News Column

SOLAZYME INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

May 8, 2014

Forward-Looking Statements The following discussion and analysis should be read together with our condensed consolidated financial statements and the other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements reflecting our current expectations and involves risks and uncertainties. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "intend," "potential" or "continue" or the negative of these terms or other comparable terminology. For example, statements regarding our expectations as to future financial and operating performance, future selling prices and margins for our products, attributes and performance of our products, manufacturing capacity, expense levels and liquidity sources are forward-looking statements. Our actual results and the timing of events may differ materially from those discussed in our forward-looking statements as a result of various factors, including those discussed below, those discussed in the section entitled "Risk Factors" included in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission (SEC). Overview We make renewable oils and other bioproducts. Our proprietary technology uses highly optimized microalgae in an industrial fermentation process to transform a growing range of abundant plant-based sugars into high-value triglyceride oils and other bioproducts. We have the ability to tailor the composition of our oils and bioproducts to address specific customer requirements, offering superior performance characteristics and value, compared with conventionally sourced products. We anticipate that the average selling prices (ASPs) of our products will capture the enhanced value that results from tailoring compositions of oils that enable heightened performance. As such, we expect our products to generate attractive margins in our target markets. In the skin and personal care market, we are currently selling two consumer branded skin and personal care offerings, our Algenist® and EverDeep® lines, and we intend to develop additional consumer products. In the first quarter of 2014, we began manufacturing at high-volume commercial production scale, and we began selling oil-based intermediate and ingredient products. We expect to sell broadly to customers in the chemicals, oil field services, fuels and food markets. We expect our average margins on these intermediate and ingredient products will be lower than those of our branded skin and personal care products; however, the sales volumes for the intermediate and ingredient products will be higher as we expand our large scale production. We have entered into sales agreements and partnership agreements to advance commercialization efforts. In addition to development agreements to fund development work and new product application testing, we expect that our partners will enter into long-term purchase agreements with us. We are currently engaged in development activities with multiple partners. The inherent flexibility of our technology platform and the broad usage of triglyceride oils and functional fluids across multiple industries allows us to approach a wide range of customers across a wide range of end markets. We have many oils in various stages of development that can address multiple end industrial markets. We are also developing food oils targeted at the nutritional markets. Our food oils are formulated to offer a variety of functional benefits such as enhanced structuring capabilities, stability, and shelf life while providing robust formulation and process flexibility. In addition, we have developed novel methods of preparing powdered forms of triglyceride oils. Our powdered ingredients are composed of whole algal cells, including the cell wall and the oils and other cellular products held within the whole algal cell. Our process is compatible with commercial-scale and widely-available fermentation equipment. We operate our lab and pilot fermentation and recovery equipment as scaled-down versions of our large commercial engineering designs. This allows us to more easily scale up to larger fermentation vessels. We have scaled up our technology platform and have successfully operated at lab (5-15 liter), pilot (600-1,000 liter), demonstration (120,000 liter) and commercial (approximately 500,000 liter and above) fermenter scale. The fermentation equipment used to achieve commercial scale at Archer-Daniels-Midland Company's (ADM) Clinton Facility is comparable to the fermentation equipment at the Solazyme Bunge Renewable Oils facility in Brazil. Our existing manufacturing operations are as follows: • Our pilot plant in South San Francisco, California, with recovery



operations capable of handling material from both 600 and 1,000 liter

fermenters, enables us to produce samples of our algal oils for testing

and optimization by our partners, as well as to test new process conditions at an intermediate scale. 24



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• In 2012, we announced successful commissioning of our first fully integrated bio-refinery (IBR) at our Peoria, Illinois facility, to produce algal oil. The IBR was partially funded with a federal grant



that we received from the U.S. Department of Energy (DOE) in December

2009 to demonstrate integrated commercial-scale production of renewable

algae-derived fuels. The Peoria Facility has a nameplate capacity of two million liters of oil annually and provides an important platform for continued work on feedstock flexibility and scaling of new algal oils



into the marketplace. We have recently modified our Peoria Facility to

produce food ingredients in conjunction with market development activity.



• In April 2012, we executed a Joint Venture Agreement with Bunge Global

Innovation, LLC and certain of its affiliates (collectively, Bunge), one

of the largest sugarcane processing companies in Brazil, establishing a

joint venture (Solazyme Bunge JV) to construct and operate a production

facility adjacent to Bunge's sugarcane mill in Moema, Brazil. We are currently completing the construction and commissioning of our 100,000 MT purpose-built production facility at Bunge's Moema sugar mill in Orindiuva, Brazil. See "Significant Partner Agreements."



• In November 2012, we executed a strategic collaboration agreement with

ADM to produce algal triglyceride oil products at ADM's facility in

Clinton, Iowa (the Clinton Facility). In January 2014, we began

commercial scale production of our products at the Clinton Facility. See

"Significant Partner Agreements."

• In January 2014, we commenced commercial operations at both the Clinton

Facility and the downstream companion facility operated by American

Natural Processors, Inc. (ANP). We, along with ADM and ANP have

successfully manufactured four distinct products at the facilities, and

products are being sold and distributed. Production at the ADM and ANP facilities is expected to ramp to nameplate capacity of 20,000 MT/year within twelve to eighteen months. • We utilize contract manufacturing to assist in the production of our



