Commitments and Contingencies | Commitments and Contingencies Operating Leases Our headquarters are located in Redwood City, California, where we occupy approximately 107,200 square feet of office and laboratory space in four buildings within the same business park of Metropolitan Life Insurance Company ("MetLife"). Our lease (“Lease”) with MetLife includes approximately 28,200 square feet of space located at 200 and 220 Penobscot Drive, Redwood City, California (the “Penobscot Space”), approximately 37,900 square feet of space located at 400 Penobscot Drive, Redwood City, California (the “Building 2 Space”), approximately 11,200 square feet of space located at 501 Chesapeake Drive, Redwood City, California (the “501 Chesapeake Space”), and approximately 29,900 square feet of space located at 101 Saginaw Drive, Redwood City, California (the “Saginaw Space”). We entered into the initial lease with MetLife for a portion of this space in 2004 and the lease has been amended multiple times since then to adjust space and amend the terms of the Lease. The lease amendment ("Seventh Amendment") in October 2016 waived our existing asset retirement obligation for one of our buildings and extended the lease term to January 2022. The various terms for the spaces under the lease have expiration dates that range from January 2020 through January 2022. Beginning in February 2014, we have subleased certain office and laboratory space to different subtenants with separate options to extend the subleases. These subleases will expire in November 2019. In February 2019, we entered into the eighth amendment to the Lease ("Eighth Amendment") with MetLife to extend the lease terms for the Penobscot Space, the Building 2 Space and the Chesapeake Space for another 88 months . The lease on the Saginaw Space will expire in January 2020. The lease terms for the Penobscot Space and Building 2 Space have an expiration date of May 2027. The lease term for the 501 Chesapeake Space has an expiration date of May 2029. We incurred $3.6 million of capital improvement costs related to the facilities leased from MetLife through December 31, 2012. During 2011 and 2012, we requested and received $3.1 million of reimbursements from the landlord for the tenant improvement and HVAC allowances for the completed construction. The reimbursements were recorded once cash was received and are amortized on a straight line basis over the term of the lease as a reduction in rent expense. The remaining lease incentive obligations were zero and $0.5 million at March 31, 2019 and December 31, 2018 , respectively. Prior to adoption of ASC 842, lease incentive obligation were reflected as liabilities on the unaudited condensed consolidated balance sheets. Upon adoption of ASC 842, lease incentive obligations were cleared to zero to create our right-of-use assets related to operating lease, reflected on the unaudited condensed consolidated balance sheets. Rent expense for the Redwood City properties is recognized on a straight-line basis over the term of the lease. We are required to restore certain areas of the Redwood City facilities that we are renting to their original form. We are expensing the asset retirement obligation over the terms of the respective leases. We review the estimated obligation each reporting period and make adjustments if our estimates change. We recorded asset retirement obligations of $0.2 million as of March 31, 2019 and December 31, 2018 , respectively, which are included in other liabilities on the unaudited condensed consolidated balance sheets. Accretion expense related to our asset retirement obligations was nominal in the three months ended March 31, 2019 and March 31, 2018 . Pursuant to the terms of the amended lease agreement, we exercised our right to deliver a letter of credit in lieu of a security deposit. The letter of credit is collateralized by deposit balances held by the bank in the amount of $1.1 million and $0.7 million as of March 31, 2019 and December 31, 2018 , respectively. These deposits are recorded as restricted cash on the unaudited condensed consolidated balance sheets. Rent expense was $1.2 million and $0.8 million during the three months ended March 31, 2019 and 2018 , respectively, partially offset by sublease income of $0.2 million and $0.3 million , respectively. Finance Leases In December 2016, we entered into a three -year financing lease agreement with a third party supplier for the purchase of laboratory equipment that was partially financed through a finance lease of approximately $0.4 million . The lease became effective upon delivery of the equipment, which occurred in February 2017, and the term of the lease is three years from the effective date. This financing agreement was accounted for as a capital lease due to the bargain purchase option at the end of the lease. In April 2017, we entered into a three -year financing lease agreement with a third party supplier for the purchase of information technology equipment for approximately $0.3 million . The effective date of the lease was May 19, 2017 and the term of the lease is three years. This financing agreement was accounted for as a finance lease due to the bargain purchase option at the end of the lease. Adoption of ASC 842 On January 1, 2019, we adopted ASC 842, using a modified retrospective approach and effective date method per adoption