| · | actual or projected fluctuations in our financial condition and operating results; |
| · | our cash and cash equivalents position; |
| · | actual or projected changes in our growth rate relative to our competitors; |
| · | actual or projected fluctuations in our competitors’ financial condition or operating results; |
| · | actual cost savings realized from our restructuring plan and cost reduction initiatives; |
| · | announcements of technological innovations by us, our collaborators or our competitors; |
| · | announcements by us, our collaborators or competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; |
| · | the entry into, modification or termination of collaborative arrangements; |
| · | changes in our customer base; |
| · | additions or departures of key management or other key personnel; |
| · | competition from existing products or new products that may emerge; |
| · | issuances of new or updated research reports by securities or industry analysts; |
| · | fluctuations in the share prices of companies perceived by investors to be comparable to us; |
| · | fluctuations in the size of our public float or trading volume; |
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| · | disputes or other developments related to proprietary rights, including patents, litigation matters, the countries in which we source our germplasm, and our ability to obtain patent protection for our technologies; |
| · | disputes or other developments relating to genetically engineered products, including claims of adventitious presence or environmental harm; |
| · | changes in existing laws, regulations and policies applicable to our business and products; |
| · | announcements or the expectation of raising additional financing; |
| · | sales of our Common Stock by us, our insiders or other stockholders; |
| · | the status of our listing on the NASDAQ; |
| · | general market conditions in our industry; and |
| · | general economic conditions, affecting the U.S. and other markets in which we operate. |
The stock markets in general, and the small-cap biotech market, for renewable energy stocks in particular, have experienced extreme volatility that have affected and continue to affect the trading prices of equity securities of many companies. These market fluctuations often have been unrelated or disproportionate to changes in the operating performance of those companies. These fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes, international currency fluctuations or regulatory changes may negatively impact the market price of our common stock.Common Stock. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns.
Our Common Stock is thinly traded and there may not be an active, liquid trading market for our Common Stock.
There is no guarantee that an active trading market for our Common Stock will be maintained on NASDAQ, or that the volume of trading will be sufficient to allow for timely trades. Investors may not be able to sell their shares quickly or at the latest market price if trading in our stock is not active or if trading volume is limited. In addition, if trading volume in our Common Stock is limited, trades of relatively small numbers of shares may have a disproportionate effect on the market price of our Common Stock.
If there are substantial sales of our common stock,Common Stock, or the perception that these sales could occur in the future, the trading price of our common stockCommon Stock could decline.
The trading price of our common stockCommon Stock could decline as a result of sales of a large number of shares of our common stockCommon Stock in the public market. The perception that these sales could occur may also depress the trading price of our common stock.Common Stock. As of November 15, 2013,10, 2015, we had 25,224,2698,830,700 shares of common stockCommon Stock outstanding. Certain stockholders owning a majority of our outstanding sharesstockholders are entitled, under contracts providing for registration rights, to require us to register shares of our common stockCommon Stock owned by them for public sale in the United States. We have filed a registration statement on Form S-1 registering for sale common stock, convertible preferred stock and warrants. In connection with our offerings of Common Stock and warrants on July 30, 2015 and August 26, 2015, we filed a registration statement on Form S-3, on September 22, 2015, to register for resale the shares of our Common Stock issuable upon exercise of such warrants. In addition, certain stockholders, including stockholders owning a majority of our outstanding shares as well as current and former employees, are eligible to resell shares of common stockCommon Stock in the public market under Rule 144, which, in the case of our affiliates, would be subject to volume limitations and certain other restrictions under Rule 144. We have also registered 3,881,155672,644 shares of common stockCommon Stock previously issued or reserved for future issuance under our equity compensation plans and agreements. Subject to the satisfaction of applicable exercise periods and vesting requirements, the shares of common stockCommon Stock issued upon exercise of outstanding options will be available for immediate resale in the United States in the open market.
If securities or industry analysts do not publish research or reports about our business or our industry, or publish negative reports about our business or our industry, our stock price and trading volume could decline.
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The trading market for our common stock will be influenced by the research and reports that securities or industry analysts publish about us, our business, our industry and our competitors. If one or more of the analysts who cover us change their recommendation regarding our stock adversely, change their opinion of the prospects for our company in a negative manner, or provide more favorable relative recommendations about our competitors, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
We are an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stockCommon Stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act and, for as long as we continue to be an emerging growth company, we intend to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements related to our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We will remain an “emerging growth company” for up to five years from the date of the completion of our IPO, or until the earlier of (1) the last day of the fiscal year in which our total annual gross revenues exceed $1 billion, (2) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common equity that is held by non-affiliates exceeds $700 million as of the last business day our most recently completed second fiscal quarter or (3) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. We cannot predict if investors will find our common stockCommon Stock less attractive if we continue to rely on these exemptions. If some investors find our common stockCommon Stock less attractive as a result of any choices that we make to reduce our disclosure, there may be a less active trading market for our common stockCommon Stock and our stock price may be more volatile.
In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Under this provision, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to delay such adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for public companies that are not emerging growth companies. As a result of such election, our financial statements may not be comparable to the financial statements of other public companies. If some investors find our common stockCommon Stock less attractive as a result, there may be a less active trading market for our common stockCommon Stock and our stock price may be more volatile.
We are a smaller reporting company and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our Common Stock less attractive to investors.
We are currently a “smaller reporting company” as defined in the Exchange Act. Similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosures in their filings, are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that an independent registered public accounting firm provide an attestation report on the effectiveness of internal control over financial reporting, and have certain other decreased disclosure obligations in their SEC filings. We cannot predict whether investors will find our Common Stock less attractive because of our reliance on any of these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.
We incur significant costs as a result of operating as a public company, and our management will be required to devote substantial time to comply with the laws and regulations affecting public companies. Failure to maintain effective internal controls over financial reporting could negatively affect our ability to provide accurate and timely financial information.
We became a public company in February 2012. Although we are an emerging growth company as defined under the JOBS Act, as a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting and corporate governance requirements, in order to comply with the rules and regulations imposed by the Sarbanes-Oxley Act, as well as rules implemented by the SEC and the NasdaqNASDAQ Stock Market. In addition, management and other personnel will need to devote a substantial amount of time to comply with these requirements.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls over financial reporting. Effective internal controls are necessary for us to provide reliable financial reports and preventdetect fraud. In addition, Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting, and have our chief executive officer and chief financial officer certify as to the accuracy and completeness of our financial reports. The process of implementing our internal controls and complying with Section 404 is expensive and time consuming, and requires significant attention from management. We cannot be certain that these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future.
Our management has concluded that there are no material weaknesses in our internal controls over financial reporting as of August 31, 2013. However, there can be no assurance that our controls over financial processes and reporting will be effective in the future or that material weaknesses or significant deficiencies in our internal controls will not be discovered in the future. Because of its inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our results of operations or cause us to fail to meet our reporting obligations. If we or our independent registered public accounting firm discover a material weakness, the disclosure of that fact, even if quickly remedied, could reduce the market's confidence in our financial statements and cause our stock price to decline.
For so long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. Once we are no longer an emerging growth company or, if prior to such date, we opt to no longer take advantage of the applicable exemption, we will be required to include an opinion from our independent registered public accounting firm on the effectiveness of our internal controls over financial reporting. To date, our independent registered public accounting firm has not expressed an opinion on the effectiveness of our internal controls. If we are not able to comply with the requirements of Section 404 in a timely manner, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause our stock price to decline.
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We have identified three material weaknesses in our internal control over financial reporting as of August 31, 2015. If our remedial measures are insufficient to address these material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, our ability to provide accurate and timely financial information could be negatively affected, which could reduce the reliability of our financial reporting, harm investor confidence in our Company and affect the market price of our Common Stock.
We perform system and process evaluations and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our testing, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. In connection with the preparation of our audited financial statements for fiscal year 2015, we identified material weaknesses in our control environment, our control activities related to expenses in Brazil, and our control activities related to our revenue recognition, in addition to a significant deficiency in our control activities related to the precision of management’s review of our year end financial statements. A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls. A significant deficiency is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company’s financial reporting. Because of these material weaknesses and the significant deficiency management concluded that the Company did not maintain effective internal control over financial reporting as of August 31, 2015.
We are in the process of taking the necessary steps to remediate the material weaknesses and the significant deficiency that we identified and have made enhancements to our control procedures; however, the material weaknesses and the significant deficiency, will not be remediated until the necessary controls have been implemented and are operating effectively. We cannot assure that there will not be additional material weaknesses and significant deficiencies that we or our independent registered public accounting firm will identify. Moreover, if we do not maintain effective internal control over financial reporting or if we or our independent registered public accounting firm identify additional deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause our stock price to decline.
Anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law could delay or prevent an acquisition of our company, even if the acquisition may be beneficial to our stockholders.
Provisions in our amended and restated certificate of incorporation and our bylaws may delay or prevent an acquisition of our company deemed undesirable by our board of directors. Among other things, our amended and restated certificate of incorporation and bylaws (i) provide for a board of directors that is divided into three classes, with staggered three-year terms, (ii) provide that all stockholder action must be effected at a duly called meeting of the stockholders and not by a consent in writing, (iii) provide that only a majority of our board of directors, the chairman of the board of directors, our chief executive officer or president (in the absence of a chief executive officer) may call a special meeting of the stockholders, (iv) provide for the ability of our board of directors to issue undesignated preferred stock, (v) require that certain amendments to the amended and restated certificate of incorporation be approved by a 66 2/3% stockholder vote, and (vi) establish advance notice requirements for nominations for election to our board of directors and for proposing matters that can be acted upon at stockholders meetings. These provisions may also frustrate or prevent any attempt by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors who are responsible for appointing the members of our management team. As a Delaware corporation, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which prohibits, with some exceptions, stockholders owning in excess of 15% of our outstanding stock from merging or combining with us without board of directors or stockholder approval. Although we believe these provisions together provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer to acquire our company may be considered beneficial by some stockholders and could limit the opportunity for our stockholders to receive a premium for their shares.
Concentration of ownership among our existing officers, directors and principal stockholders may prevent other stockholders from influencing significant corporate decisions.
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Based on the number of shares outstanding as of November 15, 2013, our officers, directors and existing stockholders who hold at least 5% of our stock together beneficially own approximately 70.4% of our outstanding common stock. If these officers, directors and principal stockholders or a group of our principal stockholders act together, they will be able to exert a significant degree of influence over our management and affairs and exercise a significant level of control over all matters requiring stockholder approval, including the election of directors and approval of mergers or other business combination transactions. This concentration of ownership may have the effect of delaying or preventing a change in control of our company or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders.
We do not expect to declare any dividends in the foreseeable future.
We do not anticipate declaring any cash dividends to holders of our common stockCommon Stock in the foreseeable future. Consequently, investors may need to rely on sales of their common stockCommon Stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our common stock.Common Stock.
If we fail to adhere to the listing criteria of the NASDAQ Capital Market, our Common Stock may be delisted, which may adversely affect the liquidity and market price of our Common Stock, our ability to raise additional financing and may subject us to certain penny stock restrictions, which may further adversely affect the liquidity and market price of our Common Stock.
Our Common Stock is currently listed on the NASDAQ Capital Market, which requires that we adhere to specified listing criteria. In April 2014, we were informed by the NASDAQ that we had failed to comply with NASDAQ Listing Rule 5450(a)(1), which required that we maintain a minimum closing bid price of $1.00 per share. After transferring our Common Stock to the NASDAQ Capital Market, we achieved compliance with the corresponding rule through a reverse stock split in April 2015. In the future, if we were to fail to adhere to the Market’s listing criteria, including maintaining a minimum closing bid price of $1.00 per share, our Common Stock may be delisted. If our Common Stock were to be delisted, the liquidity of our Common Stock would be adversely affected and the market price of our Common Stock could decrease, as would our ability to raise additional financing through public or private sales of equity securities. In addition, if delisted we would no longer be subject to NASDAQ rules, including rules requiring us to have a certain number of independent directors and to meet other corporate governance standards. Our failure to be listed on NASDAQ or another established securities market would have a material adverse effect on the value of your investment in us. Delisting could also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities.
If our Common Stock is delisted by NASDAQ or another national exchange, our Common Stock may be eligible for quotation on an over-the-counter quotation system or on the pink sheets. Upon any such delisting, our Common Stock would likely become subject to the regulations of the SEC relating to the market for penny stocks. A penny stock is any equity security not traded on a national securities exchange that has a market price of less than $5.00 per share, subject to certain exceptions. The regulations applicable to penny stocks may severely affect the market liquidity for our Common Stock and could limit the ability of shareholders to sell securities in the secondary market. In such a case, an investor may find it more difficult to dispose of or obtain accurate quotations as to the market value of our Common Stock, and there can be no assurance that our Common Stock will be eligible for trading or quotation on any alternative exchanges or markets. Under these rules, broker-dealers who recommend such securities to persons other than institutional accredited investors must:
| · | make a special written suitability determination for the purchaser; |
| · | receive the purchaser’s written agreement to the transaction prior to sale; |
| · | provide the purchaser with risk disclosure documents which identify certain risks associated with investing in “penny stocks” and which describe the market for these “penny stocks” as well as a purchaser’s legal remedies; and |
| · | obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required risk disclosure document before a transaction in a “penny stock” can be completed. |
As a result of these requirements, the market price of our securities may be adversely impacted, and current stockholders may find it more difficult to sell our securities.
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| Item 1B. | Unresolved Staff Comments |
None.
| Item 2. | Properties |
Headquarters
Our headquarters is located in Thousand Oaks, California, where we lease approximately 49,000 square feet of office, laboratory and greenhouse space. The lease expires on September 30, 2019. We have one option to extend the lease for an additional term of five years, provided that we give notice to the landlord no more than nine months, nor less than six months prior to the expiration of the term of the lease.
College Station Research Center
Our plant breeding and field research center is located in Burleson County near College Station, Texas. Completed in 2009, the site consists of approximately 12,000 square feet of office, laboratory, warehouse and greenhouse space. The research center sits on approximately five acres of leased land, on which we hold the option to purchase. Adjacent to our facility, we also lease approximately 200 acres of farmland under a five-year lease expiring in 2017, with one option to extend this lease by five years. While this facility has historically served as our primary plant breeding and field research center, we intend to shift the majority of our Northern Hemisphere breeding and related operations to other locations in the near term.
Amarillo Operations
Our primary U.S. seed warehousing, conditioning, packaging and order fulfillment facility is located in Amarillo, Texas. Purchased in 2009, the site consists of approximately 46,000 square feet of office and warehouse space on a 32-acre parcel. We anticipate that we will be able to warehouse and process up to 8 to 10 million pounds of seed annually at this facility.
Brazil
We lease two offices in the Municipality of Piracicaba, São Paulo,Uberlândia and Centralina, Brazil. We have a right of first refusal to purchase the property in the event the lessor decides to sell. The leases for these offices expire in 2015. Our plant breeding facility is located in the Municipality of Centralina, State of Minas Gerais, Brazil. The siteplant breeding facility consists of approximately 450 square meters of office and warehouse space on an approximately 3,876-square-meter parcel. The lease of the plant breeding facility expires in August 2014.2017. We have a right of first refusal into acquire the acquisition of the property. In addition, as part of our plant breeding facility, we lease approximately 58 hectares of cropland under a three-year lease expiring in 2014, which we hold an option to purchase.
We believe that our facilities in California, Texas and Brazil will adequately meet our needs in the near term.
| Item 3. | Legal Proceedings |
From time to time, we may be involved in litigation relating to claims arising out of our operations. We are not currently a party to any material litigation or other material legal proceedings. We may, however, be involved in material legal proceedings in the future. Such matters are subject to uncertainty and there can be no assurance that such legal proceedings will not have a material adverse effect on our business, results of operations, financial position or cash flows.
| Item 4. | Mine Safety Disclosures |
Not applicable.
PART II
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Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesPART II
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Market Information
Our common stock began tradingtrades on the Nasdaq Global MarketNASDAQ under the symbol “CERE” onsince February 22, 2012. Prior to that time, there was no public market for our common stock. The following table sets forth the high and low sales prices per share of our common stock for each of the quarters in fiscal 20132014 and 20122015. All of the share prices are as follows:adjusted to reflect the 1-for-8 reverse stock split of our Common Stock, which took effect on April 8, 2015.
High | Low | |||||||
| Fiscal 2013 | ||||||||
| First Quarter (September 1, 2012 – November 30, 2012 | $ | 8.19 | $ | 3.43 | ||||
| Second quarter (December 1, 2012 – February 28, 2013) | 4.94 | 3.61 | ||||||
| Third quarter (March 1, 2013 – May 31, 2013) | 4.08 | 1.87 | ||||||
| Fourth quarter (June 1, 2013 – August 31, 2013) | 5.60 | 1.10 | ||||||
| High | Low | |||||||
| Fiscal 2012 | ||||||||
| Second quarter (February 22, 2012 – February 29, 2012) | $ | 15.59 | $ | 13.50 | ||||
| Third quarter (March 1, 2012 – May 31, 2012) | 18.70 | 9.54 | ||||||
| Fourth quarter (June 1, 2012 – August 31, 2012) | 11.42 | 6.02 | ||||||
| High | Low | |||||||
| Fiscal 2014 | ||||||||
| First quarter (September 1, 2013 – November 30, 2013) | $ | 17.12 | $ | 9.28 | ||||
| Second quarter (December 1, 2013 – February 28, 2014) | 14.56 | 10.24 | ||||||
| Third quarter (March 1, 2014 – May 31, 2014) | 11.60 | 4.00 | ||||||
| Fourth quarter (June 1, 2014 – August 31, 2014) | 6.56 | 4.08 | ||||||
| Fiscal 2015 | ||||||||
| First quarter (September 1, 2014 – November 30, 2014) | $ | 4.48 | $ | 1.76 | ||||
| Second quarter (December 1, 2015 – February 28, 2015) | 3.20 | 1.44 | ||||||
| Third quarter (March 1, 2015 – May 31, 2015) | 4.48 | 1.63 | ||||||
| Fourth quarter (June 1, 2015 – August 31, 2015) | 4.80 | 0.90 | ||||||
Holders of Record
On November 15, 2013,10, 2015, there were approximately 204180 stockholders of record of our common stock. Stockholders of record do not include a substantially greater number of “street name” holders or beneficial holders of our common stock whose shares are held of record by banks, brokers and other financial institutions.
Dividends
We have never declared or paid cash dividends on our common stock. We currently intend to retain any future earnings and do not expect to declare or pay any cash dividends in the foreseeable future.
Equity Plan Information
Our equity plan information required by this item is incorporated by reference to the information in Part III, Item 12 of this Annual Report on Form 10-K.
Performance Graph
This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing of Ceres, Inc. under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
The following graph compares our total common stock return with the total return for the Nasdaq U.S. Small Cap Index and the Nasdaq Clean Edge Green Energy Index for the period from February 22, 2012 (the date our common stock commenced trading on the NASDAQ) through August 31, 2013. The data assume an investment of $100 in our common stock at a closing price of $14.80 on February 22, 2012 and in the Nasdaq U.S. Small Cap Index and the NASDAQ Clean Edge Green Energy Index on February 22, 2012. Such returns are based on historical results and are not intended to suggest future performance. Data assumes reinvestment of dividends.
Unregistered Sales of Equity Securities
None.
Use of Proceeds
On February 27,Since September 1, 2012, we completed our initial public offering. We sold 5,750,000 shares of common stock at a price tohave issued the public of $13.00 per share, which included the underwriters’ exercise in full of their option to purchase 750,000 additional shares. The offer and sale of our common stock in our initial public offering wasfollowing securities that were not registered under the Securities Act pursuant toAct:
| (1) | On July 30, 2015, in a private placement we issued for no additional consideration warrants to purchase 1,200,000 shares of our Common Stock to certain institutional investors in a concurrent SEC-registered offering of Common Stock. The warrants are exercisable beginning on January 30, 2016 at an exercise price equal to $1.62 per share of Common Stock. The warrants expire on January 30, 2021. |
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| (2) | On July 30, 2015, in a private placement we issued warrants to purchase 24,000 shares of our Common Stock to the representative in compensation for its services as a placement agent in connection with a concurrent SEC-registered offering and a private placement. The warrants are exercisable beginning on July 30, 2016 at an exercise price equal to $1.944 per share of Common Stock. The warrants expire on July 30, 2020. | |
| (3) | On August 26, 2015, in a private placement we issued warrants to purchase 1,198,859 shares of our Common Stock to certain institutional investors in a concurrent SEC-registered offering of Common Stock. The warrants were sold at a price of $0.125 per share of Common Stock issuable upon exercise of the warrants. The warrants are exercisable beginning on February 26, 2016 at an exercise price equal to $1.22 per share of Common Stock. The warrants expire on February 26, 2021. | |
| (4) | On August 26, 2015, in a private placement we issued warrants to purchase 31,970 shares of our Common Stock to the representative in compensation for its services as a placement agent in connection with a concurrent SEC-registered offering and a private placement. The warrants are exercisable beginning on August 26, 2016 at an exercise price equal to $1.83 per share of Common Stock. The warrants expire on August 26, 2020. |
The issuances of warrants described in items (1) through (4) above were deemed exempt from registration statement on Form S-1 (File No. 333-174405), which was declared effective byunder Section 4(a)(2) or Regulation D of the SEC on February 21, 2012. We raised approximately $65.2 million in net proceeds after deducting underwriting discounts and commissionsSecurities Act. The recipients of $5.2 million and other offering costs of $4.9 million. There has been no material changesecurities in the planned usetransactions exempt under Section 4(a)(2) or Regulation D of proceeds from our initial public offering as described in our Prospectus dated February 21, 2012 and filed with the Securities Act represented their intention to acquire the securities for investment purposes only and Exchange Commission.not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the instruments issued in such transactions.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 6. Selected Financial Data
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated statement of operations data for the fiscal years ended August 31, 2013, 20122015 and 20112014, and the selected consolidated balance sheet data at August 31, 20132015 and 20122014 are derived from our audited Consolidated Financial Statements, appearing elsewhere in this Annual Report on Form 10-K. The selected consolidated statement of operations data for the fiscal yearyears ended August 31, 2010, the eight months ended August 31, 20092012, 2011 and the fiscal year ended December 31, 20082010 and the selected consolidated balance sheet data as of August 31, 2011, 20102013, 2012, and 20092011 have been derived from our audited consolidated financial statements, which are not included in this Annual Report on Form 10-K. In 2009, we changed our fiscal year end from December 31 to August 31. The change was effective for the eight-month period ended August 31, 2009. Historical results are not necessarily indicative of results for future periods.
You should read the following selected consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.
| Eight Months | Year | |||||||||||||||||||||||
| Ended | Ended | |||||||||||||||||||||||
| Year Ended August 31, | August 31, | December 31, | ||||||||||||||||||||||
| 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||
| Product sales | $ | 462 | $ | 432 | $ | 116 | $ | 288 | $ | 98 | $ | 64 | ||||||||||||
| Collaborative research and government grants | 4,781 | 4,939 | 6,500 | 6,326 | 2,328 | 3,880 | ||||||||||||||||||
| Total revenues | $ | 5,243 | 5,371 | 6,616 | 6,614 | 2,426 | 3,944 | |||||||||||||||||
| Cost and operating expenses(1) | ||||||||||||||||||||||||
| Cost of product sales | 6,245 | 2,384 | 2,492 | 2,946 | 2,690 | 3,777 | ||||||||||||||||||
| Research and development | 16,401 | 19,155 | 19,014 | 16,697 | 12,397 | 20,309 | ||||||||||||||||||
| Selling, general and administrative | 15,187 | 12,634 | 10,008 | 9,207 | 6,645 | 8,784 | ||||||||||||||||||
| Total cost and operating expenses(1) | 37,833 | 34,173 | 31,514 | 28,850 | 21,732 | 32,870 | ||||||||||||||||||
| Loss from operations | $ | (32,590 | ) | (28,802 | ) | (24,898 | ) | (22,236 | ) | (19,306 | ) | (28,926 | ) | |||||||||||
| Interest expense | (46 | ) | (560 | ) | (456 | ) | (153 | ) | (5 | ) | - | |||||||||||||
| Interest income | 126 | 39 | 7 | 23 | 243 | 2,001 | ||||||||||||||||||
| Other (expense) income | - | (84 | ) | (11,020 | ) | (152 | ) | 161 | - | |||||||||||||||
| Loss before income taxes | $ | (32,510 | ) | (29,407 | ) | (36,367 | ) | (22,518 | ) | (18,907 | ) | (26,925 | ) | |||||||||||
| Income tax (expense) benefit | (1 | ) | (3 | ) | 31 | (65 | ) | 211 | 148 | |||||||||||||||
| Net loss | $ | (32,511 | ) | (29,410 | ) | (36,336 | ) | (22,583 | ) | (18,696 | ) | (26,777 | ) | |||||||||||
| Basic and diluted net loss per share attributable to common stockholders(2) | $ | (1.31 | ) | (2.18 | ) | (18.34 | ) | (11.70 | ) | (9.98 | ) | (14.68 | ) | |||||||||||
| Weighted average outstanding common shares used for net loss per share attributable to common stockholders(2): | ||||||||||||||||||||||||
| Basic and diluted | 24,796,030 | 13,488,336 | 1,981,627 | 1,930,395 | 1,873,808 | 1,824,284 | ||||||||||||||||||
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| Year Ended August 31, | ||||||||||||||||||||
| 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||||
| Revenues | ||||||||||||||||||||
| Product sales | $ | 434 | $ | 146 | $ | 462 | $ | 432 | $ | 116 | ||||||||||
Services | 2,286 | 2,258 | 4,781 | 4,939 | 6,500 | |||||||||||||||
| Total revenues | $ | 2,720 | 2,404 | 5,243 | 5,371 | 6,616 | ||||||||||||||
| Cost and operating expenses(1) | ||||||||||||||||||||
| Cost of product sales | 5,267 | 3,021 | 6,245 | 2,384 | 2,492 | |||||||||||||||
| Research and development | 9,684 | 14,156 | 16,401 | 19,155 | 19,014 | |||||||||||||||
| Selling, general and administrative | 15,946 | 14,484 | 15,187 | 12,634 | 10,008 | |||||||||||||||
| Total cost and operating expenses(1) | 30,897 | 31,661 | 37,833 | 34,173 | 31,514 | |||||||||||||||
| Loss from operations | $ | (28,177 | ) | (29,257 | ) | (32,590 | ) | (28,802 | ) | (24,898 | ) | |||||||||
| Interest expense | (30 | ) | (68 | ) | (46 | ) | (560 | ) | (456 | ) | ||||||||||
| Interest income | 28 | 5 | 126 | 39 | 7 | |||||||||||||||
| Other income (expense) | 24 | - | - | (84 | ) | (11,020 | ) | |||||||||||||
| Loss before income taxes | $ | (28,155 | ) | (29,320 | ) | (32,510 | ) | (29,407 | ) | (36,367 | ) | |||||||||
| Income tax (expense) benefit | (1 | ) | (1 | ) | (1 | ) | (3 | ) | 31 | |||||||||||
| Net loss | $ | (28,156 | ) | (29,321 | ) | (32,511 | ) | (29,410 | ) | (36,336 | ) | |||||||||
| Basic and diluted net loss per share attributable to common stockholders(2) | $ | (4.57 | ) | (6.48 | ) | (10.48 | ) | (17.44 | ) | (146.72 | ) | |||||||||
| Weighted average outstanding common shares used for net loss per share attributable to common stockholders(2): | ||||||||||||||||||||
| Basic and diluted | 6,166,006 | 4,525,745 | 3,099,503 | 1,686,402 | 247,703 | |||||||||||||||
| (1) | Our stock-based compensation expense is as follows (in thousands): |
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| Year | ||||||||||||||||||||||||
| Eight Months | Ended | |||||||||||||||||||||||
| Ended | December | |||||||||||||||||||||||
| Year ended August 31, | August 31, | 31, | ||||||||||||||||||||||
| 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
| Cost of product sales | (170 | ) | 152 | — | — | — | — | |||||||||||||||||
| Research and development | $ | 1,189 | $ | 293 | $ | 1,895 | $ | 409 | $ | 345 | $ | 467 | ||||||||||||
| Selling, general and administrative | 2,291 | 1,464 | 815 | 891 | 737 | 705 | ||||||||||||||||||
| Total stock-based compensation expense | $ | 3,310 | $ | 1,909 | $ | 2,710 | $ | 1,300 | $ | 1,082 | $ | 1,172 | ||||||||||||
| Year ended August 31, | ||||||||||||||||||||
| 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
| Cost of product sales | $ | 145 | $ | 174 | $ | (170 | ) | $ | 152 | $ | — | |||||||||
| Research and development | 640 | 1,031 | 1,189 | 293 | 1,895 | |||||||||||||||
| Selling, general and administrative | 1480 | 1,863 | 2,291 | 1,464 | 815 | |||||||||||||||
| Total stock-based compensation expense | $ | 2,265 | $ | 3,068 | $ | 3,310 | $ | 1,909 | $ | 2,710 | ||||||||||
| (2) | The basic and diluted loss per share are computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. |
Our consolidated balance sheet data is as follows (in thousands):
| As of August 31, | ||||||||||||||||||||
| 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
| Cash and cash equivalents | $ | 8,881 | $ | 21,069 | $ | 21,911 | $ | 33,055 | $ | 14,960 | ||||||||||
| Working capital | $ | 28,439 | 51,226 | 16,739 | 28,325 | 27,543 | ||||||||||||||
| Total assets | $ | 37,178 | 69,247 | 36,797 | 46,648 | 41,094 | ||||||||||||||
| Common and preferred stock warrant liabilities | $ | - | - | 17,726 | 8,911 | 2,944 | ||||||||||||||
| Convertible Notes | $ | - | - | 13,630 | - | - | ||||||||||||||
| Total long-term liabilities | $ | 175 | 344 | 33,518 | 13,310 | 3,197 | ||||||||||||||
| Convertible preferred stock | $ | - | - | 197,502 | 197,502 | 183,079 | ||||||||||||||
| Total stockholders’ equity (deficit) | $ | 33,006 | $ | 62,561 | $ | (204,318 | ) | $ | (170,829 | ) | $ | (149,577 | ) | |||||||
| As of August 31, | ||||||||||||||||||||
| 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||
| Cash and cash equivalents | $ | 8,095 | $ | 3,423 | $ | 8,881 | $ | 21,069 | $ | 21,911 | ||||||||||
| Working capital | $ | 4,544 | 24,607 | 28,439 | 51,226 | 16,739 | ||||||||||||||
| Total assets | $ | 11,122 | 32,424 | 37,178 | 69,247 | 36,797 | ||||||||||||||
| Common and preferred stock warrant liabilities | $ | 1,631 | - | - | - | 17,726 | ||||||||||||||
| Convertible Notes | $ | - | - | - | - | 13,630 | ||||||||||||||
| Total long-term liabilities | $ | 1,687 | 93 | 175 | 344 | 33,518 | ||||||||||||||
| Convertible preferred stock | $ | - | - | - | - | 197,502 | ||||||||||||||
| Total stockholders’ equity (deficit) | $ | 4,213 | $ | 27,609 | $ | 33,006 | $ | 62,561 | $ | (204,318 | ) | |||||||||
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our Consolidated Financial Statements and the other financial information appearing elsewhere in this Annual Report on Form 10-K. This Item 7 contains forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and our actual results may differ materially from those discussed in our forward-looking statements as a result of various factors, including but not limited to those listed under “Risk Factors” in Item 1A of this Annual Report on Form 10-K and those included elsewhere in this Annual Report on Form 10-K.
Overview
We are an agricultural biotechnology company sellingthat develops and markets seeds and traits to produce dedicated energy crops – renewable bioenergy feedstocks that can enable the large-scale replacement of petroleumfor feed, forages, sugar and other fossil fuels.markets. We use a combination of advanced plant breeding, biotechnology and biotechnologybioinformatics to develop seed products that we believeand biotechnology traits to address many of the current limitations of first-generation bioenergy feedstocks, such as corn and sugarcane,future challenges facing agriculture. These technology platforms, which can increase crop productivity, improve quality, reduce crop inputs and improve cultivation on marginal land.land, have broad application across multiple end markets, including food, feed, fiber and fuel.
In 2014, we began realigning our business to focus on food and forage opportunities and biotechnology traits for sugarcane and other crops. Previously, we prioritized our working capital in Brazil, where, since 2010 we focused on the large-scale evaluation and adoption of sorghum for bioenergy production. We believe that these changes represent an important step in the transformation of our business as we refocus on our strengths in agricultural technology and redirect our existing seed products and trait pipelines toward food and feed markets being fueled by global prosperity growth.
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Our largest immediatecurrent commercial opportunity isseed products have demonstrated a number of favorable attributes for forage feed, including high yields and lower water requirements, as well as competitive production costs relative to corn and certain hay crops. In addition our product development pipeline contains numerous traits and seed products that have demonstrated further yield improvements as well as enhanced energy content and nutrition. Following commercial field evaluations in Brazil where2014, we launched our U.S. forage sorghum business in 2015 via multiple distribution arrangements. Distributors provide us with local market sweet sorghum hybrids that can be used as a “drop-in” feedstockinformation, agronomy support and access to complement existing feedstock supplies and extend the operating season of Brazilian sugarcane-to-ethanol mills. Our dedicated energy crops can also be used for the production of second-generation biofuels and bio-based chemicals, including cellulosic ethanol, butanol, jet fuel, diesel-like molecules and gasoline-like molecules, from non-food biomass. Finally, utility-scale electric power can be generated from the biomass feedstocks grown from our seeds.their customer-base.
The seed industry has historically required very little capitalIn addition to produce, condition and package seeds, and seeds have typically been priced based on a share of the value they create and thus have generated high gross margins. As a producer of proprietary seeds, we believe we areour forage sorghum opportunity, in one of the most attractive segments of the bioenergy value chain — upstream from the capital-intensive refining and conversion of biomass. Therefore, we believe our success is tied to adoption of our products rather than the relative profitability of downstream participants. Our upstream position in the bioenergy value chain also allows us to be largely independent of the success of any particular conversion technology or end use.
Due to the nature of biotechnology, we believe othercertain crops, such asincluding corn, rice and soybean, can benefit from many of the traits and genetic technologiessugar beet, we are developing for dedicated energy crops, such as traits that provide drought tolerance. We have also generated many biotech traits specifically for cereal crops, such as rice, that increase grain yields and provide greater yield stability across different environments. Our strategy is to focus on genes that have shown large, step increases in performance, and whose benefits are maintained across multiple species. To date, our field evaluations have largely confirmed previous results obtained in greenhouse and laboratory settings, and we believe that based on these multiple confirmations, we have an industry leading biotech trait technology pipeline, with applications in our energy crops as well as other crops.
We believe that the strength of our technology has been validated by our receipt of multiple competitive grants and collaborations, including a United States Agency for International Development, or USAID, grant and one of the U.S. Department of Energy’s first Advanced Research Project Agency for Energy, or ARPA-E, grants in 2009, as well as a $137 million multi-year collaboration with Monsanto Company signed in 2002. We also have significant intellectual property rights to our technology platforms, traits and seed products. We have out-licensed a portion of our traits and gene technology to existing market participants and continue to pursue opportunities to out-license these technologies.technologies, among other go-to-market strategies. We believe that the strength of our technology has been validated by our receipt of multiple competitive grants as well as collaborations with leading companies. We also have significant intellectual property rights to our technology platforms, traits and seed products.
We operate in one segment, and accordingly, our results of operations are presented on a consolidated basis. To date the majority of our revenue and expense has been denominated in U.S. dollars and Brazilian Real. In fiscal year 2015 there was a benefit to our operating expenses related to the impact of expenses incurred in Brazilian Real as a result of the strengthening dollar which was offset by increased costs incurred in Brazil.
We generate our revenues from government grants,product sales, research and development collaboration agreements, government grants and from product sales.software and services. We began selling products in 2008 and, while our product sales have been minimal to date, we expect product sales to eventually become the primary source of our revenues. We expect future product revenues to include a combination of seed sales and traitstrait fees, similar to current business models used for food crops incorporating biotech traits. As we continue to develop traits for our products, we expect that a significant portion of our product revenues will be generated from the sale of seeds that include our traits. We believe our largest immediate market opportunity is selling our sorghum products into the Brazilian bioenergy market. Our longer term strategies involve capitalizing on the development of the emerging cellulosic biofuel and biopower markets in the United States and Europe.
We market and sell our sorghum seeds in Brazil and our switchgrass and sorghum seeds in the United States under our brand, Blade Energy Crops, or Blade.
Since 2010, we have completed various commercial-scale evaluations of our sweet sorghum products in Brazil with ethanol mills and mill suppliers. During this time, our seeds have been planted and harvested using existing equipment and fermented into ethanol without retrofitting or altering the existing mills. The remaining biomass from this industrial process has been combusted for electricity production using existing mill boilers. We believe these experiences have demonstrated the “drop-in” nature of our sweet sorghum products, and along with higher yielding products in our pipeline, will serve as the basis for expanded adoption of this product line as a feedstock for ethanol and power production in Brazil and other markets.
With industrial processing generally well established, we believe that field performance – primarily yields of sugars that can be fermented to ethanol – will largely determine the scale and pace at which our current and future products will be adopted. Based on industry feedback, we believe that minimum average yields in the range of 2,500 to 3,000 liters of ethanol per hectare will be necessary to achieve broad adoption. We believe that at least two growing seasons will be required to fully demonstrate this yield range. To date, we have demonstrated on a limited scale that such yields can be achieved with our products within their area of adaptation, provided that our crop management protocolsSeed inventory costs are followed and plantings receive adequate rainfall; however, further optimizations and additional hybrids will be needed to consistently achieve economically attractive yields across wide-area plantings.