Algenist® and EverDeep® products and we closely monitor and advise these

contract manufacturers to help ensure that our products meet stringent

quality standards. We also produce some ingredients for our skin and personal care products at our Peoria Facility. Through fiscal year 2013, our revenues have been generated from research and development programs and commercial sale of our skin and personal care products, and starting in the first quarter of 2014, our product revenues expanded to include intermediate and ingredient products. Our research and development programs have been conducted primarily under key agreements with government agencies and strategic partners to fund development work and perform application testing. We focus our innovation efforts on creating a broad suite of algal products that meet defined market needs. We intend to continue to work closely with our partners and customers to understand their requirements and design products to specifically address their needs. We have developed a portfolio of innovative and branded microalgae-based consumer products. Our first major ingredient was Alguronic Acid®, which was formulated into a full range of skin care products. Since its launch in March 2011, we have commercialized Algenist®, which is an anti-aging skin care line marketed to date primarily through Sephora S.A. and its affiliates (Sephora) and QVC. In April 2014, our Algenist® line launched at Nordstrom, our first high-end department store retail channel. We have also expanded our international distribution and are currently selling in over 1,300 retail stores in 17 countries including member countries of the EU, Mexico, Canada and China. In 2013, we further leveraged our innovative ingredient research and expertise by broadening the Algenist® line to include products that use Microalgae Oil as a replacement for the essential oils currently used in skin care products. In November 2013, we launched our second skin care line, EverDeep®. EverDeep® uses a new proprietary ingredient, Algasome™ complex, and is sold online and via telephone driven by direct-to-consumer "infomercial" broadcasts. The skin care line utilizes a continuity program and auto-delivery options to strengthen the link with customers to drive repeat sales. In the first quarter of 2014, we began selling our oil-based intermediate and ingredient products more broadly to customers in the oil field services markets with the launch of our Encapso™ lubricant, a biodegradable lubricant for drilling fluids and other algal oil products. Significant Partner Agreements We currently have joint venture, joint development, supply and distribution arrangements with various strategic partners. We expect to enter into additional partnerships in each of our target markets to advance commercialization of our products and to expand our upstream and downstream capabilities. Upstream, we expect partners to provide research and development funding, capital for commercial manufacturing capacity and/or secure access to feedstock. Downstream, we expect partners to provide expanded distribution channels, product application testing, marketing expertise and/or long-term purchase commitments. Our current principal partnership and strategic arrangements include: 25



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Bunge. In May 2011, we entered into a Joint Development Agreement (the JDA) with Bunge that has been extended through September 2014. Pursuant to the JDA, we and Bunge are jointly developing microbe-derived oils, and exploring the production of such oils from Brazilian sugarcane feedstock. In anticipation of the Solazyme Bunge JV's formation, in May 2011, we granted Bunge Limited a warrant (the Warrant) to purchase 1,000,000 shares of our common stock at an exercise price of $13.50 per share. The Warrant vests based on a number of milestones connected with the construction and initial operation of the Solazyme Bunge JV Plant. As of March 31, 2014, the warrant was vested as to 75% of the shares underlying the Warrant and the remaining 25% of the shares underlying the Warrant can no longer vest. The Warrant expires in May 2021. In April 2012, we and Bunge formed the Solazyme Bunge JV to build, own and operate a commercial-scale renewable algal oil production facility (the Solazyme Bunge JV Plant) adjacent to Bunge's Moema sugarcane mill in Brazil. The Solazyme Bunge JV Plant, which will leverage our technology and Bunge's sugarcane milling and natural oil processing capabilities, will produce microalgae-based products. In addition, the Solazyme Bunge JV Plant has been designed to be expanded for further production in line with market demand. We expect this production facility to have annual production capacity of 100,000 MT of oil. Construction of the Solazyme Bunge JV Plant commenced in the second quarter of 2012 and was financed with equal equity contributions by both Bunge and Solazyme and over $100 million of project financing from the Brazilian Development Bank. Commissioning is underway, and we are targeting production of first commercial product in the second quarter of 2014. As a condition of the Solazyme Bunge JV drawing funds under the loan in excess of amounts supported by bank guarantees, we may be required to provide a corporate guarantee of a portion of the loan (in an amount that, when added to the amount supported by our bank guarantee, does not exceed our ownership percentage in the Solazyme Bunge JV). In addition to forming the Solazyme Bunge JV in April 2012, we entered into a Development Agreement with the Solazyme Bunge JV to continue research and development activities that are intended to benefit the Solazyme Bunge JV, including activities in the areas of strain development, molecular biology and process development. The Development Agreement provides that the Solazyme Bunge JV will pay us a technology maintenance fee in recognition of our ongoing research investment in technology that would benefit the Solazyme Bunge JV. We also entered into a Technology Service Agreement with the Solazyme Bunge JV under which the Solazyme Bunge JV will pay us for technical services related to the operations of the plant, including, but not limited to, engineering support for plant operations, operation procedure consultation, product analysis and microbe performance monitoring and assessment. In the third quarter of 2013, the Solazyme Bunge JV also agreed to pay us to support its commercial activities, including, but not limited to, facilitating supply agreements on behalf of the Solazyme Bunge JV and providing regulatory support. In November 2012, we entered into a joint venture expansion framework agreement with Bunge. This framework agreement sets forth the intent of the partners to expand joint venture-owned oil production capacity from the current 100,000 MT under construction in Brazil to 300,000 MT by 2016 at select Bunge owned and operated processing facilities worldwide. We and Bunge amended the Joint Venture agreement in October 2013 to expand the field and product portfolio of the Solazyme Bunge JV. We and Bunge intend to work together through joint market development to bring new, healthy, edible oils to the Brazilian market. Refer to Note 8 and Note 10 in the accompanying notes to our condensed consolidated financial statements for further discussion of the Bunge JDA, Joint Venture Agreement and Warrant. ADM. In November 2012, we entered into a strategic collaboration agreement with ADM, establishing a collaboration for the production of algal triglyceride oil products at the Clinton Facility. The Clinton Facility is producing algal triglyceride oil products using our proprietary microbe-based catalysis technology. Feedstock for the facility is provided by ADM's adjacent wet mill. Under the terms of the strategic collaboration agreement, we pay ADM annual fees for use and operation of a portion of the Clinton Facility, a portion of which may be paid in our common stock. In addition, in January 2013 we granted to ADM a warrant to purchase 500,000 shares of our common stock, which vests in equal monthly installments over five years, commencing in November 2013. In addition, in March 2013 we issued a series of warrants to ADM for payment in stock, in lieu of cash, at our election, of future annual fees for use and operation of a portion of the Clinton Facility. This facility uses corn sugars as a feedstock and currently has an initial target nameplate capacity of 20,000 MT per year of algal triglyceride oil products, which we are targeting to attain 12-18 months after commencement of commercial production, which occurred in January 2014. We have an option to expand the capacity to 40,000 MT per year with the potential to further expand production to 100,000 MT per year. We are also working together with ADM to develop markets for the products produced at the Clinton Facility. Since the third quarter of 2013, downstream processing has been performed at a finishing facility in Galva, Iowa (Galva Facility), which is operated by our long-term partner, a wholly owned subsidiary of American Natural Processors, Inc. In January 2014, we began commercial scale production of our oils at the Clinton/Galva Facilities. 26



