireland revenue was $ 0.5 million, $ 37.2 million, and $ 1.4 million, for the years ended December 31, 2023, 2022, and 2021, respectively.

(3) Switzerland revenue was $ 11.1 million, $ 9.2 million, and $ 10.1 million, for the for the years ended December 31, 2023, 2022, and 2021, respectively.

(4) China revenue was $ 20.3 million, $ 48.6 million, and $ 43.5 million, for the years ended December 31, 2023, 2022, and 2021, respectively.

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

United States $ 28,624 $ 61,877

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

December 31, 2022 December 31, 2021

Performance Enzymes Novel Biotherapeutics Total Performance Enzymes Novel Biotherapeutics Total

Goodwill $ 2,463 $ 778 $ 3,241 $ 2,463 $ 778 $ 3,241

Identifiable goodwill was as follows (in thousands):

Goodwill at beginning of period

$ 3,241 $ 3,241

Impairment ( 778 ) —

Goodwill at end of period

$ 2,463 $ 3,241

Allowance for Credit Losses

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Write-offs ( 33 ) ( 257 ) —

Recoveries collected ( 50 ) — —

Adjustment to existing allowance ( 65 ) ( 50 ) —

Balance at end of period $ 65 $ 163 $ 416

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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.

In July 2023, in alignment with our enhanced strategic focus, we announced a restructuring of our business, including a plan for a workforce reduction of approximately 25 %.

During the year ended December 31, 2023 , w e recorded a restructuring charge related to this workforce reduction of $ 3.1 million related to severance and related benefit costs.

The plan was substantially completed in September 2023 and severance costs were paid through the fourth quarter of 2023.

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

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

The plan was substantially completed in December 2022 and severance costs were paid through the third quarter of 2023.

During the years ended December 31, 2023 and 2022 , we recorded restructuring charges of $ 0.2 million and $ 3.2 million, respectively, related to severance, bonus and other termination benefits in connection with the workforce reduction announced in November 2022.

We do not expect to record any future charges related to the restructuring plans initiated in 2023 and 2022.

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.

On February 13, 2024, we entered into a 5-year loan and security agreement (the “Loan Agreement”) with Innovatus Life Sciences Lending Fund I, LP (“Innovatus”), an affiliate of Innovatus Capital Partners, LLC, for an aggregate principal amount of up to $ 40.0 million (the “Term Loans”).

The Term Loans consist of two tranches, of which the first tranche of $ 30.0 million was completed on February 13, 2024.

We will be eligible to draw on the second tranche of $ 10.0 million upon achievement of certain milestones including certain pre-specified revenue thresholds.

The Term Loan carries an interest-only period of 36 months and will bear an interest at a floating rate of the sum of (a) the greater of (i) prime rate and (ii) 7.50 %, plus (b) 3.25 %.

In connection with the Term Loans, we are required to issue to Innovatus a warrant to purchase an aggregate of 424,028 shares of the Company’s common stock at an exercise price of $ 2.83 per share.

The Loan Agreement contains customary representations and warranties and covenants, subject to customary carve outs, and includes financial covenants related to liquidity and net product revenue, with the latter beginning with the period ending September 30, 2024.

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