of ASU 2018-11. We completed the full analysis by January, 2019 and we evaluated the right-of-use (ROU) assets and lease obligations using the incremental borrowing rate (IBR) at December 31, 2018 because the implicit rate is not readily determinable in the lease agreement. Upon adoption of ASC 842, all existing leases will be classified as either operating lease or finance lease. All existing leases that were classified as capital leases in accordance with Topic 840 will be classified as finance leases. We recorded $26.6 million of ROU assets and $27.6 million of lease obligations for operating leases and $0.5 million of ROU assets and $0.3 million of lease obligations for finance leases in the balance sheet at the beginning of 2019. Practical Expedients, Elections, and Exemptions We used a practical expedient available under ASC 842-10-65-1(f) that permits us not to reassess whether any expired or existing contracts are or contain leases; not to reassess the lease classification for any expired or existing leases (for example, all existing leases that were classified as operating leases in accordance with ASC 840 will be classified as operating leases, and all existing leases that were classified as capital leases in accordance with ASC 840 will be classified as finance leases); and not to reassess initial direct costs for any existing leases. On January 1, 2019, we also made an accounting policy election (by class of underlying asset to which the right of use relates) to apply accounting to leases that meet ASC 842’s definition of a short-term lease (i.e., the short-term lease exemption). A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. The following table shows the reconciliation of right-of-use assets and lease obligations, with balances reflecting the adoption of ASC 842, related to both operating leases and finance leases and gives effect to the modified retrospective adoption and effective date method of the lease guidance on January 1, 2019 (in thousands): Operating leases Finance Leases Right-of-use assets, balance at December 31, 2018 $ — $ — Changes in the period: Right-of-use assets created upon adoption of ASC 842 26,617 493 Right-of-use assets, balance at January 1, 2019 $ 26,617 $ 493 Lease obligations, balance at December 31, 2018 $ — $ — Changes in the period: Lease obligations created upon adoption of ASC 842 27,562 302 Lease obligations, balance at January 1, 2019 $ 27,562 $ 302 Lease related expenses under non-cancellable finance and operating leases and under non-cancellable subleases as follows (in thousands except discount rate and lease term): Three months ended March 31, 2019 Lease costs Finance lease cost: Amortization of right-of-use assets $ 54 Interest on lease obligations 4 Operating lease cost 1,178 Sublease income (211 ) Total lease cost $ 1,025 Other information Weighted-average remaining lease term (in years): Finance leases 1.0 Operating leases 8.3 Weighted-average discount rate: Finance leases 5.0 % Operating leases 6.6 % Cash paid for amounts included in the measurement of lease obligations Operating cash flows from operating leases $ 812 Operating cash flows from finance leases $ 4 Financing cash flows from finance leases $ 59 As of March 31, 2019 , under ASC 842, maturity analysis of annual undiscounted cash flows of the non-cancellable finance and operating leases as follows (in thousands): Years ending December 31, Finance Leases Operating Leases 2019 (remaining 9 months) $ 189 $ 2,469 2020 61 2,816 2021 — 4,197 2022 — 4,285 2023 — 4,589 2024 and thereafter — 18,220 Total minimum lease payments (1) $ 250 $ 36,576 Less: imputed interest (8 ) (9,352 ) Lease Obligations $ 242 $ 27,224 (1) Minimum payments have not been reduced by future minimum sublease rentals of $0.7 million to be received under non-cancellable subleases at March 31, 2019 . As of December 31, 2018, under ASC 840, maturity analysis of annual undiscounted cash flows of the non-cancellable capital and operating leases as follows (in thousands): Years ending December 31, Capital Leases Operating Leases 2019 $ 252 $ 3,280 2020 61 712 2021 — 490 2022 — 41 2023 — — Total minimum lease payments (1) 313 $ 4,523 Less: amount representing interest (10 ) Present value of capital lease obligations 303 Less: current portion (242 ) Long-term portion of capital leases $ 61 (1) Minimum payments have not been reduced by future minimum sublease rentals of $0.9 million to be received under non-cancellable subleases. Other Commitments We enter into supply and service arrangements in the normal course of business. Supply arrangements are primarily for fixed-price manufacture and supply. Service agreements are primarily for the development of manufacturing processes and certain studies. Commitments under service agreements are subject to cancellation at our discretion which may require payment of certain cancellation fees. The timing of completion of service arrangements is subject to variability in estimates of the time required to complete the work. The following table provides quantitative data regarding our other commitments. Future minimum payments reflect amounts that we expect to pay including potential obligations under services agreements subject to risk of cancellation by us (in thousands): Other Commitment Agreement Type Agreement Date Future Minimum Payment Manufacture and supply agreement with expected