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Mitsui. In February 2013, we entered into a multi-year agreement with Mitsui & Co., Ltd. (Mitsui) to jointly develop triglyceride oils for use primarily in the oleochemical industry. The agreement includes further development of our myristic oil, a valuable raw material in the oleochemical industry, and additional oils that we are developing for the oleochemical and industrial sectors. End use applications may include renewable, high-performance polymer additives for plastic applications, lubricants and toiletry and household products. Roquette. In November 2010, we entered into a joint venture agreement with Roquette. The purpose of the Solazyme Roquette JV was to engage in manufacturing, distribution, sales, marketing and support of products and services related to the use of microalgae to which we have not applied our targeted recombinant technology in a fermentation production process to produce materials for use in the following fields: (1) human foods and beverages; (2) animal feed; and (3) nutraceuticals. In June 2013, we and Roquette agreed to dissolve the Solazyme Roquette JV and on July 18, 2013, the Solazyme Roquette JV was dissolved. Algenist® Distribution Partners. In December 2010, we entered into a distribution contract with Sephora EMEA to distribute our Algenist® product line in Sephora EMEA stores in certain countries in Europe and select countries in the Middle East and Asia. In January 2011, we also made arrangements with Sephora Americas to sell our Algenist® product line in Sephora Americas stores (which currently includes locations in the United States and Canada). In October 2011, we launched our Algenist® product line at Sephora inside jcpenney stores in the United States. In March 2011, we entered into an agreement with QVC, Inc. (QVC) and launched the sale of our Algenist® product line through QVC's multimedia platform. Unilever. In October 2011, we entered into a joint development agreement with Unilever (our fourth agreement altogether) which expanded our current research and development efforts. In September 2013, we and Unilever extended this joint development agreement through September 30, 2014 and entered into a commercial supply agreement for at least 10,000 MT of our algal oil. Financial Operations Overview Revenues We are commercializing our products as intermediate/ingredient products or Solazyme Consumer Products. Intermediate/ingredient products encompass a portfolio of ingredient products targeted at customers in the chemicals, fuels and foods markets. Within Solazyme Consumer Products, we are currently selling consumer brands into the skin and personal care market with two branded skin and personal care offerings, our Algenist® and EverDeep® lines. Prior to commercialization of Algenist® in 2011, our revenues were primarily from collaborative research and government grants. Through the end of 2013, our product revenues were entirely from the sale of branded products into the skin and personal care market providing us with the highest gross margin within our target markets. In the first quarter of 2014, we began to sell intermediate and ingredient products more broadly into the chemicals, fuels and oil field services markets as we began to commercially produce and distribute products from our Clinton/Galva Facilities. • Research and Development Program Revenues Revenues from research and development (R&D) programs are recognized in the period during which the related costs are incurred, provided that the conditions under which the government grants and agreements were provided have been met and only perfunctory obligations are outstanding. We currently have active R&D programs with commercial partners and governmental agencies. These R&D programs are entered into pursuant to agreements and grants that generally provide payment for certain types of expenditures in return for research and development activities over a contractually defined period. Revenues related to R&D programs include reimbursable expenses and payments received for full-time equivalent employee services recognized over the related performance periods for each of the contracts. We are required to perform research and development activities as specified in each respective agreement based on the terms and performance periods set forth in the agreements as outlined above. R&D program revenues represented 41% and 40% of our total revenues for the three months ended March 31, 2014 and 2013, respectively. Revenues from commercial and strategic partner development agreements represented 100% and 95% of total R&D revenues for the three months ended March 31, 2014 and 2013, respectively. Revenues from government grants and agreements represented 0% and 5% of total R&D revenues for the three months ended March 31, 2014 and 2013, respectively. • Product Revenues Product revenues consist of revenues from products sold commercially into each of our target markets. We began our commercialization in the skin and personal care markets within Solazyme Consumer Products. Starting in 2011, we recognized revenues from the sale of our first commercial product line, Algenist®, which we 27



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distributed to the skin and personal care end market through arrangements with Sephora S.A. and its affiliates (Sephora), QVC and Space NK in 17 countries including the U.S., member countries of the EU, Mexico, Canada and China, as well as direct-to-consumer sales via the Internet. In November 2013, we launched our second algal skin care line, EverDeep®. In the first quarter of 2014, we launched our Encapso™ lubricant, a biodegradable lubricant for drilling fluids in the oil field services market, Tailored™ oil products to customers that use our oil-based intermediate products in the chemicals market, as well as fuel blend sales as part of our effort to build our fuels marketing and commercial development programs; preliminary program efforts include the sale and transfer of blended fuels to private (non-government) customers. We expect our product revenues to increase as the demand for our Algenist® and EverDeep® product lines grow and as we commercialize our portfolio of Tailored™ oil products targeted at customers in chemicals markets, our advanced biofuels in the fuel market, Encapso™ lubricant in oil field services market as well as our nutrition products in foods markets. Product revenues represented 59% and 60% of our total revenues for the three months ended March 31, 2014 and 2013, respectively. Costs and Operating Expenses Costs and operating expenses consist of cost of product revenue, research and development expenses and sales, general and administrative expenses. Personnel-related expenses, including non-cash stock-based compensation, costs associated with our strategic collaboration agreements as well as other third-party contractors and contract manufacturers, reimbursable equipment and costs associated with government contracts, consultants and facility costs, comprise the significant components of these expenses. • Cost of Product Revenue Through the end of 2013, cost of product revenue consisted primarily of third-party contractor costs associated with packaging, distribution and production of Algenist® products, internal labor, shipping, supplies and other overhead costs associated with production of Alguronic Acid®, a microalgae-based active ingredient, and microalgae oil used in our Algenist® product line. In the first quarter of 2014, cost of product revenue also included manufacturing and related third party contract costs associated with the production of our oil-based intermediate/ingredient products, such as Encapso™ lubricant, Tailored™ oils and fuels. Prior to our products' meeting any applicable regulatory requirements, all manufacturing and related production costs are recorded as research and development expenses. In the first quarter of 2014, our Encapso™ lubricant and one of our Tailored™ oils met applicable regulatory requirements, and we began capitalizing certain production costs to inventory. From time to time, certain inventory manufactured prior to regulatory approval may be expensed as research and development cost. We expect our total cost of product revenue to increase in correlation with increased product sales as the demand for our Algenist® and EverDeep® product lines grow and as we commercialize our portfolio of oil-based intermediate/ingredient products targeted at customers in the chemicals, fuels, oil field services and foods markets. • Research and Development Research and development expenses consist of costs incurred for internal projects as well as partner-funded collaborative research and development activities with commercial and strategic partners and governmental and JV entities (partners). Research and development expenses consist primarily of personnel and related costs including non-cash stock-based compensation, costs associated with our strategic collaboration agreements as well as other third-party contract manufacturers, reimbursable equipment and costs associated with government contracts. In addition, research and development expenses include certain costs associated with contract manufacturers' facilities, feedstock and supplies, depreciation and amortization of property and equipment used in the development of our algal oil products as well as manufacturing processes as we scale up our manufacturing facilities to commercial scale production. We expense our research and development costs as they are incurred. Our research and development programs are undertaken to advance our overall industrial biotechnology platform that enables us to produce high-value algal oils. Although our partners fund certain development activities, they benefit from advances in our technology platform as a whole, including costs funded by other development programs. Therefore, costs for such activities have not been separated as these costs have all been determined to be part of our total research and development related activity. Our research and development efforts are directed at (1) identifying, isolating and further optimizing strains of microalgae to achieve high cell densities, high yield converting sugar to product and high productivity rates compared to other alternatives; (2) tailoring the oil outputs to meet specific market needs; (3) product and process development projects aimed at reducing the cost of oil production; and (4) scale-up of commercial scale production at the Clinton/Galva Facilities as well as product and process development activities in our Peoria Facility. Our research and 28



