Company Quick10K Filing
Quick10K
Codexis
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$19.76 55 $1,080
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-08-05 Earnings, Officers, Exhibits
8-K 2019-07-19 Officers
8-K 2019-06-20 Enter Agreement, Sale of Shares, Regulation FD, Exhibits
8-K 2019-06-11 Officers, Shareholder Vote, Exhibits
8-K 2019-05-06 Earnings, Exhibits
8-K 2019-05-02 Enter Agreement
8-K 2019-04-02 Officers
8-K 2019-02-26 Earnings, Exhibits
8-K 2019-02-08 Enter Agreement, Off-BS Arrangement
8-K 2019-01-08 Other Events
8-K 2018-11-08 Earnings, Exhibits
8-K 2018-08-17 Officers
8-K 2018-08-08 Earnings, Exhibits
8-K 2018-07-20 Officers
8-K 2018-06-11 Shareholder Vote
8-K 2018-04-05 Other Events, Exhibits
8-K 2018-03-12 Regulation FD, Exhibits
8-K 2018-03-08 Earnings, Exhibits
NEE Nextera Energy 90,330
SPR Spirit Aerosystems Holdings 8,900
H Hyatt Hotels 8,150
FFIN First Financial Bankshares 4,190
PAHC Phibro Animal Health 1,260
EVBN Evans Bancorp 176
IMMP Immtech Pharmaceuticals 66
DWCH Datawatch 0
HTBC Hotapp Blockchain 0
MYDP Dougherty's Pharmacy 0
CDXS 2019-06-30
Part I. Financial Information
Item 1. Financial Statements
Note 1. Description of Business
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Note 3. Revenue Recognition
Note 4. Net Loss per Share
Note 5. Collaborative Arrangements
Note 6. Cash Equivalents and Marketable Securities
Note 7. Fair Value Measurements
Note 8. Balance Sheets Details
Note 9. Stock-Based Compensation
Note 10. Capital Stock
Note 11. Commitments and Contingencies
Note 12. Related Party Transactions
Note 13. Segment, Geographical and Other Revenue Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.4 a104platformtechnology.htm
EX-31.1 cdxs20190630ex311sp.htm
EX-31.2 cdxs20190630ex312sp.htm
EX-32.1 cdxs20190630ex321sp.htm

Codexis Earnings 2019-06-30

CDXS 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number: 001-34705
_____________________________
Codexis, Inc.
(Exact name of registrant as specified in its charter)
_____________________________________________
Delaware
 
71-0872999
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
200 Penobscot Drive,
Redwood City,
California
 
94063
(Address of principal executive offices)
 
(Zip Code)

(650) 421-8100
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
_____________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, par value $0.0001 per share
CDXS
The Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of July 31, 2019, there were 58,358,569 shares of the registrant’s Common Stock, par value $0.0001 per share, outstanding.





Codexis, Inc.
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2019



TABLE OF CONTENTS

 
PAGE
NUMBER
 
PART I. FINANCIAL INFORMATION
 
 
 
ITEM 1:
 
 
 
 
 
 
ITEM 2:
ITEM 3:
ITEM 4:
 
 
 
 
 
ITEM 1:
ITEM 1A:
ITEM 2:
ITEM 3:
ITEM 4:
ITEM 5:
ITEM 6:

3




PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
Codexis, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In Thousands, Except Per Share Amounts)
 
June 30,
2019
 
December 31,
2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
93,421

 
$
53,039

Accounts receivable, net of allowances of $34 at June 30, 2019 and December 31, 2018
11,814

 
11,551

Unbilled receivables, current
2,336

 
1,916

Inventories
720

 
589

Prepaid expenses and other current assets
1,950

 
1,068

Contract assets

 
35

Total current assets
110,241

 
68,198

Restricted cash
1,749

 
1,446

Equity securities
419

 
588

Right-of-use assets - Operating leases, net
25,240

 

Right-of-use assets - Finance leases, net
384

 

Property and equipment, net
5,312

 
4,759

Goodwill
3,241

 
3,241

Other non-current assets
207

 
1,051

Total assets
$
146,793

 
$
79,283

Liabilities and Stockholders' Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
2,164