For the 2012-2013 season, ethanol yields from our sweet sorghum products ranged from approximately 450 to 3,600 liters per hectare, according to mill and company calculations. Mills that followed our recommended crop management practices generally achieved the highest average yields. Lower yields were primarily due to deviations from our recommended crop management protocols, weather-related delays during planting and disease infection late in the growing season. Yield results were available from approximately two-thirds of the more than 30 mills that planted Ceres' hybrids; remaining mills reported incomplete results, did not complete the evaluation or chose not to report results.
For the 2013-2014 season, we expect to evaluate our hybrids at approximately 50 mills and mill suppliers. These plantings primarily consist of small, multi-hybrid evaluations designed to determine yield potential, identify the best performing hybrids for specific regions and demonstrate various crop management practices. Several of these mills are expected to plant larger evaluations. Total plantings of our sorghum products are expected to cover up to approximately 1,000 hectares for the 2013-2014 sorghum growing season compared to approximately 3,000 hectares for the previous season due primarily to a greater focus among mills on field performance, which can be determined at a smaller scale than evaluations needed for confirming industrial performance.
For the 2013-2014 sorghum growing season in Brazil, we have offered leading mill groups the opportunity to participate in sales incentive and performance based promotional programs. Depending on the size of the seed purchase and the crop yield in biomass or ethanol, we could incur costs representing a portion of some customers’ production costs or anticipated yield. In certain cases, we may participate directly in, and may incur certain unreimbursed costs for seed, crop production and agronomy services during this season. Certain of our revenues from seed sales and services provided will be deferred until completion of the growing season, which we currently expect to occur in the fiscal third quarter.
We have invested significantly in research, development and technology and applied our proprietary technology platforms to energy crops. For the fiscal years ended August 31, 2013, 2012 and 2011, we spent $16.4 million, $19.2 million and $19.0 million, respectively, on research and development, with the main emphasis on breeding and traits.
Our other operating expenses are related to selling, general and administrative expenses incurred to establish and build our market presence and business infrastructure as well as seed production costs. Inventory costs have been computed on a first-in, first-out basis and valued at the lower of cost or market with any excess cost recognized during the period within cost of product sales. Prior to fiscal year 2012, we recorded a full valuation reserve against all seedWhen inventory costs exceed expected market value due to obsolescence or lack of demand, inventory write-downs are recorded for the early commercializationdifference between the cost and the market value in the period based on our evaluation of such inventory. The recoverability of our seed productsinventory is dependent on increased customer adoption and no establishedacceptance.
We have invested significantly in research, development and technology and applied our proprietary technology platforms to energy crops and expect to continue to invest in research and development focusing on forage sorghum, as well as traits with significant market for these products. Aspotential in other crops, like corn, rice and sugarcane. For the fiscal years ended August 31, 2015 and 2014, we invested $9.7 million and $14.2 million, respectively, in research and development, with the main emphasis on breeding and traits. Our other operating expenses are related to selling, general and administrative expenses incurred to establish and build our market presence and business infrastructure.
Our consolidated financial statements have been prepared assuming that we will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We expect to incur further losses in the operations of our business and have been dependent on funding our operations through the issuance and sale of equity securities. Our accumulated deficit as of August 31, 2013, inventory consisted2015 was $332.1 million. Our cash and cash equivalents of work-in-process related$8.1 million as of August 31, 2015 is not sufficient to sweet sorghum seeds. A full valuation reserve has been recordedenable us to remain in business beyond January 2016 without raising further capital or significantly curtailing our operations. These circumstances raise substantial doubt about our ability to continue as a going concern.
Our consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. Therefore, you should not rely on all other seed productsour consolidated financial statements as no established market exists. Our salesan indication of the amount of proceeds that would be available to satisfy claims of creditors, and marketing expenses have not been significantpotentially be available for distribution to date but we expect such expenses to increase as we pursue, enter and expand our market opportunities.stockholders, in the event of liquidation.
Historically, we have funded our operations with payments from collaborators and government grants and the proceeds from issuances of common stock, convertible preferred stock, warrants, convertible notes and debt financing, payments from collaborators and government grants.financing. We have experienced significant losses as we invested heavily in research and development and marketing, and those costs have exceeded revenues. We will continue to need capital to fund our research and development projects, to commercialize our products and to provide working capital to fund other aspects of our business. The Company is evaluating opportunities to secure additional financing, including the issuance of equity or debt, sale or divesture of business units, and additional revenues earned through collaboration agreementsfrom grants or collaborations. However there are no assurances that such opportunities will be available or available on terms that are acceptable to the Company. If we fail to raise sufficient funds and government grants. As of August 31, 2013, we had an accumulated deficit of $274.6 million. We incurred net losses of $32.5 million, $29.4 million and $36.3 million in the years ended August 31, 2013, 2012 and 2011, respectively. We expectcontinue to incur additional losses, relatedour ability to fund our operations, take advantage of strategic opportunities, develop and commercialize products or technologies, or otherwise respond to competitive pressures will be significantly limited. If this happens, we may be forced to obtain funds through collaborative and licensing arrangements that may require us to relinquish commercial rights, grant licenses to our technology and sell assets on terms that are not favorable to us or delay or terminate research and development programs or the commercialization of products or significantly curtail or cease our operations.
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On June 19, 2015, we announced the continued developmentrealignment of our business including researchto focus on food and development,forage opportunities and biotechnology traits for sugarcane and other crops. As part of the realignment, we undertook a restructuring of our Brazilian seed production andoperations. The restructuring of our Brazilian seed operations, and sales and marketing. There is no assurance that profitable operations will be achieved, or if achieved, can be sustained on a continued basis.
On October 11, 2013, we commenced a plan intended to further align our expenditures with our near-term commercial opportunity in Brazil, shift Northern Hemisphere sorghum breeding activities to a more appropriate location, deemphasize research and development for U.S. cellulosic feedstocks, reduce costs and conserve cash.As a result, we do not intend to fully utilize our facilities at College Station in the near term and may seek alternative or additional uses for the location whichmayinclude,includes, among others, leasing office, storage and greenhouse space or selling the facility and any unnecessary assets.
These measures, which includeother actions, a workforce reduction that will impact 17initially impacted 14 positions in Brazil primarily related to administration, operations and manufacturing as well as 2 support positions in the U.S., are expected to be substantially completed by May 31, 2014. Once fully implemented, these measures are expected to deliver cash savings of up to approximately $5.0 million in fiscal year 2014 and up to approximately $8.0 to $10.0 million annually thereafter.United States. We estimateestimated that we willwould incur total charges of approximately $1.6$0.6 million duringover the first nine months of fiscal year 2014five-month period ending in October 2015 with respect to the initial workforce reductionreductions in Brazil and the U.S., including $0.4$0.1 million in continuation of salary and benefits of certain employees until their work is completed and their positions are eliminated, and $1.2$0.5 million of one-time severance and other costs, all of which will be cash expenditures.
Initial As of August 19, 2015, we had initiated a further workforce reduction that impacted an additional 19 positions in Brazil. We estimated that we would incur additional charges of approximately $0.8 million over the four-month period ending on December 31, 2015 with respect to the additional workforce reductions in Brazil, including $0.1 million in continuation of salary and benefits of certain employees until their work is completed and their positions are eliminated, and $0.7 million of one-time severance and other costs, all of which will be cash expenditures. We expect to save up to approximately $8.0 to $10.0 million in cash in fiscal 2016 as a result of restructuring our operations as described above, which is higher than we originally estimated. The restructuring of our Brazilian seed operations is expected to be substantially completed by February 1, 2016. After full implementation of the restructuring plan, our Brazilian operations will be focused on sugarcane trait development activities for the Brazilian sugarcane market. There can be no assurance that we will achieve the cost savings we expect in fiscal 2016 after fully implementing the realignment plan.
In July 2014, our Brazilian subsidiary was selected for a competitive grant and a multi-year credit facility to fund a product development project for sorghum and sugarcane for up to approximately 85 million reais, or $22.1 million, under the government’s PAISS Agricola program. The project consists of a non-repayable grant of up to approximately 10 million reais, or $2.6 million, and a government-subsidized credit facility for up to approximately 67.5 million reais, or $17.55 million. The Company is expected to fund up to approximately 7.5 million reais, or $1.95 million, of the project. While we have received approval for the grant and approval in principle for the credit facility, in light of the restructuring of our Brazilian operations first announced on June 19, 2015, we have approached the Brazilian government to narrow the focus and significantly reduce the size of the project, and it is uncertain at this time if we will draw from the grant or the credit facility.
Public OfferingOfferings
On February 27, 2012,March 10, 2014, we closed our initialcompleted a registered public offering or the IPO, of 5,750,0002,875,000 shares of common stockour Common Stock (including 750,000375,000 shares purchased by the underwritersunderwriter upon the exercise in full of their right to purchase up to an additional 750,000 shares)375,000 shares to cover over-allotments) at ana price to the public of $8.00 per share. We received approximately $20.8 million of proceeds from the offering, price of $13.00 per share, resulting in net proceeds to us of approximately $65.2 million, after deducting underwriting discounts and commissions and offering expenses.
Upon the closing We issued warrants to purchase an aggregate of the IPO, our outstanding shares of convertible preferred stock were automatically converted into 15,353,22160,000 shares of common stock to certain affiliated designees of the underwriter as part of the underwriter’s compensation related to the March 10, 2014 registered public offering. The warrants are exercisable at any time or from time to time, in whole or in part, beginning on March 4, 2015 and our outstanding convertible subordinated notes, or the Convertible Notes, were automatically converted into 1,098,575expire on March 4, 2019. The exercise price is $12 per share of common stock.
On July 30, 2015, we completed a registered public offering of an aggregate of 1,200,000 shares of common stock. Additionally, ourCommon Stock, par value $0.01 per share, of the Company, at an offering price of $1.296 per share for estimated net proceeds of approximately $1.0 million, after deducting the placement agent fee and related offering expenses. In a concurrent private placement, we issued warrants exercisable for one share of Common Stock for each share purchased in the offering for an aggregate of 1,200,000 shares of Common Stock at an exercise price of $1.62 per share. The warrants are exercisable at any time or from time to time, in whole or in part, beginning on January 30, 2016 and expire on January 30, 2021. We also issued warrants to purchase an aggregate of 24,000 shares of our common stockCommon Stock at an exercise price of $1.944 per share to the placement agent as part of the placement agent’s compensation. The warrants issued to the placement agent are exercisable at any time or from time to time, in connectionwhole or in part, beginning on July 30, 2016 and expire on July 30, 2020.
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On August 26, 2015, we completed a registered public offering of an aggregate of 1,598,478 shares of Common Stock, par value $0.01 per share, of the Company, at an offering price of $1.22 per share for estimated net proceeds, together with the issuanceconcurrent private placement, of our Series F Preferredapproximately $1.7 million, after deducting the placement agent fee and related offering expenses. In a concurrent private placement, we issued warrants exercisable for 0.75 shares of Common Stock offering, or the Series F Warrants, and Series G Preferred Stock offering, or the Series G Warrants, were marked-to-market upon the IPO closing and we will no longer record any changesfor each share purchased in the fair valueAugust 26, 2015 offering for an aggregate of these1,198,859 shares of Common Stock at an exercise price of $1.22 per share. The warrants as they are now equity classified. Ourexercisable at any time or from time to time, in whole or in part, beginning on February 26, 2016 and expire on February 26, 2021. We also issued warrants to purchase an aggregate of 31,970 shares of convertible preferred stockour Common Stock at an exercise price of $1.83 per share to the placement agent as part of the placement agent’s compensation. The warrants issued to the placement agent are exercisable at any time or from time to time, in connection with certain financing arrangements converted to warrants to purchase shares of common stock upon the IPO closing,whole or in part, beginning on August 26, 2016 and are also now equity classified. As such, we will no longer record any changes in fair value for these warrants.expire on August 26, 2020.
Key Components of Our Results of Operations
Revenues
To date, our revenues have related to our product sales, collaborative research and government grants.
| • | Product Sales. Product sales are primarily composed of |
| • | Collaborative Research. Collaborative research revenues generally consist of payments for research and development activities for specific projects. These arrangements may include a combination of non-refundable technology license fees, research and development fees, and/or fees for the achievement of contractually defined milestone events and royalties. |
| • | Government Grants. Government grant revenues consist of payments from government entities. The terms of these grants generally provide us with reimbursement for research and development services and certain types of capital expenditures over a contractually defined period. |
| • | Software Licensing and Development. Software licensing and development revenues generally consist of services related to software arrangements that involve (1) significant production, modification or customization and (2) post contract customer support (“PCS”). |
Cost of Product Sales
Cost of product sales consists principally of the cost of labor, raw materials and third-party services related to growing, harvesting, packaging and shipping our seeds.seeds, and direct and indirect costs related to our biomass sales. These costs are comprised of the direct costs of our seed production employees, as well as the temporary seasonal labor costs during planting and harvesting times. Third-party services include contract labor, grower payments, crop management services and other professional services related to the cost of product sales. Cost of product sales also consists of input costs such as chemicals and seed production costs. Costs associated with collaboration, research and government grants are not included in cost of product sales but instead are included as research and development expenses. Although historically not significant, future royalty expenses associated with collaboration and license agreements with third parties will be included in cost of product sales. The amount of royalties we owe under these agreements is a function of our sales, and the applicable royalty rates depend on a number of factors, including the portion of our third-party collaborator’s intellectual property that is present in our products. We believe that as we develop our agronomic production operations, we will be able to achieve lower cost of product sales. To date, we have relied principally on third parties for the production of our sweet sorghum seed for use in Brazil. We believe that as we increase seed production volumes, we will be able to achieve better economies of scale from these third parties. In addition, we intend to produce more ofparties as well as our own seeds in Brazil, which will allow us to further decrease our costs. In the U.S., we are currently producing our switchgrass and sorghum products at our own facility in Texas.seed production.
Research and Development
Research and development expenses principally consist of personnel costs related to our research and development staff in support of plant breeding, agronomy, technology development and protection, and exploratory research. Research and development expenses also include costs incurred for laboratory supplies, reimbursable costs associated with government grants and our collaborative agreements, third-party contract payments, consultants and facility and related overhead costs. Since our IPO, we have aligned our investments in research and development and expect that our research and development expenses will decrease in absolute dollars in the near-term. Also included in research and development expenses are expenses in connection with warrants granted to The Texas A&M University System and The Samuel Roberts Noble Foundation, Inc. The warrants vest based on the achievement of certain research and commercialization milestones or the passage of time. The warrants are accounted for at fair value at each quarter end until the vesting targets are met using the Black Scholes option pricing model. As a publicly traded company, the volatility of our stock price could cause an increase in the warrant fair value and resulting expense charges to research and development.
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We do not track our research and development expenditures by project. Our ongoing research and development activities are dedicated to expandingimproving our integrated platforms which consist ofproduct offerings, with a combination of genetic assets, specifically germplasmmain emphasis on breeding, bioinformatics and traits, and competencies in genomics and biotechnology.traits. Our research and development expenses consist principally of personnel and related costs and at November 15, 2013,10, 2015, we had 4124 full-time employees primarily engaged in our research and development activities. Our employees’ work time is spread across multiple research and development methods continuously focused on our technology platforms and to a much lesser extent areas for which we have received government grant awards and collaboration funding. As a result of the restructuring of our Brazil operations during July and August 2015, we obtain data fromexpect our efforts, we may elect to reprioritize, delay or discontinue activities in order to focus our resources on more promising research and development methods.expenses to be significantly lower during our next fiscal year ended August 31, 2016.
Selling, General and Administrative
Selling, general and administrative expenses consist primarily of personnel costs related to our executive, sales, legal, finance and human resources staff and professional fees including legal and accounting. Selling costs relate to business development and our sales and marketing programs to build brand awareness. We improve our brand awareness through programs including publication of crop management guides, speaking roles at industry events, trade show displays and local-level grower meetings. Costs related to these activities, including travel, are included in selling expenses. While we expect our selling expenses to increase in the near term, weWe believe that our focus on a relatively small numberuse of customers, particularly in Brazil, where we are primarily marketingdistributors for our forage sorghum products to mill operators, should allow us to operate with relatively modest overall selling expenses. After our IPO, selling, general and administrative expenses increased in absolute dollars in order to support product development andfor the requirementsnear term. As a result of being a public company. Such increases included increased insurance premiums, investor relations expenses, legal and accounting fees associated with the expansionrestructuring of our businessBrazil operations during July and corporate governance, financial reporting expenses, and other regulatory compliance obligations. We hired additional personnel, particularly in the area of general and administrative activities to support the growth of our business. WeAugust 2015, we expect our selling, general and administrative expenses to decrease in the near-term.be significantly lower during our next fiscal year ended August 31, 2016.
Interest Expense
We recognize interest expense on our debt obligations. We expect interest expense to fluctuate in the future with changes in our debt levels.
Interest Income
Interest income consists primarily of interest earned on investments and cash balances. Our interest income will vary each reporting period depending on our average investment and cash balances during the period and market interest rates. We expect interest income to fluctuate in the future with changes in average investment and cash balances and market interest rates.
Other Income (Expense)
Prior to the closing of the IPO, our otherOther income (expense) consistedconsists primarily of the changechanges in the fair value of our convertible preferred warrants, certain of our common stock warrants and the Convertible Notes. Our preferred stock warrants and certain of our common stock warrants were classified as liabilities. Upon the closing of the IPO, our preferred stock warrants converted to equity classified common stock warrants, and the impact to our results of operations from our preferred stock, Convertible Notes and certain of our common stock warrant liabilities was eliminated.warrants.
Provision for Income Tax Benefits
Since our inception, we have been subject to income taxes principally in the United States and Brazil, where we established a legal presence in 2010. We anticipate that as we expand our operations outside the United States, we will become subject to taxation based on the foreign statutory rates and our effective tax rate could fluctuate accordingly.
Income taxes are computed using the asset and liability method, under which deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
As of August 31, 20132015 and 2012,2014, based on the available information, it is more likely than not that our deferred tax assets will not be realized, and accordingly we have takenrecorded a full valuation allowance against all of our deferred tax assets. As of August 31, 2013,2015, we had approximately $223.2$273.9 million of federal, $152.7$196.8 million of state and $14.6$25.8 million of foreign operating loss carry-forwards available to offset future taxable income, if any, which expire in varying amounts from 2018 through 20332035 for federal tax purposes and from 20142015 through 20332035 for state tax purposes if unused. The carry-forward period for the foreign net operating loss is indefinite. Federal and state laws impose substantial restrictions on the utilization of net operating loss and tax credit carry-forwards in the event of an “ownership change”, as defined in Section 382 of the U.S. Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. We have not completed a Section 382 analysis to determine if a change in ownership has occurred. Until an analysis is completed, there can be no assurance that the existing net operating loss carry-forwards or credits are not subject to significant limitation.
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Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We base our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. The results of our analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.
Our financial statements have been prepared under the assumption that we will continue as a going concern. As discussed in the report of our independent registered public accounting firm, dated November 23, 2015, included herein, we have incurred recurring losses and we expect that the current level of cash and cash equivalents will only be sufficient to fund operations through January 2016 which raises substantial doubt as to our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.
We believe the following critical accounting policies involve significant areas of management’s judgments and estimates in the preparation of our financial statements.
Revenue Recognition
Revenues are recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) transfer of product or technology has been completed or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. To date, our primary source of revenues has been derived from research collaborations and government grants, software and services, and to a lesser extent, product sales.
Product Sales
Product sales are derived from sales of seeds, trait fees, crop management servicesseed and biomass that was delivered under certain of our sales, incentive and performance based programs for the 2012-2013 growing season in Brazil.trait fees. Product sales are recognized, net of discounts and allowances, once passage of title and risk of loss have occurred and contractually specified acceptance criteria have been met, provided all other revenue recognition criteria have also been met.
Collaborative Research and Government Grants
From time to time, we have entered into research and development collaboration agreements with third parties, including a large agriculture supplier, a consumer goods conglomerate and several biofuel producers. In addition, we have received grants from government agencies such as the DOE and the USDA. The research and development collaboration agreements typically provide us with multiple revenue streams, which may include upfront, non-refundable fees for licensing certain of our technologies, fees for research and development activities, and contingent milestone payments upon achievement of contractual criteria.
| • | Technology License Fees. For collaboration agreements in which we have continuing involvement, license fees are recognized on a straight-line basis over the term of the arrangement. Licensing fees are non-refundable and not subject to future performance. |
| • | Government Grants. We receive payments from government entities in the form of government grants. Government grants generally provide us with cost reimbursement for certain types of expenditures in return for research and development activities over a contractually defined period, as well as an allocated portion of our overhead expenses. Revenues from government grants are recognized in the period during which the related costs are incurred, provided that substantially all conditions under which the government grants were provided have been met and we only have perfunctory obligations outstanding. |
| • | Research and Development Fees. Generally, fees for research and development activities are recognized as the services are performed over the performance period, as specified in the respective agreements. Certain of our collaboration agreements require us to deliver research data by specific dates and the collective program plan will result in reaching specific crop characteristics by certain dates. For such arrangements, we recognize revenues either on a straight-line basis over the term of the arrangement or based on the |
| • | Milestone Payments. Fees that are contingent upon achievement of substantive performance milestones at inception of the agreement are recognized based on the achievement of the milestone, as defined in the respective agreements. |
We recognize deferred revenue to the extent that cash received under the collaboration agreement is in excess of the revenues recognized related to the agreement since the work under the agreement has not yet been performed at the time of cash receipt.
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In December 2007, we entered into a development and license agreement with Campbell Soup Company, or Campbell. The agreement provided that we would receive $7.5 million in payments from Campbell over a five-year period provided milestones were met. In addition, the agreement provided that we would be entitled to receive a royalty based on the gross sales of crop varieties created under the agreement. In December 2011, the development and license agreement was amended to extend the $7.5 million in payments from Campbell over a six-year period. We recognized revenue of $0.8 million, $0.9 million and $1.7 million under this agreement in the years ended August 31, 2013, 2012, and 2011, respectively. On November 19, 2012, the development and license agreement was terminated following Campbell’s sale of its vegetable seed assets to a third party. In connection with the termination, Campbell paid us $0.55 million of the remaining $0.63 million due under the agreement, which would otherwise have become payable by Campbell in 2013, in full and complete satisfaction of all remaining financial obligations under the development and license agreement.
We have earned research funding revenues from several agreements with the DOE, the USDA, USAID and several leading biofuel producers whereby we performed research activities and received revenues that partially reimbursed our expenses incurred. Under such grants and agreements, we retained a proprietary interest in the products and technology we developed. These expense reimbursements primarily consisted of direct expense sharing arrangements. We recorded revenue related to these grants of approximately $2.4 million, $2.4$1.0 million and $3.1$1.4 million in the years ended August 31, 2013, 20122015 and 2011,2014, respectively. The cumulative remaining amount to be claimed for all grants outstanding as of August 31, 2013 is approximately $2.3 million.
On December 16, 2008, we entered into a software licenseSoftware and collaboration agreement with Syngenta pursuant to which we provided software, software development and customer support for our Persephone genome viewer software. The agreement was structured into three phases and under the agreement, we received $1.5 million in payments over an approximate 4.5 year period. The software delivered is comprised of multiple elements, which include software, installation, training, customization of software, and software support. On April 16, 2012, the agreement was amended to reflect Syngenta’s acceptance of all software and software support services provided under the original agreement and to allow for the continuation of certain software support services during a post development support period beginning April 16, 2012 and extending until all services are terminated pursuant to the terms of the agreement. We recognized revenues equal to the amount of expense recognized as services were rendered until April 15, 2012, when the software support became the only undelivered element. Beginning April 16, 2012, the unrecognized revenue under the agreement is being recognized ratably over the remaining software support period. We recognized revenue totaling $1.2 million, $0.8 million and $0.2 million under this agreement inServices
During the years ended August 31, 2013, 20122015 and 2011, respectively.2014, we provided services related to software arrangements that involve (1) significant production, modification or customization and (2) PCS. The customer has the option, annually, to extend the arrangement or elect to receive only maintenance. We do not have vendor specific objective evidence (“VSOE”) related to these components. In addition, there are substantive acceptance provisions related to the production, modification or customization. We apply the completed contract method to these arrangements. However, only costs related to the production, modification or customization are deferred. Revenue is recognized upon acceptance of the production, modification or customization as that is later than the expiration of the annual PCS period. Revenue related to these arrangements was $0.7 million and $0.3 million in 2015 and 2014.
We also had an arrangement that included a license, installation services and PCS. As we do not have VSOE for the elements, we have deferred revenue until PCS is the only undelivered element and will recognize revenue over the remaining PCS period. There was no revenue related to this arrangement during 2015 and 2014.
Billings in Excess of Costs
We recognize billings in excess of costs to the extent that cash received under the software and service arrangements are in excess of the revenues recognized related to the arrangements since the work under the arrangements have not yet been performed, or the work has not been fully completed at the balance sheet date, which is classified as other current liabilities on the accompanying consolidated balance sheets.
For the fiscal year ended August 31, 2013,2015, USAID, Syngenta, ARPA-E, USAIDExelus, Florida Crystals and Campbell Soup CompanyBayer represented 22.5%33.5%, 21.2%13.1%, 20.2%12.2%, 11.9% and 14.5%10.4% of our revenues, respectively.Forrespectively. For the fiscal year ended August 31, 2012,2014, USAID, ARPA-E, Campbell Soup Company, USAIDExelus, and Syngenta represented 24.7%41.9%, 17.4%17.5%, 16.8%16.5% and 14.0%11.6% of our revenues, respectively.
Convertible Notes and Warrant Modification
In August 2011, we completed the sale of $11.4 million aggregate principal amount of the Convertible Notes to nine existing investors in the Company in a private placement. The Convertible Notes were convertible, subject to the terms and conditions set forth therein, into shares of our common stock upon the consummation of a qualified initial public offering of our common stock at a price per share equal to 20% discount from the public offering price, or $10.40. Purchasers of the Convertible Notes included holders of more than 5% of our outstanding capital stock and affiliates of certain of our directors. Additionally, so long as any investors who held warrants to purchase shares of our common stock issued in connection with certain of our preferred stock financings purchased at least their respective full pro rata portion of the Convertible Notes being offered, we agreed to amend the termination provisions of such investors existing warrants such that the warrants no longer expired upon our initial public offering. In January 2012, we amended the Convertible Notes such that the notes would have automatically converted into shares of convertible preferred stock had the initial public offering not consummated by June 30, 2012.
In connection with the offering of the Convertible Notes, warrants to purchase 539,972 shares of common stock issued in connection with our Series F Preferred Stock offering, or the Modified F warrants and all of the warrants issued in connection with our Series G Preferred Stock offering were amended such that they would no longer expire upon the completion of a qualified initial public offering at a price per share greater than or equal to $19.50 per share (subject to certain adjustments) and resulting in aggregate gross proceeds to us and any selling security holders of $40.0 million or more. Warrants to purchase 229,257 shares of common stock issued in connection with the Series F Preferred Stock offering, or the Non-Modified F warrants were not amended and remain outstanding.
We calculated the fair value of the Modified F warrants and the Series G Warrants immediately prior to and subsequent to the modification and determined that the cumulative incremental increase in the fair value of these liability classified warrants associated with this modification to be $9.6 million. Accordingly, we recorded the change in value to other income (expense) in August 2011.
Until such time as the conversion features were triggered, we accounted for the Convertible Notes and various embedded derivatives in accordance with ASC 825-10, the Fair Value Option for Financial Liabilities, whereby we initially and subsequently measured this financial instrument in its entirety at fair value, with the changes in fair value recorded each quarterly reporting period in other income (expense).
We obtained the assistance of a third-party valuation firm in estimating that the fair market value of the Convertible Notes as of August 31, 2011 was $13.6 million. We estimated the fair value of the Convertible Notes upon the closing of the IPO to be $14.3 million. Accordingly, the change in fair value was recorded in other income (expense).
Upon closing of the IPO, the Convertible Notes were revalued and converted into 1,098,575 shares of common stock.
Stock-Based Compensation
We recognize compensation expense related to stock-based compensation, including the awarding of employee and non-employee stock options, based on the grant date estimated fair value. We amortize the fair value of the employee stock options on a straight-line basis over the requisite service period of the award, which is generally the vesting period. Options granted to non-employees are re-measured as the services are performed and the options vest, and any resulting change in value is recognized as expense during the period the related services are rendered. We account for restricted stock grants issued based on the fair market value of our common stock.Common Stock. We estimate the fair value of stock-based compensation awards using the Black-Scholes option pricing model, which requires judgments to be made, including estimating: (i) the expected life of an award; (ii) stock price volatility; and (iii) prior to the IPO, estimating the fair value of our common stock.Common Stock.
The Black-Scholes option-pricing model calculates the estimated fair value of stock options using the following inputs: (i) expected life; (ii) expected volatility; (iii) risk-free interest rate; (iv) expected dividend yield rate; (v) exercise price; and (vi) closing price of our common stockCommon Stock on the date of grant. Due to our limited history of grant activity, we calculate our expected term utilizing the “simplified method” permitted by the SEC, which is the average of the total contractual term of the option and its vesting period. We calculate our expected volatility rate from the historical volatilities of selected comparable public companies within our industry, due to a lack of historical information regarding the volatility of our stock price. We will continue to analyze the historical stock price volatility assumption as more historical data for our common stockCommon Stock becomes available. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities similar to the option’s expected term. We do not expect to pay dividends. Forfeitures have been estimated based upon our historical and expected forfeiture experience.
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The estimated fair value of a stock option using the Black-Scholes option-pricing model is impacted significantly by changes in a company’s stock price. For example, all other assumptions being equal, the estimated fair value of a stock option will increase as the closing price of a company’s stock increases, and vice versa. Prior to the closing of the IPO, we were a private company and, as such, we were required to estimate the fair value of our common stock. In the absence of a public trading market, we determined a reasonable estimate of the then-current fair value of our common stockCommon Stock for purposes of granting stock-based compensation based on multiple criteria. We estimated the fair value of our common stockCommon Stock utilizing methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Practice Aid, “Valuation of Privately-Held-Company Equity Securities Issued as Compensation”, ”, or the AICPA Practice Aid. After the closing
Fair Value of the IPO, the fair value of our common stock is no longer an estimate as it is based upon the closing price of our stock on the NASDAQ Global Market on the date of grant.
Common and Preferred Stock Warrants Financing
Liability Classified Warrants to Purchase Common Stock
In connection with our Series F Preferred Stock offering in September 2007, weWe issued warrants to purchase 769,229 shares ofour common stock at an exercise pricein connection with issuances of $19.50 per share. Theour common stock. We account for these warrants as liabilities as the warrants are immediately exercisable. These warrants were reported as a liability at fair value as of each balance sheet date priornot considered indexed to the IPO. Upon the closing of the IPO, these warrants no longer met the requirements for liability classification. As such, these warrants were valued as of the closing date of the IPO with changes being recorded to the statement of operations and were reclassified to additional paid-in capital.
Upon the closing of the IPO, the Company estimated the fair value of the Non-Modified F Warrants and the Modified F warrants to be $6.3 million based on a risk free rate of 0.40%, expected volatility of 89%, expected term of 3.5 years and 0% dividend yield.
In connection with our Series G Preferred Stock offering in June 2010, the Company issued warrants to purchase 1,025,640 shares of common stock at an exercise price of $19.50 per share. The warrants are immediately exercisable. These warrants were reported as a liability at fair value as of each balance sheet date prior to the IPO. Upon the closing of the IPO, the common stock warrants no longer met the requirements for liability classification. The warrants were valued as of the closing date of the IPO with changes being recorded to the statement of operations and were reclassified to additional paid-in capital.
Upon the closing of the IPO, the Company estimatedstock. We estimate the fair value of these warrants to be $10.6 million based on a risk free rate of 1.64%, expected volatility of 73%, expected term of 8.3 years and 0% dividend yield.
Liability Classified Warrants to Purchase Convertible Preferred Stock
Prior to the IPO, we issued warrants to purchase shares of our convertible preferred stock, or the Preferred Stock Warrants, in connection with certain financing arrangements. We accounted for these warrants as liabilities because the underlying shares of convertible preferred stock were redeemable in the case of a deemed liquidation. We estimated the fair value of our Preferred Stock Warrants using an option-pricingoption pricing model, which incorporatedincorporates several estimates and assumptions that wereare subject to significant management judgment. Changes in fair value at each period end wereperiod-end are recorded in other income (expense) in our consolidated statement of operations.
Uponoperation until the closingearlier of the IPO, the Preferred Stock Warrants no longer met the requirements for liability classification. The warrants were valued asexercise or expiration of the closing date with changes being recorded to the statement of operations and were reclassified to additional paid-in capital.
Upon closing of the IPO, the Company estimated the fair value of these warrants to be $0.2 million based on a risk free rate of 1.35%, expected volatility of 81%, expected term of 7.96 - 8.01 years and 0% dividend yield.
Seed Inventory
At August 31, 2013, inventory consisted of work-in-process costs related to sweet sorghum seeds. At August 31, 2012, inventory consisted of work-in-process and finished good costs related to sweet sorghum seeds. Inventory costs are computed on a first-in, first-out basis and valued at the lower of cost or market with any excess cost recognized during the period within cost of product sales. At August 31, 2013, all seed inventory other than work-in-progress was fully written-off based on the lower of cost or market, based on the Company's evaluation of such inventory.warrants.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We record a valuation allowance when it is more likely than not that some of our net deferred tax assets will not be realized. In determining the need for valuation allowances, we consider our projected future taxable income and the availability of tax planning strategies. We have recorded a full valuation allowance to reduce our net deferred tax assets to zero because we have determined that it is more likely than not that our net deferred tax assets will not be realized. If in the future we determine that we will be able to realize any of our net deferred tax assets, we will make an adjustment to the allowance, which would increase our income in the period that the determination is made.
We operate in various tax jurisdictions and are subject to audit by various tax authorities. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
Assets Held for Sale
We reclassify long-lived assets to Assets Held for Sale when all required criteria for such reclassification are met. The assets are recorded at the lower of the carrying value or fair value less costs to sell. Assets held for sale must meet the following conditions: (1) management, having authority to approve the action, commits to a plan to sell the asset, (2) the asset is available for immediate sale in its present condition, (3) an active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated, (4) the sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year, (5) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (6) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
In connection with an agreement we entered into on March 31, 2014 to sell our facility and certain equipment located in College Station, Texas, a determination was made that the assets met the criteria to be classified as held for sale and the fair value for the related assets was in excess of their carrying amount. Accordingly, during 2014, we recorded a charge of $0.5 million to research and development expense for the difference between the net carrying amount of these assets of $1.2 million and the net cash proceeds of $0.7 million. On June 2, 2014, we completed the sale of this facility and equipment for net cash proceeds of approximately $0.7 million.
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In connection with the announcement we made on June 19, 2015, to restructure our Brazilian seed operations, a determination was made that the fixed assets in Brazil met the criteria to be classified as held for sale and the carrying amount of those assets was in excess of their fair value. Accordingly, we recorded a charge of $0.4 million to cost of product sales, research and development and general and administrative expense for the difference between the net carrying value of these assets of $0.9 million and estimated net cash proceeds of $0.5 million. Fair value of the assets held for sale was determined using an appraisal for certain assets and resale information available for certain assets.
Impairment of Long-Lived Assets
Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Our long-lived assets comprise a single asset group for evaluation purposes. We evaluate whether an impairment indicator occurs primarily based on progress achieved against our business plans. To the extent that an impairment indicator has occurred, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. In fiscal years 2013 and 2012 there was an indicator that impairment has occurred. However, there was no impairment as the carrying amount of the property and equipment did not exceed the fair value of such assets.
On February 3, 2012 our plant breeding and field research station located near College Station, Texas was damaged by a tornado. The impact was limited to structural damage to the building that houses office space, a small laboratory used to evaluate biomass samples and workspace, the small tractor sheds and damage to some agricultural equipment.
In fiscal year 2012, we impaired approximately $1.0 million in assets related to damage at the Texas facility and received insurance proceeds of $1.0 million for repair costs. The remainder of the repairs, which totaled approximately $0.2 million, was completed by November 30, 2012. These remaining repairs were also covered by insurance, subject to the Company’s deductible.
Results of Operations
The following table sets forth our consolidated results of operations for the periods shown (in thousands):
| Year Ended August 31, | Year Ended August 31, | |||||||||||||||||||
| 2013 | 2012 | 2011 | 2015 | 2014 | ||||||||||||||||
| Revenues: | ||||||||||||||||||||
| Product sales | $ | 462 | $ | 432 | $ | 116 | $ | 434 | $ | 146 | ||||||||||
| Collaborative research and government grants | 4,781 | 4,939 | 6,500 | |||||||||||||||||
| Services | 2,286 | 2,258 | ||||||||||||||||||
| Total revenues | 5,243 | 5,371 | 6,616 | 2,720 | 2,404 | |||||||||||||||
| Cost and operating expenses: | ||||||||||||||||||||
| Cost of product sales | 6,245 | 2,384 | 2,492 | 5,267 | 3,021 | |||||||||||||||
| Research and development | 16,401 | 19,155 | 19,014 | 9,684 | 14,156 | |||||||||||||||
| Selling, general and administrative | 15,187 | 12,634 | 10,008 | 15,946 | 14,484 | |||||||||||||||
| Total cost and operating expenses | 37,833 | 34,173 | 31,514 | 30,897 | 31,661 | |||||||||||||||
| Loss from operations | (32,590 | ) | (28,802 | ) | (24,898 | ) | (28,177 | ) | (29,257 | ) | ||||||||||
| Interest expense | (46 | ) | (560 | ) | (456 | ) | (30 | ) | (68 | ) | ||||||||||
| Interest income | 126 | 39 | 7 | 28 | 5 | |||||||||||||||
| Other (expense) income | - | (84 | ) | (11,020 | ) | |||||||||||||||
| Other income | 24 | - | ||||||||||||||||||
| Loss before income taxes | (32,510 | ) | (29,407 | ) | (36,367 | ) | (28,155 | ) | (29,320 | ) | ||||||||||
| Income tax (expense) benefit | (1 | ) | (3 | ) | 31 | |||||||||||||||
| Net Loss | $ | (32,511 | ) | $ | (29,410 | ) | $ | (36,336 | ) | |||||||||||
| Income tax expense | (1 | ) | (1 | ) | ||||||||||||||||
| Net loss | $ | (28,156 | ) | $ | (29,321 | ) | ||||||||||||||
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Comparison of Years Ended August 31, 20132015 and 20122014
Revenues
| Year Ended | Year Ended | |||||||||||||||||||||||
| August 31, | August 31, | |||||||||||||||||||||||
| 2013 | 2012 | Change | 2015 | 2014 | Change | |||||||||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||||||||||
| Product sales | $ | 462 | $ | 432 | $ | 30 | $ | 434 | $ | 146 | $ | 288 | ||||||||||||
| Collaborative research and government grants | 4,781 | 4,939 | (158 | ) | ||||||||||||||||||||
| Services | 2,286 | 2,258 | 28 | |||||||||||||||||||||
| Total revenues | $ | 5,243 | $ | 5,371 | $ | (128 | ) | $ | 2,720 | $ | 2,404 | $ | 316 | |||||||||||
Our total revenues decreasedincreased by $0.2$0.3 million to $5.2$2.7 million for the year ended August 31, 20132015 compared to the year ended August 31, 2012. The decrease2014. Product sales increased by $0.3 million primarily due to increased biomass sales which resulted from the expansion of our sales incentive and promotional programs for the 2014-2015 sorghum growing season in Brazil. Services revenue remained relatively unchanged at $2.3 million. Within Services, software revenue increased by $0.4 million, which was primarily drivenoffset by a decrease indecreased revenue recognized under our collaborative research revenueprograms of approximately $0.1 million as a result of decreased activity under our various collaborations.$0.4 million.