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development projects also include activities as specified in our government grants and contracts and development agreements with commercial and strategic partners. We expect to continue to use our Peoria Facility for joint development activities, to provide samples for market development as well as for commercial production for products such as our AlgaViaTM brand of whole algal powders and flours. • Sales, General and Administrative Sales, general and administrative expenses consist primarily of personnel and related costs including non-cash stock-based compensation related to our executive management, corporate administration, sales and marketing functions, professional services and administrative and facility overhead expenses. These expenses also include costs related to our business development and sales functions, including marketing programs. Professional services consist primarily of consulting, external accounting, legal and investor relations fees associated with operating as a publicly-traded company. We expect sales, general and administrative expenses to increase as we incur additional costs related to commercializing our business, including our growth and expansion in Brazil. Other Income (Expense), Net Interest and Other Income Interest and other income consist primarily of interest income earned on marketable securities and cash balances. Our interest income will vary for each reporting period depending on our average investment balances during the period and market interest rates. Interest Expense Interest expense consists primarily of interest related to our debt. As of March 31, 2014 and December 31, 2013, our outstanding debt, net of debt discounts, was approximately $89.1 million and $93.5 million, respectively. Gain (Loss) from Change in Fair Value of Warrant Liability Gain (loss) from change in fair value of warrant liability consists primarily of the change in the fair value of a common stock warrant issued to Bunge Limited. The warrant liability is remeasured to fair value at each balance sheet date and/or upon vesting, and the change in the then-current aggregate fair value of the warrants is recorded as a gain or loss from the change in the fair value in our condensed consolidated statement of operations. The warrant liability is reclassified to additional paid-in capital upon conversion of redeemable preferred stock, or vesting of common warrant shares. In April 2012, the first and second tranches of the common stock warrant issued to Bunge Limited had vested, and the related warrant liability of $4.6 million was reclassified to additional paid-in capital and was no longer adjusted to fair value. As of March 31, 2014, the warrant liability associated with the third tranche of the common stock warrant issued to Bunge Limited was adjusted to $0, as the third tranche can no longer vest. Gain (Loss) from Change in Fair Value of Derivative Liability Gain (loss) from change in fair value of derivative liability consists of the change in the fair value of the embedded derivative related to the early conversion feature of the 6.00% Convertible Senior Subordinated Notes (the "2018 Notes") issued in January 2013. Income (Loss) from Equity Method Investments, Net Income (loss) from the equity method investment in the Solazyme Bunge JV is recorded in our income statement as "Income (Loss) from Equity Method Investments, Net". Income Taxes Since inception, we have incurred net losses and have not recorded any U.S. federal, state or non-U.S. income tax provisions. We have recorded a full valuation allowance against deferred tax assets as it is more likely than not that they will not be realized. Critical Accounting Policies and Estimates Critical accounting policies are those accounting policies that management believes are important to the portrayal of our financial condition and results and require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our 2013 Annual Report on Form 10-K includes a description of certain critical accounting policies, including those with respect to revenue recognition, inventories, 29



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stock-based compensation and income taxes. There have been no material changes to the Company's critical accounting policies described in the Company's 2013 Annual Report on Form 10-K, except as described below: Inventories - In the first quarter of 2014, inventories also included manufacturing and related third party contract costs associated with the production of our intermediate/ingredient products that met applicable regulatory requirements. Prior to our products' meeting applicable regulatory requirements, the manufacturing and related production costs of such products are charged to research and development expenses. Product Revenue - Product revenue is recognized from the sale of our branded consumer products, which currently includes our Algenist® and EverDeep® skin care lines, and from the sale of intermediate/ingredient products including our Tailored™ oil products and fuel blend sales, the latter of which is part of our effort to build fuels marketing and commercial development programs. Results of Operations Comparison of Three Months Ended March 31, 2014 and 2013 Revenues Three Months Ended March 31, 2014 2013 $ Change (In thousands) Revenues: Research and development programs $ 5,043$ 2,680$ 2,363 Net product revenue 7,348 4,000 3,348 Total revenues $ 12,391$ 6,680$ 5,711 Our total revenues increased by $5.7 million in the first quarter of 2014 compared to the same period in 2013, due to $3.3 million of increased product sales and a $2.4 million increase in R&D program revenue in the first quarter of 2014 compared to the same period in 2013. The increase in net product revenue was due to new commercial sales into the chemicals, fuels and oil field services markets of $2.4 million and an increase of $1.0 million in Algenist® product sales primarily due to new product offerings and increased consumer demand. We began to sell more broadly into the chemicals, fuels and oil field services markets starting in the first quarter of 2014. These sales included our commercial launch of Encapso™ lubricant and Tailored™ oils as well as fuel blend sales as part of our effort to build fuels marketing and commercial development programs, which preliminarily includes the sale and transfer of blended fuels to private (non-government) customers. We expect product revenues in the chemicals, fuels and oil field services markets to increase as a percentage of total net product revenues as we continue to expand our large-scale production. R&D program revenues increased by $2.4 million, due primarily to an increase in revenues from development agreements with the Solazyme Bunge JV. Our revenues from development agreements with strategic partners and the Solazyme Bunge JV increased due to timing of the development work performed and achievement of contract milestones defined in these agreements. We are currently engaged in development activities with multiple strategic partners and the Solazyme Bunge JV and expect that our R&D program revenues will continue, as we continue this work and add new strategic partners. In the near term, we don't expect government program revenues to increase. As we enter into new agreements with strategic partners or government programs, we expect that quarterly trends may fluctuate based on the timing of program activities. The inherent flexibility of our technology platform and the broad usage of trigylceride oils across multiple industries allows us to approach a wide range of customers across myriad end markets. We expect our product revenues to increase as we commercialize our intermediate/ingredient products encompassing a portfolio of product revenues to total revenues as we expand our manufacturing capacity and related oil product offerings in the chemical, fuels, oil field services and foods markets. 30