 
$
3,050

Accrued compensation
4,551

 
5,272

Other accrued liabilities
4,059

 
4,855

Current portion of lease obligations - Operating leases
683

 

Current portion of lease obligations - Finance leases
183

 

Deferred revenue
5,851

 
4,936

Total current liabilities
17,491

 
18,113

Deferred revenue, net of current portion
3,249

 
3,352

Long-term lease obligations - Operating leases
26,147

 

Long-term lease obligations - Finance leases

 
61

Lease incentive obligation, net of current portion

 
35

Other long-term liabilities
1,222

 
1,416

Total liabilities
48,109

 
22,977

 
 
 
 
Commitments and Contingencies (Note 11)


 


Stockholders' equity:
 
 
 
Preferred stock, $0.0001 par value per share; 5,000 shares authorized; none issued and outstanding

 

Common stock, $0.0001 par value per share; 100,000 shares authorized;
57,940 shares and 54,065 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively
6

 
5

Additional paid-in capital
440,795

 
386,775

Accumulated deficit
(342,117
)
 
(330,474
)
Total stockholders' equity
98,684

 
56,306

Total liabilities and stockholders' equity
$
146,793

 
$
79,283

See accompanying notes to the unaudited condensed consolidated financial statements

4




Codexis, Inc.

Condensed Consolidated Statements of Operations
(Unaudited)
(In Thousands, Except Per Share Amounts)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenues:

 

 
 
 
 
Product revenue
$
6,249

 
$
3,723

 
$
14,236

 
$
9,886

Research and development revenue
6,070

 
9,815

 
13,665

 
17,694

Total revenues
12,319

 
13,538

 
27,901

 
27,580

Costs and operating expenses:

 

 
 
 
 
Cost of product revenue
2,772

 
2,611

 
7,163

 
6,436

Research and development
8,274

 
7,370

 
16,290

 
14,548

Selling, general and administrative
7,896

 
7,395

 
16,311

 
15,141

Total costs and operating expenses
18,942

 
17,376

 
39,764

 
36,125

Loss from operations
(6,623
)
 
(3,838
)
 
(11,863
)
 
(8,545
)
Interest income
220

 
174

 
450

 
245

Other expenses, net
(88
)
 
(82
)
 
(211
)
 
(142
)
Loss before income taxes
(6,491
)
 
(3,746
)
 
(11,624
)
 
(8,442
)
Provision for (benefit from) income taxes
16

 
(11
)
 
19

 
(13
)
Net loss
$
(6,507
)
 
$
(3,735
)
 
$
(11,643
)
 
$
(8,429
)
 
 
 
 
 
 
 
 
Net loss per share, basic and diluted
$
(0.12
)
 
$
(0.07
)
 
$
(0.21
)
 
$
(0.17
)
Weighted average common stock shares used in computing net loss per share, basic and diluted
54,954

 
52,787

 
54,564

 
50,598


See accompanying notes to the unaudited condensed consolidated financial statements

5




Codexis, Inc.

Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
(In Thousands)
 
 
Common Stock
 
Additional
paid-in
Capital
 
Accumulated Other
Comprehensive
Income (Loss)
 
Accumulated Deficit
 
Total Stockholders' Equity
Three Months Ended June 30, 2019
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of April 1, 2019
 
54,541

 
$
5

 
$
386,815

 
$

 
$
(335,610
)
 
$
51,210

Exercise of stock options
 
310

 

 
2,067

 

 

 
2,067

Release of stock awards
 
40

 

 

 

 

 

Employee stock-based compensation
 

 

 
1,988

 

 

 
1,988

Taxes paid related to net share settlement of equity awards
 

 

 

 

 

 

Issuance of common stock, net of issuance costs of $74
 
3,049

 
1

 
49,925

 

 

 
49,926

Net loss
 

 

 

 

 
(6,507
)
 
(6,507
)
Balance as of June 30, 2019
 
57,940

 
$
6

 
$
440,795

 
$

 
$
(342,117
)
 
$
98,684

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
Additional
paid-in
Capital
 
Accumulated Other
Comprehensive
Income (Loss)
 
Accumulated Deficit
 
Total Stockholders' Equity
Three Months Ended June 30, 2018
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of April 1, 2018
 