Cost and Operating Expenses
| Year Ended | Year Ended | |||||||||||||||||||||||
| August 31, | August 31, | |||||||||||||||||||||||
| 2013 | 2012 | Change | 2015 | 2014 | Change | |||||||||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||||||||||
| Cost of product sales | $ | 6,245 | $ | 2,384 | $ | 3,861 | $ | 5,267 | $ | 3,021 | $ | 2,246 | ||||||||||||
| Research and development | 16,401 | 19,155 | $ | (2,754 | ) | 9,684 | 14,156 | $ | (4,472 | ) | ||||||||||||||
| Selling, general and administrative | 15,187 | 12,634 | $ | 2,553 | 15,946 | 14,484 | $ | 1,462 | ||||||||||||||||
| Total cost and operating expenses | $ | 37,833 | $ | 34,173 | $ | 3,660 | $ | 30,897 | $ | 31,661 | $ | (764 | ) | |||||||||||
Cost of Product Sales
Our cost of product sales increased by $3.9$2.2 million to $6.2$5.3 million for the year ended August 31, 20132015 compared to the same period in the prior year.year ended August 31, 2014. The increase was primarily due to increased expenses of $2.2$1.9 million for obsolete seed inventory relating to our sweet sorghum products and $1.7 million forresulting from increases in crop management services performed under our sales incentive and performance based promotional programs for the 2012-20132014-2015 growing season in Brazil.Brazil, and due to $0.3 million of increased expenses related to obsolete seed inventory. As a result of the restructuring of our Brazil operations, we do not expect to incur costs for crop management services in our next fiscal year ended August 21, 2016.
Research and Development Expenses
Our research and development expenseexpenses decreased by $2.8$4.5 million to $16.4$9.7 million for the year ended August 31, 20132015 compared to the year ended August 31, 2012.2014. In the U.S., research and development expenses decreased by $4.2 million primarily due to reduced personnel and related expenses of $1.6$3.1 million, reduced external research and development and licensing expenses of $0.6$0.3 million, and reduced laboratory and agricultural supply costs of $0.6$0.8 million. In Brazil, research and development expenses decreased by $0.3 million as a result of decreased personnel and related expenses.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses increased by $2.6$1.5 million to $15.2$15.9 million for the year ended August 31, 20132015 compared to the prior year. The change is attributableyear ended August 31, 2014. In Brazil expenses increased by $1.7 million primarilyas a result of increased expenditures related to increases in Brazil forbuilding our market presence and business infrastructure, and supporting the business activities related to our sales incentive and promotional programs. In theU.S., expenses decreased by $0.2 million primarily due to reduced personnel and related administrativeexpense of $1.0 million which was mostly offset by increased legal and professional and patent expenses related to our activities in Brazil.of $0.8 million.
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Interest Expense, Interest Income and Other (Expense) Income
| Year Ended | Year Ended | |||||||||||||||||||||||
| August 31, | August 31, | |||||||||||||||||||||||
| 2013 | 2012 | Change | 2015 | 2014 | Change | |||||||||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||||||||||
| Interest expense | $ | (46 | ) | $ | (560 | ) | $ | 514 | $ | (30 | ) | $ | (68 | ) | $ | 38 | ||||||||
| Interest income | 126 | 39 | $ | 87 | 28 | 5 | 23 | |||||||||||||||||
| Other expense | - | (84 | ) | $ | 84 | |||||||||||||||||||
| Other income | 24 | - | 24 | |||||||||||||||||||||
| Total | $ | 80 | $ | (605 | ) | $ | 685 | $ | 22 | $ | (63 | ) | $ | 85 | ||||||||||
Interest Expense
Interest expense decreased by $0.5 million$38,000 for the year ended August 31, 20132015 compared to the prior year. The decrease is attributablerelated to reduced debt balances resulting from our repayment of all debt owed under our Loan Agreement with Silicon Valley Bank in May 2012.Brazil operations.
Interest Income
Interest income increased by $0.1 million$23,000 for the year ended August 31, 20132015 compared to the prior year. The increase was primarily due to higher averagerates of return from our invested cash invested balances.balances in Brazil.
Other Expense
Other expense income decreased by $0.1 million for the year ended August 31, 2013 compared to the prior year. The decrease was the result of the fair value changes associated with our warrants and Convertible Notes which upon completion of the IPO are no longer marked to market.
Comparison of Years Ended August 31, 2012 and 2011
Revenues
| Year Ended August 31, | ||||||||||||
| 2012 | 2011 | Change | ||||||||||
| (In thousands) | ||||||||||||
| Product sales | $ | 432 | $ | 116 | $ | 316 | ||||||
| Collaborative research and government grants | 4,939 | 6,500 | (1,561 | ) | ||||||||
| Total revenues | $ | 5,371 | $ | 6,616 | $ | (1,245 | ) | |||||
Our total revenues decreased by $1.2 million to $5.4 million for the year ended August 31, 2012 compared to the year ended August 31, 2011. The decrease was primarily driven by a decrease in collaborative research and government grants of approximately $1.5 million as a result of decreased activity under our various grants and collaborations, offset by an increase in product sales of approximately $0.3 million primarily as a result of initiating sales of sweet sorghum seeds in Brazil during the year ended August 31, 2012.
Cost and Operating Expenses
| Year Ended August 31, | ||||||||||||
| 2012 | 2011 | Change | ||||||||||
| (In thousands) | ||||||||||||
| Cost of product sales | $ | 2,384 | $ | 2,492 | $ | (108 | ) | |||||
| Research and development | 19,155 | 19,014 | 141 | |||||||||
| Selling, general and administrative | 12,634 | 10,008 | 2,626 | |||||||||
| Total cost and operating expenses | $ | 34,173 | $ | 31,514 | $ | 2,659 | ||||||
Cost of Product Sales
Our cost of product sales decreased by $0.1 million to $2.4 million for the year ended August 31, 2012 compared to the same period in the prior year. The decrease was primarily driven by a $0.2 million decrease in grower contracts and associated agricultural supplies as we reduced our seed production and related costs of seed production for certain products targeting the U.S. biomass-to-bioenergy market, which was offset by increased costs in Brazil of $0.1 million related to our sweet sorghum seed sales.
Research and Development Expenses
Our research and development expense increased by $0.1 million to $19.2 million for the year ended August 31, 2012 compared to the year ended August 31, 2011. This increase is partially attributable to increased research and development expense in Brazil of $1.7 million relating to additional personnel and costs associated with our Brazil sorghum breeding and agronomy operations. The remaining increase is attributable to an increase in personnel and other related overhead expense in the United States of $0.6 million. These cost increases were offset by reduced expenses related to our warrants issued in connection with our collaborations of $1.8 million and reduced costs in consulting, licensing and external research and development of $0.4 million.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses increased by $2.6 million to $12.6 million for the year ended August 31, 2012 compared to the same period in the prior year. The increase is attributable to an increase in personnel and other related administrative expense of $1.4 million in the United States, legal and accounting fees of $0.8 million, and an increase of $0.4 million in personnel and related administrative expense related to our activities in Brazil.
Interest Expense, Interest Income and Other (Expense) Income
| Year Ended August 31, | ||||||||||||
| 2012 | 2011 | Change | ||||||||||
| (In thousands) | ||||||||||||
| Interest expense | $ | (560 | ) | $ | (456 | ) | $ | (104 | ) | |||
| Interest income | 39 | 7 | 32 | |||||||||
| Other (expense) income | (84 | ) | (11,020 | ) | 10,936 | |||||||
| Total | $ | (605 | ) | $ | (11,469 | ) | $ | 10,864 | ||||
Interest Expense
Interest expense increased by $0.1 million in the year ended August 31, 2012 compared to the year ended August 31, 2011. The increase was partially a result of higher debt balances during the year ended August 31, 2012 and additional interest charges recorded in May 2012 for the loan discount related to the repayment of all debt owed under our Loan Agreement with Silicon Valley Bank in connection with our termination of the Loan Agreement.
Interest Income
Interest income increased by $32,000 in the year ended August 31, 2012 compared to the prior year. The increase was primarily due to higher average cash invested balances.
Other (Expense) Income
Other (expense) income decreasedincreased by $10.9 million in the year ended August 31, 2012 compared$24,000 due to the year ended August 31, 2011. Other income (expense) was higher for the year ended August 31, 2011 which primarily related to the charge of $9.6 million related to the modification of liability classified warrants and the charge of $2.2 million upon issuance of our Convertible Notes. The remaining change was the result of fair value changes associated with our warrants which, upon completion of the IPO, are no longer marked-to-market, and as a result of the changes in the pricefair market value of our common stock forwarrants issued in connection with the comparable periods.July and August 2015 financings.
Liquidity and Capital Resources
Our consolidated financial statements have been prepared assuming that we will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We expect to incur further losses in the operations of our business and have been dependent on funding our operations through the issuance and sale of equity securities. Our accumulated deficit as of August 31, 2015 was $332.1 million. Our cash and cash equivalents of $8.1 million as of August 31, 2015 is not sufficient to enable us to remain in business beyond January 2016 without raising further capital or significantly curtailing our operations. These circumstances raise substantial doubt about our ability to continue as a going concern.
Our consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. Therefore, you should not rely on our consolidated financial statements as an indication of the amount of proceeds that would be available to satisfy claims of creditors, and potentially be available for distribution to stockholders, in the event of liquidation.
Since our inception, we have incurred significant net losses, and, as of August 31, 2013,2015, we had an accumulated deficit of $274.6$332.1 million. We expect to incur additional losses related to the continued development and expansion of our business including research and development, seed production and operations, and sales and marketing. There is also no assurance that we will achieve profitable operations, or if achieved, that we can sustain them on a continued basis.
Management has taken certain actions subsequent
Historically, we have funded our operations with payments from collaborators and government grants and the proceeds from issuances of Common Stock, convertible preferred stock, warrants, convertible notes and debt financing. We have experienced significant losses as we invested heavily in research and development and marketing, and those costs have exceeded revenues. We will continue to August 31, 2013need capital to extendfund our research and development projects, to commercialize our products and to provide working capital to fund other aspects of our business. The Company is evaluating opportunities to secure additional financing, including the Company’sissuance of equity or debt, sale or divesture of business units, and additional revenues from grants or collaborations. However there are no assurances that such opportunities will be available working capital. We believeor available on terms that are acceptable to the Company. If we fail to raise sufficient funds and continue to incur losses, our existing cash and cash equivalents and marketable securities will provide adequate resourcesability to fund our operations, includingtake advantage of strategic opportunities, develop and commercialize products or technologies, or otherwise respond to competitive pressures will be significantly limited. If this happens, we may be forced to obtain funds through collaborative and licensing arrangements that may require us to relinquish commercial rights, grant licenses to our technology and sell assets on terms that are not favorable to us or delay or terminate research and development expenses, planned capital expendituresprograms or the commercialization of products or significantly curtail or cease our operations.
On July 30, 2015, we completed a registered public offering of an aggregate of 1,200,000 shares of Common Stock, par value $0.01 per share, of the Company, at an offering price of $1.296 per share for estimated net proceeds of approximately $1.0 million, after deducting the placement agent fee and working capital requirementsrelated offering expenses. In a concurrent private placement, we agreed to issue warrants exercisable for one share of Common Stock for each share purchased in the next 12July 30, 2015 offering for an aggregate of 1,200,000 shares of Common Stock at an exercise price of $1.62 per share. The warrants are exercisable at any time or from time to 15 months.time, in whole or in part, beginning on January 30, 2016 and expire on January 30, 2021. We also issued warrants to purchase an aggregate of 24,000 shares of our Common Stock at an exercise price of $1.944 per share to the placement agent as part of the placement agent’s compensation. The warrants issued to the placement agent are exercisable at any time or from time to time, in whole or in part, beginning on July 30, 2016 and expire on July 30, 2020.
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On August 26, 2015, we completed a registered public offering of an aggregate of 1,598,478 shares of Common Stock, par value $0.01 per share, of the Company, at an offering price of $1.22 per share for estimated net proceeds, together with the concurrent private placement, of approximately $1.7 million, after deducting the placement agent fee and related offering expenses. In ordera concurrent private placement, we agreed to fundissue warrants exercisable for 0.75 shares of Common Stock for each share purchased in the August 26, 2015 offering for an aggregate of 1,198,859 shares of Common Stock at an exercise price of $1.22 per share. The warrants are exercisable at any time or from time to time, in whole or in part, beginning on February 26, 2016 and expire on February 26, 2021. We also issued warrants to purchase an aggregate of 31,970 shares of our operations beyond thatCommon Stock at an exercise price of $1.83 per share to the placement agent as part of the placement agent’s compensation. The warrants issued to the placement agent are exercisable at any time or from time to time, in whole or in part, beginning on August 26, 2016 and expire on August 26, 2020.
On March 10, 2014, we believe we will needcompleted a registered public offering of 2,875,000 shares of our Common Stock (including 375,000 shares purchased by the underwriter upon the exercise in full of their right to raisepurchase up to an additional funds through375,000 shares to cover over-allotments) at a price to the issuancepublic of equity, equity-related$8.00 per share, resulting in net proceeds of approximately $20.8 million, after deducting underwriting discounts and commissions and offering expenses. We also issued warrants to purchase an aggregate of 60,000 shares of our Common Stock to certain affiliated designees of the underwriter as part of the underwriter’s compensation. The warrants are exercisable at any time or debt securitiesfrom time to time, in whole or through obtaining credit from government or financial institutions. We cannot be certain that additional funds will be available to usin part, beginning on favorable terms when required, or at all.March 4, 2015 and expire on March 4, 2019. The exercise price is $12.00 per share of Common Stock.
On October 11, 2013, we commenced the implementation of a plan (Plan) intended to further align our expenditures with our near-term commercial opportunity in Brazil, shift Northern Hemisphere sorghum breeding activities from College Station, Texas to a more appropriate location, deemphasizede-emphasize research and development for U.S. cellulosic feedstocks, reduce costs and conserve cash.As a result, we do not intend to fully utilize our facilities at College Station in The actions taken under the near term and may seek alternative or additional uses for the locationPlan, whichmayinclude, included, among others, leasing office, storage and greenhouse space or selling the facility and any unnecessary assets.
These measures, which include a workforce reduction that will impact 17impacted 16 positions in the U.S, are expected to be substantiallywere completed by Mayat August 31, 2014. Once fully implemented, these measures are expected to deliver cash savings of up to approximately $5.0 million in fiscal yearDuring 2014, and up to approximately $8.0 to $10.0 million annually thereafter. We estimate that we will incurincurred total charges of approximately $1.6 million during the first nine months of fiscal year 2014 with respect to the U.S. workforce reduction in the U.S.,reductions, including $0.9 million of one-time severance expenses, $0.4 million infor continuation of salary and benefits of certain employees until their work iswas completed and their positions are eliminated and $1.2$0.3 million of one-time severanceother costs. Of the $1.6 million of cash payments made during 2014, $1.0 million, $0.5 million and other costs, all$0.1 million was recorded to research and development expenses, cost of which will be cash expenditures.
Capital Expendituressales and general and administrative expenses, respectively.
For the years ended August 31, 2013, 20122015 and 20112014, we used $0.9 million, $1.3$0.4 million and $0.5$1.0 million, respectively, in cash to fund capital expenditures. We currently anticipate making aggregate capital expenditures of between $1.0$0.1 million and $1.5$0.5 million for the year ended August 31, 2014.2016.
The following table sets forth a summary of our cash flows for the periods indicated (in thousands):
| Year Ended August 31, | ||||||||||||
| 2013 | 2012 | 2011 | ||||||||||
| Net cash used in operating activities | $ | (27,855 | ) | $ | (25,312 | ) | $ | (20,007 | ) | |||
| Net cash provided by (used in) investing activities | 16,043 | (36,543 | ) | (436 | ) | |||||||
| Net cash (used in) provided by financing activities | (180 | ) | 61,275 | 9,326 | ||||||||
| Year Ended August 31, | ||||||||
| 2015 | 2014 | |||||||
| Net cash used in operating activities | $ | (23,217 | ) | $ | (22,563 | ) | ||
| Net cash (used in) provided by investing activities | 24,069 | (3,589 | ) | |||||
| Net cash provided by (used in) financing activities | 2,725 | 20,592 | ||||||
Cash Flows from Operating Activities
For all periods presented, we have incurred net losses and net cash used in operating activities. The net cash used in operating activities primarily resulted from significant research and development expenses and seed production costs to develop and produce our seeds and traits. Such expenses and costs have exceeded our revenues, which have primarily been generated from collaborative research and government grants and, to a much lesser extent, product sales.
Net cash outflows of $27.9$23.2 million from operating activities during the year ended August 31, 20132015 primarily resulted from our net loss of $32.5$28.2 million, which was partially offset by non-cash charges of $6.0$3.6 million and changes in operating assets of $1.4 million. Non-cash charges primarily included $1.9$2.3 million in stock-based compensation expense, $0.7 million in depreciation expense, $0.6and $0.5 million in asset impairment. The net change in our operating assets and liabilities was $1.4 million, primarily consisting of an increase in accounts payable and accrued expenses of $0.9 million, an increase in billings in excess of cost of $0.5 million.
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Net cash outflows of $22.6 million from operating activities during the year ended August 31, 2014 primarily resulted from our net loss of $29.3 million, which was partially offset by non-cash charges of $5.4 million and changes in operating assets of $1.4 million. Non-cash charges primarily included $1.5 million in depreciation expense, $0.3 million in amortization of discounts on marketable securities and $3.3$3.1 million in stock-based compensation expense. The net change in our operating assets and liabilities was $1.4$1.3 million, primarily consisting of a decreasean increase in accounts payable and accrued expenses of $1.6$0.4 million, a decrease in deferred revenue of $0.7 million and an increase in accounts receivablebillings in excess of $0.2 million, allcost of which was offset by a decrease in inventories of $0.7$0.4 million and a decrease in prepaid expenses and other assets of $0.4 million.
Net cash outflows of $25.3 million from operating activities during the year ended August 31, 2012 primarily resulted from our net loss of $29.4 million, which was partially offset by non-cash charges of $4.1 million. Non-cash charges primarily included $2.1 million in depreciation expense, $1.9 million in stock-based compensation expense and $0.1 million in the fair value of warrants and Convertible Notes. Net change in our operating assets and liabilities was flat and consists of a $2.8 million decrease in deferred offering costs, a $0.5 million decrease in accounts receivable a $0.1 million decrease in other assets, which was offset by a $1.8 million decrease in accounts payable and accrued expenses, a $0.3 million decrease in deferred revenue and deferred rent, a $0.8 million increase in inventory and a $0.4 million increase in prepaid expenses.
Net cash outflows of $20.0 million from operating activities during the year ended August 31, 2011 primarily resulted from our net loss of $36.3 million and an increase of $2.8 million in deferred costs associated with our initial public offering. These were partially offset by an increase of $3.2 million in our accounts payable and $0.2 million in deferred revenue. These uses of cash were partially offset by non-cash items, including $11.0 million associated with the modification and changes in fair value of warrants and debt, $2.7 million of stock based compensation expense and $2.1 million of depreciation expense.$0.6 million.
Cash Flows from Investing Activities
Our investing activities consisted primarily of net investment purchases, maturities of investments and capital expenditures.
Net cash provided by investing activities was $16.0$24.1 million during the year ended August 31, 2013,2015, which resulted from the maturity of marketable securities of $32.9 million offset by the purchase of marketable securities of $16.0$25.1 million and the purchaseproceeds from sale of property and equipment of $0.9$0.1 million, which was partially offset by the purchases of marketable securities of $0.7 million and purchases of property and equipment of $0.4 million.
Net cash used in investing activities was $36.5$3.6 million during the year ended August 31, 2012,2014, which includedresulted from the $39.2 million purchase of marketable securities of $33.1 million and $1.3 million paid for property and equipment purchases, partially offset by $3.0 million resulting from the release of restricted cash and $1.0 million provided by insurance proceeds related to the tornado damage to our plant breeding and field research station located near College Station, Texas.
Net cash used by investing activities of $0.4 million during the year ended August 31, 2011 was attributable to purchasespurchase of property and equipment totaling $0.5of $1.0 million, partiallywhich was mostly offset by the maturity of marketable securities of $29.7 million and proceeds from the sale of assetsthe property and equipment of $0.1$0.8 million.
Cash Flows from Financing Activities
Net cash used ininflows of $2.7 million from finance activities of $0.2 million during the year ended August 31, 2013 resulted2015 was due to $2.8 million net proceeds from principalthe issuance of common stock and warrants in connection with our July and August 2015 financings, which was partially offset by $0.1 million of payments on debt.capital leases.
Net cash provided by financinginflows of $20.6 million from finance activities of $61.3 million during the year ended August 31, 20122014 was due to $20.8 million net IPO proceeds from the issuance of $65.2 million, borrowings under our Loan Agreement with Silicon Valley Bank of $2.5 million, andcommon stock option exercises of $0.5 million, offset by net principal debt repayments of approximately $6.9 million, including all amounts due and owing under our Loan Agreement with Silicon Valley Bank in connection with our termination of the Loan Agreement.
Net cash provided by financing activities of $9.3 million during the year ended August 31, 2011follow-on equity offering, which was primarily a result of the issuance of $11.4 million in Convertible Notes, partially offset by $2.2$0.2 million in principal repayments under our Loan Agreement with Silicon Valley Bank.of payments on capital leases.
Contractual Obligations
The following is a summary of our contractual obligations as of August 31, 2013:2015:
| Year Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
| August 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
| For Years Ended August 31, | 2018 and | For Years Ended August 31, | ||||||||||||||||||||||||||||||||||||||||||||||
| Contractual Obligations | Total | 2014 | 2015 | 2016 | 2017 | Beyond | Total | 2016 | 2017 | 2018 | 2019 | 2020 and thereafter | ||||||||||||||||||||||||||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Operating Lease Obligations | $ | 3,515 | $ | 595 | $ | 548 | $ | 550 | $ | 559 | $ | 1,263 | $ | 2,527 | $ | 621 | 606 | $ | 618 | 631 | $ | 51 | ||||||||||||||||||||||||||
| Interest Payments Relating to Long-Term Debt | $ | 3 | 2 | 1 | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Research Collaboration Agreements | $ | 9,597 | 3,041 | 2,977 | 2,966 | 613 | - | $ | 652 | 602 | 50 | - | - | - | ||||||||||||||||||||||||||||||||||
| Long-Term Debt | $ | 236 | 154 | 73 | 9 | - | - | |||||||||||||||||||||||||||||||||||||||||
| Total | $ | 13,351 | $ | 3,792 | $ | 3,599 | $ | 3,525 | $ | 1,172 | $ | 1,263 | $ | 3,179 | $ | 1,223 | $ | 656 | $ | 618 | 631 | $ | 51 | |||||||||||||||||||||||||
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our consolidated balance sheets.
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Seasonality
The sale of seeds isProduct sales are dependent upon planting and growing seasons, which vary from year to year, and are expected to result in both highly seasonal patterns and substantial fluctuations in quarterly sales and profitability. Our product sales for the years ended August 31, 20132015 and 20122014 were minimal and, accordingly, we have not yet experienced the full nature or extent to which our business may be seasonal. We expect that the sale of our seeds in Brazil will typically be higher in our first and second fiscal quarters, due to the timing of the planting decisions made by our customers. As we increase our sales in our current markets, and as we expand into new markets in different geographies, it is possible we may experience different seasonality patterns in our business. Weather conditions and natural disasters, such as heavy rains, hurricanes, hail, floods, tornadoes, freezing conditions, drought or fire, also affect decisions by our customers about the types and amounts of seeds to plant and the timing of harvesting and planting such seeds. Disruptions that cause delays by our customers in harvesting or planting can result in the movement of orders to a future quarter, which would negatively affect the quarter and cause fluctuations in our operating results.
Inflation
We believe that inflation has not had a material impact on our results of operations for the years ended August 31, 2013, 20122015 and 2011.2014. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition.
Recent Accounting Pronouncements
The information contained in Note (2)(1) to the Audited Consolidated Financial Statements under the heading recent accounting pronouncements“Recent Accounting Pronouncements” is hereby incorporated by reference in this Part I, Item 3.7.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to the effect of interest rate changes, foreign currency fluctuations and changes in commodity prices. We are also exposed to changes in the general economic conditions in the countries where we conduct business, which currently is substantially all in the United States and Brazil.
Interest Rate Risk
As of August 31, 2013,2015, our exposure to risk for changes in interest rates primarily related to our cash equivalents and marketable securities. We have investments in money market funds, commercial paper and corporate bonds, which all have relatively short term maturities. Accordingly, our interest income fluctuates with short term market conditions. All marketable securities are classified as available for sale and are highly liquid. Due to the relatively short-term nature of our investments, we do not believe that there would be a significant negative impact to our consolidated financial position or results of operations as a result of interest rate fluctuations in the financial markets. While we believe our cash equivalents do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits. We cannot assure you that we will not experience losses on these deposits.
Prior to completion of the IPO, our exposure to risk for changes in interest rates had primarily related to our equipment loans with Silicon Valley Bank, which were variable-rate debt obligations. At August 31, 2013,2015, we had paid off all amounts due and owing under the equipment loans and have limited interest rate risk related to our indebtedness.
Foreign Currency Risk
We have foreign currency risks related to our operating expenses denominated in currencies other than the U.S. Dollar. Changes in exchange rates between the U.S. Dollar and other currencies will result in increases or decreases in our costs and earnings, and also may affect the book value of our assets outside the United States. To date, most of our contracts have been entered into in the United States and accordingly have been denominated in U.S. Dollars. Going forward we anticipate that our sales will be denominated in the local currency of the country in which the sale occurs. In addition, our operating expenses to date have been denominated in the currencies of the countries in which our operations are located, primarily the United States and Brazil.
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Through August 31, 2013,2015, the fluctuations in the Brazil Real for our operations in Brazil had no adverse impact on our results of operations as the U.S. Dollar has been strengthening against the Brazil Real. AsIf our international operations in Brazil were to grow, our results of operations and cash flows willwould become increasingly subject to fluctuations due to changes in the foreign currency exchange rates. In periods when the U.S. dollar declines in value as compared to the Brazil Real, our foreign-currency based expenses increase when translated into U.S. dollars. To date, we have not hedged the risks associated with foreign currency exchange exposure. As the risks associated with fluctuations in the Brazil Real become greater, we will continue to reassess our approach to managing this risk.
Commodity Risk
Our exposure to market risk for changes in commodity prices currently is minimal. As our commercial operations grow, our exposure will relate mostly to the demand side as our customers are highly exposed to fluctuations in prices of sugar and crude oil and somewhat exposed to fluctuations in agricultural commodities, especially soybean. For example, if the price of sugar, which is produced from sugarcane and which cannot be produced from sweet sorghum today, rises significantly relative to the price of ethanol, it may become more profitable for ethanol mill operators to grow sugarcane even in adverse conditions, such as through the expansion of sugarcane fields to marginal land or the extension of the sugarcane harvesting season. During sustained periods of significantly higher sugar prices, demand for our seeds may decrease, which could materially and adversely affect our operating results. We are also indirectly exposed to fluctuations in soft commodities prices like soybean when we negotiate production contracts with seed producers. We currently do not use derivative financial instruments to hedge any price volatility of agricultural commodities.
Item 8. Financial Statements and Supplementary Data
| Item 8. | Financial Statements and Supplementary Data |
The consolidated financial statements and supplementary data required by Item 8 are contained in Item 7 and Item 15 of this Annual Report on Form 10-K and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
Item 9A. Controls and Procedures
| Item 9A. | Controls and Procedures |
(a) Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosures.
We conducted an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(b) and 15d-15(b) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of August 31, 2013.2015.
(b) Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of August 31, 20132015 based on the guidelines established inInternal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.
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Based on
A material weakness is a control deficiency or a combination of control deficiencies that results in more than a remote likelihood that a material misstatement of the resultsannual or interim financial statements will not be prevented or detected. A significant deficiency is a deficiency, or a combination of our evaluation, our management concludeddeficiencies, that ouris less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the Company’s financial reporting. In connection with the Company’s assessment of the effectiveness of internal control over financial reporting, was effectivethe Company identified the following material weaknesses that existed as of August 31, 2013. 2015:
| • | Control Environment -We determined that our ability to evaluate the appropriate accounting for significant, unusual transactions and controls pertaining to risk assessment over these transactions did not operate effectively, resulting in a material weakness. Significant unusual transactions during the year ended August 31, 2015 included (a) the evaluation of the impact of the actions taken by the Company in Brazil, including the classification of assets held for sale; and (b) the issuance of liability classified warrants. This material weakness contributed to the other material weaknesses described below and an environment where there was more than a remote likelihood that a material misstatement of the interim and annual consolidated financial statements could occur and not be prevented or detected. This material weakness had previously been identified as a significant deficiency as of August 31, 2014, but was not effectively remediated during the year ended August 31, 2015. |
| • | Control Activities – Expenses in Brazil.The design and operating effectiveness of our controls were inadequate to ensure that operating expenses in Brazil were reviewed and approved for accuracy and completeness and that we identified, accumulated and documented appropriate information necessary to support such expenses. |
| • | Control Activities - Revenue Recognition.The design and operating effectiveness of our controls were inadequate to ensure that the reported amount and timing of revenue recognition was accurate. |
The Company also identified a significant deficiency, which was that the design of our controls over the accuracy of the year end financial statements was not at a sufficient level of precision.
Errors identified and corrected in our financial statements and the aforementioned material weaknesses and significant deficiency identified by management resulted in a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis.
As a result, management concluded that the Company did not maintain effective internal control over financial reporting as of August 31, 2015.
The Company reviewed the results of management’s assessment with ourthe Audit Committee.
BecauseCommittee of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projectionsthe Company’s Board 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.Directors.
Because we are an "emerging growth company" as defined in the JOBS Act, we are not currently required to comply with the auditor attestation requirements related to internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act.
Management's Remediation Activities
During the fourth quarter of the fiscal year ended August 31, 2015, our Brazil operations were significantly reduced, including a significant reduction in headcount. Effective September 1, 2015 the Company engaged Grant Thornton to oversee all in-house accounting and financial reporting activities related to our Brazil subsidiary. We believe engaging Grant Thornton to oversee all in-house accounting and financial reporting activities related to our Brazil subsidiary and controls and the significant reduction in our activities in Brazil will remediate the material weakness related to our expenses in Brazil.
With the oversight of senior management and our audit committee, we plan to retain an outside third-party to assist in the review, documentation and recommendation of appropriate accounting treatment for significant unusual transactions and revenue recognition and implement quarterly management controls review over such items going forward.
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(c) Changes in Internal Controls over Financial Reporting
NoOther than the changes described above under “Management's Report on Internal Control over Financial Reporting,” there were no changes in our internal control over financial reporting (as definedidentified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15(f) and 15d-15(f) under the Exchange Act)13a-15 or 15d-15 that occurred during the quarterly period ended August 31, 2013our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 10. Directors, Executive Officers and Corporate Governance
MANAGEMENT
Executive Officers and Directors
The following table sets forth information regarding our executive officers, directors and key employees as of November 15, 2013.10, 2015.
| Name | Age | Position | ||
| Board of Directors: | ||||
| Pascal | Director | |||
| Director | ||||
| Director | ||||
| Director | ||||
| Richard Hamilton, Ph.D. | Director, President and Chief Executive Officer | |||
| Thomas | Director | |||
| Other Executive Officers and Key Employees: | ||||
| Paul Kuc | Chief Financial Officer | |||
| Wilfriede van Assche | Senior Vice President, General Counsel and Secretary | |||
| Vice President of Trait Development |
| (1) | Member of Audit Committee |
| (2) | Member of Compensation Committee |
| (3) | Member of the Nominating and Corporate Governance Committee |
Our executive officers are elected by, and serve at the discretion of, our Board of Directors. There are no family relationships among any of our directors and executive officers.
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Board of Directors
Walter De Logi, Ph.D., ChairmanCheryl Morley, Chair of the Board
Dr. De Logi is one of the founders of Ceres and served as our President and Chief Executive Officer from the founding of the Company in 1996 until September 2002. Dr. De LogiMs. Morley has served on our Board of Directors since our inceptionAugust 2011 and as ChairmanChair of the Board since September 2014. She was Senior Vice President of Corporate Strategy with Monsanto Company from 2003 to 2009, president of the Animal Agricultural Group from 1997 to 2003 and held a number of other leadership positions at Monsanto and its subsidiaries from 1983 to 1997. Ms. Morley has served as a board member of Fleming Pharmaceuticals since March 2010 and the Missouri Botanical Gardens since June 2006. Ms. Morley has served as a board member and finance committee member for Mercy Health System since June 2012. From March 2009 to October 2010, she served as a board member for Mercy Health Plans. Ms. Morley was chair of the board and a member of the audit and compensation committees of the Nidus Center for Scientific Enterprise from September 2003 to October 2010. She was presiding director, chair of the nominating and governance committee and a member of the audit committee for Indevus Pharmaceuticals from June 2002 to present. From 1986 to 1996, he was the Chief Executive Officer of Plant Genetic Systems, an eminent first-generation plant biotechnology company that was sold to Hoechst Schering AgrEvo GmbH, now part of Bayer AG, in 1996. HeMarch 2009. She holds an M.B.A. from Harvard University and a Ph.D.B.S. degree from the California InstituteUniversity of Technology. Dr. De Logi was originally nominated to serve on our Board of Directors pursuant to the terms ofArizona and is a voting agreement. Dr. De LogiCertified Public Accountant. Ms. Morley brings extensive experience in finance, service on numerous boards and an understanding of the plant biotechnologyseed business to our Board of Directors.
Pascal Brandys, Director
Mr. Brandys has served on our Board of Directors sincefrom December 1997.1997 until March 2014. He rejoined the Board in September 2014. Mr. Brandys is the President and managing member of Biobank Technology Ventures, LLC, an early-stage life sciences investment company which he co-founded in 2001. He was previously a co-founder of the genomics company, Genset S.A., and also served as its Chairman and Chief Executive Officer from 1989 to 2000. Mr. Brandys is currently a director of several private companies and previously served as a director of Ilog S.A. and Innogenetics N.V. He holds an M.S. in Economic Systems from Stanford University and is a graduate of the Ecole Polytechnique of Paris. Mr. Brandys brings extensive business experience in the genomics field and experience as an executive and an investment professional to our Board of Directors.
Raymond Debbane, Director
Mr. Debbane has served on our Board of Directors since March 1998. Mr. Debbane has served as President and Chief Executive Officer of The Invus Group, LLC, a New York based multi-billion dollar investment firm which is the exclusive investment advisor of Artal Luxembourg S.A., a shareholder of Ceres, since 1985. Prior to forming The Invus Group in 1985, Mr. Debbane was a manager and consultant for The Boston Consulting Group in Paris, France from 1979 to 1985. He is currently a director of Artal Group S.A. and Lexicon Pharmaceuticals, Inc., as well as a number of private companies in which Artal or Invus, L.P. is an investor. Mr. Debbane is also the Chairman of the board of directors of Weight Watchers International. He holds an M.B.A. from Stanford Graduate School of Business, an M.S. in Food Science and Technology from the University of California, Davis and a B.S. in Agricultural Sciences and Agricultural Engineering from American University of Beirut. Mr. Debbane was originally nominated to serve on our Board of Directors by Artal Luxembourg S.A. pursuant to the terms of a voting agreement. Mr. Debbane brings extensive business and finance experience to our Board of Directors, as well as experience as a director of a number of companies.
Richard Flavell, Ph.D., FRS, CBE, Director
Dr. Flavell has served on our Board of Directors since June 2009. Dr. Flavell joined Ceres in 1998 and served as Chief Scientific Officer from 1998 until October 2012, when he became our Chief Scientific Advisor on a consultancy basis. Since 2001, Dr. Flavell has been an Adjunct Professor in the Department of Molecular, Cellular and Developmental Biology at the University of California, Los Angeles. From 1987 to 1998, Dr. Flavell was the Director of the John Innes Centre in Norwich, England, a premier plant and microbial research institute. He has published over 200 scientific articles, lectured widely and contributed significantly to the development of modern biotechnology in agriculture. Dr. Flavell is an expert in cereal plant genomics, having produced the first molecular maps of plant chromosomes to reveal the constituent sequences. In 1999, Dr. Flavell was named a Commander of the British Empire for his contributions to plant and microbial sciences. Dr. Flavell received his Ph.D. from the University of East Anglia and has been a Fellow of European Molecular Biology Organization since 1990 and of The Royal Society of London since 1998. Dr. Flavell brings extensive experience and knowledge of plant biotechnology to our Board of Directors.