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Cost of Product Revenue

Three Months Ended March 31, 2014 2013 Change (In thousands) Cost of revenue: Product $ 3,390$ 1,454$ 1,936 Gross profit: Product $ 3,958$ 2,546$ 1,412 Gross margin: Product 53.9 % 63.7 % (9.8 )% Beginning in the first quarter of 2014, cost of product revenue includes 2014 production costs associated with our Encapso™ lubricant and Tailored™ oil, as well as renewable fuels purchased in connection with our fuels marketing and commercial development programs, as we began to sell more broadly to customers in the oil field services, chemicals and fuels markets. Prior to meeting applicable regulatory requirements for these products in 2014, certain Encapso™ lubricant and Tailored™ oil manufacturing and related production costs were charged to research and development expenses. These inventories, manufactured and charged to research and development in 2013, were sold in the first quarter of 2014. Cost of product revenue increased $1.9 million in the first quarter of 2014 compared to the same period in 2013 and gross margins were 54% in the first quarter of 2014 compared to 64% in the first quarter of 2013. The sales of Encapso® lubricant, Tailored™ oil and blended fuel sales resulted in higher cost of product revenues in the first quarter of 2014. Gross margins decreased primarily due to the higher mix of lower gross margin intermediate and ingredient product sales of fuels, Encapso™ lubricant and Tailored™ oil sales offset by the higher gross margin on sales of Algenist® products. The gross margin related to Algenist® products was 70% in the first quarter of 2014 compared to 64% in the same period in 2013 due mainly to the change in product mix. The gross margin for fuels, Encapso™ lubricant and Tailored™ oil sales was 21% in the first quarter of 2014, impacted favorably by the sale of inventories that were expensed previously to research and development expense as they were produced during the scale-up of commercial scale production at the Clinton/Galva Facilities. The gross margins for our intermediate and ingredient products are expected to be lower than our historical margins, which were based on our branded skin and personal care products. We will continue to sell our highest gross margin branded skin and personal care products and we expect to ramp up our production and sales of intermediate and ingredient products. We expect our overall gross margin to decline as our product mix shifts more to intermediate and ingredient product sales into the chemicals, fuels, food and oil field services markets. We expect our cost of production for products manufactured at the Clinton/Galva Facilities will increase as we continue commercial production for the chemicals, fuels, oil field services and foods markets and as our production volume ramps up over 12-18 months after commencement of commercial production, while we work toward our target nameplate capacity of 20,000 MT/year. We also expect that our cost of production as a percentage of revenue may be higher in the early stages of production, depending on mix of products, but will ease and flatten as production volume increases to nameplate capacity. Operating Expenses Three Months Ended March 31, 2014 2013 $ Change (In thousands)



Operating expenses: Research and development $ 20,835$ 13,720$ 7,115 Sales, general and administrative 20,607

14,866 $ 5,741



Total operating expenses $ 41,442$ 28,586$ 12,856

Research and Development Expenses Our research and development expenses increased by $7.1 million in the first quarter of 2014 compared to the same period in 2013, due primarily to $4.9 million of costs related to development of new algal oils and scale up commercial production at the Clinton/Galva Facilities, as well as increased personnel-related and facilities-related costs of $1.8 million and $0.3 million, respectively. 31



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Personnel and facilities-related costs increased as a result of headcount growth to support the Clinton, Galva and Solazyme Bunge JV activities as well as Peoria manufacturing and collaborative research activities. Personnel-related costs include non-cash stock-based compensation expense of $1.8 million in the first quarter of 2014 compared to $1.1 million in the same period in 2013. We plan to continue to make investments in research and development for the foreseeable future as we continue (1) to identify, isolate and further optimize strains of microalgae to achieve high cell densities, high yield converting sugar to product and high productivity rates compared to other alternatives; (2) to tailor the oil outputs to meet specific market needs; (3) product and process development projects aimed at reducing the cost of oil production; and (4) to scale-up commercial production at the Clinton/Galva Facilities to commercial scale, as well as product development activities. We do not expect a significant increase in our research and development expenses in the near term as we scale up to commercial production. Sales, General and Administrative Expenses Our sales, general and administrative expenses increased by $5.7 million in the first quarter of 2014 compared to the same period in 2013, primarily due to increased personnel-related and facilities-related costs of $4.1 million and $0.3 million, respectively, and increased marketing and promotional costs of $1.0 million. Personnel-related and facilities-related costs increased due to headcount growth primarily related to commercialization of our products. Personnel-related costs include non-cash stock-based compensation of $4.8 million in the first quarter of 2014 compared to $2.9 million in the same period in 2013. Marketing and promotional costs increased mainly due to Algenist® product launches during the first quarter of 2014. We expect our sales, general and administrative expenses to increase as we hire additional personnel and enhance our infrastructure to support the anticipated commercialization into the chemicals, fuels, oil field services and food markets domestically and in Brazil. Other Income (Expense), Net Three Months Ended March 31, 2014 2013 $ Change (In thousands) Other income (expense): Interest and other income, net $ 235$ 348$ (113 ) Interest expense (1,347 ) (1,871 ) (524 ) Loss from equity method investment (3,834 ) (959 ) 2,875 Gain from change in fair value of warrant liability 688 54 634 Gain (loss) from change in fair value of derivative liability 2,018 (737 ) (2,755 ) Total other income (expense), net $ (2,240 ) $ (3,165



) $ (925 )