48,925

 
$
5

 
$
339,354

 
$

 
$
(324,291
)
 
$
15,068

Exercise of stock options
 
224

 

 
1,423

 

 

 
1,423

Release of stock awards
 
46

 

 

 

 

 

Employee stock-based compensation
 

 

 
2,455

 

 

 
2,455

Non-employee stock-based compensation
 

 

 
2

 

 

 
2

Issuance of common stock, net of issuance costs of $179
 
4,313

 

 
37,317

 

 

 
37,317

Net loss
 

 

 

 

 
(3,735
)
 
(3,735
)
Balance as of June 30, 2018
 
53,508

 
$
5

 
$
380,551

 
$

 
$
(328,026
)
 
$
52,530

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

See accompanying notes to the unaudited condensed consolidated financial statements


6




Codexis, Inc.

Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
(In Thousands)
 
 
Common Stock
 
Additional
paid-in
Capital
 
Accumulated Other
Comprehensive
Income (Loss)
 
Accumulated Deficit
 
Total Stockholders' Equity
Six Months Ended June 30, 2019
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of January 1, 2019
 
54,065

 
$
5

 
$
386,775

 
$

 
$
(330,474
)
 
$
56,306

Exercise of stock options
 
529

 

 
2,843

 

 

 
2,843

Release of stock awards
 
441

 

 

 

 

 

Employee stock-based compensation
 

 

 
4,051

 

 

 
4,051

Taxes paid related to net share settlement of equity awards
 
(144
)
 

 
(2,799
)
 

 

 
(2,799
)
Issuance of common stock, net of issuance costs of $74
 
3,049

 
1

 
49,925

 

 

 
49,926

Net loss
 

 

 

 

 
(11,643
)
 
(11,643
)
Balance as of June 30, 2019
 
57,940

 
$
6

 
$
440,795

 
$

 
$
(342,117
)
 
$
98,684

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
Additional
paid-in
Capital
 
Accumulated Other
Comprehensive
Income (Loss)
 
Accumulated Deficit
 
Total Stockholders' Equity
Six Months Ended June 30, 2018
 
Shares
 
Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of January 1, 2018
 
48,365

 
$
5

 
$
340,079

 
$
(472
)
 
$
(315,065
)
 
$
24,547

Exercise of stock options
 
303

 

 
1,858

 

 

 
1,858

Release of stock awards
 
824

 

 

 

 

 

Employee stock-based compensation
 

 

 
4,413

 

 

 
4,413

Non-employee stock-based compensation
 

 

 
24

 

 

 
24

Taxes paid related to net share settlement of equity awards
 
(297
)
 

 
(3,140
)
 

 

 
(3,140
)
Issuance of common stock, net of issuance costs of $179
 
4,313

 

 
37,317

 

 

 
37,317

Cumulative effect of change in accounting principles (1)
 

 

 

 
472

 
(4,532
)
 
(4,060
)
Net loss
 

 

 

 

 
(8,429
)
 
(8,429
)
Balance as of June 30, 2018
 
53,508

 
$
5

 
$
380,551

 
$

 
$
(328,026
)
 
$
52,530

 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Cumulative effect of change in accounting principles included: Accounting Standards Update 2014-9 (Topic 606), of $4.1 million and Accounting Standards Update 2016-01 (Subtopic 825-10), of $0.5 million.
 
 


See accompanying notes to the unaudited condensed consolidated financial statements


7




Codexis, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in Thousands)
 
Six Months Ended June 30,
 
2019
 
2018
Operating activities:
 
 
 
Net loss
$
(11,643
)
 
$
(8,429
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation
693

 
503

Amortization expense - right-of-use assets - operating and finance leases
1,486

 

Loss (Gain) on disposal of property and equipment
(1
)
 
1

Stock-based compensation
4,051

 
4,437

Unrealized loss (gain) on investment in equity securities
168

 
(5
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(262
)
 
3,057

Unbilled receivables
365

 
(103
)
Inventories
(131
)
 

Prepaid expenses and other current assets
(882
)
 
(132
)
Contract assets
35

 
(554
)
Other non-current assets
59

 
79

Accounts payable
(1,625
)
 
(530
)
Accrued compensation
(721
)
 