Daniel Glat, Director
Mr. Glat has served on our Board of Directors since June 2013. He has been a principal of Glat & Associates, an agribusiness consultancy firm in Brazil, since June 2011. He previously spent 25 years working for Pioneer Hi-Bred International, Inc., a Dupont business, including 21 years in Brazil. From August 2007 to June 2011, he served as the director for international operations, where he was responsible for Pioneer’s activities in Latin America, Africa and Asia. During this time he also served on the board of directors of Pioneer Hi-Bred International, Inc. From January 1998 to August 2007, Mr. Glat was president of Pioneer’s Brazilian subsidiary, Pioneer Sementes Ltda., having previously held various sales, marketing and business leadership roles at the subsidiary. Mr. Glat owns a farming operation in the Brazilian state of Tocatins. He received his B.S. and M.S. in Agronomy and Plant Genetics from the University of Arizona. Mr. Glat brings considerable international experience in agribusiness to our Board of Directors.
Robert Goldberg, Ph.D., Director
Dr. Goldberg is a Distinguished Professor of Molecular, Cell and Developmental Biology at the University of California, Los Angeles and a founder of Ceres. He has been a Professor at the University of California, Los Angeles since 1976, teaching genetic engineering and studying the genes that are required for seed formation. Dr. Goldberg is a member of the National Academy of Sciences and has consulted extensively in the agriculture and biotechnology industries. Dr. Goldberg has served as a director of Ceres since 1996. Dr. Goldberg received his Bachelor’s Degree in botany from Ohio University, his Ph.D. in plant genetics from the University of Arizona, and was a Postdoctoral Fellow in developmental biology at the California Institute of Technology. Dr. Goldberg brings extensive experience in the agriculture and biotechnology industries to our Board of Directors.
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Aflalo Guimaraes, Director
Mr. Guimaraes has served on our Board since December 2014. He is a Managing Director of the Invus Group. He joined Invus in 1998. Prior to joining Invus, Mr. Guimaraes was at Marakon Associates where as a manager he led strategic consulting engagements for large multinational companies in a wide range of industries including financial services, retail and consumer products. Previously he worked at the Federal Reserve Bank. Mr. Guimaraes holds an MBA from the University of Pennsylvania's The Wharton School and a BA in Economics and Political Science from Yale University. He also serves on the boards and audit committees of a number of private companies. Mr. Guimaraes brings extensive financial and business expertise to our Board of Directors.
Richard Hamilton, Ph.D., President, Chief Executive Officer and Director
Dr. Hamilton joined Ceres in 1998. He served as our Chief Financial Officer until September 2002, at which time he was appointed President and Chief Executive Officer. He has served on our Board of Directors since 2002. In addition to his leadership role at Ceres, Dr. Hamilton sits on the Keck Graduate Institute Advisory Council and he was a founding member of the Council for Sustainable Biomass Production. He has served on the U.S. Department of Energy’s Biomass Research and Development Technical Advisory Committee and has been active in the Biotechnology Industry Organization where he has served as Vice Chairman of the organization, chaired its Food and Agriculture Governing Board and served in other leadership roles. From 1992 to 1997, Dr. Hamilton was a principal at Oxford Bioscience Partners, one of the leading investors in the genomics field and a founder of Ceres. From 1990 to 1991, he was a Howard Hughes Medical Institute Research Fellow at Harvard Medical School. Dr. Hamilton holds a Ph.D. in molecular biology from Vanderbilt University. Dr. Hamilton brings extensive management experience and biotechnology and renewable energy industry expertise to our Board of Directors.
Thomas Kiley, Director
Mr. Kiley has served as a director of Ceres since May 2003. He became the first general counsel of Genentech in February 1980 and later served as its vice president for corporate development until 1988. Previously, Mr. Kiley practiced intellectual property litigation as a partner of Lyon & Lyon from June 1969 until January 1980. Mr. Kiley has served as a director of Transcept Pharmaceuticals, Inc., a publicly traded pharmaceutical company sincefrom February 2004.2004 to October 2014 upon completion of a merger with Paratek. He also serves as a director of several privately-held development stage companies. From July 1996 to May 2013, Mr. Kiley served as a director of Geron, Inc., a publicly traded biopharmaceutical company. He received his B.S. in chemical engineering from The Pennsylvania State University and his J.D. from The George Washington University School of Law. He is a member of the State Bar of California. Mr. Kiley brings extensive experience as an intellectual property attorney and director of other public companies to our Board of Directors.
Steven Koonin, Ph.D, Director.
Dr. Koonin has served on our Board of Directors since August 2012. He has been the director of the Center for Urban Science and Progress since its creation by New York University in April 2012. Prior to his current role, Dr. Koonin served as Undersecretary for Science at the U.S. Department of Energy from May 2009, following his confirmation by the U.S. Senate, until November 2011. Prior to joining the government, Dr. Koonin spent five years, from March 2004 to May 2009, as Chief Scientist for BP, p.l.c. From September 1975 to July 2006, Dr. Koonin was a professor of theoretical physics at Caltech and was the institute’s Provost from February 1995 to January 2004. His memberships include the U.S. National Academy of Sciences, the American Academy of Arts and Sciences and the Council on Foreign Relations. He has been a member of the JASON advisory group from July 1988 to May 2009, and from November 2011 to present, and served as the group’s chair from 1998 to 2004. He also has served as an independent governor of the Los Alamos and Lawrence Livermore National Security LLCs since July 2012. Koonin holds a B.S. in Physics from Caltech and a Ph.D. in Theoretical Physics from MIT and has been an adjunct staff member at the Institute for Defense Analyses since 1999. Mr. Koonin brings extensive experience in science, energy and government to our Board of Directors.
David Krieger, Director
Mr. Krieger has served as a director of Ceres since February 2011. Mr. Krieger has been a managing director at Warburg Pincus LLC since 2006, which through its affiliates is a shareholder of Ceres, and has been with Warburg Pincus since 2000. Prior to joining Warburg Pincus, he worked at McKinsey & Company in Atlanta and Europe from September 1995 to May 1998. He is currently a board member of Black Swan Energy Ltd., Canbriam Energy Inc., Endurance Energy Ltd., Kosmos Energy Ltd., MEG Energy Corp., Osum Oil Sands Corp., Velvet Energy Ltd. and West Valley Energy Corp. He received a B.S. in Economics from the Wharton School of the University of Pennsylvania, an M.S. from the Georgia Institute of Technology and an M.B.A. from Harvard Business School. Mr. Krieger was originally nominated to serve on our Board of Directors by Warburg Pincus pursuant to the terms of a voting agreement and brings extensive experience in business and finance and the energy industry to our Board of Directors.
Cheryl Morley, Director
Ms. Morley has served on our Board of Directors since August 2011. She was Senior Vice President of Corporate Strategy with Monsanto Company from 2003 to 2009, president of the Animal Agricultural Group from 1997 to 2003 and held a number of other leadership positions at Monsanto and its subsidiaries from 1983 to 1997. She also led the marketing and business development efforts for Monsanto’s NutraSweet product. Ms. Morley has served as a board member of Fleming Pharmaceuticals since March 2010 and the Missouri Botanical Gardens since June 2006. Ms. Morley has served as a board member and finance committee member for Mercy Health System since June 2012. In addition, since January 2010, she has served as chairman of the strategic advisory board to Joule Biotechnologies, Inc., and since November 2010 as a member of the business development advisory board of Pronutria, Inc. (formerly Essentient, Inc.). From March 2009 to October 2010, she served as a board member for Mercy Health Plans. Ms. Morley was chairman of the board and a member of the audit and compensation committees of the Nidus Center for Scientific Enterprise from September 2003 to October 2010. She was presiding director, chairman of the nominating and governance committee and a member of the audit committee for Indevus Pharmaceuticals from June 2002 to March 2009. She holds a B.S. degree from the University of Arizona and is a Certified Public Accountant. Ms. Morley brings extensive experience in finance, service on numerous boards and an understanding of the seed business to our Board of Directors.
Edmund Olivier, Director
Mr. Olivier has served on our Board of Directors since our inception in 1996. Mr. Olivier is a founding general partner of Oxford Bioscience Partners, one of the founders of Ceres. Mr. Olivier has been with Oxford Bioscience Partners since 1995. He has overseen investments in numerous life science companies in the United States, Europe, India and Japan. He has also served on the board of directors of a number of Oxford Bioscience’s portfolio companies. Mr. Olivier received an M.B.A. from Harvard Business School and a B.S. in Chemical Engineering from Rice University. He is a Life Fellow and member of the International Council of the Salk Institute and a Regent of Harris Manchester College, Oxford University. Mr. Olivier was originally nominated to serve on our Board of Directors by entities affiliated with Oxford Bioscience Partners pursuant to the terms of a voting agreement and brings extensive experience in business and finance, as well as an understanding of the life sciences industry, to our Board of Directors.
Executive Officers
Paul Kuc, Chief Financial Officer
Mr. Kuc joined Ceres in 2008 as Chief Financial Officer, following a 12-year career with Monsanto Company, where he held various regional and global finance positions, including posts in Argentina, Brazil, Canada, Mexico and the United States, with his last position, beginning April 2007, as Lead Worldwide Manufacturing Finance at Seminis, Inc., which was purchased by Monsanto in 2005. At Monsanto, among other responsibilities, he developed and implemented international costing and financial systems for the seed and agricultural biotechnology company. Mr. Kuc began his career, from June 1994 to June 1996, at the pharmaceutical company Eli Lilly and Company. He holds a Master’s of Science degree in Economics from the University of Lodz, Poland and an M.B.A. from the Ivey Business School, University of Western Ontario, Canada.
Wilfriede van Assche, Senior Vice President & General Counsel and Secretary
Ms. van Assche joined Ceres in 2000. She has more than 2025 years of legal experience in the plant biotechnology and seed industry. From 1996 until 2000, Ms. van Assche was the General Counsel of the plant biotechnology and seed divisions of Hoechst Schering AgrEvo GmbH and following the merger of Hoechst and Rhone Poulenc, of the same divisions of Aventis, a leading life sciences company that is now part of Bayer AG. Previously, she was the General Counsel of Plant Genetic Systems N.V. from 1988 until its acquisition by Hoechst Schering AgrEvo GmbH in 1996. She began her career with the law firm De Bandt van Hecke (now Linklaters) in Belgium from 1979 until 1982, and was counsel in the legal department of GTE Atea (now Siemens), a telecommunications company, from 1982 until 1988. Ms. van Assche holds a law degree from the University of Leuven and a postgraduate degree from the College of Europe. She is a member of the State Bar of California.
J. Jefferson Gwyn, Ph.D., Vice President of Breeding and Genomics
Dr. Gwyn joined Ceres in 2008 as Director of Breeding and was promoted in August 2009 to Vice President of Breeding and Genomics. He oversees crop improvement in switchgrass, sorghum and other energy crops. He also manages our field research center near College Station, Texas. Prior to joining Ceres, Dr. Gwyn was head of soybean trait development at Syngenta Seeds, Inc. from July 2007 to August 2008 and station manager from September 2005 to July 2007. Earlier in his career, Dr. Gwyn established and managed cotton breeding and trait programs stations in the United States and Brazil for Bayer Cotton Seed International as Director of Breeding from March 1998 to July 2005. He was also a project director and program manager in corn trait breeding for DeKalb Genetics from March 1996 to February 1998. Dr. Gwyn began his career as a cotton breeder and plant geneticist with Chembred, Inc. (American Cyanamid) from May 1989 to October 1995. He holds a Ph.D. in genetics from Texas A&M University and a Master’s Degree in genetics and plant breeding from Iowa State University. He completed his undergraduate studies at the University of Arkansas.
Michael Stephenson, Vice President of Operations
Mr. Stephenson joined Ceres in 2008. Prior to joining Ceres, Mr. Stephenson was a general manager for one of the brands of AgReliant Genetics, the fifth largest corn seed company in the United States, from 2000 to 2008. In addition to his commercial experience, Mr. Stephenson has chaired the American Seed Trade Association’s corn and sorghum division, and served as President of the Soybean Research Foundation and Regional Vice President of American Seed Trade Association. Mr. Stephenson holds a B.S. in Business Administration from the University of Kansas.
Roger Pennell, Ph.D., Vice President of Trait Development
Dr. Pennell joined Ceres in 1998 and held various research management positions, including Director, Trait Development from 2006 until 2009 when he assumed his current role as Vice President of Trait Development. Dr. Pennell has been an Adjunct Professor in the Department of Molecular, Cellular and Developmental Biology at the University of California, Los Angeles since 2001 and a frequent reviewer for the scientific press. Dr. Pennell holds a Ph.D. from University College London. He performed post-doctoral research at the John Innes Institute and Wageningen Agricultural University, and in 1990 was the recipient of a prestigious Royal Society University Research Fellowship, which he used at University College London and, from 1995, at the Salk Institute. During this time, Dr. Pennell studied cellular and molecular aspects of plant growth, development and disease resistance, and has published more than 40 scientific papers on these subjects.
Board of Directors
Our Board of Directors currently consists of twelveseven members. Our amended and restated certificate of incorporation and our amended and restated bylaws permit our Board of Directors to establish by resolution the authorized number of directors.
Our amended and restated certificate of incorporation and our amended and restated bylaws provide for a classified Board of Directors consisting of three classes, with staggered three-year terms as follows:
·Class I directors, whose current | ||
· Class II directors, whose current term will expire at the annual meeting of stockholders to be held in 2017; and
· Class III directors, whose current term will expire at the annual meeting of stockholders to be held in 2018.
At each annual meeting of stockholders, upon expiration of the term of a class of directors, directors in that class will be elected for three-year terms at the annual meeting of stockholders held in the year in which that term expires. Each director’s term continues until the election and qualification of his or her successor, or his or her earlier death, resignation or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of directors.
The Class I directors consist of Mr. Debbane, Dr. Goldberg, Mr. KileyGuimaraes and Dr. Koonin;Mr. Kiley; the Class II directors consist of Mr. Brandys, Dr. Flavell and Dr. Hamilton and Mr. Olivier;Hamilton; and the Class III directors consist of Dr. De Logi, Mr. Glat, Mr. KriegerBrandys and Ms. Morley.
The classification of our Board of Directors may have the effect of delaying or preventing changes in our control or management.
Risk Oversight
The Board of Directors is responsible for general oversight of company risk and risk management, and reviews management’s strategies for adequately mitigating and managing the identified risks. Although our Board of Directors administers this risk management oversight function, our Audit Committee supports our Board of Directors in discharging its oversight duties and addressing risks. Our Compensation Committee oversees management of risks relating to our compensation plans and programs. Our Board of Directors expects company management to consider risk and risk management in its business decisions, to develop and monitor risk management strategies and processes for day-to-day activities and to implement risk management strategies adopted by the committees and the Board of Directors.
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Director Independence
Our common stockCommon Stock is listed on the NasdaqNASDAQ Stock Market. Under the rules of the NasdaqNASDAQ Stock Market, independent directors must comprise a majority of a listed company’s board of directors. In addition, the rules of the NasdaqNASDAQ Stock Market require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. Under the rules of the NasdaqNASDAQ Stock Market, a director will only qualify as an “independent director” if, in the opinion of that company’s Board of Directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
In order to be considered to be independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries.
Our Board of Directors has reviewed its composition, the composition of its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our Board of Directors has determined that none of Messrs. De Logi, Brandys, Debbane, Glat, Goldberg, Kiley, Koonin, KriegerGuimaraes, Flavell and OlivierKiley and Ms. Morley, representing tensix of our twelveseven directors, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the rules of the NasdaqNASDAQ Stock Market.
Our Board of Directors also determined that Messrs. Brandys, and Kiley and Ms. Morley, who comprise our Audit Committee, and Messrs. De Logi and OlivierMr. Guimaraes and Ms. Morley, who comprise our Compensation Committee, satisfy the independence standards for those committees established by applicable SEC rules and the rules of The NasdaqNASDAQ Stock Market. In making this determination, our Board of Directors considered the relationships that each non-employee director has with our company and all other facts and circumstances our Board of Directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock held by each non-employee director.
Committees of the Board of Directors
Our Board of Directors has established an Audit Committee, Compensation Committee and a Nominating and Corporate Governance Committee. Each committee has the composition and responsibilities described below.
Audit Committee
Our Audit Committee is comprised of Ms. Morley and Messrs. Brandys and Kiley and Ms. Morley,Brandys, who is the chair of the Audit Committee. The composition of our Audit Committee meets the requirements for independence under the current NasdaqNASDAQ Stock Market and SEC rules and regulations. Each member of our Audit Committee possesses financial sophistication as defined under the rules of the Nasdaq GlobalNASDAQ Stock Market. Ms. Morley isand Mr. Brandys are our “Audit Committee financial expert”experts” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act. Being an “Audit Committee financial expert” does not impose on Ms. Morley or Mr. Brandys any duties, obligations or liabilities that are greater than are generally imposed on herthem as a member of our Audit Committee and our Board of Directors. Our Board of Directors has adopted a charter for our Audit Committee, which provides, among other things, that our Audit Committee will:
| · | oversee our accounting and financial reporting processes and audits of our financial statements; |
| · | be directly responsible for the appointment, retention, compensation and oversight of the work of the independent registered public accounting firm; |
| · | have the sole authority to preapprove any non-audit services to be provided by the independent registered public accounting firm and to review with the lead audit partner whether any of the audit team members receive any discretionary compensation from the audit firm with respect to non-audit services performed by the independent registered public accounting firm; |
| · | actively engage in dialogue with the independent registered public accounting firm with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent registered public accounting firm and recommend that the Board of Directors take, appropriate action to oversee the independence of the independent auditor; and |
| · | discuss the adequacy of the Company’s internal control over financial reporting with the independent registered public accounting firm and management and review and discuss any changes implemented by management to address control deficiencies or to make controls more effective. |
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Compensation Committee
Our Compensation Committee is comprised of Mr. Flavell, Mr. Guimaraes and Ms. Morley, and Messrs. De Logi and Olivier, who is the chair of the Compensation Committee. In addition, Douglas Suttles was a member of ourMr. Flavell joined the Compensation Committee from March 2013 through his resignation from our Board of Directors in June 2013.on October 11, 2015. The composition of our Compensation Committee meets the requirements for independence under the current NasdaqNASDAQ Stock Market and SEC rules and regulations. The purpose of our Compensation Committee is to set compensation policy, administer compensation plans and recommend compensation for executive officers to the Board of Directors. Our Board of Directors has adopted a charter for our Compensation Committee, under which our Compensation Committee will discharge the responsibilities of our Board of Directors relating to compensation of our executive officers, and will, among other things:
| · | establish the Company’s general compensation philosophy; |
| · | review and recommend that our Board of Directors approve the compensation of our executive officers; |
| · | review and recommend that our Board of Directors approve the compensation of our directors; |
| · | review and approve, or recommend that the Board of Directors approve, payouts under annual bonus and other performance-based compensation programs; |
| · | review and recommend that our Board of Directors approve new or existing long-term or equity-based compensation plans or arrangements and administer those plans or arrangements; |
| · | assist in developing succession and continuity plans for the CEO and other executive officers; |
| · | review and consult with the Board of Directors on our compensation and benefit plans to determine whether they create risks that are reasonably likely to have a material adverse effect on the company; and |
| · | review, discuss with management, and approve the compensation, discussion and analysis when required in our public filings. |
Nominating and Corporate Governance Committee
Our Board of Directors has established a Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance Committee is comprised of Messrs. De Logi, Debbane, KriegerGoldberg, Guimaraes and Kiley, who is the chair of the Nominating and Corporate Governance Committee. The composition of our Nominating and Corporate Governance Committee meets the requirements for independence under the current NasdaqNASDAQ Stock Market and SEC rules and regulations. Our Board of Directors has adopted a charter for our Nominating and Corporate Governance Committee, under which our Nominating and Corporate Governance Committee will, among other things:
| · | identify and recommend director nominees; |
| · | recommend directors to serve on our various committees; and |
| · | implement our corporate governance guidelines. |
The charters of our Audit, Compensation and Nominating and Corporate Governance Committees, and any amendments that may be adopted from time to time, are posted on our website atwww.ceres.net.
Compensation Committee Interlocks and Insider Participation
During fiscal 2013,2015, our Compensation Committee consisted of Mr. Guimaraes and Ms. Morley, and Messrs. De Logi and Olivier, who is the chair of our Compensation Committee. In addition, Mr. Douglas Suttles served on ourFlavell joined the Compensation Committee between March 2013 and June 2013.on October 11, 2015. Mr. Daniel Glat was a member of the Compensation Committee until his resignation as a director in July 2015. None of them has at any time during the last fiscal year been one of our officers or employees, nor have any of our executive officers served as a member of the Board of Directors, or as a member of the compensation or similar committee, of an entity that has one or more executive officers who served on our Board of Directors or Compensation Committee during fiscal 2013.2015.
Limitation of Liability and Indemnification of Officers and Directors
Our amended and restated certificate of incorporation and our amended and restated bylaws limit the liability of our directors, officers, employees and other agents to the fullest extent permitted by Delaware law. Section 145 of the Delaware General Corporation Law permits indemnification of officers, directors and other agents under certain circumstances and subject to certain limitations. Delaware law also permits a corporation to not hold its directors personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability for:
| · | breach of their duty of loyalty to us or our stockholders; |
| · | acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; |
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| · | unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; and |
| · | any transaction from which the director derived an improper personal benefit. |
These limitations of liability do not apply to liabilities arising under the federal or state securities laws and do not affect the availability of equitable remedies such as injunctive relief or rescission. Our amended and restated certificate of incorporation also permits us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in this capacity. We have obtained directors’ and officers’ liability insurance to cover certain liabilities described above. We have entered into separate indemnity agreements with each of our directors and executive officers that require us to indemnify such persons against any and all expenses (including attorneys’ fees), witness fees, judgments, fines, settlements and other amounts incurred (including expenses of a derivative action) in connection with any action, suit or proceeding or alternative dispute resolution mechanism, inquiry hearing or investigation, whether threatened, pending or completed, to which any such person may be made a party by reason of the fact that such person is or was a director, an officer or an employee of us or any of our affiliated enterprises, provided that such person must follow the procedures for determining entitlement to indemnification set out in the indemnity agreements. The indemnity agreements also set forth other procedures that will apply in the event of a claim for indemnification thereunder. We believe that these provisions and agreements are necessary to attract and retain qualified persons as executive officers and directors of our company.
At present, there is no pending litigation or proceeding involving any of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and our amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might provide a benefit to us and our stockholders. Our results of operations and financial conditions may be negatively affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, executive officers or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Director Compensation
The following table sets forth information concerning the compensation of our directors during the year ended August 31, 2013:2015:
| Name (1) | Fees earned or paid in cash ($) | Option awards($)(2) | All other compensation($) | Total($) | ||||||||||||
| Walter De Logi, Ph.D. | 71,000 | 13,694 | — | 84,694 | ||||||||||||
| Pascal Brandys | 37,500 | 13,694 | — | 51,194 | ||||||||||||
| Raymond Debbane | 33,500 | 13,694 | — | 47,194 | ||||||||||||
| Richard Flavell, Ph.D. | 30,000 | 25,701 | 45,000 | (3) | 100,701 | |||||||||||
| Daniel Glat | 6,000 | 27,892 | — | 33,892 | ||||||||||||
| Robert Goldberg, Ph.D. | 30,000 | 25,701 | — | 55,701 | ||||||||||||
| Thomas Kiley | 43,500 | 13,694 | — | 57,194 | ||||||||||||
| Steven Koonin, Ph. D. | 30,000 | 13,694 | — | 43,694 | ||||||||||||
| Cheryl Morley | 52,500 | 13,694 | — | 66,194 | ||||||||||||
| David Krieger | 33,500 | 13,694 | — | 47,194 | ||||||||||||
| Edmund Olivier | 45,000 | 13,694 | — | 58,694 | ||||||||||||
| Douglas Suttles(4) | 25,847 | 13,694 | — | 39,541 | ||||||||||||
| Name (1) | Fees earned or paid in cash | Option awards | All other compensation | Total ($) | ||||||||||||
| Pascal Brandys (3) | 32,375 | 5,766 | — | 38,141 | ||||||||||||
| Raymond Debbane (4) | 17,831 | — | 17,831 | |||||||||||||
| Richard Flavell, Ph.D. | 30,000 | 1,363 | 45,340 | (5) | 76,703 | |||||||||||
| Daniel Glat (6) | 29,637 | 1,363 | — | 31,000 | ||||||||||||
| Robert Goldberg, Ph.D. | 32,625 | 1,363 | — | 33,988 | ||||||||||||
| Aflalo Guimaraes (7) | 19,288 | 3,361 | — | 22,648 | ||||||||||||
| Thomas Kiley | 43,500 | 1,363 | — | 44,863 | ||||||||||||
| Steven Koonin, Ph. D. (8) | 42,339 | 1,363 | — | 43,702 | ||||||||||||
| Cheryl Morley | 76,875 | 1,363 | — | 78,238 | ||||||||||||
| (1) | Dr. Hamilton, our President and Chief Executive Officer, is not included in this table as he is an employee of the Company and does not receive additional compensation for his service as a director. All of the compensation paid to Dr. Hamilton for the services he provides to us is reflected in the Summary Compensation Table. |
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| (2) | The amounts in the “Option Awards” column reflect the aggregate grant date fair value of stock options granted during fiscal |
| (3) | Mr. Brandys had chosen not to stand for re-election to the Board of Directors at the 2014 Annual Shareholder Meeting and left the Board of Directors in March 2014. On September 12, 2014, Mr. Brandys was elected to serve as a Class III director for a term beginning September 12, 2014 and expiring at the Company’s annual meeting of stockholders in 2015, to fill the vacancy on the Board. |
| (4) | Mr. Debbane resigned from the Board of Directors in December 2014. |
| (5) | Represents payments for consulting services performed under Dr. Flavell’s exclusive consultancy agreement described under “Narrative to |
| Mr. |
| (7) | Mr. Guimaraes joined the Board of Directors in December 2014. |
| (8) | Mr. Koonin resigned from the Board of Directors in July 2015. |
Narrative to director compensation table.Director Compensation Table.
Based on the recommendation of our Compensation Committee, our Board of Directors has adopted a compensation policy that is applicable to all of our non-employee directors. Under our Amended and Restated Non-employee Director Compensation Program, each non-employee director will receive an annual cash retainer payable on a quarterly basis, and an annual stock option grant. In addition, upon initial appointment to the Board of Directors, each non-employee director will receive an initial stock option grant. In addition, committee members who serve on one or more of the Audit, Compensation or Nominating and Governance Committee members and committee chairpersonsof the Board of Directors will receive, for each committee he or she serves on, either an additional annual cash committee retainers, and ifretainer or, in the case of a committee chair, a committee chair retainer paid in lieu of the committee retainer. If we elect a lead/non-executive chairmanchair of the Board of Directors, he or she will also receive an additional annual cash lead director retainer. All annual cash retainers are payable on a quarterly basis. The retainer and stock option amounts that we provide are as follows:
| · | an annual retainer of $30,000, payable on a quarterly basis; |
| · | an initial stock option grant to purchase 1,458 shares, to vest annually over three years; |
| · | an annual stock option grant to purchase 729 shares, to vest 100% on January 31 of the year following the date of grant; |
| · | an annual retainer for committee members as follows: $7,500 for members of the audit and compensation committees, and $3,500 for members of the nominating and governance committee; |
| · | an annual retainer for committee chairs as follows: $15,000 for the chairs of the audit and compensation committees, and $6,000 for the chair of the nominating and governance committee; |
| · | an additional annual retainer of $30,000 for any non-employee director appointed as lead/non-executive chairman of the board of directors; and |
| · | reimbursement for reasonable out-of-pocket business expenses. |
In connection with hisDr. Flavell’s retirement from the position of Chief Scientific Officer in October 2012, we entered into an exclusive consultancy agreement with Dr. Flavell.him. Pursuant to the consultancy agreement, Dr. Flavell will earn $2,000 per day for 20 to 25 days of service per year, and he agrees not to provide services to any other party in the field of commercial, for profit bioenergy crop activities. The consultancy agreement had an initial term of one year, effective October 11, 2012, and automatically renews for an undetermined amount of time, subject to termination by either party by giving six months’ notice. In June 2013, Dr. Flavell was granted an option to purchase 5,000625 shares of our common stockCommon Stock under the Amended and Restated Ceres, Inc. 2011 Equity Incentive Plan, or the 2011 Plan, in connection with his consulting services.
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In June 2013, we entered into a consulting agreement with Dr. Goldberg pursuant to which we reimburse him for reasonable out-of-pocket business expenses incurred in the performance of his consulting duties of up to $25,000 per year. In addition, Dr. Goldberg was granted an option to purchase 5,000 shares of our common stock under the 2011 Plan.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership of these securities with the SEC. Executive officers, directors and greater than ten percent beneficial owners are required by applicable regulations to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of the forms furnished to us during or with respect to our most recent fiscal year, all of our directors and executive officers subject to the reporting requirements and each beneficial owner of more than ten percent of our Common Stock satisfied all applicable filing requirements under Section 16(a).
Code of Business Conduct and Ethics
Our Board of Directors has adopted a Code of Business Conduct and Ethics which applies to all directors, officers and employees of Ceres, Inc. and its subsidiaries, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The full text of our Code of Business Conduct and Ethics is available on our website,www.ceres.net , in the “Investor Relations”“Investors” section.
Item 11. Executive Compensation
| Item 11. | Executive Compensation |
Summary Compensation Table
The following table sets forth information regarding compensation earned by our named executive officers for the years ended August 31, 20132015, 2014 and 2012.2013.
| Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(2) | All Other Compensation ($) | Total ($) | Year | Salary ($) | Bonus ($) (1) | Stock Awards | Option Awards | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||
| Richard Hamilton | 2013 | 466,000 | — | 262,824 | — | 10,934 | (3) | 739,758 | ||||||||||||||||||||||||||||||||||||||||||||||||
| President and Chief Executive Officer | 2012 | 443,877 | 198,000 | — | 1,470,663 | 15,147 | 2,127,687 | 2015 | 478,923 | — | 13,250 | 18,872 | 10,900 | (3) | 521,945 | |||||||||||||||||||||||||||||||||||||||||
| 2014 | 466,000 | 168,925 | 103,333 | 163,334 | 10,100 | 911,692 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2013 | 466,000 | — | 262,824 | — | 10,934 | 739,758 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Paul Kuc | 2013 | 323,000 | — | 182,172 | — | 6,582 | (4) | 511,754 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Chief Financial Officer | 2012 | 309,077 | 129,000 | — | 514,726 | 6,428 | 959,231 | 2015 | 332,231 | — | 4,770 | 6,040 | 6,778 | (4) | 349,819 | |||||||||||||||||||||||||||||||||||||||||
| 2014 | 323,000 | 96,900 | 82,667 | 130,666 | 6,263 | 639,496 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| J. Jefferson Gwyn(5) | 2013 | 278,154 | — | 154,536 | — | 9,720 | (6) | 442,410 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Vice President of Breeding and Genomics | 2012 | 271,892 | 76,500 | — | 220,600 | 10,615 | 579,607 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2013 | 323,000 | — | 182,172 | — | 6,582 | 511,754 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Wilfriede van Assche | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior Vice President and General Counsel | 2015 | 308,308 | — | 3,710 | 4,908 | 10,349 | (5) | 327,275 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2014 | 300,000 | 90,000 | 16,533 | 26,134 | 10,100 | 442,767 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2013 | 300,000 | — | — | — | 10,295 | 310,295 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) |
| (2) | The amounts in the “Stock Awards” and “Option Awards” column reflect the aggregate grant date fair value of stock options and restricted stock awards granted during fiscal |
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| (3) | This amount includes a company matching contribution to our 401(k) plan in the amount of |
| (4) | This amount includes a company matching contribution to our 401(k) plan in the amount of |
| (5) |
| This amount includes a company matching contribution to our 401(k) plan in the amount of |
Outstanding Equity Awards at Fiscal 20132015 Year-End
The following table itemizes outstanding equity awards held by the named executive officers as of August 31, 2013.2015.
| Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Option Grant Date | Number of Securities Underlying Unexercised Options(#) Exercisable (1) * | Number of Securities Underlying Unexercised Options(#) Unexercisable | Option Exercise Price ($)(2) | Option Expiration Date | Number of Shares or Units of Stock (#) That Have Not Vested ** | Stock Award Grant Date | Market Value of Shares or Units of Stock ($) That Have Not Vested (3) | Option Grant Date | Number of Securities Underlying Unexercised Options(#) Exercisable (1) * | Number of Securities Underlying Unexercised Options(#) Unexercisable | Option Exercise Price | Option Expiration | Number Shares or Units of Stock (#) That Not Vested** | Stock Award Grant Date | Market Value of Shares or Units of Stock ($) That Have Not Vested (3) | ||||||||||||||||||||||||||||||||||||
| Richard Hamilton | 12/19/2002 | 400,000 | (4) | — | 1.95 | 12/18/2012 | 12/19/2002 | 49,999 | (4) | — | 15.60 | 12/18/2015 | ||||||||||||||||||||||||||||||||||||||||
| 1/16/2006 | 8,541 | (5) | — | 31.20 | 1/15/2016 | |||||||||||||||||||||||||||||||||||||||||||||||
| 12/21/2007 | 23,415 | (6) | — | 54.00 | 12/20/2017 | |||||||||||||||||||||||||||||||||||||||||||||||
| 1/16/2006 | 68,333 | (5) | — | 3.90 | 1/15/2016 | 6/23/2011 | 8,332 | (7) (8) | — | 134.16 | 6/22/2021 | |||||||||||||||||||||||||||||||||||||||||
| 12/21/2007 | 187,332 | (6) | — | 6.75 | 12/20/2017 | 2/27/2012 | 11,180 | (9) (10) | 5,485 | (9) (10) | 104.00 | 2/26/2022 | ||||||||||||||||||||||||||||||||||||||||
| 6/23/2011 | 66,666 | (7)(8) | — | 16.77 | 6/22/2021 | 1,942 | 10/10/2012 | 2,292 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2012 | — | 133,333 | (9)(10) | 13.00 | 2/26/2022 | 9/25/2013 | 20,832 | (11) (12) | — | 9.92 | 9/24/2023 | |||||||||||||||||||||||||||||||||||||||||
| 46,600 | 10/10/2012 | 55,454 | 9/12/2014 | — | 6,249 | (13) (14) | 4.24 | 9/11/2024 | 2,344 | 9/12/2014 | 2,766 | |||||||||||||||||||||||||||||||||||||||||
| Paul Kuc | 9/3/2008 | 109,999 | (11) | — | 6.75 | 9/2/2018 | 9/3/2008 | 13,749 | (15) | — | 54.00 | 9/2/2018 | ||||||||||||||||||||||||||||||||||||||||
| 6/8/2010 | 33,332 | (12) | — | 6.75 | 6/7/2020 | 6/8/2010 | 4,165 | (16) | — | 54.00 | 6/7/2020 | |||||||||||||||||||||||||||||||||||||||||
| 6/23/2011 | 13,333 | (7)(8) | — | 16.77 | 6/22/2021 | 6/23/2011 | 1,666 | (7) (8) | — | 134.16 | 6/22/2021 | |||||||||||||||||||||||||||||||||||||||||
| 2/27/2012 | — | 46,666 | (9)(10) | 13.00 | 2/26/2022 | 2/27/2012 | 3,665 | (9) (10) | 2,167 | (9) (10) | 104.00 | 2/26/2022 | ||||||||||||||||||||||||||||||||||||||||
| 32,300 | 10/10/2012 | 38,437 | 1,346 | 10/10/2012 | 1,588 | |||||||||||||||||||||||||||||||||||||||||||||||
| J. Jefferson Gwyn (13) | 8/19/2008 | 24,999 | (14) | — | 6.75 | 8/18/2018 | ||||||||||||||||||||||||||||||||||||||||||||||
| 9/25/2013 | 16,665 | (11) (12) | — | 9.92 | 9/24/2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| 9/12/2014 | 2,000 | (13) (14) | 4.24 | 9/11/2024 | 844 | 9/12/2014 | 996 | |||||||||||||||||||||||||||||||||||||||||||||
| Wilfriede van Assche | 1/16/2006 | 4,270 | (5) | — | 31.20 | 1/15/2016 | ||||||||||||||||||||||||||||||||||||||||||||||
| 9/15/2009 | 38,332 | (15) | — | 6.75 | 9/14/2019 | 6/8/2010 | 1,041 | (16) | — | 54.00 | 6/7/2020 | |||||||||||||||||||||||||||||||||||||||||
| 6/8/2010 | 33,332 | (12) | — | 6.75 | 6/7/2020 | 1/20/2011 | 2,082 | (17) | — | 58.56 | 1/19/2021 | |||||||||||||||||||||||||||||||||||||||||
| 6/23/2011 | 13,333 | (7)(8) | — | 16.77 | 6/22/2021 | 6/23/2011 | 1,666 | (7) (8) | — | 134.16 | 6/22/2021 | |||||||||||||||||||||||||||||||||||||||||
| 2/27/2012 | — | 20,000 | (9)(10) | 13.00 | 2/26/2022 | 2/27/2012 | 2,275 | (9) (10) | 1,474 | (9) (10) | 104.00 | 2/26/2022 | ||||||||||||||||||||||||||||||||||||||||
| 27,400 | 10/10/2012 | 32,606 | 9/25/2013 | 3,333 | (11) (12) | — | 9.92 | 9/24/2023 | ||||||||||||||||||||||||||||||||||||||||||||
| 9/12/2014 | — | 1,625 | (13) (14) | 4.24 | 9/11/2024 | 657 | 9/12/2014 | 775 | ||||||||||||||||||||||||||||||||||||||||||||
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| * | All stock options issued under our 2010 Stock Option/Stock Issuance Plan, or the 2010 Plan, and our 2000 Stock Option/Stock Issuance Plan, or the 2000 Plan, may be exercised prior to vesting, subject to repurchase rights that expire over the vesting periods indicated in the footnotes below. |
| ** | Unvested shares of restricted stock are generally forfeited if the named executive officer’s employment terminates, except to the extent otherwise provided in an employment agreement or award agreement. The stock awards held by our named executive officers awards may be accelerated upon a change in control of our company, and/or a termination of employment following a change in control, as further described below in “Executive Compensation — Potential Severance Payments upon Termination and upon Termination Following a Change in Control”. |
| (1) | Unless otherwise specified, options granted before 2011 vest as to 25% of the original number of shares on the first anniversary of the vesting commencement date and the remainder of the shares vest ratably each month thereafter until the fourth anniversary of the vesting commencement date. Notwithstanding the foregoing, awards may be accelerated upon a change in control of our company, and/or a termination of employment following a change in control, as further described below in “Executive Compensation — Potential Severance Payments upon Termination and upon Termination Following a Change in Control”. Unvested options granted under the 2010 Plan and the 2000 Plan are subject to early exercise, in which case, until they vest, the shares acquired pursuant to such exercise will be restricted and subject to repurchase by the Company at the exercise price upon the participant’s termination of employment. |
| (2) | The option exercise price for options granted prior to our initial public offering represents the fair market value of our |
| (3) | The market value of stock awards reported is computed by multiplying the number of shares of Restricted Stock granted by |
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| (4) | The vesting commencement date of this grant is September 23, 2002. The options underlying this grant were originally scheduled to expire on December 18, 2012. On August 15, 2012, we held a Special Meeting of Stockholders, at which the stockholders of the Company approved an amendment to the 2000 Plan to extend the term of such options to thirteen years from their date of grant (subject to the consent of the affected |
| (5) | The vesting commencement date of this grant is January 16, 2006. |
| (6) | The vesting commencement date of this grant is December 21, 2007. |
| (7) | All options granted on June 23, 2011, are subject to a five-year vesting schedule with a two-year cliff, with 40% of the options vesting on the second anniversary of the grant date and the remainder vesting ratably each month thereafter until the fifth anniversary of the grant date. |
| (8) | The vesting commencement date of this grant is June 23, 2011. |
| (9) | All options granted on February 27, 2012 are subject to a five-year vesting schedule with a two-year cliff, with 40% of the options |
| (10) | The vesting commencement date of this grant is February 27, 2012. |
| (11) | All options granted on September 25, 2013, are subject to a two-year vesting schedule, with 50% of the options vesting on July 19, 2014 and the remaining 50% of the options vesting on July 19, 2015. |
| (12) | The vesting commencement date of this grant is September 25, 2013. |
| (13) | All options granted on September 12, 2014, vest as to 25% of the original number of shares on the first anniversary of the vesting commencement date and the remainder of the shares vest ratably each month thereafter until the fourth anniversary of the vesting commencement date. |
| (14) | The vesting commencement date of this grant is September 12, 2014. |
| (15) | The vesting commencement date of this grant is September 3, 2008. |
| The vesting commencement date of this grant is June 8, 2010. |
| The vesting commencement date of this grant is |
Potential Payments upon Termination and upon Termination in Connection with a Change in Control
We entered into employment agreements with each of our named executive officers that became effective on September 1, 2011, and which are described in more detail under “Executive Employment Agreements” below. Under these employment agreements, our named executive officers are entitled to certain severance payments and benefits in the event of their termination of employment under certain circumstances, including (i) termination without cause, (ii) resignation for good reason, (iii) termination without cause or resignation for good reason in connection with a change in control of the Company or (iv) termination due to death or disability. In addition, under our 2010 Plan and our 2000 Plan, our named executive officers are entitled to accelerated vesting of outstanding equity awards in the event of their involuntary termination of employment within 12 months after a change in control or other corporate transaction. Under our 2011 Plan, our named executive officers are entitled to accelerated vesting of outstanding equity awards in the event of a qualifying termination of employment, as defined in the 2011 Plan, within six months prior to or 12 months after a change in control or other corporate transaction.