Interest expense Interest expense decreased by $0.5 million in the first quarter of 2014 compared to the same period in 2013, due to $0.2 million of decreased interest expense resulting from early conversions of the 2018 Notes and $0.3 million of interest expense capitalized to our investment in the Solazyme Bunge JV. On April 1, 2014, we issued $149.5 million aggregate principal amount of 5.00% Convertible Senior Subordinated Notes due 2019 (the "2019 Notes"); therefore, we expect interest expense and amortization of debt discounts and debt issue costs to increase significantly. Loss from Equity Method Investment Loss from equity method investment increased by $2.9 million in the first quarter of 2014 compared to the same period in 2013, primarily due to the increase in our proportionate share of the net loss from the Solazyme Bunge JV. We expect the loss from our equity method investment to increase as the Solazyme Bunge JV completes plant construction and commissioning and begins scale up of commercial-scale production in Brazil. Gain from Change in Fair Value of Warrant Liability There was a $0.7 million gain from the change in fair value of warrant liability in the first quarter of 2014 compared to a $54,000 gain from the change in fair value of warrant liability in the same period in 2013. The change in fair value of warrant liability is related to the fair value of the unvested warrant issued to Bunge Limited. The warrant vests in three separate tranches, each contingent upon the achievement of specific performance-based milestones related to the formation and operations of the Solazyme Bunge JV. The unvested warrant shares were recorded as a liability on our condensed consolidated balance sheet beginning in the second quarter of 2012, and the unvested portion of the warrant continues to be remeasured to 32



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fair value at each balance sheet date and reclassified to additional paid-in capital upon vesting. In the second quarter of 2012, 750,000 warrant shares (first and second tranche) vested and were reclassified to additional paid-in capital. As of March 31, 2014, the warrant liability associated with the third tranche of the common stock warrant issued to Bunge Limited was adjusted to $0, as the third tranche can no longer vest. Gain (Loss) from Change in Fair Value of Derivative Liability Gain from change in fair value of derivative liability of $2.0 million in the first quarter of 2014 was due primarily to the change in the fair value of the embedded derivative related to the early conversion feature of the 2018 Notes issued in January 2013 compared to a $0.7 million loss in the same period in 2013. At each reporting period, we remeasure this embedded derivative at fair value, which is included as a component of convertible debt on our condensed consolidated balance sheets. We used a Monte Carlo simulation model to estimate the fair value of the embedded derivative related to the early conversion feature of the 2018 Notes. Changes in certain inputs into the model may have a significant impact on changes in the estimated fair value of the embedded derivative. We expect that the loss from the change in the fair value of the derivative liability will fluctuate with the change in our stock price and other certain inputs to the Monte Carlo simulation model and upon early conversion by 2018 Note holders. Liquidity and Capital Resources March 31, December 31,

2014 2013 (In thousands) Cash and cash equivalents $ 50,506$ 54,977 Marketable securities 82,648 112,544 Cash, cash equivalents and marketable securities decreased by $34.4 million in the quarter ended 2014, primarily due to cash used in operating activities of $28.6 million, $8.1 million of capital contributed primarily to the Solazyme Bunge JV and $2.7 million of property and equipment purchases, partially offset by $5.6 million of proceeds received from common stock issuances pursuant to our equity plans. The following table shows a summary of our cash flows for the periods indicated: Three Months Ended March 31, 2014 2013 (In thousands) Net cash used in operating activities $ (28,640 )$ (18,220 ) Net cash provided by (used in) investing activities 18,592 (72,652 ) Net cash provided by financing activities 5,535 115,515 Sources and Uses of Capital Since our inception, we have incurred significant net losses, and as of March 31, 2014, we had an accumulated deficit of $341.0 million. We anticipate that we will continue to incur net losses as we continue the scale-up of our manufacturing activities, support commercialization activities for our products and continue to support our research and development activities. In addition, we may acquire additional manufacturing facilities, expand or build out our current manufacturing facilities and/or build additional manufacturing facilities. We are unable to predict the extent of any future losses or when we will become profitable, if at all. We expect to continue making investments in research and development and manufacturing, and expect selling, general and administrative expenses to increase as we begin and ramp up commercialization. As a result, we will need to generate significant revenues from product sales, collaborative research and joint development activities, licensing fees and other revenue arrangements to achieve profitability. To date, our sources for capital are as follows: Strategic Partners and Government In January 2010, we obtained a grant from the DOE to receive up to $21.8 million for reimbursement of expenses incurred towards building, operating, and optimizing a pilot-scale integrated biorefinery, which has allowed us to develop integrated U.S.-based production capabilities at the Peoria Facility to make oil for algae-derived biofuel. Under the terms of the grant, we are responsible for funding an additional $8.4 million. We anticipate that the remaining objectives under the program will be completed as outlined in the program by the end of the second quarter of 2014. 33