(936
)
Other accrued liabilities
402

 
451

Other long term liabilities
(715
)
 
(514
)
Deferred revenue
812

 
(9,466
)
Net cash used in operating activities
(7,909
)
 
(12,141
)
Investing activities:

 
 
Purchase of property and equipment
(1,258
)
 
(1,472
)
Proceeds from disposal of property and equipment
1

 

Net cash used in investing activities
(1,257
)
 
(1,472
)
Financing activities:
 
 
 
Proceeds from exercises of stock options
2,843

 
1,858

Proceeds from issuance of common stock in connection with public offering, net of underwriting discounts and commission

 
37,497

Costs incurred in connection with public placement

 
(179
)
Proceeds from issuance of common stock in connection with private placement
50,000

 

Costs incurred in connection with private placement
(74
)
 

Payments of lease obligations - Finance leases
(119
)
 
(118
)
Taxes paid related to net share settlement of equity awards
(2,799
)
 
(3,140
)
Net cash provided by financing activities
49,851

 
35,918

Net increase in cash, cash equivalents and restricted cash
40,685

 
22,305

Cash, cash equivalents and restricted cash at the beginning of the period
54,485

 
32,776

Cash, cash equivalents and restricted cash at the end of the period
$
95,170

 
$
55,081

 
 
 
 
Supplemental disclosure of cash flow information
 
 
 
Interest paid
$
9

 
$
42

Income taxes paid
$

 
$
5

Purchase of property and equipment recorded in accounts payable and accrued expenses
$
773

 
$
67


8




The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets to the total of the same such amounts shown above:
 
Six Months Ended June 30,
 
2019
 
2018
Cash and cash equivalents
$
93,421

 
$
53,621

Restricted cash included in non-current assets
1,749

 
1,460

Total cash, cash equivalents and restricted cash at the end of the period
$
95,170

 
$
55,081


See accompanying notes to the unaudited condensed consolidated financial statements

9




Codexis Inc.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 1. Description of Business
In these notes to the unaudited condensed consolidated financial statements, the "Company," "we," "us," and "our" refers to Codexis, Inc. and its subsidiaries on a consolidated basis.
We discover, develop and sell proteins that deliver value to our clients in a growing set of industries. We view proteins as a vast untapped source of value-creating materials, and we are using our proven technologies, which we have been continuously improving since our inception in 2002, to commercialize an increasing number of novel proteins, both as proprietary Codexis products and in partnership with our customers.
We are a pioneer in the harnessing of computational technologies to drive biology advancements. Since 2002, we have made substantial investments in the development of our CodeEvolver® protein engineering technology platform, the primary source of our competitive advantage. Our technology platform is powered by proprietary, artificial intelligence-based, computational algorithms that rapidly mine our large and continuously growing library of protein variants’ performance attributes. These computational outputs enable increasingly reliable predictions for next generation protein variants to be engineered, enabling delivery of targeted performance enhancements in a time-efficient manner. In addition to its computational prowess, our CodeEvolver® protein engineering technology platform integrates additional modular competencies, including robotic high-throughput screening and genomic sequencing, organic chemistry and process development which are all coordinated to create our novel protein innovations.
Our approach to develop commercially viable biocatalytic manufacturing processes begins by conceptually designing the most cost-effective and practical process for a targeted product. We then develop optimized protein catalysts to enable that process design, using our CodeEvolver® protein engineering platform technology. Engineered protein catalyst candidates - many thousands for each protein engineering project - are then rapidly screened and validated in high throughput screening under relevant manufacturing operating conditions. This approach results in an optimized protein catalyst enabling cost-efficient processes that typically are relatively simple to run in conventional manufacturing equipment. This also allows for the efficient technical transfer of our process to our manufacturing partners.
The successful embodiment of our CodeEvolver® protein engineering technology platform in commercial manufacturing processes requires well-integrated expertise in a number of technical disciplines. In addition to those directly involved in practicing our CodeEvolver® protein engineering platform technology, such as molecular biology, enzymology, microbiology, cellular engineering, metabolic engineering, bioinformatics, biochemistry and high throughput analytical chemistry, our process development projects also involve integrated expertise in organic chemistry, chemical process development, chemical engineering, fermentation process development and fermentation engineering. Our integrated, multi-disciplinary approach to biocatalyst and process development is a critical success factor for our company.
We initially commercialized our CodeEvolver® protein engineering technology platform and products in the pharmaceuticals market, which remains our primary business focus. Our customers, which include several large global pharmaceutical companies, use our technology, products and services in their manufacturing processes and process development.
We have also used the technology to develop protein catalysts for use in the fine chemicals market. The fine chemicals market consists of several large market verticals, including food and food ingredients, animal feed, flavors, fragrances and agricultural chemicals.
We have also begun using the CodeEvolver® protein engineering technology platform to develop early stage, novel biotherapeutic product candidates, both for our customers and for our own business, most notably our lead program for the potential treatment of phenylketonuria ("PKU") in humans. PKU is an inherited metabolic disorder in which the enzyme that converts the essential amino acid phenylalanine into tyrosine is deficient. In October 2017, we entered into a Global Development, Option and License Agreement (the "Nestlé Agreement") with Nestec Ltd. ("Nestlé Health Science") to advance CDX-6114, our enzyme biotherapeutic product candidate for the potential treatment of PKU. In February 2019, Nestlé Health Science exercised its option to obtain an exclusive license to develop and commercialize CDX-6114.