future payment date of December 2022 April 2016 $ 1,310 Service agreement for clinical trial December 2017 455 Total other commitments $ 1,765 Credit Facility Effective June 30, 2017, we entered into a credit facility (the "Credit Facility") consisting of term loans ("Term Debt") totaling up to $10.0 million , and advances ("Advances") under a revolving line of credit ("Revolving Line of Credit") totaling up to $5.0 million with an accounts receivable borrowing base of 80% of eligible accounts receivable. At March 31, 2019 , we have not drawn from the Credit Facility. In September 2018, we entered into a Fourth Amendment to the Credit Facility whereby the draw period on the term debt was extended to September 30, 2019. In January 2019, we entered into a Fifth Amendment to the Credit Facility to allow for Codexis to obtain a letter of credit of up to $1.1 million to secure its obligations under the Lease with MetLife. We may draw on the Term Debt at any time prior to September 30, 2019, subject to customary conditions for funding including, among others, that no event of default exists. We may draw on the Revolving Line of Credit at any time prior to the maturity date. On October 1, 2022 , any loans for Term Debt mature and the Revolving Line of Credit terminates. Term Debt bears interest through maturity at a variable rate based on the London Interbank Offered Rate plus 3.60% . Advances under the Revolving Line of Credit bear interest at a variable annual rate equal to the greater of (i) 1.00% above the prime rate and (ii) 5.00% . The Credit Facility allows for interest-only payments on Term Debt through November 1, 2020 . Monthly payments of principal and interest on the Term Debt are required following the applicable amortization date. We may elect to prepay in full the Term Debt and Advances under the Revolving Line of Credit at any time. Our obligations under the Credit Facility are secured by a lien on substantially all of our personal property other than our intellectual property. The Credit Facility includes a number of customary covenants and restrictions which require us to comply with certain financial covenants including achieving consolidated product revenues levels at minimum levels as set forth in the Credit Facility unless we maintain certain minimum cash levels with the lender in an amount equal to or greater than six times the sum of the average six -month trailing operating cash flow net outlay plus the average monthly principal due and payable in the immediately succeeding three -month period. The Credit Facility places various restrictions on our transferring collateral, incurring additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other distributions, making investments, creating liens, and selling assets and permitted assets to be held at foreign subsidiaries above specified caps, in each case subject to certain exceptions. A failure to comply with these covenants could permit the lender to exercise remedies against us and the collateral securing the Credit Facility, including foreclosure of our properties securing the Credit Facility and our cash. At March 31, 2019 , we were in compliance with the covenants for the Credit Facility. Legal Proceedings We are not currently a party to any material pending litigation or other material legal proceedings. In February 2018, we and EnzymeWorks, Inc. (U.S.), Suzhou Hanmei Biotechnology Co. Ltd, d/b/a EnzymeWorks, Inc. (China) (collectively, "EnzymeWorks"), Junhua Tao, and Andrew Tao reached a settlement concerning the lawsuit filed by us in February 2016 against EnzymeWorks, Junhua Tao, and Andrew Tao in the United States District Court for the Northern District of California. The parties have entered into a settlement agreement, the terms of which are confidential. The parties have also stipulated to a judgment of patent infringement of all asserted patents against EnzymeWorks, and a permanent injunction barring any future infringement. The remaining claims against EnzymeWorks, and all claims against Junhua Tao, and Andrew Tao including trade secret misappropriation, breach of contract and voidable transfer have been dismissed with prejudice. EnzymeWorks appealed the sanctions levied against them by Judge Orrick to the Federal Circuit and filed its opening brief on May 30, 2018. On July 9, 2018, Codexis filed its response brief, and EnzymeWorks filed its reply on July 30, 2018. On February 8, 2019, the Federal Circuit panel of judges assigned to the case issued an opinion affirming the lower court’s ruling and remanding the case to the lower court on jurisdictional grounds to vacate the order to which the parties had earlier stipulated. EnzymeWorks has 90 days from the decision in which to appeal. Indemnifications We are required to recognize a liability for the fair value of any obligations we assume upon the issuance of a guarantee. We have certain agreements with licensors, licensees, and collaborators that contain indemnification provisions. In such provisions, we typically agree to indemnify the licensor, licensee and collaborator against certain types of third party claims. The maximum amount of the indemnifications is not limited. We accrue for known indemnification issues when a loss is probable and can be reasonably estimated. There were no accruals for expenses related to indemnification issues for any periods presented. |