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We purchased the Peoria Facility in May 2011. We began fermentation operations in the fourth quarter of 2011 and successfully commissioned our integrated biorefinery in June 2012, funded in part by the DOE grant described above. In connection with the closing of the Peoria Facility acquisition, we entered into a promissory note, mortgage and security agreement with the seller in the initial amount of $5.5 million. In March 2013, we paid in full the outstanding principal on this promissory note. In April 2012, we entered into the Solazyme Bunge JV, which is jointly capitalized by us and Bunge, to construct and operate an oil production facility in Brazil that will utilize our proprietary technology to produce oil products from sugar feedstock provided by Bunge. Through April 30, 2014, we contributed approximately $40.3 million in capital to the Solazyme Bunge JV, and we may need to contribute additional capital to this project. In February 2013, the Solazyme Bunge JV entered a loan agreement with the Brazilian Development Bank (BNDES) under which it may borrow up to R$245.7 million (approximately USD $108.4 million based on the exchange rate as of March 31, 2014). As a condition of the Solazyme Bunge JV drawing funds under the loan in excess of amounts supported by bank guarantees, we may be required to provide a corporate guarantee for a portion of the loan (in an amount that when added to the amount supported by our bank guarantee does not to exceed our ownership percentage in the Solazyme Bunge JV). The BNDES funding is supporting the Solazyme Bunge JV's first commercial-scale production facility in Brazil, which will reduce the capital requirements funded directly by us and Bunge. We expect to scale up additional manufacturing capacity in a capital-efficient manner by signing additional agreements whereby our partners will invest capital and operational resources in building manufacturing capacity, while also providing access to feedstock. We expect to evaluate the optimal amount of capital expenditures that we agree to fund on a case-by-case basis. These events may require us to access additional capital through equity or debt offerings. If we are unable to access additional capital, our growth may be limited due to the inability to build out additional manufacturing capacity. In November 2012, we entered into a strategic collaboration agreement with ADM, whereby we have agreed to pay ADM annual fees for use and operation of a portion of its commercial scale facility in Clinton, Iowa, a portion of which may be paid in our common stock. In addition, in March 2013 we issued a series of warrants to ADM for payment in stock or cash, at our election, of future annual fees for use and operation of a portion of the Clinton Facility. In 2013, we made payments to ADM in both common stock and cash. Commercial Banks OnMay 11, 2011, we entered into a loan and security agreement with Silicon Valley Bank (the bank) that provided for a $20.0 million credit facility (the SVB facility) consisting of (i) a $15.0 million term loan (the term loan) and (ii) a $5.0 million revolving facility (the SVB revolving facility). In the first quarter of 2013, the SVB facility was terminated when we paid in full the outstanding principal and interest on the term loan using proceeds from the revolving facility with HSBC Bank, USA, National Association (HSBC) we entered into in March 2013 as described below. On March 26, 2013, we entered into a credit facility with HSBC (the HSBC facility), which provides for a $30.0 million revolving facility for working capital, letters of credit denominated in U.S. dollars or a foreign currency and other general corporate purposes, in May 2013 we entered into an amendment to increase the HSBC facility to $35.0 million, and in March 2014 we amended the HSBC facility to extend the maturity date to May 31, 2016. Also on March 26, 2013, we drew down approximately $10.4 million under the HSBC facility to repay the outstanding term loan plus accrued interest under the SVB facility. The HSBC facility is unsecured unless (i) we take action that could cause or permit obligations under the HSBC facility not to constitute senior debt (as defined in the indenture related to the 2018 Notes dated as of January 24, 2013 by and between us and Wells Fargo Bank, National Association, as trustee), (ii) we breach financial covenants that require us and our subsidiaries to maintain cash and unrestricted cash equivalents at all times of not less than $35.0 million plus one hundred ten percent of the aggregate dollar equivalent amount of outstanding advances and letters of credit under the HSBC facility, or (iii) there is a payment default under the HSBC facility or bankruptcy or insolvency events relating to us. As of March 31, 2014, $10.4 million was outstanding under the HSBC facility. A portion of the HSBC facility supports the bank guarantee issued to BNDES in May 2013. Therefore, $9.0 million of the HSBC facility remained available as of March 31, 2014, and we were in compliance with all the financial covenants under the loan. Private and Public Offerings In January 2013, we issued $125.0 million aggregate principal amount of 2018 Notes in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The 2018 Notes bear interest at a fixed rate of 6.00% per year, payable semiannually in arrears on August 1 and February 1 of each year, beginning on August 1, 2013. The 2018 Notes are convertible into our common stock and will mature on February 1, 2018, unless earlier repurchased or converted. We may not redeem the 2018 Notes prior to maturity. The initial conversion price is approximately $8.26 per share of common stock and, under certain circumstances, the 2018 Note holders will be entitled to additional payments upon conversion. The 2018 Notes are convertible at the option of the holders at any time prior to February 1, 2018 into shares of our 34



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common stock at the then-applicable conversion rate. The conversion rate is initially 121.1240 shares of common stock per $1,000 principal amount of 2018 Notes. In the event the 2018 Notes are converted prior to November 1, 2016 (other than conversions in connection with certain fundamental changes described below), in addition to the shares deliverable upon conversion, the holders are entitled to receive an early conversion payment of $83.33 per $1,000 principal amount of 2018 Notes surrendered for conversion that may be settled, at our election, in cash or, subject to satisfaction of certain conditions, in shares of our common stock. If we undergo a fundamental change (as defined in the indenture entered into with the trustee), 2018 Note holders may require that we repurchase for cash all or part of their 2018 Notes at a purchase price equal to 100% of the principal amount of the 2018 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, if fundamental changes occur, we may be required in certain circumstances to increase the conversion rate for any 2018 Notes converted in connection with such fundamental changes by a specified number of shares of our common stock. Certain 2018 Note holders elected to convert their 2018 Notes and, as of March 31, 2014, we had issued approximately 5.9 million shares of our common stock to settle both the 2018 Note conversions and early conversion payments. We had $79.2 million aggregate principal amount of 2018 Notes outstanding as of March 31, 2014. On April 1, 2014, we issued $149.5 million aggregate principal amount of 5.00% Convertible Senior Subordinated Notes due 2019 (the "2019 Notes"), in a public offering pursuant to an effective shelf registration statement (the "Note Offering"). The 2019 Notes bear interest at a fixed rate of 5.00% per year, payable semiannually in arrears on April 1 and October 1 of each year, beginning on October 1, 2014. The 2019 Notes are convertible into our common stock and will mature on October 1, 2019, unless earlier repurchased or converted. We may not redeem the 2019 Notes prior to maturity. The initial conversion price of the 2019 Notes is approximately $13.20 per share of common stock) and, under certain circumstances, the 2019 Note holders will be entitled to additional payments upon conversion. The 2019 Notes are convertible at the option of the holders at any time prior to January 1, 2018 into shares of our common stock at the then-applicable conversion rate. The conversion rate is initially 75.7576 shares of common stock per $1,000 principal amount of 2019 Notes. In the event the 2019 Notes are converted prior to January 1, 2018 (other than conversions in connection with certain fundamental changes described below), in addition to the shares deliverable upon conversion, the holders are entitled to receive an early conversion payment of $83.33 per $1,000 principal amount of 2019 Notes surrendered for conversion that may be settled, at our election, in cash, or subject to satisfaction of certain conditions, in shares of our common stock. If we undergo a fundamental change (as defined in the indenture entered into with the trustee), 2019 Note holders may require that we repurchase for cash all or part of their Notes at a purchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, if fundamental changes occur, we may be required in certain circumstances to increase the conversion rate for any 2019 Notes converted in connection with such fundamental changes by a specified number of shares of our common stock. On April 1, 2014, the Company also issued 5,750,000 shares of its common stock, par value $0.001 per share, at $11.00 per share (the "Common Stock Offering") in a public offering pursuant to an effective shelf registration statement. The net proceeds from the Common Stock Offering were approximately $59.3 million, after deducting underwriter discounts and commissions and estimated offering expenses payable by the Company. We believe that our current cash, cash equivalents, marketable securities, revenue from product sales and net proceeds from the issuance of the 2018 Notes and 2019 Notes will be sufficient to fund our current operations for at least the next 12 months. However, our liquidity assumptions may prove to be wrong, and we could utilize our available financial resources sooner than we currently expect. We may elect to raise additional funds within this period of time through public or private debt or equity financings and/or additional collaborations. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under "Risk Factors" elsewhere in this Quarterly Report on Form 10-Q. We may not be able to secure additional financing to meet our funding requirements on acceptable terms, if at all. If we raise additional funds by issuing equity securities, dilution to our existing stockholders may result. If we are unable to obtain additional funds, we will have to reduce our operating costs and delay our manufacturing and research and development programs. Cash Flows from Operating Activities Cash used in operating activities of $28.6 million in the quarter ended March 31, 2014 reflects a loss of $34.7 million, and a net change of $3.9 million in our net operating assets and liabilities, partially offset by aggregate non-cash charges of $10.0 million. Non-cash charges included stock-based compensation, loss from equity method investments, revaluations of our warrant liability and derivative liability, depreciation and amortization, net amortization of premiums on marketable securities and debt discount and loan fee amortization. We expect stock-based compensation and revaluation of our derivative liability to fluctuate with the change in our stock price and other factors. We expect loss from equity method investments and depreciation to increase as construction and commissioning of the Solazyme Bunge JV Plant is completed, production of first commercial product at the Solazyme Bunge JV Plant begins and the Clinton/Galva Facilities are ramped up. 35