10




In April 2018, we entered into a strategic agreement (the "Porton Agreement") with Porton Pharma Solutions, Ltd. ("Porton") to license key elements of our CodeEvolver® protein engineering technology platform to Porton’s global custom intermediate and active pharmaceutical ingredients ("API") development and manufacturing business. This gives us access to a wide variety of small and medium-sized pharmaceutical customers.
We are also using our technology to develop enzymes for customers using next generation sequencing ("NGS") and polymerase chain reaction ("PCR/qPCR") for in vitro molecular diagnostic and genomic research applications. Our first enzyme for this application is a DNA ligase which we began marketing to customers in 2018.
In May 2019, we entered into a Platform Technology Transfer and License Agreement (the “Novartis CodeEvolver® Agreement”) with Novartis Pharma AG (“Novartis”). The Novartis CodeEvolver® Agreement allows Novartis to use Codexis’ proprietary CodeEvolver® protein engineering platform technology in the field of human healthcare.
Below are brief descriptions of our business segments (See Note 13, "Segment, Geographical and Other Revenue Information"):
Performance Enzymes
We initially commercialized our CodeEvolver® protein engineering technology platform and products in the pharmaceuticals market, and to date this continues to be our largest market served. Our customers, which include many large global pharmaceutical companies, use our technology, products and services in their manufacturing processes and process development. We have also used the technology to develop customized enzymes for use in other industrial markets. These markets consist of several large industrial verticals, including food and food ingredients, animal feed, flavors, fragrances, and agricultural chemicals. We also use our technology to develop enzymes for customers using NGS and PCR/qPCR for in vitro molecular diagnostic and molecular biology research applications.

Novel Biotherapeutics
We are also targeting new opportunities in the pharmaceutical industry to discover, improve, and/or develop biotherapeutic drug candidates. We believe that our CodeEvolver® protein engineering platform technology can be used to discover 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. Most notable is our lead program for the potential treatment of PKU in humans. PKU is an inherited metabolic disorder in which the enzyme that converts the essential amino acid phenylalanine into tyrosine is deficient. In October 2017, we announced a strategic collaboration with Nestlé Health Science to advance CDX-6114, our own novel orally administrable enzyme therapeutic candidate for the potential treatment of PKU. In July 2018, we announced that we had dosed the first subjects in a first-in-human Phase 1a dose-escalation trial with CDX-6114, which was conducted in Australia. In November 2018, we announced top-line results from the Phase 1a study in healthy volunteers with CDX-6114. In December 2018, Nestlé Health Science became obligated to pay us an additional $1.0 million within 60 days after the achievement of a milestone relating to formulation of CDX-6114. In January 2019, we received notice from the U.S. Food and Drug Administration (the “FDA”) that it had completed its review of our investigational new drug application (“IND”) for CDX-6114 and concluded that we may proceed with the proposed Phase 1b multiple ascending dose study in healthy volunteers in the United States. In February 2019, Nestlé Health Science exercised its option to obtain an exclusive, worldwide, royalty-bearing, sub-licensable license for the global development and commercialization of CDX-6114 for the management of PKU. As a result of the option exercise, we earned a milestone and recognized $3.0 million in revenues in the first quarter of 2019. Upon exercising its option, Nestlé Health Science has assumed all responsibilities for future clinical development and commercialization of CDX-6114, with the exception of the completion of an extension study, CDX-6114-004, which was substantially completed in the second quarter of 2019.
We have also developed a pipeline of other biotherapeutic drug candidates, which are in preclinical development, and in which we expect to continue to make additional investments with the aim of advancing additional product candidates targeting other therapeutic areas.
Recent Financing Activities
In June 2019, we entered into a Securities Purchase Agreement with an affiliate of Casdin Capital, LLC (“Casdin”) pursuant to which we issued and sold to Casdin 3,048,780 shares of our common stock at a purchase price of $16.40 per share (the “Private Offering”). After deducting legal fees of $74 thousand from the Private Offering, our net proceeds were $49.9 million. See Note 10, "Capital Stock" to our unaudited condensed consolidated financial statements for further details.