Executive Employment Agreements
We entered into executive employment agreements with each of our named executive officers effective as of September 1, 2011. The terms of each of these agreements are substantially similar, except with respect to each named executive officer’s initial base salary, which is described below.
Each of the executive employment agreements has an initial term of one year, starting on September 1, 2011, with an automatic renewal for additional one-year periods, unless either party gives 90 days’ notice of nonrenewal. The employment agreements provide for an initial annual base salary (to be reviewed by the Compensation Committee annually), a performance bonus and long-term incentive award opportunity as determined by the Compensation Committee, and participation in the Company’s savings, retirement and other welfare benefit plans that the Company may have in place from time to time.
Under the executive employment agreements, if the Company terminates the named executive officer’s employment or does not renew the term of the employment agreement for reasons other than for “cause” or if the named executive officer resigns his or her employment for “good reason”, then he will be entitled to (i) a lump sum severance payment equal to one years’ base salary; (ii) to the extent the termination occurs on or after the midpoint of the Company’s fiscal year, a pro-rated annual bonus and (iii) any other compensation and benefits accrued on or prior to the termination date. The named executive officer (or his or her estate, if applicable) will also receive the foregoing amounts if his or her employment is terminated due to death or disability.
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If the named executive officer’s employment is terminated or not renewed by the Company for reasons other than for “cause” or if he resigns from his or her employment for “good reason”, in each case within six months prior to, or within twelve months after, a “change in control”, then he is entitled to a lump sum severance payment equal to two times his or her base salary and any other accrued compensation and benefits. If the named executive officer’s employment is terminated or the term of the employment agreement is not renewed for “cause” or if the named executive officer resigns from his or her employment or does not renew the term for any reason other than “good reason”, then he will be entitled only to compensation and benefits that have accrued on or prior to the termination date.
The named executive officers are obligated to comply with a confidentiality, proprietary information and inventions assignment agreement previously entered into with the Company and non-disparagement covenants under the executive employment agreements. In addition, payments under the agreements will be subject to any clawback or recoupment policies as required under applicable law.
Under the executive employment agreements, the following definitions apply:
| “Cause” is defined as (i) a material breach of the employment agreement or any other written agreement with the Company to the extent the breach is not cured within 30 days; (ii) the named executive officer’s conviction or plea ofnolo contendereto a felony or another crime involving dishonesty or moral turpitude or which could reflect negatively on or otherwise impair or impede the Company’s operations; (iii) the named executive officer’s engaging in misconduct, negligence, dishonesty, violence or threat of violence that is injurious to the Company; (iv) a material breach of a written policy of the Company or the rules of any governmental or regulatory body applicable to the Company that could result in an adverse effect on the Company or could reflect negatively on or impair the operations of the Company or (v) any other willful misconduct that is materially injurious to the financial condition or business reputation of the Company. | ||
| “Good reason” is defined as any of the following: (i) an adverse change in the named executive officer’s position with the Company that materially reduces his or her level of authority, duties or responsibility; (ii) a reduction of base salary by more than five percent (except a reduction of 15% or less if the reduction is similarly applied to all executives); (iii) a relocation of place of employment by more than 50 miles without the executive’s consent or (iv) a substantial change in the nature or orientation of the Company’s core business such that the Company is no longer substantially engaged in the agricultural biotechnology business. |
| · |
As of the following events: (i) any person or group becomesend of August 31, 2015, the beneficial owner of greater than 50% of the Company’s total voting power; (ii) the sale of substantially all of the Company’s assets; or (iii) the consummation of a merger or consolidation of the Company, after which the voting securities of the Company outstanding immediately prior to the event no longer represent 50% or more of the voting power represented by the voting securities of the Company or surviving entity immediately after the event.
The initial base salaries set forth in each of our named executive officers’ employment agreementsofficers were such named executive officers’ rate of annual base salary on September 1, 2011. Upon the effective date of our initial public offering, we provided a salary increase for our named executive officers, as follows:
| Name | Salary ($) | |||
| Richard Hamilton | ||||
| Paul Kuc | ||||
| 66 |
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
The following table sets forth information with respect to the beneficial ownership of our common stock, as of November 15, 2013,10, 2015, by:
| • | each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our voting securities; | |
| • | each of our directors; | |
| • | each of our named executive officers; and | |
| • | all of our directors and executive officers as a group. |
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes any shares over which the individual or entity has sole or shared voting power or investment power. The information does not necessarily indicate beneficial ownership for any other purpose. Except as indicated in the footnotes to this table and pursuant to applicable community property laws, to our knowledge the persons named in the table below have sole voting and investment power with respect to all shares of common stock beneficially owned.
Percentage ownership of our common stock in the table is based on 25,224,2698,830,700 shares of our common stock outstanding on November 15, 2013.10, 2015. The number of shares beneficially owned by each person or group as of November 15, 201310, 2015 includes shares of common stock that such person or group had the right to acquire on or within 60 days after November 15, 2013,10, 2015, upon the exercise of options and warrants. References to options and warrants in the footnotes of the table below include only options and warrants outstanding as of November 15, 201310, 2015 that were exercisable on or within 60 days after November 15, 2013.10, 2015. For the purposes of calculating each person’s or group’s percentage ownership, stock options and warrants exercisable within 60 days after November 15, 201310, 2015 are included for that person or group but not the stock options or warrants of any other person or group.
Information in the table is derived from SEC filings made by such persons on Schedule 13D, Schedule 13G and/or under Section 16(a) of the Exchange Act and other information received by us. Except as otherwise set forth below, the address of the beneficial owner is c/o Ceres, Inc., 1535 Rancho Conejo Blvd., Thousand Oaks, CA 91320.
| Name and Address of Beneficial Owner | Number (#) | Percentage (%) | ||||||
| 5% Stockholders | ||||||||
| Artal Luxembourg S.A. (1) | 4,683,914 | 18.21 | % | |||||
| Ambergate Trust (2) | 3,265,232 | 12.72 | ||||||
| Warburg Pincus Private Equity IX, L.P. (3) | 2,922,345 | 11.38 | ||||||
| Oxford Bioscience entities (4) | 1,845,190 | 7.32 | ||||||
| Gimv entities (5) | 1,569,072 | 6.18 | ||||||
| Oppenheimer Growth entities (6) | 1,476,953 | 5.83 | ||||||
| Wellington Management Company, LLP (7) | 1,285,395 | 5.10 | ||||||
| Directors and Named Executive Officers | ||||||||
| Walter De Logi (8) | 539,161 | 2.14 | ||||||
| Pascal Brandys (9) | 94,399 | * | ||||||
| Raymond Debbane (1)(10) | 26,506 | * | ||||||
| Richard Flavell (11) | 227,182 | * | ||||||
| Robert Goldberg (12) | 218,859 | * | ||||||
| Daniel Glat | — | * | ||||||
| Richard Hamilton (13) | 942,763 | 3.63 | ||||||
| Thomas Kiley (14) | 87,370 | * | ||||||
| David B. Krieger (3) (15) | 2,928,178 | 11.40 | ||||||
| Edmund Olivier (4) (16) | 1,876,919 | 7.44 | ||||||
| Cheryl Morley (17) | 5,833 | * | ||||||
| Paul Kuc (18) | 258,031 | 1.02 | ||||||
| Jefferson J. Gwyn (19) | 140,729 | * | ||||||
| All directors and executive officers as a group (17 persons) | 7,764,043 | 28.49 | % | |||||
| Name and Address of Beneficial Owner | Number (#) | Percentage (%) | ||||||
| 5% Stockholders | ||||||||
| Artal Luxembourg S.A.(1) | 1,080,750 | 12.16 | ||||||
| Directors and Named Executive Officers | ||||||||
| Cheryl Morley(2) | 2,187 | * | ||||||
| Pascal Brandys(3) | 12,883 | * | ||||||
| Richard Flavell(4) | 32,052 | * | ||||||
| Robert Goldberg(5) | 29,270 | * | ||||||
| Aflalo Guimaraes(6) | 486 | * | ||||||
| Richard Hamilton(7) | 107,063 | 1.20 | ||||||
| Thomas Kiley(8) | 12,376 | * | ||||||
| Paul Kuc(9) | 55,324 | * | ||||||
| Wilfriede van Assche(10) | 21,168 | * | ||||||
| All directors and executive officers as a group (10 persons) | 302,961 | 3.36 | % | |||||
| * | Less than 1%. |
| (1) | Includes |
| (2) |
| (3) | Includes 5,563 shares of |
| Includes |
| Includes |
| 67 |
| Includes | ||
| (7) | Includes 2,344 shares of restricted stock held by Dr. Hamilton, 4,166 shares of Common Stock held by the Richard Hamilton 2011-Ceres GRAT and 75,135 shares of Common Stock issuable pursuant to stock options exercisable within 60 days of November 10, 2015, 833 of which are unvested and early exercisable and would be subject to a right of repurchase in our favor upon Dr. Hamilton’s cessation of service with us prior to vesting. |
| Includes |
| Includes |
| Includes |
Equity Compensation Plans
The following table provides information as of August 31, 2013November 10, 2015 regarding compensation plans under which our equity securities are authorized for issuance:
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options | Weighted Average Exercise Price of Outstanding Options | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | Number of Securities to be Issued Upon Exercise of Outstanding Options | Weighted Average Exercise Price of Outstanding Options | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | ||||||||||||||||||
| Equity compensation plans approved by stockholders | 2,791,556 | (1) | $ | 7.49 | 1,916,292 | (2) | 402,130 | (1) | $ | 43.85 | 150,800 | (2) | ||||||||||||
| Equity compensation plans not approved by stockholders | — | — | — | — | — | — | ||||||||||||||||||
| Total | 2,791,556 | (1) | $ | 7.49 | 1,916,292 | (2) | 402,130 | (1) | $ | 43.85 | 150,800 | (2) | ||||||||||||
| (1) | Consists of shares underlying stock options granted under our Amended and Restated 2011 Equity Incentive Plan, or the 2011 Plan, our 2010 Stock Option/Stock Issuance Plan, or the 2010 Plan, and our 2000 Stock Option/Stock Issuance Plan, or the 2000 Plan. |
| (2) | Consists of shares issuable under the 2011 Plan and the 2010 Plan. No additional shares are available for future issuance under the 2000 Plan other than in respect of shares underlying outstanding stock options. The shares issuable under the 2011 Plan may be increased by the number of shares that would have been issuable under any stock option granted under the 2010 Plan or the 2000 Plan that were forfeited or that expired without being exercised. No future grants will be made under the 2010 Plan. |
Item 13. Certain Relationships and Related Transactions, and Director Independence
| Item 13. | Certain Relationships and Related Transactions, and Director Independence |
In addition to the compensation arrangements, including employment, termination of employment and change-in-control and indemnification arrangements, discussed above under “Item 10. ManagementManagement” and Item“Item 11. Executive Compensation,” the following is a description of each transaction since September 1, 2012,2014, and each currently proposed transaction in which:
| 68 |
| we have been or are to be a participant; |
| · | the amount involved exceeds or will exceed $120,000; and |
| · | any of our directors, executive officers or holders of more than 5% of any class of our capital stock at the time of the transactions in issue, or any immediate family member of or person sharing the household with any of these individuals, had or will have a direct or indirect material interest. |
Indemnification Arrangements
We have entered into an indemnity agreement with each of our directors and officers. The indemnity agreements and our amended and restated certificate of incorporation and amended and restated bylaws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law. Please see “Management“Item 10. Management — Limitation of Liability and Indemnification of Officers and Directors”.
Executive Compensation and Employment Arrangements
Please see “Item 11. Executive Compensation” for information on compensation arrangements with our executive officers, including option grants and agreements with executive officers.
Investors’ Rights Agreement
Stockholder Registration Rights
In June 2010, we entered into an Amended and Restated Investors’ Rights Agreement, or the Investors’ Rights Agreement, with our major stockholders pursuant to which we agreed to provide certain rights to those stockholders that are a party to the Investors’ Rights Agreement to register the shares of our common stockCommon Stock (i) issuable upon conversion of outstanding convertible preferred stock, (ii) issued as a dividend or other distribution related to the convertible preferred stock, (iii) currently held or later acquired, and (iv) issuable upon the exercise of warrants held by any stockholder that is party to the agreement. We will bear all expenses incurred in connection with any underwritten registration, including, without limitation, all registration, filing and qualification fees, printers and accounting fees and the reasonable fees of counsel for the selling holders, but excluding underwriting discounts and commissions.
The registration rights provided for under the Investors’ Rights Agreement terminate after the earlier of five years following the consummation of an initial public offering, or any such time as the holder would be able to dispose of all of its registrable securities in any three month period under SEC Rule 144.
Demand Registration Rights
Pursuant to the Investors’ Rights Agreement, if, at any time after six months after the effective date of the first registration statement for a public offering of our securities (other than a registration statement relating either to the sale of securities to our employees pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145 transaction), upon the written request of the holders of at least 15% of the securities covered by the Investors’ Rights Agreement that we file a registration statement under the Securities Act covering the registration of at least 15% of the securities covered by the Investors’ Rights Agreement, then we are required to file a registration statement covering the resale of the common stockCommon Stock requested to be registered. We are not obligated to file a registration statement after we have effected five registration statements pursuant to the Investors’ Rights Agreement or during certain periods prior to and after a registration statement has been filed by the company or, for a period of 90 days in the event the Boardboard of Directors,directors, in its judgment, makes the determination that it would be seriously detrimental to the Company and its shareholders for such registration statement to be filed and is therefore essential to defer the filing of such registration statement.
If an underwriter selected for an underwritten offering advises the holders demanding registration that marketing factors require a limitation on the number of shares to be underwritten, then, subject to certain limitations, the number of shares of registrable securities that may be included in the underwriting will be allocated among all holders of registrable securities in proportion to the amount of our registrable securities owned by each holder.
| 69 |
Piggyback Registration Rights
Pursuant to the Investors’ Rights Agreement, if, subject to certain exceptions, we propose to register any of our stock or other securities under the Securities Act in connection with the public offering of such securities solely for cash, we are required to promptly give such holders written notice of such registration. Upon the written request of each eligible holder, we will, subject to certain limitations, cause to be registered under the Securities Act all such securities that each such holder has requested to be registered.
Registration Rights Agreement
Stockholder Registration Rights
On July 30, 2015, we entered into a Registration Rights Agreement with certain stockholders, and on August 26, 2015, we amended and supplemented the Registration Rights Agreement. We agreed pursuant to the Registration Rights Agreement to provide certain rights to those stockholders that are a party to the Registration Rights Agreement to register (i) the shares of our Common Stock issuable upon exercise of outstanding warrants held by such stockholders and (ii) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the warrants or shares underlying the warrants held by such stockholders. We will bear all expenses incurred in connection with our performance of or compliance with the Registration Rights Agreement, including, without limitation, all registration, filing and qualification fees, printers and accounting fees and fees and disbursements of our counsel.
The registration rights provided for under the Registration Rights Agreement terminate after the earlier of (a) all securities registrable under the Registration Rights Agreement have been disposed of pursuant to an effective registration statement, (b) all securities registrable under the Registration Rights Agreement have been sold pursuant to Rule 144 under the Securities Act, (c) all securities registrable under the Registration Rights Agreement may be sold without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent or (d) the five (5) year anniversary of the date of the issuance of the warrants that were the subject of the registration rights agreement.
Piggyback Registration Rights
Pursuant to the Registration Rights Agreement, if, subject to certain exceptions, we determine to register any of our equity securities under the Securities Act, we are required to promptly give holders of Registrable Securities under the Registration Rights Agreement written notice of such determination. Upon the written request of each eligible holder, we will, subject to certain limitations, cause to be registered under the Securities Act all such securities that each such holder has requested to be registered.
Related Person Transaction Policy
As provided in our current Audit Committee charter, our Audit Committee is responsible for reviewing and approving all related party transactions on an ongoing basis and must review any potential conflict of interest situations where appropriate.
Director Independence
For a discussion of the independence of our directors, please see “Management — Director Independence” above.
Item 14. Principal Accountant Fees and Services
| Item 14. | Principal Accountant Fees and Services |
Independent Registered Public Accounting Firm’s Fees
The following table presents fees billed for professional audit services and other services rendered to us by KPMG LLP for the years ended August 31, 20132015 and 20122014 (in thousands).
| Year ended August 31, | Year ended August 31, | |||||||||||||||
| 2013 | 2012 | 2015 | 2014 | |||||||||||||
| Audit Fees | $ | 485 | $ | 1,178 | $ | 673 | $ | 658 | ||||||||
| Audit-related Fees | — | 70 | — | 45 | ||||||||||||
| Tax Fees | — | — | — | — | ||||||||||||
| All Other Fees | — | — | 3 | 3 | ||||||||||||
| TOTAL | $ | 485 | $ | 1,248 | $ | 676 | $ | 706 | ||||||||
In the above table, in accordance with applicable SEC rules:
| 70 |
| • | The “Audit Fees” category includes aggregate fees billed in the relevant fiscal year for professional services rendered for the audit of annual financial statements, review of financial statements included in Quarterly Reports on Form 10-Q, services rendered in connection with our initial public offering and for services that are normally provided in connection with statutory or regulatory filings or engagements for those fiscal years. | |
| • | The “Audit-Related Fees” category consists of fees billed for professional services rendered in connection audit requirements relating to our government grants. | |
Audit Committee Pre-approval Policy
Our Audit Committee pre-approves all audit and non-audit services provided by our independent registered public accounting firm, except where pre-approval is not required because such non-audit services arede minimis under the rules of the SEC, in which case subsequent approval may be obtained. In April 2013, our Audit Committee delegated to the Chair of our Audit Committee the authority to pre-approve audit and permissible non-audit services. Our Audit Committee pre-approval policy is set forth in the Audit Committee Charter available at http://investor.ceres.net.
All fees paid to, and all services provided by, KPMG LLP during the years ended August 31, 20132015 and 20122014 were pre-approved by our Audit Committee.
| 71 |
Item 15. Exhibits and Financial Statement Schedule
(a)(1) Financial Statements
The financial statements listed in the accompanying Index to Consolidated Financial Statements on page F-1 are filed as part of this Annual Report on Form 10-K.
(a)(2) Financial Statement Schedules.
All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
(a)(3) Exhibits
See “Index to Exhibits” beginning on page E-1, which is incorporated by reference herein. The Index to Exhibits lists all exhibits filed with this Annual Report on Form 10-K and identifies which of those exhibits, if any, are management contracts and compensation plans.
| 72 |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 2623thrd day of November, 2013.2015.
| CERES, INC. | ||
| By: | /s/ PAUL KUC | |
| Name: Paul Kuc | ||
| Title: Chief Financial Officer | ||
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard Hamilton, Paul Kuc and Wilfriede van Assche, his/her attorney-in-fact, each with the power of substitution, for him/her in any and all capacities, to sign any amendments to this Annual Report, and to file the same, with exhibits thereto and other documents in connections therewith, with the Securities and Exchange Commission, hereby ratifying and conforming all that each of said attorneys-in-fact, or his or her substitutes, may do or cause to be done by virtue of hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Capacity | Date | ||
| /s/ | November | |||
| /s/ PASCAL BRANDYS | Director | November | ||
| Pascal Brandys | ||||
| /s/ RICHARD FLAVELL | Director | November | ||
| Richard Flavell, PhD, FRS, CBE | ||||
| /s/ BOB GOLDBERG | Director | November | ||
| Robert Goldberg | ||||
| /s/ AFLALO GUIMARAES | Director | November 23, 2015 | ||
| Aflalo Guimaraes | ||||
| /s/ RICHARD HAMILTON | President, Chief Executive Officer and Director | November | ||
| Richard Hamilton, PhD | (Principal Executive Officer) | |||
| /s/ THOMAS KILEY | Director | November | ||
| Thomas Kiley | ||||
| /s/ | November | |||
| (Principal Financial Officer and Principal Accounting Officer) |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | |
| Consolidated Financial Statements | |
| Report of Independent Registered Public Accounting Firm | F-2 |
| Consolidated Balance Sheets | |
| Consolidated Statements of Operations | |
| Consolidated Statements of Comprehensive Loss | |
| Consolidated Statements of Stockholders’ Equity | |
| Consolidated Statements of Cash Flows | |
| Notes to Consolidated Financial Statements |
| F-1 |
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Ceres, Inc.:
We have audited the accompanying consolidated balance sheets of Ceres, Inc. and subsidiarysubsidiaries as of August 31, 20132015 and 20122014 and the related consolidated statements of operations, comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the years in the three-yeartwo-year period ended August 31, 2013.2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ceres, Inc. and subsidiarysubsidiaries as of August 31, 20132015 and 20122014 and the results of their operations and their cash flows for each of the years in the three-yeartwo-year period ended August 31, 2013,2015, in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLPThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 1 to the consolidated financial statements, the Company has incurred recurring losses and expects that the current level of cash and cash equivalents will only be sufficient to fund operations until January 2016 which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| /s/ KPMG LLP | |
| Los Angeles, California | |
| November 23, 2015 |
November 25, 2013
| F-2 |
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
| August 31, | August 31, | |||||||||||||||
| 2013 | 2012 | 2015 | 2014 | |||||||||||||
| Assets | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 8,881 | $ | 21,069 | $ | 8,095 | $ | 3,423 | ||||||||
| Marketable securities | 21,630 | 33,565 | - | 24,579 | ||||||||||||
| Prepaid expenses | 791 | 1,050 | 477 | 633 | ||||||||||||
| Accounts receivable | 957 | 765 | 577 | 370 | ||||||||||||
| Inventories | 20 | 841 | - | 84 | ||||||||||||
| Assets held for sale | 474 | - | ||||||||||||||
| Other current assets | 157 | 278 | 143 | 240 | ||||||||||||
| Total current assets | 32,436 | 57,568 | 9,766 | 29,329 | ||||||||||||
| Property and equipment, net | 4,633 | 5,756 | 1,258 | 2,996 | ||||||||||||
| Marketable securities | - | 5,720 | ||||||||||||||
| Other assets | 109 | 203 | 98 | 99 | ||||||||||||
| Total long-term assets | 4,742 | 11,679 | 1,356 | 3,095 | ||||||||||||
| Total assets | $ | 37,178 | $ | 69,247 | $ | 11,122 | $ | 32,424 | ||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Accounts payable and accrued expenses | $ | 3,825 | $ | 5,476 | $ | 4,402 | $ | 4,278 | ||||||||
| Deferred revenue | - | 701 | ||||||||||||||
| Billings in excess of costs | 802 | 356 | ||||||||||||||
| Deferred rent | 18 | 31 | 18 | 18 | ||||||||||||
| Current portion of long-term debt | 154 | 134 | - | 70 | ||||||||||||
| Total current liabilities | 3,997 | 6,342 | 5,222 | 4,722 | ||||||||||||
| Deferred rent | 93 | 88 | 56 | 75 | ||||||||||||
| Common stock warrant liabilities | 1,631 | - | ||||||||||||||
| Long-term debt, net of current portion | 82 | 256 | - | 18 | ||||||||||||
| Total liabilities | 4,172 | 6,686 | 6,909 | 4,815 | ||||||||||||
| Commitments and contingencies | ||||||||||||||||
| Stockholders’ equity: | ||||||||||||||||
| Common Stock, $0.01 par value; 490,000,000 shares authorized; 24,897,199 shares issued and outstanding at August 31, 2013; 24,549,029 shares issued and outstanding at August 31, 2012. | 248 | 245 | ||||||||||||||
| Common Stock, $0.01 par value; 240,000,000 shares authorized; 8,830,700 shares issued and outstanding at August 31, 2015; 6,024,108 shares issued and outstanding at August 31,2014 | 88 | 60 | ||||||||||||||
| Additional paid-in capital | 308,038 | 304,672 | 335,424 | 332,049 | ||||||||||||
| Accumulated other comprehensive loss | (696 | ) | (283 | ) | 762 | (595 | ) | |||||||||
| Accumulated deficit | (274,584 | ) | (242,073 | ) | (332,061 | ) | (303,905 | ) | ||||||||
| Total stockholders’ equity | 33,006 | 62,561 | 4,213 | 27,609 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 37,178 | $ | 69,247 | $ | 11,122 | $ | 32,424 | ||||||||
See accompanying notes to the consolidated financial statements.
| F-3 |
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
| Year Ended August 31, | Year Ended August 31, | |||||||||||||||||||
| 2013 | 2012 | 2011 | 2015 | 2014 | ||||||||||||||||
| Revenues: | ||||||||||||||||||||
| Product sales | $ | 462 | $ | 432 | $ | 116 | $ | 434 | $ | 146 | ||||||||||
| Collaborative research and government grants | 4,781 | 4,939 | 6,500 | |||||||||||||||||
| Services | 2,286 | 2,258 | ||||||||||||||||||
| Total revenues | 5,243 | 5,371 | 6,616 | 2,720 | 2,404 | |||||||||||||||
| Cost and operating expenses: | ||||||||||||||||||||
| Cost of product sales | 6,245 | 2,384 | 2,492 | 5,267 | 3,021 | |||||||||||||||
| Research and development | 16,401 | 19,155 | 19,014 | 9,684 | 14,156 | |||||||||||||||
| Selling, general and administrative | 15,187 | 12,634 | 10,008 | 15,946 | 14,484 | |||||||||||||||
| Total cost and operating expenses | 37,833 | 34,173 | 31,514 | 30,897 | 31,661 | |||||||||||||||
| Loss from operations | (32,590 | ) | (28,802 | ) | (24,898 | ) | (28,177 | ) | (29,257 | ) | ||||||||||
| Interest expense | (46 | ) | (560 | ) | (456 | ) | (30 | ) | (68 | ) | ||||||||||
| Interest income | 126 | 39 | 7 | 28 | 5 | |||||||||||||||
| Other expense | - | (84 | ) | (11,020 | ) | |||||||||||||||
| Other income | 24 | - | ||||||||||||||||||
| Loss before income taxes | (32,510 | ) | (29,407 | ) | (36,367 | ) | (28,155 | ) | (29,320 | ) | ||||||||||
| Income tax (expense) benefit | (1 | ) | (3 | ) | 31 | |||||||||||||||
| Net Loss | $ | (32,511 | ) | $ | (29,410 | ) | $ | (36,336 | ) | |||||||||||
| Income tax expense | (1 | ) | (1 | ) | ||||||||||||||||
| Net loss | $ | (28,156 | ) | $ | (29,321 | ) | ||||||||||||||
| Basic and diluted net loss per share attributable to common stockholders | $ | (1.31 | ) | $ | (2.18 | ) | $ | (18.34 | ) | $ | (4.57 | ) | $ | (6.48 | ) | |||||
| Weighted average outstanding common shares used for net loss per shares attributable to common stockholders: | ||||||||||||||||||||
| Basic and diluted | 24,796,030 | 13,488,336 | 1,981,627 | 6,166,006 | 4,525,746 | |||||||||||||||
See accompanying notes to the consolidated financial statements.
| F-4 |
Consolidated Statements of Comprehensive Loss
(In thousands)
| Year Ended August 31, | Year Ended August 31, | |||||||||||||||||||
| 2013 | 2012 | 2011 | 2015 | 2014 | ||||||||||||||||
| Net loss | $ | (32,511 | ) | $ | (29,410 | ) | $ | (36,336 | ) | $ | (28,156 | ) | $ | (29,321 | ) | |||||
| Other comprehensive income (loss): | ||||||||||||||||||||
| Foreign currency translation adjustments | (395 | ) | (262 | ) | (27 | ) | 1,346 | 100 | ||||||||||||
| Net unrealized (loss) gain on marketable securities | (18 | ) | 6 | — | ||||||||||||||||
| Net unrealized gain (loss) on marketable securities | 11 | 1 | ||||||||||||||||||
| Total comprehensive loss | $ | (32,924 | ) | $ | (29,666 | ) | $ | (36,363 | ) | $ | (26,799 | ) | $ | (29,220 | ) | |||||
See accompanying notes to the consolidated financial statements.
| F-5 |
Consolidated Statements of Stockholders’ Equity (Deficit)
(In thousands, except share amounts)
| Accumulated | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional | Other | Total | Common Stock | Additional | Other | Total | |||||||||||||||||||||||||||||||||||||||||
| Number of | Paid-in | Comprehensive | Accumulated | Stockholders’ | Number of | Paid-in | Comprehensive | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Capital | Loss | Deficit | Equity (Deficit) | Shares | Amount | Capital | Loss | Deficit | Equity (Deficit) | |||||||||||||||||||||||||||||||||||||
| Balance at August 31, 2010 | 1,948,042 | $ | 19 | $ | 5,479 | $ | - | $ | (176,327 | ) | $ | (170,829 | ) | |||||||||||||||||||||||||||||||||||
| Exercise of common stock options | 66,126 | 1 | 163 | - | - | 164 | ||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | - | - | 2,710 | - | - | 2,710 | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | (36,336 | ) | (36,336 | ) | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | (27 | ) | - | (27 | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance at August 31, 2011 | 2,014,168 | 20 | 8,352 | (27 | ) | (212,663 | ) | (204,318 | ) | |||||||||||||||||||||||||||||||||||||||
| Exercise of common stock options | 298,282 | 3 | 535 | - | - | 538 | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued upon IPO, net of offering costs | 5,750,000 | 58 | 65,100 | - | - | 65,158 | ||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible notes upon IPO | 1,098,575 | 11 | 14,271 | - | - | 14,282 | ||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible preferred stock upon IPO | 15,353,221 | 153 | 197,349 | - | - | 197,502 | ||||||||||||||||||||||||||||||||||||||||||
| Cancellation of common stock | (5,817 | ) | - | - | - | - | — | |||||||||||||||||||||||||||||||||||||||||
| Restricted stock issued | 45,100 | - | - | - | - | — | ||||||||||||||||||||||||||||||||||||||||||
| Restricted stock cancelled | (4,500 | ) | - | - | - | - | — | |||||||||||||||||||||||||||||||||||||||||
| Conversion of liability classified warrants to equity classified warrants upon IPO | - | - | 17,158 | - | - | 17,158 | ||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | - | - | 1,909 | - | - | 1,909 | ||||||||||||||||||||||||||||||||||||||||||
| Effect of reverse stock split | - | - | (2 | ) | - | - | (2 | ) | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | (29,410 | ) | (29,410 | ) | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | (262 | ) | - | (262 | ) | ||||||||||||||||||||||||||||||||||||||||
| Unrealized gain on marketable securities | - | - | - | 6 | - | 6 | ||||||||||||||||||||||||||||||||||||||||||
| Balance at August 31, 2012 | 24,549,029 | 245 | 304,672 | (283 | ) | (242,073 | ) | 62,561 | ||||||||||||||||||||||||||||||||||||||||
| Exercise of common stock options | 23,832 | - | 56 | - | - | 56 | ||||||||||||||||||||||||||||||||||||||||||
| Balance at August 31, 2013 | 3,112,147 | 30 | 308,256 | (696 | ) | (274,584 | ) | 33,006 | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued upon offering, net of costs | 2,875,000 | 29 | 20,722 | - | - | 20,751 | ||||||||||||||||||||||||||||||||||||||||||
| Restricted stock issued | 348,375 | 3 | - | - | - | 3 | 43,320 | 1 | 3 | - | - | 4 | ||||||||||||||||||||||||||||||||||||
| Restricted stock cancelled | (24,037 | ) | - | - | - | - | - | (6,359 | ) | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Stock compensation expense | - | - | 3,310 | - | - | 3,310 | - | - | 3,068 | - | - | 3,068 | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | (32,511 | ) | (32,511 | ) | - | - | - | - | (29,321 | ) | (29,321 | ) | ||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | (395 | ) | - | (395 | ) | - | - | - | 100 | - | 100 | ||||||||||||||||||||||||||||||||||
| Unrealized gain on marketable securities | - | - | - | (18 | ) | - | (18 | ) | - | - | - | 1 | - | 1 | ||||||||||||||||||||||||||||||||||
| Balance at August 31, 2013 | 24,897,199 | 248 | 308,038 | (696 | ) | (274,584 | ) | 33,006 | ||||||||||||||||||||||||||||||||||||||||
| Balance at August 31, 2014 | 6,024,108 | $ | 60 | $ | 332,049 | $ | (595 | ) | $ | (303,905 | ) | $ | 27,609 | |||||||||||||||||||||||||||||||||||
| Common stock issued upon offering, net of costs | 2,798,478 | 28 | 1,110 | - | - | 1,138 | ||||||||||||||||||||||||||||||||||||||||||
| Restricted stock issued | 9,125 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Restricted stock cancelled | (1,011 | ) | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | - | - | 2,265 | - | - | 2,265 | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | (28,156 | ) | (28,156 | ) | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | 1,346 | - | 1,346 | ||||||||||||||||||||||||||||||||||||||||||
| Unrealized gain on marketable securities | - | - | - | 11 | - | 11 | ||||||||||||||||||||||||||||||||||||||||||
| Balance at August 31, 2015 | 8,830,700 | $ | 88 | $ | 335,424 | $ | 762 | $ | (332,061 | ) | $ | 4,213 | ||||||||||||||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
| F-6 |
Consolidated Statements of Cash Flows
(In thousands)
| Year Ended | Year Ended | |||||||||||||||||||
| August 31, | August 31, | |||||||||||||||||||
| 2013 | 2012 | 2011 | 2015 | 2014 | ||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||
| Net loss | $ | (32,511 | ) | $ | (29,410 | ) | $ | (36,336 | ) | $ | (28,156 | ) | $ | (29,321 | ) | |||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||||||
| Change in fair value of common and preferred stock warrants and convertible notes | - | 84 | (818 | ) | ||||||||||||||||
| Charge on issuance of convertible notes | - | - | 2,205 | |||||||||||||||||
| Charge for modification of liability classified warrants | - | - | 9,633 | |||||||||||||||||
| Impairment of assets, net of insurance proceeds | 2 | 26 | - | |||||||||||||||||
| Net loss on disposal of assets | 109 | 30 | 42 | |||||||||||||||||
| Depreciation | 1,912 | 2,059 | 2,075 | |||||||||||||||||
| Change in fair value of common stock warrants | (24 | ) | - | |||||||||||||||||
| Impairment of assets | 502 | - | ||||||||||||||||||
| Net (loss) gain on disposal of assets | (39 | ) | 385 | |||||||||||||||||
| Depreciation and amortization | 657 | 1,517 | ||||||||||||||||||
| Amortization of premiums on marketable securities | 572 | - | - | 142 | 288 | |||||||||||||||
| Stock compensation | 3,310 | 1,909 | 2,710 | 2,265 | 3,068 | |||||||||||||||
| Other | 130 | - | - | 52 | 152 | |||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||||||
| Prepaid expenses | 337 | (419 | ) | 44 | 122 | 113 | ||||||||||||||
| Accounts receivable | (195 | ) | 527 | (96 | ) | (208 | ) | 589 | ||||||||||||
| Inventories | 679 | (841 | ) | — | 65 | (61 | ) | |||||||||||||
| Deferred offering costs | - | 2,775 | (2,775 | ) | ||||||||||||||||
| Other assets | 26 | 59 | (83 | ) | 85 | (21 | ) | |||||||||||||
| Accounts payables and accrued expenses | (1,517 | ) | (1,827 | ) | 3,197 | 892 | 390 | |||||||||||||
| Deferred revenue | (701 | ) | (223 | ) | 247 | |||||||||||||||
| Billings in excess of costs | 446 | 356 | ||||||||||||||||||
| Deferred rent | (8 | ) | (61 | ) | (52 | ) | (18 | ) | (18 | ) | ||||||||||
| Net cash used in operating activities | (27,855 | ) | (25,312 | ) | (20,007 | ) | (23,217 | ) | (22,563 | ) | ||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||
| Purchases of property and equipment | (892 | ) | (1,265 | ) | (548 | ) | (387 | ) | (1,014 | ) | ||||||||||
| Proceeds from sale of property and equipment | - | - | 112 | 60 | 810 | |||||||||||||||
| Proceeds from insurance | - | 1,000 | - | |||||||||||||||||
| Change in restricted cash and investments | - | 3,000 | - | |||||||||||||||||
| Purchase of marketable securities (at cost) | (15,944 | ) | (39,278 | ) | - | (720 | ) | (33,085 | ) | |||||||||||
| Maturities of marketable securities | 32,879 | - | - | 25,116 | 29,700 | |||||||||||||||
| Net cash provided by (used in) investing activities | 16,043 | (36,543 | ) | (436 | ) | 24,069 | (3,589 | ) | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||
| Principal payments on debt | (240 | ) | (6,921 | ) | (2,263 | ) | (69 | ) | (159 | ) | ||||||||||
| Proceeds from issuance of convertible notes | - | - | 11,425 | |||||||||||||||||
| Proceeds from issuance of debt and preferred stock warrants | - | 2,500 | - | |||||||||||||||||
| Proceeds from issuance of common stock | 60 | 538 | 164 | |||||||||||||||||
| Proceeds from issuance of common stock upon IPO, net of underwriters discounts and commission | - | 65,158 | - | |||||||||||||||||
| Net cash (used in) provided by financing activities | (180 | ) | 61,275 | 9,326 | ||||||||||||||||
| Proceeds from issuance of common stock and common stock warrants, net of underwriters discounts and commissions and offering expenses | 2,794 | 20,751 | ||||||||||||||||||
| Net cash provided by financing activities | 2,725 | 20,592 | ||||||||||||||||||
| Effect of foreign currency translation on cash | (196 | ) | (262 | ) | (27 | ) | 1,095 | 102 | ||||||||||||
| Net (decrease) increase in cash and cash equivalents | (12,188 | ) | (842 | ) | (11,144 | ) | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | 4,672 | (5,458 | ) | |||||||||||||||||
| Cash and cash equivalents at beginning of period | 21,069 | 21,911 | 33,055 | 3,423 | 8,881 | |||||||||||||||
| Cash and cash equivalents at end of period | $ | 8,881 | $ | 21,069 | $ | 21,911 | $ | 8,095 | $ | 3,423 | ||||||||||
See accompanying notes to the consolidated financial statements.
| F-7 |
CERES, INC.