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The net change in our operating assets and liabilities was primarily a result of increased accounts receivable and unbilled revenue of $1.1 million, increased inventories of $1.1 million, increased deferred revenues of $0.7 million, decreased accounts payable and accrued liabilities of $3.7 million and decreased other assets of $1.5 million. Accounts receivable and unbilled revenue increased primarily due to billing related to commercial sale launch of intermediate/ingredient products, such as Encapso™ lubricant, Tailored™ oils and fuels, research and development agreements entered into in 2013 and timing on collections of accounts receivables. Inventories increased mainly due to the launch of new commercial products in the first quarter of 2014. Deferred revenues increased due primarily to the timing of payments received under our R&D programs. The net decrease in accounts payable and accrued liabilities was due primarily to timing of annual employee bonus payment, increased scale-up activities at the Clinton Facility and timing of semi-annual interest payment on the Notes. Other assets decreased due to amortization of a deferred rent asset. We expect increased working capital requirements as we commercialize our portfolio of products in the chemical, fuels, oil field services and food markets. Cash used in operating activities of $18.2 million in the quarter ended March 31, 2013 reflects a loss of $26.5 million, and a net change of $0.8 million in our net operating assets and liabilities, partially offset by aggregate non-cash charges of $7.5 million. Non-cash charges primarily included $4.0 million of stock-based compensation, $0.7 million related to the revaluation of our derivative liability, $0.4 million of net amortization of premiums on marketable securities, $1.1 million of depreciation and amortization and $1.0 million loss on an equity method investment. The net change in our operating assets and liabilities was primarily a result of increased accounts receivable and unbilled revenue of $3.2 million, increased deferred revenues of $3.1 million and net increased accounts payable and accrued liabilities of $0.6 million, decreased prepaid expenses and other current assets of $0.5 million and decreased other current and long-term liabilities of $0.5 million. Accounts receivable and unbilled revenue increased primarily due to billing related to research and development agreements entered into in mid-2012 and timing of payments received on accounts receivables from strategic partners. Deferred revenues increased due primarily to the timing of payments received under a research and development agreement with a strategic partner. The net increase to accounts payable and accrued liabilities was due to increased employee bonus accruals and interest payable under our Notes, partially offset by overall decreased research and development costs. Prepaid expenses and other current assets decreased primarily due to receipt of payment on a receivable balance from our investment in unconsolidated joint venture. Other current and long-term liabilities decreased due to prepayment of rent resulting in reclassification of deferred rent liability to prepaid rent. Cash Flows from Investing Activities In the three months ended March 31, 2014, cash provided by investing activities was $18.6 million, primarily as a result of $29.7 million of net marketable securities maturities, partially offset by $8.1 million of capital contributed to the Solazyme Bunge JV, $2.7 million of capital expenditures related primarily to equipment installed at the Clinton Facility and $0.3 million of interest capitalized related to the Solazyme Bunge JV. In the three months ended March 31, 2013, cash used in investing activities was $72.7 million, primarily as a result of $66.0 million of net marketable securities purchases, $5.5 million of capital contributed to the Solazyme Bunge JV and $1.2 million of capital expenditures. Cash Flows from Financing Activities In the three months ended March 31, 2014, cash provided by financing activities was $5.5 million, primarily due to cash received from common stock issuances pursuant to our equity plans. In the three months ended March 31, 2013, cash provided by financing activities was $115.5 million, primarily due to $119.3 million of proceeds received from the issuance of the 2018 Notes, net of debt discounts and debt issue costs, $10.4 million of loan proceeds received from HSBC and $0.8 million received from common stock issuances pursuant to our equity plans, partially offset by $14.9 million of principal debt payments. 36



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Contractual Obligations and Commitments The following is a summary of our contractual obligations and commitments as of March 31, 2014 (in thousands): Remainder of 2018 Total 2014 2015 2016 2017 and beyond Principal payments on long-term debt $ 89,603 $ 49 $ 6$ 10,369 $ - $ 79,179 Interest payments on long-term debt, fixed rate 19,631 2,595 5,040 4,870 4,751 2,375 Non-cancelable operating leases 9,615 2,991 6,624 - - - Purchase obligations 1,514 734 360 360 60 - Total $ 120,363$ 6,369$ 12,030$ 15,599$ 4,811$ 81,554 This table does not reflect (1) a lease agreement entered into in May 2011 for facility space in Brazil; the lease term is five years, commencing on April 1, 2011 and expiring on April 1, 2016; the rent is 35,300 Brazilian Real (approximately $15,600 based on the exchange rate at March 31, 2014) per month and is subject to an annual inflation adjustment; this lease is cancelable at any time, subject to a maximum three month rent penalty, (2) fees expected to be incurred related to the bank guarantee issued to BNDES in May 2013, (3) amounts due under the 2019 Notes issued on April 1, 2014 and (4) that portion of the expenses that we expect to incur, up to $0.4 million from January through September 2014, in connection with research activities under the DOE program for which we will not be reimbursed. We currently lease approximately 96,000 square feet of office and laboratory space in South San Francisco, California. Operating leases also include annual fees to use and operate a portion of the Clinton/ Galva Facilities, a portion of which may be paid in our common stock. Off-Balance Sheet Arrangements For information on variable interest entities and guarantees, refer to Note 8 and Note 12, respectively, in the accompanying notes to our unaudited condensed consolidated financial statements. Recent Accounting Pronouncements Refer to Note 2 in the accompanying notes to our unaudited condensed consolidated financial statements for a discussion of recent accounting pronouncements. 37



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