11


Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and the applicable rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2018. The condensed consolidated balance sheet at December 31, 2018 has been derived from the audited consolidated financial statements at that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements. The significant accounting policies used in preparation of the unaudited condensed consolidated financial statements for the three months and six months ended June 30, 2019 are consistent with those discussed in Note 2 to the audited consolidated financial statements in the Company’s 2018 Annual Report on Form 10-K and are updated below as necessary.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to present fairly our financial position as of June 30, 2019, results of our operations for the three and six months ended June 30, 2019 and 2018, changes in stockholders' equity for the three and six months ended June 30, 2019 and 2018, and cash flows for the six months ended June 30, 2019 and 2018. The interim results are not necessarily indicative of the results for any future interim period or for the entire year. Accounting Standard Update ("ASU") 2016-02, "Leases (Topic 842)" ("ASC 842) establishes a right-of-use ("ROU") model that requires a lessee to record a right-of-use asset and a lease obligation on the balance sheet for all leases with terms longer than 12 months. See "Recently Adopted Accounting Pronouncements" for details regarding the adoption of ASU 2016-02 effective January 1, 2019.
The unaudited interim condensed consolidated financial statements include the accounts of Codexis, Inc. and its wholly owned subsidiaries in the United States, India and the Netherlands. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent liabilities at the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. We regularly assess these estimates which primarily affect revenue recognition, accounts receivable, inventories, the valuation of marketable securities, 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 unaudited condensed consolidated financial statements.
Segment Reporting

We report two business segments, Performance Enzymes and Novel Biotherapeutics, which are based on our operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker ("CODM"), or decision making group, in deciding how to allocate resources, and in assessing performance. Our CODM is our Chief Executive Officer. Our business segments are primarily based on our organizational structure and our operating results as used by our CODM in assessing performance and allocating resources for our company. We do not allocate or evaluate assets by segment.
The Novel Biotherapeutics segment focuses on new opportunities in the pharmaceutical industry to discover or improve novel biotherapeutic drug candidates that will target human diseases that are in need of improved therapeutic interventions. The Performance Enzymes segment consists of protein catalyst products and services with focus on pharmaceutical, food, molecular diagnostics, and other industrial markets.
Leases
We determine if an arrangement is a lease at inception. Operating leases are included in right-of-use ("ROU") lease assets, current portion of lease obligations, and long-term lease obligations on our balance sheets.
ROU lease assets represent our right to use an underlying asset for the lease term and lease obligations represent our