Consolidated Statements of Cash Flows (continued)
(In thousands)
| Year Ended August 31, | ||||||||||||
| 2013 | 2012 | 2011 | ||||||||||
| Supplemental cash flow information: | ||||||||||||
| Interest paid during the year | $ | 1 | $ | 376 | $ | 373 | ||||||
| Income taxes paid during the year | $ | 1 | $ | 3 | $ | 1 | ||||||
| Supplemental schedule of non-cash investing and financing activities: | ||||||||||||
| Additions to property and equipment under capital leases | $ | 263 | $ | 489 | $ | — | ||||||
| Acquisitions of assets under accounts payable & accrued expenses | $ | — | $ | 330 | $ | — | ||||||
| Accrued deferred offering costs | $ | — | $ | — | $ | 1,965 | ||||||
| Surrender of common stock applied to stock option exercise | $ | — | $ | 90 | $ | — | ||||||
| Detail of IPO transactions; | ||||||||||||
| Conversion of convertible notes to common stock | $ | — | $ | 14,282 | $ | — | ||||||
| Conversion of convertible preferred stock to common stock | — | 197,502 | $ | — | ||||||||
| Conversion of liability classified warrants to equity classified warrants | — | 17,158 | $ | — | ||||||||
| Total non-cash IPO transactions | $ | — | $ | 228,942 | $ | — | ||||||
Year Ended August 31, | ||||||||
| 2015 | 2014 | |||||||
| Supplemental cash flow information: | ||||||||
| Interest paid during the year | $ | 30 | $ | 46 | ||||
| Income taxes paid during the year | $ | 1 | $ | 1 | ||||
See accompanying notes to the consolidated financial statements
| F-8 |
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
(1) Summary of Significant Accounting Policies
Description of Business
Ceres, Inc. (Company) is an agricultural biotechnology company sellingthat develops and markets seeds and traits to produce dedicated energy crops – renewable bioenergy feedstocks that can enable the large-scale replacement of petroleumfor feed, forages, sugar and other fossil fuels.markets. The Company uses a combination of advanced plant breeding, biotechnology and biotechnologybioinformatics to develop seed products.products and biotechnology traits to address many of the current limitations and future challenges facing agriculture. These technology platforms, which can increase crop productivity, improve quality, reduce crop inputs and improve cultivation on marginal land, have broad application across multiple end markets, including food, feed, fiber and fuel.
In January 2010, the Company incorporatedformed a subsidiary, Ceres Sementes do Brasil Ltda. The Company’s ownership in this subsidiary is 99.9% and the Company’s Chief Executive Officer owns the remaining interest. In May 2014, the Company formed a wholly owned subsidiary, Ceres Agrotechnologies Intl LLC. In May 2014, the Company also formed a subsidiary, CS Semillas de Mexico, S.de L. de C.V. The Company’s ownership in this subsidiary is 99.9% and Ceres Agrotechnologies Intl LLC owns the remaining interest.
On January 24, 2012,March 10, 2014, the Company completed a registered public offering of 23,000,000 shares of its common stock (including 3,000,000 shares purchased by the underwriter upon the exercise in full of their right to purchase up to an additional 3,000,000 shares to cover over-allotments) at a price to the public of $1.00 per share. The Company received approximately $20,800 of proceeds from the offering, after deducting underwriting discounts and commissions and offering expenses.
On April 8, 2015, the Company filed an amendment to its amended and restated certificate of incorporation which effected a 1 for 38 reverse stock split of the Company’s issued and outstanding shares of common stock. The par value of the common stock was not adjusted as a result of the reverse stock split. All issued and outstanding shares of common stock, warrants, and stock options and per share amounts contained in the Company’s consolidated financial statements have been retroactively adjusted to reflect this reverse stock split for all periods presented.
On February 27, 2012,July 30, 2015, the Company closed its initialcompleted a registered public offering (IPO) of 5,750,000an aggregate of 1,200,000 shares of common stock (including 750,000 shares purchased byCommon Stock, par value $0.01 per share, of the underwriters upon the exercise of their option to purchase up to an additional 750,000 shares)Company, at an offering price of $13.00$1.296 per share resulting infor estimated net proceeds toof approximately $1.0 million, after deducting the placement agent fee and related offering expenses. In connection with the offering, the Company issued warrants exercisable for one share of approximately $65,158, after deducting underwriting discounts and commissions and offering expenses. Upon closingCommon Stock for each share purchased at an exercise price of the IPO, all of the Company’s outstanding shares of convertible preferred stock were automatically converted into 15,353,221 shares of common stock, all of the Company’s outstanding convertible subordinated notes (Convertible Notes) were automatically converted into 1,098,575 shares of common stock and all of the Company’s outstanding convertible preferred stock warrants were automatically converted into$1.62 per share. The Company also issued warrants to purchase a totalan aggregate of 20,51124,000 shares of common stock.Common Stock at an exercise price of $1.944 per share to the placement agent as part of the placement agent’s compensation.
On August 26, 2015, the Company completed a registered public offering of an aggregate of 1,598,478 shares of Common Stock, par value $0.01 per share, of the Company, at an offering price of $1.22 per share for estimated net proceeds, together with the concurrent private placement, of approximately $1.7 million, after deducting the placement agent fee and related offering expenses. In connection with the offering, the Company issued warrants exercisable for 0.75 shares of Common Stock, for an aggregate of 1,198,859 shares of Common Stock at an exercise price of $1.22 per share. The Company also issued warrants to purchase an aggregate of 31,970 shares of Common Stock at an exercise price of $1.83 per share to the placement agent as part of the agent's compensation.
Liquidity
The Company has incurred substantial net losses from operations since its inception, including net losses of $32,511, $29,410$28,156 and $36,336$29,321 for the years ended August 31, 2013, 2012,2015 and 2011,2014, respectively. As of August 31, 20132015 the Company had an accumulated deficit of $274,584.$332,061.
Management has taken certain actions subsequent toAs of August 31, 20132015, the Company had cash and cash equivalents of $8,095. Management believes this will only be sufficient to extendfund operations until January 2016. The Company needs to raise additional capital to continue beyond this point. The Company is evaluating opportunities to secure additional financing, including the issuance of equity or debt, sale or divesture of business units, and additional revenues from grants or collaborations. However there are no assurances that such opportunities will be available or available on terms that are acceptable to the Company. If the Company is unable to raise additional funds, the Company will not have adequate liquidity to fund its operations and will be forced to significantly curtail or cease its operations. This raises substantial doubt about the Company’s available working capital. ability to continue as a going concern. These financial statements have been prepared under the assumption that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.
The Company has incurred recurring losses and expects to incur additional losses related to the continued development and expansion of its business, including research and development, seed production and operations, and sales and marketing. The Company plans to finance its operations for the next 12 to 15 months with cash and investments currently on hand, with cash inflows from collaboration and grant funding and from product sales. There is no assurance that the Company will achieve profitable operations, or if achieved, that profitable operations can be sustained on a continued basis.
| F-9 |
Restructuring
Management believes thatOn October 11, 2013, the Company commenced the implementation of a plan (Plan) intended to further align expenditures with the Company’s cashnear-term commercial opportunity in Brazil, shift Northern Hemisphere sorghum breeding activities from College Station, Texas to a more appropriate location, de-emphasize research and cash equivalentsdevelopment for U.S. cellulosic feedstocks, reduce costs and marketable securitiesconserve cash. The actions taken under the Plan, which included, among others, a workforce reduction that impacted 16 positions in the U.S, were completed at August 31, 20132014. During 2014, the Company incurred total charges of approximately $1,600 with respect to the U.S. workforce reductions, including $900 of one-time severance expenses, $400 for continuation of salary and benefits of certain employees until their work was completed and $300 of other costs. Of the $1,600 of cash payments made during the nine months ending May 31, 2014, $1,000, $500 and $100 was recorded to research and development expenses, cost of sales and general and administrative expenses, respectively.
On June 19, 2015, the Company announced the continued realignment of its business to focus on food and forage opportunities and biotechnology traits for sugarcane and other crops. As part of the realignment, the Company undertook a restructuring of its Brazilian seed operations. The restructuring of the Company’s Brazilian seed operations, includes, among other actions, a workforce reduction that initially impacted 14 positions in Brazil primarily related to administration, operations and manufacturing as well as 2 support positions in the United States. The Company estimated that it would incur charges of approximately $600 over the five-month period ending in October 2015 with respect to the initial workforce reductions in Brazil and the U.S., including $100 in continuation of salary and benefits of certain employees until their work is completed and their positions are sufficienteliminated, and $500 of one-time severance and other costs, all of which will be cash expenditures. During the year ended August 31, 2015, the Company made cash payments of approximately $500 related to fundthese expenses. The remaining cash payments of approximately $100 are expected to be made prior to the quarter ended November 30, 2015, and are accrued in accounts payable and accrued expenses as of August 31, 2015.
As of August 19, 2015, the Company initiated a further workforce reduction that impacted an additional 19 positions in Brazil. The Company estimated that it would incur additional charges of approximately $800 over the four-month period ending on December 31, 2015 with respect to the additional workforce reductions in Brazil, including $100 in continuation of salary and benefits of certain employees until their work is completed and their positions are eliminated, and $700 of one-time severance and other costs, all of which will be cash expenditures. The restructuring of the Company’s Brazilian seed operations is expected to be substantially completed by February 1, 2016. After full implementation of the restructuring plan, the Brazilian operations will be focused on sugarcane trait development activities for the next 12 months.Brazilian sugarcane market. During the year ended August 31, 2015, the Company made cash payments of approximately $200 related to these expenses. The remaining cash payments of approximately $600 are expected to be made prior to December 31, 2015, and are accrued in accounts payable and accrued expenses as of August 31, 2015.
| F-10 |
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (GAAP) and with the Rules and Regulations of the Securities and Exchange Commission. The consolidated financial statements include the accounts of the Company and its subsidiary.subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. This affects the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include the valuation of property and equipment,assets held for sale, inventory, deferred tax assets, common stock, convertible preferred stock, stock options, warrant liabilities and convertible notes.liability classified warrants. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments, with an original maturity of three months or less when purchased, to be cash equivalents. Cash equivalents totaled $8,881$3,792 and $16,769$2,174 at August 31, 20132015 and 2012,2014, respectively.
Marketable Securities
Marketable securities are classified as available for sale and are recorded at fair value, with the unrealized gains and losses, if any, net of taxes, reported as a component of shareholders’ equity until realized or until a determination is made that an other-than-temporary decline in market value has occurred.
In determining whether an other-than-temporary impairment exists for debt securities, management considers: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Management has determined that there has been no other-than-temporary impairment of its marketable securities.
The cost of marketable securities sold is based upon the specific identification method and any realized gains or losses on the sale of investments are reflected as a component of interest income or expense. There were no sales of marketable securities during the years ended August 31, 20132015 and 2012.2014.
The Company classifies marketable securities as current or non-current based upon whether such assets are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business.
Financial Instruments
The carrying value of financial instruments such as cash and cash equivalents, accounts receivables, accounts payable, and accrued expenses approximate their fair value due to the short-term nature of these instruments. At each period end, the fair value of the long-term debt approximated carrying value based on interest rates currently available to the Company.
Fair Value of Financial Instruments
Assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels that are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:
| F-11 |
The following tables present the Company’s financial assets that were measured at fair value on a recurring basis as of August 31, 20132015 and 20122014 by level within the fair value hierarchy:
| August 31, 2013 | August 31, 2015 | |||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
| Financial Assets | ||||||||||||||||||||||||||||||||
| Money market funds | $ | 2,310 | $ | — | $ | — | $ | 2,310 | $ | 3,732 | $ | — | $ | — | $ | 3,732 | ||||||||||||||||
| Certificates of deposit — available for sale | — | 4,555 | — | 4,555 | — | 60 | — | 60 | ||||||||||||||||||||||||
| Commercial paper — available for sale | — | 2,198 | — | 2,198 | ||||||||||||||||||||||||||||
| Corporate bonds — available for sale | — | 16,076 | — | 16,076 | ||||||||||||||||||||||||||||
| Total | $ | 2,310 | $ | 22,829 | $ | — | $ | 25,139 | $ | 3,732 | $ | 60 | $ | — | $ | 3,792 | ||||||||||||||||
All of the money market funds and $1,199certificates of the commercial paperdeposit are included in cash and cash equivalents on the consolidated balance sheets.
| August 31, 2012 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Financial Assets | ||||||||||||||||
| Money market funds | $ | 16,769 | $ | — | $ | — | $ | 16,769 | ||||||||
| Commercial paper — available for sale | — | 10,187 | — | 10,187 | ||||||||||||
| Corporate bonds — available for sale | — | 29,098 | — | 29,098 | ||||||||||||
| Total | $ | 16,769 | $ | 39,285 | $ | — | $ | 56,054 | ||||||||
| August 31, 2014 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Financial Assets | ||||||||||||||||
| Money market funds | $ | 2,114 | $ | — | $ | — | $ | 2,114 | ||||||||
| Certificates of deposit — available for sale | — | 4,240 | — | 4,240 | ||||||||||||
| Commercial paper — available for sale | — | 5,249 | — | 5,249 | ||||||||||||
| Corporate bonds ��� available for sale | — | 15,150 | — | 15,150 | ||||||||||||
| Total | $ | 2,114 | $ | 24,639 | $ | — | $ | 26,753 | ||||||||
All of the money market funds and $60 of the certificates of deposit are included in cash and cash equivalents on the consolidated balance sheets.
Financial Liabilities
Certain common stock warrants have been classified as liabilities due to some features which could enable the holder to receive cash. The Company utilized an option pricing valuation model to determine the fair value of its outstanding common stock warrant liabilities. The inputs to the model included fair value of the stock related to the warrant, exercise price of the warrant, expected term, expected volatility, risk-free interest rate and dividend yield. As several significant inputs were not observable, the overall fair value measurement of the common stock warrants were classified as Level 3. The fair value of the Company’s common stock warrant liabilities were $1,631 at August 31, 2015. There were no common stock warrant liabilities outstanding at August 31, 2014.
The fair value of the common stock warrant liabilities at August 31, 2015 was estimated using the following weighted-average assumptions:
| Year Ended August 31, 2015 | ||
| Expected term (in years) | 4.91 - 5.49 | |
| Expected volatility | 69.80% | |
| Risk free interest rate | 1.54% | |
| Expected dividend yield | 0% |
Accounts Receivable
Accounts receivable represents amounts owed to the Company from product sales and collaborative research and government grants. The Company had no amounts reserved for doubtful accounts at August 31, 20132015 and 20122014 as the Company expected full collection of the accounts receivable balances.
| F-12 |
Customers representing greater than 10% of accounts receivable were as follows (in percentages):
| As of August 31, | As of August 31, | |||||||||||||||
| Customers | 2013 | 2012 | 2015 | 2014 | ||||||||||||
| Customer A | 37.3 | 47.9 | ||||||||||||||
| Customer B | 23.1 | * | 23.7 | 59.5 | ||||||||||||
| Customer D | ** | 13.6 | ||||||||||||||
| Customer E | * | 15.2 | 18.9 | 25.9 | ||||||||||||
| Customer F | 21.8 | ** | 38.2 | ** | ||||||||||||
| Customer G | 16.1 | ** | ||||||||||||||
** No balance
Customers representing greater than 10% of revenues were as follows (in percentages):
| Year Ended August 31, | Year Ended August 31, | |||||||||||||||||||
| Customers | 2013 | 2012 | 2011 | 2015 | 2014 | |||||||||||||||
| Customer A | 21.2 | 24.7 | 20.5 | ** | 17.5 | |||||||||||||||
| Customer B | 20.2 | 16.8 | 16.6 | 33.5 | 41.9 | |||||||||||||||
| Customer C | ** | * | 20.9 | |||||||||||||||||
| Customer D | 14.5 | 17.4 | 25.4 | |||||||||||||||||
| Customer E | 12.2 | 16.5 | ||||||||||||||||||
| Customer F | 22.5 | 14.0 | * | 13.1 | 11.6 | |||||||||||||||
| Customer I | 11.9 | ** | ||||||||||||||||||
** No revenue
Inventories and Inventory Valuation
At August 31, 2015, inventory was fully reserved. At August 31, 2014, seed inventory consisted of work-in-process and finished goods for costs related to the Company’s sorghum seeds in Brazil. When inventory costs exceed expected market value due to obsolescence or lack of demand, inventory write-downs are recorded for the difference between the cost and the market value in the period based on the Company's evaluation of such inventory.
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided using the straight-line method over the shorter of the estimated useful lives or the remaining life of the lease. Depreciation periods for the Company’s property and equipment are as follows:
| Automobiles and trucks | 3-5 years |
| Office, laboratory, farm and warehouse equipment and furniture | 3-5 years |
| Leasehold improvements | 3-10 years |
| Buildings | 14-39 years |
Assets Held for Sale
The Company reclassifies long-lived assets to Assets Held for Sale when all required criteria for such reclassification are met. The assets are recorded at the lower of the carrying value or fair value less costs to sell. Assets held for sale must meet the following conditions: (1) management, having authority to approve the action, commits to a plan to sell the asset, (2) the asset is available for immediate sale in its present condition, (3) an active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated, (4) the sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year, (5) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (6) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
| F-13 |
In connection with an agreement the Company entered into on March 31, 2014 to sell its facility and certain equipment located in College Station, Texas, a determination was made that the assets met the criteria to be classified as held for sale and the fair value for the related assets was in excess of their carrying amount. Accordingly, the Company recorded a charge of $464 to Research and development expense for the difference between the net carrying amount of these assets of $1,152 and the net cash proceeds of $688. On June 2, 2014, the Company completed the sale of this facility and equipment for net cash proceeds of $688.
In connection with the announcement by the Company on June 19, 2015, to restructure its Brazilian seed operations, a determination was made that the fixed assets in Brazil met the criteria to be classified as held for sale and the carrying amount of those assets was in excess of their fair value. Accordingly, the Company recorded a charge of $395 to cost of product sales, research and development and general and administrative expense for the difference between the net carrying value of these assets of $869 and estimated net cash proceeds of $474. Fair value of the assets held for sale was determined using an appraisal for certain assets and resale information available for certain assets.
Impairment of Long-Lived Assets
Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. To the extent that an impairment indicator has occurred, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. In fiscal years 2013 and 2012 there was an indicator that impairment has occurred. However, there was no impairment as the carrying amount of the property and equipment did not exceed the fair value of such assets.
On February 3, 2012, the Company’s plant breeding and field research station located near College Station, Texas was damaged by a tornado. The impact was limited to structural damage to the building that houses office space and a small laboratory used to evaluate biomass samples and work space. A small greenhouse and tractor sheds, and some agricultural equipment were also damaged.
In fiscal year 2012, the Company impaired $1,026 in assets related to damage at the Texas facility and received insurance proceeds of $1,000 for repair costs. The remainder of the repairs, which totaled approximately $150, were completed by November 30, 2012. These remaining repairs were also covered by insurance, subject to the Company’s deductible.
Common and Convertible Preferred Stock Warrant Liabilities
Prior to the closing of the IPO, the Company determined that common stock warrants issued to certain holders of convertible preferred stock were not considered indexed to the Company’s common stock and therefore required liability classification. In addition, the Company accounted for its warrants to purchase shares of the Company’s convertible preferred stock that were contingently redeemable as liabilities at fair value on the consolidated balance sheets. These common and convertible preferred stock warrants were subject to re-measurement at each balance sheet date and the changes in fair value, if any, were recognized as other (expense) income.
Upon the closing of the IPO, certain common and convertible preferred stock warrants, previously classified as liabilities were revalued and reclassified to additional paid-in capital as they no longer met the requirements for liability classification given the automatic conversion of the convertible preferred stock to common stock upon consummation of the IPO.
Convertible Preferred Stock
In connection with the Company’s decision to file a registration statement with the Securities and Exchange Commission for the IPO, the Company adopted the provisions of Accounting Standards Codification (ASC) Topic 480-10-S99-3A,Classification and Measurement of Redeemable Securities.
The convertible preferred stock was not redeemable by the Company or at the option of the preferred stockholders. The holders of the Company’s outstanding convertible preferred stock, voting or consenting together as a separate class, controlled the vote of the Company’s stockholders. As a result, the holders of all series of the Company’s convertible preferred stock could vote to approve a change in control under circumstances that would trigger a deemed liquidation under the Company’s certificate of incorporation in effect prior to the IPO. As redemption of the convertible preferred stock through a deemed liquidation was outside the control of the Company, all shares of convertible preferred stock were classified as temporary equity rather than as a component of stockholders’ equity in the Company’s consolidated balance sheets. The carrying value of convertible preferred stock was recorded at its fair value at the date of issue. As discussed in Note (1), all of the outstanding shares of convertible preferred stock were automatically converted into shares of common stock upon the closing of the IPO.
Stock-Based Compensation
The Company accounts for stock-based compensation arrangements with employees using a fair value method under ASC Topic 718,Compensation – Stock Compensation, which requires the recognition of compensation expense for costs related to all stock-based payments including stock options and restricted stock awards.
The fair value method requires the Company to estimate the fair value of stock-based payment awards on the date of grant using an option pricing model. The Company uses an option pricing model to estimate the fair value of stock options granted that are expensed on a straight-line basis over the vesting period. The Company accounts for stock options issued to non-employees based on the estimated fair value of the awards using the option pricing model. The measurement of stock-based compensation to non-employees is subject to periodic adjustments as the underlying equity instruments vest, and the resulting change in value, if any, is recognized in the Company’s consolidated statements of operations during the period the related services are rendered.
The Company accounts for restricted stock awards based on the quoted market price of the Company’s common stock on the date of grant that are expensed on a straight-line basis over the vesting period.
Revenue Recognition
Revenues are recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) transfer of product or technology has been completed or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. To date, the Company’s primary source of revenues has been derived from collaborative research agreements and government grants and to a lesser extent, product sales.
Product Sales
Product sales are derived from sales of seeds, trait fees, crop management servicesseed and biomass that was delivered under certain of our sales, incentive and performance based programs for the 2012-2013 growing season in Brazil.trait fees. Product sales are recognized, net of discounts and allowances, once passage of title and risk of loss have occurred and contractually specified acceptance criteria have been met, provided all other revenue recognition criteria have also been met. To date, product sales have not been significant.
| F-14 |
Collaborative Research and Government Grants
From time to time, the Company entershas entered into research and development collaboration agreements with third parties, including a large agriculture supplier, a consumer goods conglomerate and several biofuel producers andproducers. In addition, the Company has received grants from government agencies such as the Department of Energy (DOE) and the United States Department of Agriculture (USDA). The research and development collaboration agreements typically provide the Company with multiple revenue streams, which may include up-front, non-refundable fees for licensing certain of the Company’s technologies, government grants and fees for research and development activities, and contingent milestone payments based upon achievement of contractual criteria.
| • | Technology License Fees— For collaboration agreements in which the Company has continuing involvement, license fees are recognized on a straight-line basis over the term of the arrangement. Licensing fees are non-refundable and not subject to future performance. |
| • | Government Grants— The Company receives payments from government entities in the form of government grants. Government grants generally provide the Company with |
| • | Research and Development Fees— Generally, fees for research and development activities are recognized as the services are performed over the performance period, as specified in the respective agreements. Certain of the Company’s collaboration agreements require the Company to deliver research data by specific dates and that the collective program plan will result in reaching specific crop characteristics by certain dates. For such arrangements, the Company recognizes revenues either on a straight-line basis over the term of the arrangement or based on the approximate percentage of completion of services under the agreement, but the revenue recognized cannot exceed payments received by the Company to date under the agreement. The research and development period is estimated at the inception of each agreement and is periodically evaluated. |
| • | Milestone Fees— Fees that are contingent based on achievement of substantive performance milestones at inception of the agreement are recognized based on the achievement of the milestone, as defined in the respective agreements. |
Deferred Revenue
The Company recognizes deferred revenue to the extent that cash received under the collaboration agreement is in excess of the revenues recognized related to the agreement since the work under the agreement has not yet been performed at the time of cash receipt, which is classified as other current liabilities on the accompanying consolidated balance sheet.
On December 20, 2007, the Company and Campbell Soup Company (Campbell) entered into a development and license agreement under which the Company was working to improve yields of a food product. The agreement provided that the Company would receive $7,500 in payments from Campbell over a five-year period provided milestones were met. In addition, the agreement provided that the Company would be entitled to receive a royalty based on the gross sales of crop varieties created under the agreement. In December 2011, the development and license agreement was amended to extend the $7,500 in payments from Campbell over a six-year period. In November 2012, following Campbell’s sale of its vegetable seed assets to a third party, the development and license agreement, as amended, was terminated and cancelled. In connection with the termination, Campbell paid the Company $550 in full and complete satisfaction of all remaining financial obligations. The Company recognized revenue of $758, $933 and $1,683 under this agreement in 2013, 2012 and 2011, respectively.
The Company has earned research funding revenues from several agreements with the DOE, the USDA, USAID and several leading bio-fuelsbiofuel producers whereby the Company performed research activities and received revenues that partially reimbursed its expenses incurred. Under such grants and agreements, the Company retained a proprietary interest in the products and technology it developed. These expense reimbursements primarily consisted of direct expense sharing arrangements. The Company recorded revenue related to these grants and collaboration agreements of approximately $2,355, $2,416$1,630 and $3,120$1,980 in 2013, 20122015 and 2011,2014, respectively. The cumulative remaining amount to be claimed for all grants and certain collaboration agreements outstanding as of August 31, 2013 is approximately $2,288.
On December 16, 2008,Software and Services
During the Companyyears ended August 31, 2015 and Syngenta Biotechnology, Inc. (Syngenta) entered into a software license and collaboration agreement pursuant to which2014, the Company provided services related to software software developmentarrangements that involve (1) significant production, modification or customization and (2) post contract customer support for certain research application-based software.(PCS). The agreementcustomer has the option, annually, to extend the arrangement or elect to receive only maintenance. The Company does not have vendor specific objective evidence (VSOE) related to these components. In addition, there are substantive acceptance provisions related to the production, modification or customization. The company applies the completed contract method to the arrangement. However, only costs related to the production, modification or customization are deferred. Revenue is recognized upon acceptance of the production, modification or customization as that is later that the expiration of the annual PCS period. Revenue related to these arrangements was structured into three phases$656 and under the agreement,$278 million in 2015 and 2014.
The Company also had an arrangement that included a license, installation services and PCS. As the Company received $1,500 in payments over an approximate 4.5 year period. The software delivered is comprised of multiple elements, which include software, installation, training, customization of software, and software support. On April 16, 2012, the agreement was amended to reflect Syngenta’s acceptance of all software and software support services provided under the original agreement and to allowdoes not have VSOE for the continuationelements, the Company has billings in excess of certain software support services during a post development support period beginning April 16, 2012 and extendingcash until all services are terminated pursuant to the terms of the agreement. The Company recognized revenues equal to the amount of expense recognized as services were rendered until April 15, 2012, when the software support becamePCS is the only undelivered element. Beginning April 16, 2012, the unrecognizedelement and will recognize revenue under the agreement is being recognized ratably over the remaining software supportPCS period. There was no revenue related to these arrangements during 2015 and 2014.
| F-15 |
Billings in Excess of Costs
The Company recognizes billings in excess of costs to the extent that cash received under the software and service arrangements are in excess of the revenues recognized revenues totaling $1,180, $750 and $243related to the arrangements since the work under this agreement in 2013, 2012 and 2011, respectively.the arrangements have not yet been performed, or the work has not been fully completed at the balance sheet date.
Research and Development
Research and development expenses principally consist of personnel costs related to the Company’s research and development staff as well as depreciation of research and development assets. Research and development expenses also include costs incurred for laboratory supplies, reimbursable costs associated with government grants and collaborative agreements, third-party contract payments, consultants, facility and related overhead costs.
Seed Inventories
At August 31, 2013, inventory consisted of work-in-process costs related to sweet sorghum seeds. At August 31, 2012, inventory consisted of work-in-process and finished good costs related to sweet sorghum seeds. Inventory costs are computed on a first-in, first-out basis and valued at the lower of cost or market with any excess cost recognized during the period within cost of product sales. At August 31, 2013, all seed inventory other than work-in-process was fully written off based on the lower of cost or market, based on on the Company's evaluation of such inventory.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740,Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
The Company accounts for unrecognized tax benefits also in accordance with ASC 740,Income Taxes, which prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution to any related appeals or litigation, based solely on the technical merits of the position. The Company has no accrual for interest or penalties related to uncertain tax positions at August 31, 20132015 and 2012,2014, and did not recognize interest or penalties in the Statements of Operations during the years ended August 31, 2013, 20122015 and 2011.2014.
The major jurisdictions in which the Company files income tax returns include the federal and state jurisdictions within the United States and Brazil, where it has a subsidiary. The tax years after 20082009 remain open to examination by federal and state taxing jurisdictions and the tax years after 20102011 remain open to examination by foreign jurisdictions. However, the Company has NOLs beginning in 1998 which would cause the statute of limitations to remain open for the year in which the NOL was incurred.
Foreign Currency Translation
The Brazilian real is the functional currency of the Company’s subsidiary in Brazil.Brazil and the Mexican Peso is the functional currency of the Company’s subsidiary in Mexico. Accordingly, assets and liabilities of those operations are translated into United States dollars using the current exchange rate in effect at the balance sheet date and equity accounts are translated into United States dollars using historical rates. Revenues and expenses are translated at the weighted average rate of exchange during the reporting period. Gains and losses from foreign currency translation adjustments are represented as a component of accumulated other comprehensive loss.
Accumulated Other Comprehensive IncomeLoss
The Company’s unrealized gains and losses on available-for-sale securities and foreign currency translation adjustments represents the components of comprehensive income (income)loss and have been disclosed in the consolidated statements of stockholders’ equity (deficit).equity.
| F-16 |
The following summarizes the changes in the balances of each component of accumulated comprehensive income (loss) during the years presented:
| Accumulated | ||||||||||||
| Foreign | Unrealized | Other | ||||||||||
| Currency | Gains (Losses) | Comprehensive | ||||||||||
| Translation | on Securities | Loss | ||||||||||
| Balance at August 31, 2011 | $ | (27 | ) | $ | - | $ | (27 | ) | ||||
| Comprehensive (loss) gain | (262 | ) | 6 | (256 | ) | |||||||
| Balance at August 31, 2012 | (289 | ) | 6 | (283 | ) | |||||||
| Comprehensive loss | (395 | ) | (18 | ) | (413 | ) | ||||||
| Balance at August 31, 2013 | $ | (684 | ) | $ | (12 | ) | $ | (696 | ) | |||
| Accumulated | ||||||||||||
| Foreign | Unrealized | Other | ||||||||||
| Currency | Gains (Losses) | Comprehensive | ||||||||||
| Translation | on Securities | Loss | ||||||||||
| Balance at August 31, 2013 | $ | (684 | ) | $ | (12 | ) | $ | (696 | ) | |||
| Comprehensive gain | 100 | 1 | 101 | |||||||||
| Balance at August 31, 2014 | (584 | ) | (11 | ) | (595 | ) | ||||||
| Comprehensive gain | 1,346 | 11 | 1,357 | |||||||||
| Balance at August 31, 2015 | $ | 762 | $ | - | $ | 762 | ||||||
Basic and Diluted Net Loss Per Share
Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares and dilutive potential common share equivalents then outstanding, to the extent they are dilutive. Potential common shares consist of shares issuable upon the exercise of stock options and warrants (using the treasury stock method), and the weighted average conversion of the convertible preferred stock into shares of common stock (using the if-converted method). Dilutive net loss per share is the same as basic net loss per share for all periods presented because the effects of potentially dilutive items were anti-dilutive.
The following table sets forth the computation of basic and diluted net loss per common share:
| Year Ended | ||||||||||||
| August 31, | ||||||||||||
| 2013 | 2012 | 2011 | ||||||||||
| Net loss | $ | (32,511 | ) | $ | (29,410 | ) | $ | (36,336 | ) | |||
| Basic and diluted net loss per common share | $ | (1.31 | ) | $ | (2.18 | ) | $ | (18.34 | ) | |||
| Basic and diluted weighted average outstanding common shares used for net loss | 24,796,030 | 13,488,336 | 1,981,627 | |||||||||
The following potentially dilutive, common share equivalents were excluded from the calculation of diluted net loss per common share because their effect was anti-dilutive for each of the periods presented:
| Year Ended | ||||||||||||
| August 31, | ||||||||||||
| 2013 | 2012 | 2011 | ||||||||||
| Options to purchase common stock | 2,791,556 | 2,778,508 | 2,597,285 | |||||||||
| Warrants to purchase common stock | 2,082,045 | 2,082,045 | 1,994,868 | |||||||||
| Warrants to purchase convertible preferred stock | — | — | 20,511 | |||||||||
| Convertible preferred stock | — | — | 15,353,226 | |||||||||
| Convertible notes | — | — | 1,171,818 | |||||||||
| Total | 4,873,601 | 4,860,553 | 21,137,708 | |||||||||
| Year Ended | ||||||||
| August 31, | ||||||||
| 2015 | 2014 | |||||||
| Options to purchase common stock | 409,763 | 396,504 | ||||||
| Warrants to purchase common stock | 2,775,083 | 320,255 | ||||||
| Total | 3,184,846 | 716,759 | ||||||
Segment and geographic information
Management has determined that it has one business activity and operates in one segment as it only reports financial information on an aggregate and consolidated basis to its Chief Executive Officer, who is the Company’s chief operating decision maker. Geographic information regarding the Company’s operations outside of North America is not significant for any period presented.
Recent Accounting Pronouncements
In February 2013, the FASB issued ASU 2013-02,Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.ASU 2013-02 finalizes the requirements of ASU 2011-05 that ASU 2011-12 deferred, clarifying how to report the effect of significant reclassifications out of accumulated other comprehensive income. ASU 2013-02 is effective for reporting periods beginning after December 15, 2012 and is to be applied prospectively. The Company does not anticipate that the adoption of this ASU will materially change the presentation of its consolidated financial statements.
In July 2013, the FASB issued ASU 2013-11,Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (NOL) carryforward, or similar tax loss or tax credit carryforward, rather than as a liability when: (1) the uncertain tax position would reduce the NOL or other carryforward under the tax law of the applicable jurisdiction, and (2) the entity intends to use the deferred tax asset for that purpose. ASU 2013-11 changes existing presentation requirements but does not require new recurring disclosures and is effective for fiscal years, and the interim periods within those years, beginning after December 15, 2013. The Company does not anticipate that the adoption of this ASU will materially change the presentation of its consolidated financial statements.
| F-17 |
In May 2014, the Financial Accounting Standards Board issued the Accounting Standards Update (“ASU”) 2014-09Revenue from Contracts with Customers (Topic 606) .. ASU 2014-09 replaces the majority of all U.S. GAAP guidance that currently exists on revenue recognition with a single model to be applied to all contracts with customers. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
For a public entity, ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is not permitted. An entity must apply ASU 2014-09 using either the full retrospective approach, by restating all years presented, or the cumulative effect at the date of adoption approach. We are currently assessing the impact that these changes will have on our consolidated financial statements and therefore are unable to quantify such impact or determine the method of adoption.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern Sub-topic 205-40. The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. This ASU is effective for interim and annual periods beginning on or after December 15, 2016, and early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on its financial position or results of operations.
| F-18 |
(2) Marketable Securities
MarketableAt August 31, 2015, there were no marketable securities.
At August 31, 2014, marketable securities classified as available for sale consisted of the following:
| August 31, 2013 | ||||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | ||||||||||||||
| Available for sale securities | Cost | Gain | Loss | Fair Value | ||||||||||||
| Certificates of Deposit | $ | 4,561 | $ | - | $ | (6 | ) | $ | 4,555 | |||||||
| Commercial Paper | 2,199 | - | (1 | ) | 2,198 | |||||||||||
| Corporate Bonds | 16,081 | 2 | (7 | ) | 16,076 | |||||||||||
| Total | $ | 22,841 | $ | 2 | $ | (14 | ) | $ | 22,829 | |||||||
| August 31, 2014 | ||||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | ||||||||||||||
| Available for sale securities | Cost | Gain | Loss | Fair Value | ||||||||||||
| Certificates of Deposit | $ | 4,244 | $ | - | $ | (4 | ) | $ | 4,240 | |||||||
| Commercial Paper | 5,249 | - | - | 5,249 | ||||||||||||
| Corporate Bonds | 15,157 | - | (7 | ) | 15,150 | |||||||||||
| Total | $ | 24,650 | $ | - | $ | (11 | ) | $ | 24,639 | |||||||
$1,199At August 31, 2014, $60 of the certificates of deposit and $1,199 of the commercial paper, respectively, is included in the cash and cash equivalents on the consolidated balance sheets.sheet.
| August 31, 2012 | ||||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | ||||||||||||||
| Available for sale securities | Cost | Gain | Loss | Fair Value | ||||||||||||
| Commercial Paper | $ | 10,187 | $ | 2 | $ | (2 | ) | $ | 10,187 | |||||||
| Corporate Bonds | 29,092 | 17 | (11 | ) | 29,098 | |||||||||||
| Total | $ | 39,279 | $ | 19 | $ | (13 | ) | $ | 39,285 | |||||||
There were no marketable securities classified as held-to maturity as of August 31, 20132015 and 2012,2014, respectively.
The following tables summarize the amortized cost and fair value of the Company’sAll marketable securities classified by stated maturity as ofat August 31, 2013 and 2012:2014 are due to mature in one year or less.
| August 31, 2013 | ||||||||
| Amortized Cost | Fair Value | |||||||
| Marketable securities | ||||||||
| Due in 1 year or less | $ | 22,841 | $ | 22,829 | ||||
| Due in 1 — 2 years | - | - | ||||||
| $ | 22,841 | $ | 22,829 | |||||
| August 31, 2012 | ||||||||
| Amortized | ||||||||
| Cost | Fair Value | |||||||
| Marketable securities | ||||||||
| Due in 1 year or less | $ | 33,567 | $ | 33,565 | ||||
| Due in 1-2 years | 5,712 | 5,720 | ||||||
| $ | 39,279 | $ | 39,285 | |||||
(3) Inventories
At August 31, 2015, inventory was fully reserved. Inventories at August 31, 2014 consisted of the following:
| August 31, | August 31, | August 31, | ||||||||||
| 2013 | 2012 | 2014 | ||||||||||
| Work in process | $ | 20 | $ | 264 | $ | 20 | ||||||
| Seed inventory | - | 577 | 64 | |||||||||
| Total inventories | $ | 20 | $ | 841 | $ | 84 | ||||||
| F-19 |
(4) Property and Equipment
Property and equipment are summarized as follows:
| As of | ||||||||
| August 31, | ||||||||
| 2013 | 2012 | |||||||
| Land | $ | 43 | $ | 43 | ||||
| Automobiles and trucks | 796 | 728 | ||||||
| Buildings | 3,180 | 3,252 | ||||||
| Office, laboratory, farm and warehouse equipment and furniture | 14,792 | 15,552 | ||||||
| Leasehold improvements | 5,716 | 5,709 | ||||||
| 24,527 | 25,284 | |||||||
| Less accumulated depreciation | (19,894 | ) | (19,528 | ) | ||||
| Property and equipment, net | $ | 4,633 | $ | 5,756 | ||||
| As of | ||||||||
| August 31, | ||||||||
| 2015 | 2014 | |||||||
| Land | $ | 43 | $ | 43 | ||||
| Automobiles and trucks | 44 | 1,113 | ||||||
| Buildings | 1,215 | 1,215 | ||||||
| Office, laboratory, farm and warehouse equipment and furniture | 10,863 | 12,718 | ||||||
| Leasehold improvements | 5,659 | 5,659 | ||||||
| 17,824 | 20,748 | |||||||
| Less accumulated depreciation and amortization | (16,566 | ) | (17,752 | ) | ||||
| Property and equipment, net | $ | 1,258 | $ | 2,996 | ||||
(5) Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following:
| As of | As of | |||||||||||||||
| August 31, | August 31, | |||||||||||||||
| 2013 | 2012 | 2015 | 2014 | |||||||||||||
| Accounts payable | $ | 1,289 | $ | 1,865 | $ | 2,000 | $ | 1,406 | ||||||||
| Accrued payroll and related expenses | 1,020 | 2,530 | 1,581 | 2,303 | ||||||||||||
| Research and development contracts | 1,098 | 686 | 283 | 123 | ||||||||||||
| Accrued grower commitments | 38 | 76 | ||||||||||||||
| Taxes | 395 | - | ||||||||||||||
| Other | 380 | 319 | 143 | 446 | ||||||||||||
| $ | 3,825 | $ | 5,476 | $ | 4,402 | $ | 4,278 | |||||||||
(6) Long-Term Debt
There were no long-term debt obligations as of August 31, 2015. Long-term debt as of August 31, 2014 is summarized as follows:
| As of | ||||||||
| August 31, | ||||||||
| 2013 | 2012 | |||||||
| Capital Leases | $ | 236 | S | 390 | ||||
| 236 | 390 | |||||||
| Less current portion | (154 | ) | (134 | ) | ||||
| $ | 82 | $ | 256 | |||||
The aggregated maturities of debt as of August 31, 2013 are as follows:
| 2014 | $ | 154 | ||
| 2015 | 73 | |||
| 2016 | 9 | |||
| $ | 236 |
| As of | ||||
| August 31, 2014 | ||||
| Capital Leases | $ | 88 | ||
| Less current portion | (70 | ) | ||
| $ | 18 | |||
(7) Stock-Based Compensation
Equity Plans
The Company has established three equity plans: the Ceres, Inc. 2000 Stock Option/Stock Issuance Plan (2000 Plan), the Ceres, Inc. 2010 Stock Option/Stock Issuance Plan (2010 Plan) and the Amended and Restated Ceres, Inc. 2011 Equity Incentive Plan (2011 Plan, and collectively with the 2000 Plan and the 2010 Plan, the Equity Plans). The Equity Plans provide for grants of Incentive Stock Options (ISOs) to employees and Nonqualified Stock Options (NSOs), stock and restricted stock to employees, directors, and consultants. In addition, the 2011 Plan provides for the grant of other equity based awards such as restricted stock units, stock appreciation rights and deferred stock to employees, directors and consultants. The option term, as determined by the Company’s Board of Directors, may not exceed ten years. Vesting, also determined by the Company’s Board of Directors, generally occurs ratably over four to five years. ISOs and NSOs may be granted at a price per share of not less than the fair market value at the date of grant.
| F-20 |
During September 2012, the Company modified options to purchase 403,333 shares of common stock that were scheduled to expire on December 18, 2012 by extending the terms such that the options now expire on December 18, 2015. A modification charge of $157 was recorded in September 2012.
The total number of shares reserved for issuance under the Equity Plans is 6,754,999.844,374. At the Company’s 2013 Annual Meeting of Stockholders, the stockholders approved the amendment and restatement of the Ceres, Inc. 2011 Equity Incentive Plan, which increased the maximum aggregate number of shares that may be issued under the plan by 1.5 million187,500,000 shares and prohibits the repricingre-pricing of stock options without stockholder approval. As of August 31, 2013,2015, the Company had 1,916,292135,456 shares available under the 2011 Plan for future grant. The Company does not intend to make further grants under the 2000 Plan or the 2010 Plan.
Stock Option Valuation and Compensation
The Company uses a Black Scholes option pricing model to determine the fair value of stock options. The weighted average grant date fair value of stock option awards was $2.64, $10.40$3.04 and $8.16$7.28 per option share for 2013, 2012,2015 and 2011,2014, respectively.
The weighted average grant date estimated fair value of the Company’s common stock was $3.63, $14.44$3.76 and $11.97$10.24 per share for 2013, 2012,2015 and 2011,2014, respectively.
The fair value of employee stock options was estimated using the following weighted-average assumptions:
| Year ended | Year ended | |||||||||||||||||||
| August 31, | August 31, | |||||||||||||||||||
| 2013 | 2012 | 2011 | 2015 | 2014 | ||||||||||||||||
| Expected term (in years) | 5.50-6.08 | 5.50-6.46 | 6.08-6.46 | 5.50-6.08 | 5.50-6.08 | |||||||||||||||
| Expected volatility | 87%-88 | % | 78%-81 | % | 70%-78 | % | 79%-83 | % | 83%-87 | % | ||||||||||
| Risk free interest rate | 0.82%-1.96 | % | 0.88%-1.35 | % | 1.48%-2.44 | % | 1.66%-2.06 | % | 1.62%-2.04 | % | ||||||||||
| Expected dividend yield | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||||
Expected Term — Because of limited employee share option exercises, the Company uses a simplified method in which the expected term of an award is presumed to be mid-point between the vesting date and the expiration date of the award. The expected term for all employee option grants is an average of 3.06 years.
Expected Volatility — The Company estimates the volatility of its common stock by using the historical volatility of a group of comparable companies over the option’s expected term. The decision to use historical volatility of comparable companies was based upon the fact there is limited history of trading activity of the Company’s common stock.
Risk-Free Interest Rate — The Company bases the risk-free interest rate used in the option valuation model on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options.
Expected Dividend Yield — The Company does not anticipate paying any cash dividends in the foreseeable future.
| F-21 |
Stock-based compensation expense included in operating expenses and total intrinsic value of stock options exercised areis as follows:
| Year ended | Year ended | |||||||||||||||||||
| August 31, | August 31, | |||||||||||||||||||
| 2013 | 2012 | 2011 | 2015 | 2014 | ||||||||||||||||
| Stock-based compensation costs for employee stock options | $ | 3,624 | $ | 2,464 | $ | 1,478 | $ | 2,270 | $ | 3,074 | ||||||||||
| Fair value changes of collaboration warrants | (314 | ) | (555 | ) | 1,232 | (5 | ) | (6 | ) | |||||||||||
| Total stock-based compensation costs included in operating expenses | $ | 3,310 | $ | 1,909 | $ | 2,710 | $ | 2,265 | $ | 3,068 | ||||||||||
| Intrinsic value of stock options exercised | $ | 79 | $ | 3,573 | $ | 632 | ||||||||||||||
Stock Option Activity
The following summarizes the stock option transactions under the Equity Plans during the periods presented:
| Weighted | ||||||||
| Average | ||||||||
| Shares | Exercise Price | |||||||
| Options outstanding at August 31, 2011 | 2,597,285 | $ | 6.06 | |||||
| Options granted | 623,645 | 12.77 | ||||||
| Options exercised | (298,282 | ) | 2.11 | |||||
| Options forfeited | (144,140 | ) | 7.34 | |||||
| Options outstanding at August 31, 2012 | 2,778,508 | 7.92 | ||||||
| Options granted | 315,064 | 3.63 | ||||||
| Options exercised | (23,832 | ) | 2.36 | |||||
| Options forfeited | (278,184 | ) | 7.87 | |||||
| Options outstanding at August 31, 2013 | 2,791,556 | $ | 7.49 | |||||
| Weighted | ||||||||
| Average | ||||||||
| Shares | Exercise Price | |||||||
| Options outstanding at August 31, 2013 | 348,830 | $ | 59.92 | |||||
| Options granted | 98,004 | 10.16 | ||||||
| Options forfeited | (50,330 | ) | 67.60 | |||||
| Options outstanding at August 31, 2014 | 396,504 | 46.62 | ||||||
| Options granted | 41,738 | 3.75 | ||||||
| Options forfeited | (28,479 | ) | 23.41 | |||||
| Options outstanding at August 31, 2015 | 409,763 | $ | 43.87 | |||||
The following table summarizes information about stock options outstanding and exercisable at August 31, 2013:2015:
| Average | Average | |||||||||||||||||||||||
| Remaining | Weighted- | Number | Remaining | Weighted- | ||||||||||||||||||||
| Range of | Number | Contractual | Average | Vested and | Contractual | Average | ||||||||||||||||||
| Exercise Price | Outstanding | Life | Exercise Price | Exercisable | Life | Exercise Price | ||||||||||||||||||
| $1.95 | 415,331 | 2.26 | $ | 1.95 | 415,331 | 2.26 | $ | 1.95 | ||||||||||||||||
| $3.90 - $4.05 | 301,492 | 2.50 | 3.91 | 301,492 | 2.50 | 3.91 | ||||||||||||||||||
| $6.75 | 808,211 | 5.29 | 6.75 | 761,705 | 5.20 | 6.75 | ||||||||||||||||||
| $7.32 | 192,940 | 7.29 | 7.32 | 127,585 | 7.29 | 7.32 | ||||||||||||||||||
| $16.77 | 160,536 | 7.78 | 16.77 | 72,990 | 7.76 | 16.77 | ||||||||||||||||||
| $17.16 | 79,028 | 7.88 | 17.16 | 33,951 | 7.88 | 17.16 | ||||||||||||||||||
| $12.71 | 36,442 | 8.29 | 12.71 | 12,454 | 8.22 | 12.71 | ||||||||||||||||||
| $12.10 | 46,664 | 8.49 | 12.10 | 46,664 | 8.49 | 12.10 | ||||||||||||||||||
| $13.00 | 444,817 | 8.49 | 13.00 | — | — | — | ||||||||||||||||||
| $8.97 | 750 | 8.80 | 8.97 | 225 | 8.80 | 8.97 | ||||||||||||||||||
| $6.66 | 11,666 | 8.98 | 6.66 | — | — | — | ||||||||||||||||||
| $3.60 - $7.70 | 25,350 | 9.03 | 5.70 | 12,300 | 8.86 | 7.70 | ||||||||||||||||||
| $3.94 | 24,000 | 9.25 | 3.94 | — | — | — | ||||||||||||||||||
| $3.32 | 64,163 | 9.42 | 3.32 | — | — | — | ||||||||||||||||||
| $3.49 | 1,500 | 9.44 | 3.49 | — | — | — | ||||||||||||||||||
| $1.40 - $3.30 | 178,666 | 9.81 | 3.18 | — | — | — | ||||||||||||||||||
| 2,791,556 | 1,784,697 | |||||||||||||||||||||||
| Weighted- | Weighted- | |||||||||||||||||||||||
| Remaining | Average | Number | Remaining | Average | ||||||||||||||||||||
| Range of | Number | Contractual | Exercise | Vested and | Contractual | Exercise | ||||||||||||||||||
| Exercise Price | Outstanding | Life | Price | Exercisable | Life | Price | ||||||||||||||||||
| $1.96 - $5.06 | 36,004 | 9.52 | $ | 4.00 | 187 | 8.76 | $ | 5.06 | ||||||||||||||||
| $7.26 - $15.60 | 137,803 | 5.26 | $ | 12.24 | 134,754 | 5.19 | $ | 12.30 | ||||||||||||||||
| $26.24 - $32.40 | 56,831 | 3.50 | $ | 29.53 | 50,326 | 2.95 | $ | 29.83 | ||||||||||||||||
| $45.68 - $61.60 | 103,286 | 3.67 | $ | 54.93 | 102,719 | 3.65 | $ | 54.91 | ||||||||||||||||
| $96.80 - $137.28 | 75,839 | 6.26 | $ | 113.77 | 58,178 | 6.24 | $ | 114.68 | ||||||||||||||||
| 409,763 | 346,164 | |||||||||||||||||||||||
No tax benefits were recorded on compensation costs recognized during the yearyears ended August 31, 2013. The tax benefit realized from options exercised during the year ended August 31, 2012 was $32. No tax benefits were recorded on compensation costs recognized for the year ended August 31, 2011.2015 and 2014. As of August 31, 20132015 and 2012,2014, there were $5,389$1,159 and $8,189$2,993 of total unrecognized compensation cost related to stock options respectively. That cost is expected to be recognized over a weighted average 3.061.46 years. The Company’s policy is to issue new shares for options exercised.
| F-22 |
Restricted Stock Activity
The following summarizes the restricted stock transactions under the Equity Plans for the periods presented:
| Weighted | Shares | Weighted Average Grant Date Fair Value | ||||||||||||||
| Average | ||||||||||||||||
| Grant Date | ||||||||||||||||
| Shares | Fair Value | |||||||||||||||
| Restricted stock outstanding and unvested at August 31, 2011 | 833 | $ | 6.51 | |||||||||||||
| Restricted stock outstanding and unvested at August 31, 2013 | 36,311 | $ | 44.40 | |||||||||||||
| Restricted stock granted | 45,100 | 12.16 | 41,032 | $ | 10.48 | |||||||||||
| Restricted stock vested | (833 | ) | 6.51 | (32,877 | ) | $ | 16.96 | |||||||||
| Restricted stock forfeited | (4,500 | ) | 12.71 | (6,648 | ) | $ | 38.00 | |||||||||
| Restricted stock outstanding and unvested at August 31, 2012 | 40,600 | 12.10 | ||||||||||||||
| Restricted stock outstanding and unvested at August 31, 2014 | 37,818 | $ | 32.58 | |||||||||||||
| Restricted stock granted | 288,375 | 5.24 | 9,125 | $ | 4.20 | |||||||||||
| Restricted stock vested | (19,100 | ) | 11.42 | (8,690 | ) | $ | 36.63 | |||||||||
| Restricted stock forfeited | (19,175 | ) | 8.81 | (1,011 | ) | $ | 12.77 | |||||||||
| Restricted stock outstanding and unvested at August 31, 2013 | 290,700 | $ | 5.55 | |||||||||||||
| Restricted stock outstanding and unvested at August 31, 2015 | 37,242 | $ | 25.17 | |||||||||||||
As of August 31, 2013,2015, there was $1,064$91 of total unrecognized compensation cost related to restricted stock awards. That cost is expected to be recognized over a weighted average of 2.091.07 years.
Stock Activity
During June 2013,the fiscal year 2014, the Company granted 60,0002,288 shares of common stock under the 2011 Plan with a fair market value of $3.33$7.28 per share. The Company recorded $200$16.7 of expense in the year ended August 31, 2013 related to this stock grantgrant.
(8)Convertible Notes and Warrant Modification
In August 2011, the Company completed the sale of $11,425 aggregate principal amount of the Convertible Notes to nine existing investors in the Company in a private placement. The Convertible Notes were convertible, subject to the terms and conditions set forth therein, into shares of the Company’s common stock upon the consummation of a qualified initial public offering of the Company’s common stock at a price per share equal to 20% discount from the public offering price, or $10.40. Purchasers of the Convertible Notes included holders of more than 5% of the Company’s outstanding capital stock and affiliates of certain of the Company’s directors. Additionally, so long as any investors who held warrants to purchase shares of the Company’s common stock issued in connection with certain of the Company’s preferred stock financings purchased at least their respective full pro rata portion of the Convertible Notes being offered, the Company agreed to amend the termination provisions of such investors existing warrants such that the warrants no longer expired upon the IPO. In January 2012, the Company amended the Convertible Notes such that the notes would have automatically converted into shares of convertible preferred stock had the initial public offering not consummated by June 30, 2012.
In connection with the offering of the Convertible Notes, warrants to purchase 539,972 shares of common stock issued in connection with the Company’s Series F Preferred Stock offering, or the Modified F warrants and all of the warrants issued in connection with the Company’s Series G Preferred Stock offering were amended such that they would not expire upon the consummation of a qualified initial public offering. Warrants to purchase 229,257 shares of common stock issued in connection with the Series F Preferred Stock offering, or the Non-Modified F warrants were not amended and remain outstanding.
The Company calculated the fair value of the modified warrants immediately prior to and subsequent to the modification and determined that the cumulative incremental increase in the fair value of these liability classified warrants associated with this modification to be $9,633. Accordingly, the Company recorded the change in value to other income (expense) in August 2011.
Until such time as the conversion features were triggered, the Company accounted for the Convertible Notes and various embedded derivatives in accordance with ASC 825-10, the Fair Value Option for Financial Liabilities, whereby the Company initially and subsequently measured this financial instrument in its entirety at fair value, with the changes in fair value recorded each quarterly reporting period in other income (expense).
The Company obtained the assistance of a third-party valuation firm in estimating that the fair market value of the Convertible Notes as if August 31, 2011 was $13,630. The Company estimated the fair value of the Convertible Notes upon the closing of the IPO to be $14,282. Accordingly, the change in fair value was recorded in other income (expense).
Upon closing of the IPO, the Convertible Notes were revalued and converted into 1,098,575 shares of common stock (see Note (9))
(9) Stockholders’ Equity
Initial Public Offering
Upon closing of the IPO (see Note (1)):
Common Stock
PursuantOn March 7, 2014, the Company held its 2014 Annual Meeting of Stockholders (Annual Meeting). At the Annual Meeting, the stockholders approved an amendment to the Company’s amendedAmended and restated certificateRestated Certificate of incorporation,Incorporation which decreased the Company is authorized to issue 490,000,000total number of shares of common stock.stock of the Company from 490,000,000 to 240,000,000. Holders of the Company’s common stock are entitled to dividends as and when declared by the Board of Directors, subject to rights and holders of all classes of stock outstanding having priority rights to dividends. There have been no dividends declared to date. Each share of common stock is entitled to one vote.
Preferred Stock
Pursuant to the Company’s amended and restated certificate of incorporation, the Company is authorized to issue 10,000,000 shares of preferred stock. The Board of Directors has the authority, without action by the Company’s stockholders, to designate and issue shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof.
| F-23 |
Common and Preferred Stock Warrants Financing
Warrants issued in connection with Series F Convertible Preferred Stock Financing
In connection with the issuance of the Series F Convertible Preferred Stock in September 2007, the Company issued warrants to purchase 769,229 shares of common stock at an exercise price of $19.50 per share. The warrants are immediately exercisable.
As discussed in Note (1), the common stock warrants issued to the holders of Series F Convertible Preferred Stock were reported as a liability at fair value as of each balance sheet date. Upon closing of the IPO, the common stock warrants no longer met the requirements for liability classification. The warrants were revalued as of the closing date and reclassified to additional paid-in capital.
Upon closing of the IPO, the Company estimated the fair value of certain warrants (Non-Modified F warrants and Modified F warrants) to be $6,301 based on a risk free rate of 0.40%, expected volatility of 89%, expected term of 3.5 years and 0% dividend yield.
Warrants issued in connection with Series G Convertible Preferred Stock Financing
In connection with the issuance of the Series G Convertible Preferred Stock in June 2010, the Company issued warrants to purchase 1,025,640 shares of common stock at an exercise price of $19.50 per share. The warrants are immediately exercisable.
As discussed in Note (1), the common stock warrants issued to the holders of Series G Convertible Preferred Stock were reported as a liability at fair value as of each balance sheet date. Upon closing of the IPO, the common stock warrants no longer met the requirements for liability classification. The warrants were revalued as of the closing date and reclassified to additional paid-in capital.
Upon closing of the IPO, the Company estimated the fair value of these warrants to be $10,633 based on a risk free rate of 1.64%, expected volatility of 73%, expected term of 8.3 years and 0% dividend yield.
Warrants issued in connection with Borrowing and Loan Agreements
In July 2004, in connection with a borrowing agreement (Borrowing Agreement) entered into with the Bank, the Company issued the Bank warrants to purchase 18,461 shares of the Company’s Series E Convertible Preferred Stock. Upon closing of the IPO, these preferred stock warrants were converted into warrants to purchase 6,153 shares of common stock at $19.50 per share.
In February 2010, in connection with the Loan Agreement (see Note (6)), the Company issued the Bank warrants to purchase 43,076 shares of the Company’s Series F Convertible Preferred Stock. Upon closing of the IPO, these preferred stock warrants were converted into warrants to purchase 14,358 shares of common stock at $19.50 per share.
As discussed in Note (1), the preferred stock warrants issued in connection with the Borrowing Agreement and the Loan Agreement were reported as a liability at fair value as of each balance sheet date. Upon closing of the IPO, these preferred stock warrants no longer met the requirements for liability classification. These preferred stock warrants were revalued as of the closing date and reclassified to additional paid-in capital.
Upon closing of the IPO, the Company estimated the fair value of the Series E and F preferred stock warrants to be $68 and $158, respectively, based on a risk-free interest rate of 1.35%, volatility of 81%, expected term of 7.96 — 8.01 years, and 0% dividend yield.
Warrants issued in connection with Noble Agreement
In May 2006, the Company entered into a collaboration agreement with The Samuel Roberts Noble Foundation, Inc. (Noble) (Noble Agreement) to establish a research program (see Note (13)(12)). In connection with this collaboration, the Company granted Noble a warrant to purchase 133,33316,667 shares of the Company’s common stock for an exercise price of $30.00$240.00 per share. The original terms were as follows: the warrant vests in equal installments of 33,3334,167 shares on May 19, 2009, May 19, 2011, May 19, 2013, and May 19, 2015, respectively, and shall remain exercisable for a period of two years from the respective vesting dates. These warrants arewere accounted for at fair value and remeasured until vested. The fair value, including the resulting change in value as a result of remeasurement is beingwas recognized as research and development expense. The inception to date expense recognized with respect to this warrant totals $625$624.4 as of August 31, 2013. At2015. As of August 31, 2013, 99,9992015, all of the 16,667 warrants had vested under this arrangement. The fair value of the warrants not yet vested at August 31, 2013 was $1.0 using a risk-free rate of 1.21% based on the respective exercise periods of each installment, expected volatility of 73.3%, expected term of 3.72years based on the respective exercise periods of each installment, which is also the remaining contractual term, and 0% dividend yield.
In June 2011, the Company and Noble agreed to modify the warrants issued to Noble as follows: the warrant vests in equal installments of 33,3334,167 shares on May 19, 2013 and May 19, 2015, respectively and shall remain exercisable until the earliest of a period of five years from the respective vesting dates and May 18, 2017.
Warrants issued in connection with TAMU Agreement
In August 2007, the Company entered into a sponsored research and intellectual property rights agreement with The Texas A&M University System (TAMU) to establish a research program (see Note (13)(12)). In connection with this collaboration, the Company granted TAMU a warrant to purchase 66,6668,333 shares of the Company’s common stock for an exercise price of $30.00$240.00 per share. The warrant vests based on certain research and commercialization milestones being met and shall remain exercisable until August 28, 2017. This warrant is accounted for at fair value and remeasured until the vesting targets are met. The fair value, including the resulting change in value as a result of remeasurement is being recognized as research and development expense. The inception to date expense recognized with respect to this warrant totals $2.0$0 as of August 31, 2013.2015. The fair value of the warrants at August 31, 20132015 was $2.4,$0, using a risk-free rate of 1.19%0.74%, expected volatility of 73.3%72.1%, expected term of 3.991.99 years and 0% dividend yield. No warrants had vested under this arrangement as of August 31, 2013.2015.
In December 2011, pursuant to an Amended and Restated Intellectual Property Rights Agreement (IP Rights Agreement) (see Note (13)(12)), the Company issued warrants to TAMU to purchase 66,6668,333 shares of common stock at an exercise price of $14.30$114.40 per share. The warrants expire on September 24, 2026 and, subject to certain conditions, vest in equal installments on the fifth, tenth and fifteenth anniversary of the IP Rights Agreement. The inception to date expense recognized with respect to this warrant totals $10.9$1.8 as of August 31, 2013.2015. The fair value of the warrants at August 31, 20132015 was $49.7,$3.8, using a risk-free rate of 2.78%2.21%, expected volatility of 78.9%88.9%, expected term of 13.0611.06 years and 0% dividend yield. No warrants had vested under this arrangement as of August 31, 2013.2015.
(10)Warrants issued in connection with March 10, 2014 registered public offering
On March 10, 2014 the Company issued warrants to purchase an aggregate of 60,000 shares of common stock to certain affiliated designees of the underwriter as part of the underwriter’s compensation related to the registered public offering. The warrants are exercisable at any time or from time to time, in whole or in part, beginning on March 4, 2015 and expire on March 4, 2019. The exercise price is $12 per share of common stock. The fair value of these warrants upon issuance was $305 using a risk free rate of 1.64%, expected volatility 84.2%, expected term of 5 years and 0% dividend yield and was treated as an issuance cost of the common stock.
Warrants issued in connection with the July 30, 2015 registered public offering
On July 30, 2015 the Company issued warrants exercisable for one share of Common Stock for each share purchased in the July 30, 2015 offering for an aggregate of 1,200,000 shares of Common Stock at an exercise price of $1.62 per share. The Company estimated the fair value upon issuance of these warrants to be $760.0 based on a risk-free rate of 1.62%, volatility of 69.50%, expected term or 5.5 years and 0% dividend yield. The warrants are exercisable at any time or from time to time, in whole or in part, beginning on January 30, 2016 and expire on January 30, 2021. The fair value of these warrants at August 31, 2015 was $755.6 based on a risk-free rate of 1.54%, volatility of 69.80%, expected term of 5.41 years and 0% dividend yield.
| F-24 |
The Company also issued warrants to purchase an aggregate of 24,000 shares of our Common Stock at an exercise price of $1.944 per share to the placement agent as part of the placement agent’s compensation. The Company estimated the fair value upon issuance of these warrants to be $13.3 based on a risk-free rate of 1.62%, volatility of 69.50%, expected term of 5.0 years and 0% dividend yield. The warrants issued to the placement agent are exercisable at any time or from time to time, in whole or in part, beginning on July 30, 2016 and expire on July 30, 2020. The fair value of these warrants at August 31, 2015 was $13.2 based on a risk-free rate of 1.62%, volatility of 69.80%, expected term of 4.9 years and 0% dividend yield.
Warrants issued in connection with the August 26, 2015 registered public offering
On August 26, 2015, the Company issued warrants exercisable for 0.75 shares of Common Stock for each share purchased in the August 26, 2015 offering for an aggregate of 1,198,859 shares of Common Stock at an exercise price of $1.22 per share. The Company estimated the fair value upon issuance of these warrants to be $863.5 based on a risk-free rate of 1.49%, volatility of 69.80%, expected term of 5.5 years and 0% dividend yield. The warrants are exercisable at any time orfrom time to time, in whole or in part, beginning on February 26, 2016 and expire on February 26, 2021. The fair value of these warrants at August 31, 2015 was $844.2 based on a risk-free rate of 1.54%, volatility of 69.80%, expected term of 5.5 years and 0% dividend yield.
The Company also issued warrants to purchase an aggregate of 31,970 shares of our Common Stock at an exercise price of $1.83 per share to the placement agent as part of the placement agent’s compensation. The Company estimated the fair value upon issuance of these warrant to be $18.7 based on a risk-free rate of 1.49%, volatility of 69.80%, expected term of 5.0 years and 0% dividend yield. The warrants issued to the placement agent are exercisable at any time or from time to time, in whole or in part, beginning on August 26, 2016 and expire on August 26, 2020. The fair value of these warrants at August 31, 2015 was $18.3 based on a risk-free rate of 1.54%, volatility of 69.80%, expected term of 5.0 years and 0% dividend yield.
(9) Income Taxes
Deferred tax benefits associated with deferred tax assets are offset by a corresponding valuation allowance. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes.
Income tax expense (benefit) attributable to loss before income taxes consisted of the following:
| Current | Deferred | Total | Current | Deferred | Total | |||||||||||||||||||
| Year ended August 31, 2013 | ||||||||||||||||||||||||
| Year ended August 31, 2015 | ||||||||||||||||||||||||
| U.S. federal | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
| State and local | 1 | — | 1 | 1 | — | 1 | ||||||||||||||||||
| $ | 1 | $ | — | $ | 1 | $ | 1 | $ | — | $ | 1 | |||||||||||||
| Current | Deferred | Total | Current | Deferred | Total | |||||||||||||||||||
| Year ended August 31, 2012 | ||||||||||||||||||||||||
| Year ended August 31, 2014 | ||||||||||||||||||||||||
| U.S. federal | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
| State and local | 3 | — | 3 | 1 | — | 1 | ||||||||||||||||||
| $ | 3 | $ | — | $ | 3 | $ | 1 | $ | — | $ | 1 | |||||||||||||
| Current | Deferred | Total | ||||||||||
| Year ended August 31, 2011 | ||||||||||||
| U.S. federal | $ | (30 | ) | $ | — | $ | (30 | ) | ||||
| State and local | (1 | ) | — | (1 | ) | |||||||
| $ | (31 | ) | $ | — | $ | (31 | ) | |||||
| F-25 |
Income tax expense differs from the amount computed by applying the federal corporate income tax rate of 34% to the loss before income taxes due to the following:
| Year Ended | Year Ended | Year Ended | ||||||||||
| August 31, | August 31, | August 31, | ||||||||||
| 2013 | 2012 | 2011 | ||||||||||
| Computed “expected” tax expense (benefit) | $ | (11,054 | ) | $ | (9,999 | ) | $ | (12,365 | ) | |||
| Increase (reduction) in income taxes resulting from: | ||||||||||||
| Stock-based compensation | 876 | 636 | 893 | |||||||||
| State and local income taxes, net of federal income tax benefit | 1 | 2 | (1 | ) | ||||||||
| Foreign rate differential | — | 1,258 | 512 | |||||||||
| Convertible note changes and change in fair value | — | — | 750 | |||||||||
| Warrants modification and changes in fair value | — | 29 | 2,997 | |||||||||
| Other | 17 | 182 | 7 | |||||||||
| Change in valuation allowance | 10,161 | 7,895 | 7,176 | |||||||||
| Income tax expense (benefit) | $ | 1 | $ | 3 | $ | (31 | ) | |||||
| Year Ended | Year Ended | |||||||
| August 31, | August 31, | |||||||
| 2015 | 2014 | |||||||
| Computed “expected” tax expense | $ | (9,584 | ) | $ | (9,969 | ) | ||
| Increase (reduction) in income taxes resulting from: | ||||||||
| Stock-based compensation | 625 | 774 | ||||||
| State and local income taxes, net of federal income tax benefit | 1 | 1 | ||||||
| Foreign rate differential | — | — | ||||||
| Warrants modification and changes in fair value | — | — | ||||||
| Other | 21 | 12 | ||||||
| Change in valuation allowance | 8,937 | 9,183 | ||||||
| Income tax expense | $ | 1 | $ | 1 | ||||
| F-26 |
The following table summarizes the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at each period end:
| August 31, | August 31, | August 31, | August 31, | |||||||||||||
| 2013 | 2012 | 2015 | 2014 | |||||||||||||
| Deferred tax assets: | ||||||||||||||||
| Accrued liabilities | $ | 163 | $ | 799 | $ | 240 | $ | 279 | ||||||||
| Other assets | 77 | 17 | 157 | 169 | ||||||||||||
| Inventory capitalization | 265 | 145 | 266 | 446 | ||||||||||||
| Deferred revenue | - | 275 | 348 | 139 | ||||||||||||
| Total current deferred tax assets | 505 | 1,236 | 1,011 | 1,031 | ||||||||||||
| Noncurrent assets: | ||||||||||||||||
| Depreciation | 2,150 | 2,044 | 1,834 | 2,310 | ||||||||||||
| Inventory reserves | 2,427 | 2,328 | 2,973 | 2,689 | ||||||||||||
| Deferred rent | 36 | 27 | 22 | 29 | ||||||||||||
| Other assets | 568 | 301 | 1,013 | 859 | ||||||||||||
| Net operating loss carryforward | 88,791 | 74,412 | 112,373 | 101,485 | ||||||||||||
| Federal and state tax credit carryforward | 8,919 | 8,919 | 8,919 | 8,919 | ||||||||||||
| Total noncurrent deferred tax assets | 102,891 | 88,031 | 127,133 | 116,291 | ||||||||||||
| Total deferred tax assets | 103,396 | 89,267 | 128,145 | 117,323 | ||||||||||||
| Less valuation allowance | (103,396 | ) | (89,267 | ) | (128,145 | ) | (117,323 | ) | ||||||||
| Net deferred tax assets | $ | — | $ | — | $ | — | $ | — | ||||||||
As of August 31, 2013,2015 the Company had $223,205$273,908 of federal, $152,667$196,789 of state and $14,625$25,833 of foreign net operating loss (NOL) carryforwards available to offset future taxable income, if any, which expire in varying amounts from 2018 through 20332035 for federal tax purposes and from 20142015 through 20332035 for state tax purposes if unused. The carry forwardcarryforward period for the foreign NOL is indefinite. The excess tax benefits associated with the exercise of non-qualified stock options, restricted stock grants, and disqualifying dispositions of incentive stock option stock, for 20132015 and 20122014 in the amount of $2,458and $2,367,$911 and $957, respectively, did not reduce the current income taxes payable and, accordingly, are not included in the deferred tax asset relating to NOL carryforwards, but are included with the federal and state NOL carryforwards. In addition, the Company has alternative minimum tax (AMT) for state income tax purposes of approximately $17 and research and development tax carryforwards for federal income tax purposes of approximately $8,907, which are available to offset future tax liabilities, if any, through 2029.