12


obligation to make lease payments arising from the lease. Operating ROU lease assets and obligations are recognized at the commencement date based on the present value of the future minimum lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term. We elected to apply the short-term lease measurement and recognition exemption in which ROU assets and lease obligations are not recognized for short-term leases.
Recent Accounting Pronouncements
Recently adopted accounting pronouncements
In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" (“ASC 842”), which is intended to improve financial reporting of leasing transactions by requiring lessees to recognize leases on balance sheets and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, "Land Easement Practical Expedient for Transition to Topic 842"; ASU 2018-10, "Codification Improvements to ASC 842, Leases"; and ASU 2018-11, "Leases (Topic 842): Targeted Improvements." The new standard establishes a right-of-use ("ROU") model that requires lessees to record a ROU asset and lease obligations on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern and classification of expense recognition in the condensed consolidated statement of operations. We adopted the new standard on January 1, 2019 using a modified retrospective approach and effective date method. We also elected the "package of practical expedients," which permit us not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. We did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to us. Upon adoption, for operating leases, we recognized $26.6 million of ROU assets and $27.6 million of lease obligations, which represents the present value of the lease payments discounted using our incremental borrowing rate ("IBR") of 6.6%. For finance leases, we recognized $0.5 million of ROU assets and $0.3 million of lease obligations which represents the present value of the lease payments discounted using weighted-average implicit rate of 5.0%. These amounts, included the eighth amendment to the lease agreement disclosed in Note 11, "Commitments and Contingencies," were recorded in our unaudited condensed consolidated balance sheet on January 1, 2019.

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. This standard allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and requires certain disclosures about stranded tax effects and will be effective for us beginning January 1, 2019 and should be applied either in the period of adoption or retrospectively. We adopted ASU 2018-02 in the first quarter of 2019, and the adoption had no impact on our unaudited condensed consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, "Compensation-Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting," which expands the scope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees. The new standard is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We adopted ASU 2018-07 in the first quarter of 2019, and the adoption had no impact on our unaudited condensed consolidated financial statements.
In July 2018, the FASB issued ASU 2018-09, "Codification Improvements”, which represent changes to clarify, correct errors in, or make minor improvements to the Codification, eliminating inconsistencies and providing clarifications in current guidance. The amendments in this ASU include those made to: Subtopic 220-10, Income Statement-Reporting Comprehensive Income-Overall; Subtopic 470-50, Debt-Modifications and Extinguishments; Subtopic 480-10, Distinguishing Liabilities from Equity-Overall; Subtopic 718-740, Compensation-Stock Compensation-Income Taxes; Subtopic 805-740, Business Combinations-Income Taxes; Subtopic 815-10, Derivatives and Hedging-Overall; Subtopic 820-10, Fair Value Measurement-Overall; Subtopic 940-405, Financial Services-Brokers and Dealers-Liabilities; and Subtopic 962-325, Plan Accounting-Defined Contribution Pension Plans-Investments-Other. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments do not require transition guidance and will be effective upon issuance. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities. We adopted subtopics under ASU 2018-09 that are applicable to our Company which included subtopics 718-740 and 820-10 in the first quarter of 2019, and the adoption had no impact on our unaudited condensed consolidated financial statements.

13


Recently issued accounting pronouncements not yet adopted
From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our unaudited condensed consolidated financial statements upon adoption.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which amends the FASB's guidance on the impairment of financial instruments. The standard adds a new impairment model (known as the "current expected credit loss model") that is based on expected losses rather than incurred losses. ASU 2016-13 is effective for annual reporting periods ending after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact of adopting ASU 2016-13 on our financial statements and related disclosures.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." The amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the impact of adoption of ASU 2017-04 on our financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement". The primary focus of ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in ASU 2018-13 are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact of adoption of ASU 2018-13 on our financial statements and related disclosures.

In November 2018, the FASB issued ASU 2018-18, "Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606." ASU 2018-18 provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard. The ASU also provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. In general, for public companies, the amendments in this standard are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of adoption of ASU 2018-18 on our financial statements.

In November 2018, the FASB issued ASU 2018-19, "Codification Improvements to Topic 326, Financial Instruments-Credit Losses." ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard. In general, the amendments in this standard are effective for public business entities that meet the definition of a SEC filer for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We are currently evaluating the impact of adoption of ASU 2018-19 on our financial statements.

In January 2019, the FASB issued ASU 2019-01, "Leases (Topic 842): Codification Improvements". These amendments align the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842 with that of existing guidance (Issue #1). The ASU also requires lessors within the scope of Topic 942, Financial Services—Depository and Lending, to present all “principal payments received under leases” within investing activities (Issue #2). The ASU exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard (Issue #3). In general, the amendments in ASU 2019-01 are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The transition and effective date provisions apply to Issue 1 and Issue 2. They do not apply to Issue 3 because the amendments for that Issue are to the

14


original transition requirements in Topic 842. We are currently evaluating the impact of adopting ASU 2019-01 on our financial statements and related disclosures.

In April 2019, the FASB issued ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments." ASU 2019-04 clarifies and improves areas of guidance related to the recently issued standards on credit losses, hedging, and recognition and measurement. As we have adopted the amendments in ASU 2016-13 as of the issuance date of ASU 2019-04, the effective date is for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact of adopting ASU 2019-04 on our financial statements and related disclosures.

In May 2019, the FASB issued ASU 2019-05, "Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief." ASU 2019-05 provides entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments—Overall, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326. The fair value option election does not apply to held-to-maturity debt securities. An entity that elects the fair value option should subsequently apply the guidance in Subtopics 820-10, Fair Value Measurement—Overall, and 825-10. As we have adopted the amendments in ASU 2016-13, the effective date is for fiscal years and interim periods beginning after December 15, 2019. We are currently evaluating the impact of adopting ASU 2019-05 on our financial statements and related disclosures.


Note 3. Revenue Recognition
Disaggregation of Revenue
The following table provides information about disaggregated revenue from contracts with customers, the nature of the products and services and geographic regions, and includes a reconciliation of the disaggregated revenue with reportable segments. The geographic regions that are tracked are the Americas (United States, Canada, Latin America), EMEA (Europe, Middle East, Africa), and APAC (Australia, New Zealand, Southeast Asia, China).
 
Three months ended June 30, 2019
 
Three months ended June 30, 2018
(in thousands)
Performance Enzymes
 
Novel Biotherapeutics
 
Total
 
Performance Enzymes
 
Novel Biotherapeutics
 
Total
Major products and service:
 
 
 
 
 
 
 
 
 
 
 
       Product Revenue
$
6,249

 
$

 
$
6,249

 
$
3,723

 
$

 
$
3,723

Research and development revenue
4,340

 
1,730

 
6,070

 
7,442

 
2,373

 
9,815

Total revenues
$
10,589

 
$
1,730

 
$
12,319

 
$
11,165

 
$
2,373

 
$
13,538

 
 
 
 
 
 
 
 
 
 
 
 
Primary geographical markets:
 
 
 
 
 
 
 
 
 
 
 
Americas
$
4,076

 
$

 
$
4,076

 
$
6,058

 
$

 
$
6,058

EMEA
3,011

 
1,730

 
4,741

 
1,435

 
2,373

 
3,808

APAC
3,502

 

 
3,502

 
3,672

 

 
3,672

Total revenues
$
10,589

 
$
1,730

 
$
12,319

 
$
11,165

 
$
2,373

 
$
13,538




15


 
Six months ended June 30, 2019
 
Six months ended June 30, 2018
(in thousands)
Performance Enzymes
 
Novel Biotherapeutics
 
Total
 
Performance Enzymes
 
Novel Biotherapeutics
 
Total
Major products and service:
 
 
 
 
 
 
 
 
 
 
 
       Product Revenue
$
14,236

 
$

 
$
14,236

 
$
9,886

 
$

 
$
9,886

Research and development revenue
6,440

 
7,225

 
13,665

 
12,008

 
5,686

 
17,694

Total revenues
$
20,676

 
$
7,225

 
$
27,901

 
$
21,894

 
$
5,686

 
$
27,580

 
 
 
 
 
 
 
 
 
 
 
 
Primary geographical markets:
 
 
 
 
 
 
 
 
 
 
 
Americas
$
6,913

 
$

 
$
6,913

 
$
9,655

 
$

 
$
9,655

EMEA
5,241

 
7,225

 
12,466

 
3,114

 
5,686

 
8,800

APAC
8,522

 

 
8,522

 
9,125

 

 
9,125

Total revenues
$
20,676

 
$
7,225

 
$
27,901

 
$
21,894

 
$
5,686

 
$
27,580



Contract Balances
The following table presents changes in the contract assets, unbilled receivables, contract costs, and contract liabilities (in thousands):
<
 
January 1, 2019 balance
 
Additions
 
Deductions (1)
 
June 30, 2019 balance
Contract Assets
$
35

 
3,510