In accordance with Internal Revenue Code (IRC) Sections 382 and 383, the annual utilization of net operating loss carryforwards and credits is limited if a change in control occurs, including a change resulting from an initial public offering. The Company has not completed a Section 382 analysis to determine if a change in ownership has occurred. Until such analysis is completed, there are no assurances that the existing net operating loss carryforwards or credits are not subject to significant limitation.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the historical taxable income (loss) and projections for future taxable income (loss) over the periods in which the deferred tax assets are deductible, management believes it is more likely that the Company will not realize the benefits of these deductible differences. Accordingly, the Company has established a full valuation allowance of $103,396$128,145 and $89,267$117,323 for the years ended August 31, 20132015 and 2012,2014, respectively.
(11)
| F-27 |
(10) 401(k) Benefit Plan
The Company has a 401(k) profit sharing plan (the Plan) which covers substantially all employees of the Company. Plan participants may make voluntary contributions of up to 60% of their earnings up to the statutory limit. The Company will match 50% of each employee contribution up to a maximum of 4% of the employee’s salary in matching funds per pay period. The matching contribution vests over a three-year service period; 25% vests immediately and an additional 25% vests for each year of service to the Company thereafter over the next three years. The Company recorded expense of $288, $297$132 and $279$207 in 2013, 20122015 and 2011,2014, respectively. The Company made no discretionary contributions in any year.
(12)(11) Commitments and Contingencies
The Company leases certain of its facilities and equipment under various noncancelable operating leases expiring through 2023.2020. The leases on the facilities contains provisions for future rent increases. The Company records monthly rent expense equal to the total of the payments due over the lease term, divided by the number of months of the lease term. The difference between rent expense recorded and the amount paid is credited or charged to deferred rent, which is reflected as a separate line item in the accompanying consolidated balance sheets as of August 31, 20132015 and 2012.2014.
In connection with one of its facilities leases, the Company received a reimbursement for leasehold improvements of $270. This reimbursement is a lease incentive which has been recognized as a liability in deferred rent and is being amortized to rent expense on a straight-line basis over the lease term. Total rental expense recognized during each period was $500, $519$457 and $645$440 for 2013, 20122015 and 2011,2014, respectively.
Future minimum payments under noncancelable operating leases as of August 31, 20132015 are as follows:
| Operating | Operating | |||||||
| leases | leases | |||||||
| 2014 | $ | 595 | ||||||
| 2015 | 548 | |||||||
| 2016 | 550 | $ | 621 | |||||
| 2017 | 559 | 606 | ||||||
| 2018 | 575 | 618 | ||||||
| Thereafter | 688 | |||||||
| 2019 | 631 | |||||||
| 2020 | 51 | |||||||
| Total minimum lease payments | $ | 3,515 | $ | 2,527 | ||||
(13)(12) Research Collaboration Agreements
The Company has a number of research agreements with academic collaborators, including among others, TAMU, Noble, and the Institute of Crop Sciences of the Chinese Academy of Agricultural Sciences. In connection with these agreements, the Company receives certain exclusive options or licensing rights to technology and intellectual property developed under these agreements. The Company expenses amounts under these agreements to research and development expense in the period in which the services are rendered. The Company also licenses technology from third parties. Initial payments under these license agreements are capitalized and expensed on a straight-line basis over the license term.
Noble Agreement
In May 2006, the Company entered into a collaboration agreement with Noble to establish a research program. Under the Noble Agreement, the Company agreed to fund certain research activities undertaken by Noble in an amount up to $3,800 through July 31, 2012 and granted Noble a warrant to purchase 133,33316,667 shares of the Company’s common stock for an exercise price of $30.00$240.00 per share (see Note (9)). Additional projects may be added under the agreement, if agreed to by both parties.
| F-28 |
Under the collaboration agreement, in August 2012 the Company agreed to fund certain research activities undertaken by Noble through July 31, 2013 and 2014 of $82.7 and $85.3 per year, respectively.
TAMU Agreement
In August 2007, the Company entered into a Sponsored Research and Intellectual Property Rights agreement with TAMU to establish a research program. Under the agreement, the Company agreed to fund certain research activities undertaken by TAMU in an amount up to $5,100 through 2012 and granted TAMU a warrant to purchase 66,6668,333 shares of the Company’s common stock for an exercise price of $30.00$240.00 per share (see Note (9)).
On September 24, 2011, the Company entered into an Amended and Restated Sponsored Research Agreement and an Amended and Restated Intellectual Property Rights Agreement (the “IP Rights Agreement”) with TAMU which both expire on September 23, 2026. The specific research projects and budgets undertaken pursuant to such agreement will be determined by an Executive Committee comprised of two members from each of TAMU and the Company as set forth in the Amended and Restated Sponsored Research Agreement. In December 2011, pursuant to the IP Rights Agreement, the Company issued warrants to TAMU to purchase 66,6668,333 shares of common stock at an exercise price of $14.30$114.40 per share (see Note (9)).
At August 31, 2013,2015, the future minimum payments under the Company’s research collaboration agreements are as follows:
| 2014 | $ | 3,041 | ||
| 2015 | 2,977 | |||
| 2016 | 2,966 | |||
| 2017 | 613 | |||
| $ | 9,597 |
| 2016 | $ | 602 | ||||
| 2017 | 50 | |||||
| $ | 652 |
(14) Selected Quarterly Financial Information (unaudited)EXHIBIT INDEX
The following is a summary of the unaudited quarterly results of operations for the years ended August 31, 2013 and 2012
| Where Located | ||||||||||
| Filed | ||||||||||
| Exhibit No. | Description of Exhibit | Form | Exhibit No. | Filing Date | Herewith | |||||
| 3.1 | Amended and Restated Certificate of Incorporation of Ceres, Inc. | 10-Q | 3.1 | 4/12/2012 | ||||||
| 3.1.1 | Certificate of Amendment to Amended and Restated Certificate of Incorporation of Ceres, Inc. filed with the Secretary of State of the State of Delaware on March 11, 2014 and effective as of March 11, 2014. | 8-K | 3.1 | 3/11/2014 | ||||||
| 3.1.2 | Certificate of Amendment to Amended and Restated Certificate of Incorporation of Ceres, Inc. filed with the Secretary of State of the State of Delaware on April 8, 2015 and effective as of April 8, 2015. | 8-K | 3.1 | 4/08/2015 | ||||||
| 3.2 | Amended and Restated Bylaws of Ceres, Inc. | 10-Q | 3.2 | 4/12/2012 | ||||||
| 4.1 | Form of Ceres, Inc. Common Stock Certificate | S-1/A | 4.1 | 1/17/2012 | ||||||
| 4.2 | Warrant to Purchase Shares of Series E Preferred Stock issued to Silicon Valley Bank, dated August 16, 2004, as amended | S-1/A | 4.2 | 7/25/2011 | ||||||
| 4.2.1 | Amendment No. 2 to Warrant to Purchase Shares of Series E Preferred Stock issued to Silicon Valley Bank, dated August 16, 2004, as amended | 10-K | 4.2.1 | 11/20/2012 | ||||||
| 4.3 | Warrants to Purchase Shares of Series F Preferred Stock issued to Silicon Valley Bank, dated March 1, 2010 | S-1/A | 4.5 | 7/25/2011 | ||||||
| 4.3.1 | Amendment No. 1 to Warrant to Purchase Shares of Series F Preferred Stock issued to Silicon Valley Bank, dated March 1, 2010 (6,153.67 shares) | 10-K | 4.3.1 | 11/20/2012 | ||||||
| 4.3.2 | Amendment No. 1 to Warrant to Purchase Shares of Series F Preferred Stock issued to Silicon Valley Bank, dated March 1, 2010 (8,205 shares) | 10-K | 4.3.2 | 11/20/2012 | ||||||
| 4.4 | Warrant to Purchase Shares of Common Stock issued to The Samuel Roberts Noble Foundation, Inc., dated November 28, 2006, as amended | S-1/A | 4.3 | 9/16/2011 | ||||||
| 4.5 | Warrant to Purchase Shares of Common Stock issued to The Texas A&M University System, dated July 18, 2008, as amended | S-1/A | 4.4 | 7/25/2011 | ||||||
| November 30, | February 29, | May 31, | August 31, | |||||||||||||
| 2012 | 2013 | 2013 | 2013 | |||||||||||||
| 2013: | ||||||||||||||||
| Net sales | $ | 1,966 | $ | 1,026 | $ | 1,355 | $ | 898 | ||||||||
| Cost of revenues | 700 | 2,280 | 2,134 | 1,132 | ||||||||||||
| Operating loss | (6,921 | ) | (9,014 | ) | (9,317 | ) | (7,339 | ) | ||||||||
| Net loss | (6,894 | ) | (8,966 | ) | (9,323 | ) | (7,331 | ) | ||||||||
| Basic and diluted net loss per share | (0.28 | ) | (0.36 | ) | (0.38 | ) | (0.29 | ) | ||||||||
| E-1 |
| November 30, | February 29, | May 31, | August 31, | |||||||||||||
| 2011 | 2012 | 2012 | 2012 | |||||||||||||
| 2012: | ||||||||||||||||
| Net sales | $ | 1,748 | $ | 1,311 | $ | 1,148 | $ | 1,164 | ||||||||
| Cost of revenues | 763 | 487 | 627 | 507 | ||||||||||||
| Operating loss | (7,094 | ) | (6,980 | ) | (8,078 | ) | (6,650 | ) | ||||||||
| Net loss | (7,540 | ) | (6,831 | ) | (8,416 | ) | (6,623 | ) | ||||||||
| Basic and diluted net loss per share | (3.73 | ) | (2.48 | ) | (0.34 | ) | (0.27 | ) | ||||||||
| Where Located | ||||||||||
| Filed | ||||||||||
| Exhibit No. | Description of Exhibit | Form | Exhibit No. | Filing Date | Herewith | |||||
| 4.6 | Warrant to Purchase Shares of Common Stock issued to The Texas A&M University System, dated December 19, 2011 | S-1/A | 4.10 | 1/17/2012 | ||||||
| 4.7 | Amended and Restated Investors’ Rights Agreement, dated June 25, 2010, by and among Ceres, Inc. and the stockholders named therein | S-1 | 4.6 | 5/23/2011 | ||||||
| 4.8 | Form of Series F Original Warrant | 10-K | 4.8 | 11/20/2012 | ||||||
| 4.8.1 | Form of Series F Original Warrant, as amended | S-1/A | 4.7 | 8/23/2011 | ||||||
| 4.9 | Form of Series G Original Warrant, as amended | S-1/A | 4.8 | 8/23/2011 | ||||||
| 4.10 | Form of Convertible Note | S-1/A | 4.9 | 8/23/2011 | ||||||
| 4.10.1 | Amendment No. 1 to Convertible Notes, dated January 10, 2012 | S-1/A | 4.11 | 1/17/2012 | ||||||
| 4.11 | Common Stock Purchase Warrant Agreement, dated March 10, 2014, between Ceres, Inc. and certain affiliated designees of Aegis Capital Corp. | 8-K | 4.1 | 3/10/2014 | ||||||
| 4.12 | Form of Investor Warrant, dated July 30, 2015 | 8-K | 4.1 | 7/30/2015 | ||||||
| 4.13 | Form of Placement Agent Warrant, dated July 30, 2015 | 8-K | 4.2 | 7/30/2015 | ||||||
| 4.14 | Form of Investor Warrant, dated August 26, 2015 | 8-K | 4.1 | 8/26/2015 | ||||||
| 4.15 | Form of Placement Agent Warrant, dated August 26, 2015 | 8-K | 4.2 | 8/26/2015 | ||||||
| 10.1 | Ceres, Inc. 2000 Stock Option/Stock Issuance Plan, as amended | 8-K | 10.1 | 8/20/2012 | ||||||
| 10.2 | Form of Stock Option Agreement under the Ceres, Inc. 2000 Stock Option/Stock Issuance Plan | S-1/A | 10.2 | 7/25/2011 | ||||||
| 10.3 | Form of Stock Purchase Agreement under the Ceres, Inc. 2000 Stock Option/Stock Issuance Plan | S-1/A | 10.3 | 10/14/2011 | ||||||
| 10.4 | Ceres, Inc. 2010 Stock Option/Stock Issuance Plan | S-1/A | 10.4 | 5/23/2011 | ||||||
| 10.5 | Form of Stock Option Agreement under the Ceres, Inc. 2010 Stock Option/Stock Issuance Plan | S-1/A | 10.5 | 7/25/2011 | ||||||
| 10.6 | Form of Stock Purchase Agreement under the Ceres, Inc. 2010 Stock Option/Stock Issuance Plan | S-1/A | 10.6 | 9/16/2011 | ||||||
| 10.7 | Amended and Restated Ceres, Inc. 2011 Equity Incentive Plan | 8-K | 10.1 | 2/13/2013 | ||||||
| 10.8 | Ceres, Inc. Performance Incentive Plan | S-1/A | 10.31 | 10/14/2011 | ||||||
| 10.9 | Form of Stock Option Grant Notice and Option Award Agreement under the Amended and Restated Ceres, Inc. 2011 Equity Incentive Plan | S-1/A | 10.32 | 1/17/2012 | ||||||
Quarterly and year-to-date computations of per share amounts are made independently. Therefore, the sum of per share amounts for the quarters may not agree with per share amounts for the year shown elsewhere in the Annual Report on Form 10-K.
| E-2 |
(15) Subsequent Events
On October 11, 2013, the Company announced a restructuring plan which includes a workforce reduction that will impact 17 positions in the U.S, and is expected to be substantially completed by May 31, 2014. The Company estimates that it will incur total charges of approximately $1.6 million during the first nine months of fiscal year 2014 with respect to the workforce reduction in the U.S.
EXHIBIT INDEX
| Where Located | ||||||||||
| Filed | ||||||||||
| Exhibit No. | Description of Exhibit | Form | Exhibit No. | Filing Date | Herewith | |||||
| 10.10 | Form of Restricted Stock Grant Notice and Restricted Stock Award Agreement under the Amended and Restated Ceres, Inc. 2011 Equity Incentive Plan | 10-K | 10.10 | 11/20/2012 | ||||||
| 10.10.1 | Form of Stock Payment Grant Notice and Stock Payment Award Agreement under the Amended and Restated Ceres, Inc. 2011 Equity Incentive Plan | 10-K | 10.10.1 | 11/26/2013 | ||||||
| 10.11 | Form of Indemnification Agreement between Ceres, Inc. and its directors and officers | S-1/A | 10.36 | 1/25/2012 | ||||||
| 10.12 | Employment Agreement between Ceres, Inc. and Richard Hamilton, dated September 1, 2011 | S-1/A | 10.23 | 9/16/2011 | ||||||
| 10.13 | Employment Agreement between Ceres, Inc. and Paul Kuc, dated September 1, 2011 | S-1/A | 10.24 | 9/16/2011 | ||||||
| 10.14 | Employment Agreement between Ceres, Inc. and Michael Stephenson, dated September 1, 2011 | S-1/A | 10.25 | 9/16/2011 | ||||||
| 10.15 | Employment Agreement between Ceres, Inc. and Wilfriede van Assche, dated September 1, 2011 | S-1/A | 10.26 | 9/16/2011 | ||||||
| 10.16 | Exclusive Consultancy Agreement between Ceres, Inc. and Richard Flavell, dated October 11, 2011 | 10-K | 10.16 | 11/20/2012 | ||||||
| 10.17 | Exclusive Consulting Agreement between Ceres, Inc. and Robert Goldberg, dated June 19, 2013 | 10-K | 10.1 | 7/11/2013 | ||||||
| 10.18 | Agricultural Lease Agreement between John & Connie Giesenschlag and Ceres, Inc. dated April 1, 2008 | S-1/A | 10.9 | 7/25/2011 | ||||||
| 10.19 | Ground Lease Agreement between John & Connie Giesenschlag and Ceres, Inc. dated April 1, 2008 | S-1 | 10.10 | 5/23/2011 | ||||||
| †10.20 | Exclusive License Agreement between Cambridge University Technical Services, Ltd. and Ceres, Inc., dated November 1, 2001 | S-1/A | 10.11 | 10/14/2011 | ||||||
| †10.21 | Sponsored Research Agreement between The Texas Agricultural Experiment Station of The Texas A&M University System and Ceres, Inc., dated August 29, 2007, as amended | S-1/A | 10.12 | 1/17/2012 | ||||||
| Where Located | |||||||||||
| Filed | |||||||||||
| Exhibit No. | Description of Exhibit | Form | Exhibit No. | Filing Date | Herewith | ||||||
| 3.1 | Amended and Restated Certificate of Incorporation of Ceres, Inc. | 10-Q | 3.1 | 4/12/2012 | |||||||
| 3.2 | Amended and Restated Bylaws of Ceres, Inc. | 10-Q | 3.2 | 4/12/2012 | |||||||
| 4.1 | Form of Ceres, Inc. Common Stock Certificate | S-1/A | 4.1 | 1/17/2012 | |||||||
| 4.2 | Warrant to Purchase Shares of Series E Preferred Stock issued to Silicon Valley Bank, dated August 16, 2004, as amended | S-1/A | 4.2 | 7/25/2011 | |||||||
| 4.2.1 | Amendment No. 2 to Warrant to Purchase Shares of Series E Preferred Stock issued to Silicon Valley Bank, dated August 16, 2004, as amended | 10-K | 4.2.1 | 11/20/2012 | |||||||
| 4.3 | Warrants to Purchase Shares of Series F Preferred Stock issued to Silicon Valley Bank, dated March 1, 2010 | S-1/A | 4.5 | 7/25/2011 | |||||||
| 4.3.1 | Amendment No. 1 to Warrant to Purchase Shares of Series F Preferred Stock issued to Silicon Valley Bank, dated March 1, 2010 (6,153.67 shares) | 10-K | 4.3.1 | 11/20/2012 | |||||||
| 4.3.2 | Amendment No. 1 to Warrant to Purchase Shares of Series F Preferred Stock issued to Silicon Valley Bank, dated March 1, 2010 (8,205 shares) | 10-K | 4.3.2 | 11/20/2012 | |||||||
| 4.4 | Warrant to Purchase Shares of Common Stock issued to The Samuel Roberts Noble Foundation, Inc., dated November 28, 2006, as amended | S-1/A | 4.3 | 9/16/2011 | |||||||
| 4.5 | Warrant to Purchase Shares of Common Stock issued to The Texas A&M University System, dated July 18, 2008, as amended | S-1/A | 4.4 | 7/25/2011 | |||||||
| 4.6 | Warrant to Purchase Shares of Common Stock issued to The Texas A&M University System, dated December 19, 2011 | S-1/A | 4.10 | 1/17/2012 | |||||||
| 4.7 | Amended and Restated Investors’ Rights Agreement, dated June 25, 2010, by and among Ceres, Inc. and the stockholders named therein | S-1 | 4.6 | 5/23/2011 | |||||||
| 4.8 | Form of Series F Original Warrant | 10-K | 4.8 | 11/20/2012 | |||||||
| 4.8.1 | Form of Series F Original Warrant, as amended | S-1/A | 4.7 | 8/23/2011 | |||||||
| 4.9 | Form of Series G Original Warrant, as amended | S-1/A | 4.8 | 8/23/2011 | |||||||
| 4.10 | Form of Convertible Note | S-1/A | 4.9 | 8/23/2011 | |||||||
| 4.10.1 | Amendment No. 1 to Convertible Notes, dated January 10, 2012 | S-1/A | 4.11 | 1/17/2012 | |||||||
| 10.1 | Ceres, Inc. 2000 Stock Option/Stock Issuance Plan, as amended | 8-K | 10.1 | 8/20/2012 | |||||||
| Where Located | |||||||||||
| Filed | |||||||||||
| Exhibit No. | Description of Exhibit | Form | Exhibit No. | Filing Date | Herewith | ||||||
| 10.2 | Form of Stock Option Agreement under the Ceres, Inc. 2000 Stock Option/Stock Issuance Plan | S-1/A | 10.2 | 7/25/2011 | |||||||
| 10.3 | Form of Stock Purchase Agreement under the Ceres, Inc. 2000 Stock Option/Stock Issuance Plan | S-1/A | 10.3 | 10/14/2011 | |||||||
| 10.4 | Ceres, Inc. 2010 Stock Option/Stock Issuance Plan | S-1/A | 10.4 | 5/23/2011 | |||||||
| 10.5 | Form of Stock Option Agreement under the Ceres, Inc. 2010 Stock Option/Stock Issuance Plan | S-1/A | 10.5 | 7/25/2011 | |||||||
| 10.6 | Form of Stock Purchase Agreement under the Ceres, Inc. 2010 Stock Option/Stock Issuance Plan | S-1/A | 10.6 | 9/16/2011 | |||||||
| 10.7 | Amended and Restated Ceres, Inc. 2011 Equity Incentive Plan | 8-K | 10.1 | 2/13/2013 | |||||||
| 10.8 | Ceres, Inc. Performance Incentive Plan | S-1/A | 10.31 | 10/14/2011 | |||||||
| 10.9 | Form of Stock Option Grant Notice and Option Award Agreement under the Amended and Restated Ceres, Inc. 2011 Equity Incentive Plan | S-1/A | 10.32 | 1/17/2012 | |||||||
| 10.10 | Form of Restricted Stock Grant Notice and Restricted Stock Award Agreement under the Amended and Restated Ceres, Inc. 2011 Equity Incentive Plan | 10-K | 10.10 | 11/20/2012 | |||||||
| 10.10.1 | Form of Stock Payment Grant Notice and Stock Payment Award Agreement under the Amended and Restated Ceres, Inc. 2011 Equity Incentive Plan | X | |||||||||
| 10.11 | Form of Indemnification Agreement between Ceres, Inc. and its directors and officers | S-1/A | 10.36 | 1/25/2012 | |||||||
| 10.12 | Employment Agreement between Ceres, Inc. and Richard Hamilton, dated September 1, 2011 | S-1/A | 10.23 | 9/16/2011 | |||||||
| 10.13 | Employment Agreement between Ceres, Inc. and Paul Kuc, dated September 1, 2011 | S-1/A | 10.24 | 9/16/2011 | |||||||
| 10.14 | Employment Agreement between Ceres, Inc. and Michael Stephenson, dated September 1, 2011 | S-1/A | 10.25 | 9/16/2011 | |||||||
| 10.15 | Employment Agreement between Ceres, Inc. and Wilfriede van Assche, dated September 1, 2011 | S-1/A | 10.26 | 9/16/2011 | |||||||
| 10.16 | Exclusive Consultancy Agreement between Ceres, Inc. and Richard Flavell, dated October 11, 2011 | 10-K | 10.16 | 11/20/2012 | |||||||
| 10.17 | Exclusive Consulting Agreement between Ceres, Inc. and Robert Goldberg, dated June 19, 2013 | 10-K | 10.1 | 7/11/2013 | |||||||
| 10.18 | Agricultural Lease Agreement between John & Connie Giesenschlag and Ceres, Inc. dated April 1, 2008 | S-1/A | 10.9 | 7/25/2011 | |||||||
| 10.19 | Ground Lease Agreement between John & Connie Giesenschlag and Ceres, Inc. dated April 1, 2008 | S-1 | 10.10 | 5/23/2011 | |||||||
| †10.20 | Exclusive License Agreement between Cambridge University Technical Services, Ltd. and Ceres, Inc., dated November 1, 2001 | S-1/A | 10.11 | 10/14/2011 | |||||||
| Where Located | |||||||||||
| Filed | |||||||||||
| Exhibit No. | Description of Exhibit | Form | Exhibit No. | Filing Date | Herewith | ||||||
| †10.21 | Sponsored Research Agreement between The Texas Agricultural Experiment Station of The Texas A&M University System and Ceres, Inc., dated August 29, 2007, as amended | S-1/A | 10.12 | 1/17/2012 | |||||||
| †10.21.1 | Amended and Restated Sponsored Research Agreement between Texas AgriLife Research (f/k/a The Texas Agricultural Experiment Station of The Texas A&M University System) and Ceres, Inc., dated September 24, 2011 | S-1/A | 10.34 | 12/19/2011 | |||||||
| 10.22 | Intellectual Property Rights Agreement between The Texas Agricultural Experiment Station of The Texas A&M University System and Ceres, Inc., dated August 29, 2007 | S-1/A | 10.13 | 12/19/2011 | |||||||
| †10.22.1 | Amended and Restated Intellectual Property Rights Agreement between The Texas Agricultural Experiment Station of The Texas A&M University System and Ceres, Inc., dated September 24, 2011 | S-1/A | 10.35 | 12/29/2011 | |||||||
| †10.23 | Material Transfer and Evaluation Agreements between The Texas A&M University System and Ceres, Inc., dated April 23, 2008, as amended | S-1/A | 10.14 | 8/29/2011 | |||||||
| 10.23.1 | Amendment No. 2 to Material Transfer and Evaluation Agreement between The Texas A&M University System and Ceres, Inc., dated April 23, 2008 (MTA-001018) | 8-K | 10.1 | 1/10/2013 | |||||||
| 10.23.2 | Amendment No. 2 to Material Transfer and Evaluation Agreement between The Texas A&M University System and Ceres, Inc., dated April 23, 2008 (MTA-001019) | 8-K | 10.1 | 1/10/2013 | |||||||
| †10.24 | Line License Agreement between The Texas A&M University System and Ceres, Inc., dated October 16, 2009 | S-1/A | 10.15 | 10/14/2011 | |||||||
| †10.25 | Line License Agreement between Ceres, Inc. and The Texas A&M University System, dated July 12, 2011. | S-1/A | 10.30 | 8/29/2011 | |||||||
| †10.25.1 | Amendment No. 1 to Line License Agreement between Ceres, Inc. and The Texas A&M University System, dated July 12, 2011. | 10-K | 10.25.1 | 11/20/2012 | |||||||
| †10.26 | Master Research Agreement between The Samuel Roberts Noble Foundation, Inc. and Ceres, Inc., dated May 19, 2006 | S-1/A | 10.16 | 1/25/2012 | |||||||
| †10.26.1 | Schedule 7 to Master Research Agreement between The Samuel Roberts Noble Foundation, Inc. and Ceres, Inc., dated May 19, 2006 | 10-K | 10.26.1 | 11/20/2012 | |||||||
| †10.27 | Evaluation, Production and License Agreement between The Samuel Roberts Noble Foundation, Inc. and Ceres, Inc., dated May 19, 2006 | S-1/A | 10.17 | 10/14/2011 | |||||||
| †10.28 | License Agreement for NF/GA992 and NF/GA993 between The Samuel Roberts Noble Foundation, Inc. and Ceres, Inc., dated December 1, 2008 | S-1/A | 10.18 | 10/14/2011 | |||||||
| †10.29 | License Agreement for NF/GA002 between The Samuel Roberts Noble Foundation, Inc. and Ceres, Inc., dated September 1, 2009 | S-1/A | 10.19 | 10/14/2011 | |||||||
| Where Located | |||||||||||
| Filed | |||||||||||
| Exhibit No. | Description of Exhibit | Form | Exhibit No. | Filing Date | Herewith | ||||||
| †10.30 | Collaboration Agreement between the Institute of Biological, Environmental and Rural Sciences of Aberystwyth University and Ceres, Inc., dated April 1, 2007, as amended | S-1/A | 10.20 | 1/25/2012 | |||||||
| †10.30.1 | Amendment IV to the Schedule I to the Collaboration Agreement between the Institute of Biological, Environmental, and Rural Sciences of Aberystwyth University in Wales, U.K. and Ceres, Inc., dated April 1, 2007. | 10-Q | 10.1 | 7/12/2012 | |||||||
| †10.30.2 | Amendment V to the Schedule I to the Collaboration Agreement between the Institute of Biological, Environmental, and Rural Sciences of Aberystwyth University in Wales, U.K. and Ceres, Inc., dated April 1, 2007. | X | |||||||||
| †10.31 | Collaboration Agreement between Institute of Crop Sciences of the Chinese Academy of Agricultural Sciences and Ceres, Inc., dated November 15, 2007, as amended | S-1/A | 10.21 | 12/19/2011 | |||||||
| 10.31.1 | Amendment III to the Collaboration Agreement between Institute of Crop Sciences of the Chinese Academy of Agricultural Sciences and Ceres, Inc., dated November 15, 2007, as amended | 10-Q | 10.1 | 7/12/2012 | |||||||
| 10.31.2 | Amendment IV to the Collaboration Agreement between Institute of Crop Sciences of the Chinese Academy of Agricultural Sciences and Ceres, Inc., dated November 15, 2007, as amended | 10-K | 10.31.2 | 11/20/2012 | |||||||
| †10.32 | Enabling Technology License Agreement between Ceres, Inc. and Monsanto Company, dated April 1, 2002 | S-1/A | 10.29 | 7/5/2011 | |||||||
| 10.33 | Convertible Note Purchase Agreement among Ceres, Inc. and the investors named therein, dated August 1, 2011 | S-1/A | 10.33 | 11/10/2012 | |||||||
| 21.1 | List of Subsidiaries | S-1 | 21.1 | 5/23/2011 | |||||||
| 23.1 | Consent of KPMG LLP | X | |||||||||
| 24.1 | Power of Attorney (see signature page to this Annual Report on Form 10-K). | X | |||||||||
| *31.1 | Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), of the Securities Exchange Act of 1934, as amended. | X | |||||||||
| *31.2 | Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), of the Securities Exchange Act of 1934, as amended. | X | |||||||||
| *32.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350. | X | |||||||||
| Where Located | ||||||||||
| Filed | ||||||||||
| Exhibit No. | Description of Exhibit | Form | Exhibit No. | Filing Date | Herewith | |||||
| †10.21.1 | Amended and Restated Sponsored Research Agreement between Texas AgriLife Research (f/k/a The Texas Agricultural Experiment Station of The Texas A&M University System) and Ceres, Inc., dated September 24, 2011 | S-1/A | 10.34 | 12/19/2011 | ||||||
| 10.22 | Intellectual Property Rights Agreement between The Texas Agricultural Experiment Station of The Texas A&M University System and Ceres, Inc., dated August 29, 2007 | S-1/A | 10.13 | 12/19/2011 | ||||||
| †10.22.1 | Amended and Restated Intellectual Property Rights Agreement between The Texas Agricultural Experiment Station of The Texas A&M University System and Ceres, Inc., dated September 24, 2011 | S-1/A | 10.35 | 12/29/2011 | ||||||
| †10.23 | Material Transfer and Evaluation Agreements between The Texas A&M University System and Ceres, Inc., dated April 23, 2008, as amended | S-1/A | 10.14 | 8/29/2011 | ||||||
| 10.23.1 | Amendment No. 2 to Material Transfer and Evaluation Agreement between The Texas A&M University System and Ceres, Inc., dated April 23, 2008 (MTA-001018) | 8-K | 10.1 | 1/10/2013 | ||||||
| 10.23.2 | Amendment No. 2 to Material Transfer and Evaluation Agreement between The Texas A&M University System and Ceres, Inc., dated April 23, 2008 (MTA-001019) | 8-K | 10.1 | 1/10/2013 | ||||||
| †10.24 | Line License Agreement between The Texas A&M University System and Ceres, Inc., dated October 16, 2009 | S-1/A | 10.15 | 10/14/2011 | ||||||
| †10.25 | Line License Agreement between Ceres, Inc. and The Texas A&M University System, dated July 12, 2011. | S-1/A | 10.30 | 8/29/2011 | ||||||
| †10.25.1 | Amendment No. 1 to Line License Agreement between Ceres, Inc. and The Texas A&M University System, dated July 12, 2011. | 10-K | 10.25.1 | 11/20/2012 | ||||||
| †10.26 | Master Research Agreement between The Samuel Roberts Noble Foundation, Inc. and Ceres, Inc., dated May 19, 2006 | S-1/A | 10.16 | 1/25/2012 | ||||||
| †10.26.1 | Schedule 7 to Master Research Agreement between The Samuel Roberts Noble Foundation, Inc. and Ceres, Inc., dated May 19, 2006 | 10-K | 10.26.1 | 11/20/2012 | ||||||
| E-4 |
| Where Located | ||||||||||
| Filed | ||||||||||
| Exhibit No. | Description of Exhibit | Form | Exhibit No. | Filing Date | Herewith | |||||
| †10.27 | Evaluation, Production and License Agreement between The Samuel Roberts Noble Foundation, Inc. and Ceres, Inc., dated May 19, 2006 | S-1/A | 10.17 | 10/14/2011 | ||||||
| †10.28 | License Agreement for NF/GA992 and NF/GA993 between The Samuel Roberts Noble Foundation, Inc. and Ceres, Inc., dated December 1, 2008 | S-1/A | 10.18 | 10/14/2011 | ||||||
| †10.29 | License Agreement for NF/GA002 between The Samuel Roberts Noble Foundation, Inc. and Ceres, Inc., dated September 1, 2009 | S-1/A | 10.19 | 10/14/2011 | ||||||
| †10.30 | Collaboration Agreement between the Institute of Biological, Environmental and Rural Sciences of Aberystwyth University and Ceres, Inc., dated April 1, 2007, as amended | S-1/A | 10.20 | 1/25/2012 | ||||||
| †10.30.1 | Amendment IV to the Schedule I to the Collaboration Agreement between the Institute of Biological, Environmental, and Rural Sciences of Aberystwyth University in Wales, U.K. and Ceres, Inc., dated April 1, 2007. | 10-Q | 10.1 | 7/12/2012 | ||||||
| †10.30.2 | Amendment V to the Schedule I to the Collaboration Agreement between the Institute of Biological, Environmental, and Rural Sciences of Aberystwyth University in Wales, U.K. and Ceres, Inc., dated April 1, 2007. | 10-K | 10.30.2 | 11/26/2013 | ||||||
| †10.31 | Collaboration Agreement between Institute of Crop Sciences of the Chinese Academy of Agricultural Sciences and Ceres, Inc., dated November 15, 2007, as amended | S-1/A | 10.21 | 12/19/2011 | ||||||
| 10.31.1 | Amendment III to the Collaboration Agreement between Institute of Crop Sciences of the Chinese Academy of Agricultural Sciences and Ceres, Inc., dated November 15, 2007, as amended | 10-Q | 10.1 | 7/12/2012 | ||||||
| 10.31.2 | Amendment IV to the Collaboration Agreement between Institute of Crop Sciences of the Chinese Academy of Agricultural Sciences and Ceres, Inc., dated November 15, 2007, as amended | 10-K | 10.31.2 | 11/20/2012 | ||||||
| †10.32 | Enabling Technology License Agreement between Ceres, Inc. and Monsanto Company, dated April 1, 2002 | S-1/A | 10.29 | 7/5/2011 | ||||||
| E-5 |
| Where Located | ||||||||||
| Filed | ||||||||||
| Exhibit No. | Description of Exhibit | Form | Exhibit No. | Filing Date | Herewith | |||||
| 10.33 | Convertible Note Purchase Agreement among Ceres, Inc. and the investors named therein, dated August 1, 2011 | S-1/A | 10.33 | 11/10/2011 | ||||||
| 10.34 | Form of Registration Rights Agreement, dated as of July 30, 2015, by and among Ceres, Inc. and certain investors | 8-K | 10.2 | 7/30/2015 | ||||||
| 10.35 | Form of Registration Rights Agreement Amendment, dated as of August 26, 2015, by and among Ceres, Inc. and certain investors | 8-K | 10.2 | 8/26/2015 | ||||||
| 10.36 | Form of Securities Purchase Agreement, dated as of July 26, 2015, by and among Ceres, Inc. and certain investors | 8-K | 10.1 | 7/30/2015 | ||||||
| 10.37 | Form of Securities Purchase Agreement, dated as of August 20, 2015, by and among Ceres, Inc. and certain investors | 8-K | 10.1 | 8/26/2015 | ||||||
| 21.1 | List of Subsidiaries | 10-K | 21.1 | 11/20/2014 | ||||||
| 23.1 | Consent of KPMG LLP | X | ||||||||
| 24.1 | Power of Attorney (see signature page to this Annual Report on Form 10-K). | X | ||||||||
| *31.1 | Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), of the Securities Exchange Act of 1934, as amended. | X | ||||||||
| *31.2 | Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), of the Securities Exchange Act of 1934, as amended. | X | ||||||||
| *32.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350. | X | ||||||||
| 101.INS | XBRL Instance Document | X | ||||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | X | ||||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||
| † | Certain provisions of this exhibit have been omitted pursuant to a request for confidential treatment. |
| * | This certification is furnished herewith and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |