As filed with the U.S. Securities and Exchange Commission on July 22, 2011

Registration No. 333-174583

­ ­

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

 

 

Amendment No. 2

to

Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

 

 

 

MYRIANT CORPORATION

(Exact name of Registrant as specified in its charter)

 

 

1 Pine Hill Drive, Batterymarch Park II, Suite 301, Quincy, MA 02169
(617) 657-5200

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

 

 

Stephen J. Gatto
Chief Executive Officer
Myriant Corporation

1 Pine Hill Drive
Batterymarch Park II, Suite 301
Quincy, MA 02169
(617) 657-5200

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

 

Copies to:

 

 

 

 

 

Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

CALCULATION OF REGISTRATION FEE

 

 

 

 

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

SUBJECT TO COMPLETION          , 2011

 

PRELIMINARY PROSPECTUS

 

          Shares

 

 

Common Stock

 

This is the initial public offering of our common stock. No public market currently exists for our common stock. We are offering all of the shares of common stock offered by this prospectus. We expect the public offering price to be between $      and $      per share.

 

We have applied to list our common stock on The Nasdaq Global Market under the symbol “MYRT.”

 

Investing in our common stock involves a high degree of risk. Before buying any shares, you should carefully read the discussion of material risks of investing in our common stock in “Risk factors” beginning on page 11 of this prospectus.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

The underwriters have the option to purchase from us up to an additional      shares of our common stock at the public offering price, less the underwriting discounts and commissions payable by us, to cover over-allotments, if any, within 30 days from the date of this prospectus. If the underwriters exercise this option in full, the total underwriting discounts and commissions will be $      , and our total proceeds, after underwriting discounts and commissions but before expenses, will be $     .

 

The underwriters are offering the common stock as set forth under “Underwriting.” Delivery of the shares will be made on or about          , 2011.

 

 

 

 

Morgan Joseph TriArtisan

 

Prospectus dated          , 2011

 

You should rely only on the information contained in this prospectus. We and the underwriters have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front cover of this prospectus, or such other dates as are stated in this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

 

TABLE OF CONTENTS

 

 

Unless the context otherwise requires, in this prospectus:

 

 

Certain market data presented in this prospectus have been derived from data published by government agencies and commodities exchanges, as well as private sector organizations. These agencies, exchanges and organizations include those listed above as well as leading chemical industry consulting firms. Certain target market size information presented in this prospectus has been calculated by us (as further described below) based on such data. Unless otherwise indicated, market data included in this prospectus were derived as discussed below. None of these entities has endorsed or otherwise passed upon the computations, accuracy or presentations of data calculated on the basis of data published by these entities. In addition, you should read our cautionary statement in the section entitled “Special note regarding forward-looking statements.”

 

With respect to our calculation of product market volumes and market sizes contained in this prospectus:

 

 

 

Prospectus summary

	•	developing drop-in and replacement products for large, existing markets
	•	leveraging and establishing partnerships to achieve commercial success
	•	targeting drop-in applications to drive market penetration
	•	securing customer contracts to support production capacity expansion
	•	expanding internationally to markets with the greatest business opportunities
	•	capitalizing on feedstock flexibility to further reduce our costs

	•	We are an early stage company with a history of losses. We expect to incur losses for at least the next several years, and we may never achieve profitability.
	•	We have never operated a commercial-scale plant or produced our lead product, biosuccinic acid, in commercial volumes, and as a result, we may encounter unforeseen difficulties in constructing and operating large-scale commercial facilities.
	•	Our biochemical products, including biosuccinic acid, may not be accepted by customers in the petrochemicals industry, particularly if we cannot meet our customers’ product specifications.
	•	We will be dependent initially on three customers for sales of our lead product, biosuccinic acid. The product requirements of these customers may be less than the initial capacity of our Louisiana Plant.
	•	Our initial production of biosuccinic acid will be conducted at a single location. Any delays or disruptions in production that occur at this plant may prevent us from generating revenue from the sales of our product.
	•	We expect to face competition for our biochemical products, including biosuccinic acid, often from companies with greater resources and experience.
	•	A significant decline in the price of petroleum and petroleum-based products may reduce demand for our biosuccinic acid and our other biochemical intermediates.
	•	We are dependent on third parties with whom we have entered into strategic commercial relationships.

	•	Some of our key operating strategies, including those involving Davy and PTTCH, depend upon negotiating and executing binding agreements.
	•	Our rights to key intellectual property are licensed to us. Termination of the underlying agreements would be highly detrimental to us.
	•	We may not be able to enforce our intellectual property rights, including our trade secrets, especially in the international markets in which we expect to operate.

Common stock offered by us		shares (or           shares if the underwriters exercise in full their over-allotment option to purchase additional shares).
Common stock to be outstanding after this offering		shares (or           shares if the underwriters exercise in full their over-allotment option to purchase additional shares).
Proposed Nasdaq Global Market symbol		MYRT
Use of proceeds		We expect that the net proceeds to us from the sale of the shares of common stock we are offering will be $      million, assuming a public offering price of $      per share (the mid-point of the price range set forth on the cover page of this prospectus) and after deducting underwriting discounts and commissions and estimated offering expenses. If the underwriters exercise their over-allotment option in full, the net proceeds to us would be approximately $      million.
		We intend to use the net proceeds of this offering to finance, in part, the construction of the Louisiana Plant (approximately $103 million, including working capital, fees and expenses), to fund our expected equity contribution to the planned expansion of the Louisiana Plant (approximately $60 million, which includes working capital, fees and expenses), to pay the dividend accruing on the Class A common stock (which totaled $1,025,753 as of March 31, 2011), to fund research and development expenses (which we estimate will be approximately $25.5 million in the aggregate for the two fiscal years following the completion of this offering) and for working capital and other general corporate purposes, which will include expenses and the costs associated with being a public company.
		We may also use a portion of the net proceeds to acquire other complementary businesses, products or technologies or to make other strategic investments. We currently have no agreements or commitments for any specific acquisitions or investments at this time.
		The potential uses of net proceeds from this offering represent our current intentions based upon our present business plans and conditions. We cannot guarantee the specific amount of the net proceeds that will be used to develop, construct and operate our biochemical production capabilities globally, fund working capital or be used for other general corporate purposes.
		Please see “Use of proceeds.”
Risk factors		See “Risk factors” beginning on page 11 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.

	•	1,162,043 shares of common stock issuable upon the exercise of options issued under our 2011 Omnibus Incentive Plan and outstanding as of July 21, 2011 at a weighted average exercise price of $12.38 per share;
	•	506,250 shares issuable under restricted stock units granted subject to vesting conditions under the 2011 Omnibus Incentive Plan;
	•	59,231 shares of common stock issuable upon the exercise of warrants outstanding as of March 31, 2011 at an exercise price of $13.00 per share;
	•	2,139,483 shares of our common stock reserved for future issuance under our 2011 Omnibus Incentive Plan, plus any annual increases in the number of shares of common stock reserved for future issuance as provided for in such plan, as described in “Management — Employee Benefit and Stock Plans; and
	•	500,000 shares of common stock reserved for issuance under our 2011 employee stock purchase plan, which will become effective upon completion of this offering.

	•	gives effect to the conversion of all of our outstanding shares of convertible common stock into 14,259,858 shares of common stock upon completion of this offering;
	•	assumes no exercise of the underwriters’ option to purchase additional shares; and
	•	reflects the filing of our second amended and restated certificate of incorporation upon completion of this offering.

 

Summary selected financial data

		Predecessor Company																Myriant Corporation
																		Period from
														Period from				July 16,
		Fiscal Year				Fiscal Year				Fiscal Year				January 1,				2009				Fiscal Year
		Ended				Ended				Ended				2009				(Inception)				Ended				Three Months Ended
		December 31,				December 31,				December 31,				to July 15,				to December 31,				December 31,				March 31,
		2006				2007				2008				2009				2009				2010				2010				2011
		(Unaudited)				(Unaudited)																				(Unaudited)				(Unaudited)
Revenues:
License fee revenue		$	267,065			$	396,515			$	344,860			$	71,833			$	221,711			$	258,241			$	—			$	—
Management fee revenue-related party			—				—				262,212				267,318				—				3,557,574				600,166				2,519
Development fee revenue-related party			—				—				3,125,714				—				—				—				—				—
Government awards			—				—				—				—				—				10,419,043				1,516,323				—
Total revenues			267,065				396,515				3,732,786				339,151				221,711				14,234,858				2,116,489				2,519
Operating expenses:
Cost of license fee revenue			108,432				135,813				110,020				22,373				73,859				84,600				—				—
Research and development			653,469				1,499,577				4,679,935				3,770,721				2,793,085				15,904,717				2,552,100				1,883,603
Project development			706,666				1,764,244				2,179,965				—				—				—				—				—
General and administrative expense			1,547,540				3,166,646				5,699,186				5,438,073				4,979,186				12,673,247				2,806,285				3,034,498
Total operating expenses			3,016,107				6,566,280				12,669,106				9,231,167				7,846,130				28,662,564				5,358,385				4,918,101
Operating loss			(2,749,042	)			(6,169,765	)			(8,936,320	)			(8,892,016	)			(7,624,419	)			(14,427,706	)			(3,241,896	)			(4,915,582	)
Other income (expense), net:
Interest income			1,477				138,395				60,222				5,385				8,051				87,611				84,844				6,328
Interest expense			(260,268	)			(1,959,909	)			(1,636,062	)			(1,352,767	)			(915,804	)			(4,470,478	)			(628,386	)			(12,606,762	)
Miscellaneous income			600				—				—				—				—				—				—				8,000
Gain(loss) on foreign currency exchange			—				—				—				(21,721	)			—				(5,235	)			(3,853	)			11,638
Changes in fair value of warrant liability			—				—				—				2,092,643				(515,108	)			2,592,979				(823,582	)			2,461
Other income (expense), net			(258,191	)			(1,821,514	)			(1,575,840	)			723,540				(1,422,861	)			(1,795,123	)			(1,370,977	)			(12,578,335	)
Net loss			(3,007,233	)			(7,991,279	)			(10,512,160	)			(8,168,476	)			(9,047,280	)			(16,222,829	)			(4,612,873	)			(17,493,917	)
Dividend on Class A common stock			—				—				—				—				—				—				—				(1,025,753	)
Net loss attributable to common stockholders		$	(3,007,233	)		$	(7,991,279	)		$	(10,512,160	)		$	(8,168,476	)		$	(9,047,280	)		$	(16,222,829	)		$	(4,612,873	)		$	(18,519,670	)

		Predecessor Company																Myriant Corporation
																		Period from
														Period from				July 16,
		Fiscal Year				Fiscal Year				Fiscal Year				January 1,				2009				Fiscal Year
		Ended				Ended				Ended				2009				(Inception)				Ended				Three Months Ended
		December 31,				December 31,				December 31,				to July 15,				to December 31,				December 31,				March 31,
		2006				2007				2008				2009				2009				2010				2010				2011
		(Unaudited)				(Unaudited)																				(Unaudited)				(Unaudited)
Net loss per unit/share attributable to common stockholders-basic and diluted		$	(0.69	)		$	(1.72	)		$	(2.14	)		$	(1.55	)		$	(1.30	)		$	(2.31	)		$	(0.66	)		$	(2.29	)
Weighted average number of units outstanding- basic and diluted			4,358,126				4,655,011				4,918,668				5,285,807				6,953,079				7,009,251				6,982,215				8,092,943
Net loss used in computing pro forma net loss per share of common stock-basic and diluted (unaudited)																															(18,519,670	)
Pro forma net loss per common share (unaudited)																														$	(0.83	)
Weighted average shares used in computing pro forma basic and diluted net loss per common share (unaudited)																															22,352,801

		March 31, 2011
		Actual				As Adjusted(1)
		(Unaudited)				(Unaudited)
Cash, cash equivalents and restricted cash		$	50,692,707			$	—
Working capital			31,985,396
Total assets			61,134,435
Warrant liability			2,199,585				840
Stockholders’ equity			54,967,658				57,112,796

(1)		Adjusted for the issuance of 639,170 shares of common stock upon the exercise of warrants on April 12, 2011, and the issuance and sale of the shares of our common stock in this offering (assuming a public offering price of $      per share, which is the mid-point of the price range set forth on the cover page of this prospectus, and after underwriting discounts and commissions and our expected offering expenses) and the receipt of the net proceeds from the offering.

 

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this prospectus, before deciding whether to invest in shares of our common stock. The occurrence of any of the events described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the trading price of our common stock may decline and you may lose all or part of your investment.

 

WE ARE AN EARLY STAGE COMPANY WITH AN UNPROVEN PRODUCT

 

We are a development stage company with a history of losses. We expect to incur losses for at least the next several years, and we may not achieve or maintain profitability.

 

We are a development stage company. To date, we have generated no product sales of any significance, and the minimal revenues we have generated have been generated primarily through licensing royalties and government awards. We, and before us, the Predecessor Company, have a history of losses, including losses of $10.5 million in 2008, $17.2 million in 2009 and $16.2 million in 2010, as well as a loss of $17.5 million for the three months ended March 31, 2011. As of March 31, 2011, we had an accumulated deficit of $17.5 million, resulting from losses incurred by us since our conversion to a subchapter C corporation in January 2011. Our cumulative losses (including those of our Predecessor Company) total $72.4 million. We expect to incur losses and negative cash flow from operating activities for at least the next several years, and we may never achieve profitability. In addition, as detailed below, we expect to incur substantial costs associated with the construction of the Louisiana Plant. As a result, even if our revenues increase substantially, we expect that our expenses will exceed revenues for at least the next several years. If we never become profitable, or if the time required to become profitable is longer than we expect, we may not be able to continue our business. Even if we become profitable, we may not be able to sustain or increase profitability on a quarterly or annual basis.

 

Our processes and resulting products are unproven at commercial scale.

 

While the manufacturing of organic compounds from fossil-fuel feedstocks has a long history of process development and optimization, we have limited experience operating our biobased technology and have only done so at pilot scale. To successfully commercialize our biosuccinic acid and other biochemical intermediates, we must manufacture our products on a cost-competitive basis at commercial scale and in accordance with customer quality specifications. We have only manufactured a variety of chemical intermediates at laboratory and pilot scale, with the exception of D(−) lactic acid, which has been manufactured at commercial scale by our licensee, Purac Biochem BV, or Purac, a wholly-owned subsidiary of CSM N.V., a leading global chemical producer. However, our biosuccinic acid technology, and that of other products that we attempt to commercialize, may not perform at commercial scale in the same manner as we have seen at laboratory or pilot scale. Moreover, our technology may not achieve customer acceptance or generate significant product sales for a variety of reasons, many of which are described in detail below.

 

OUR BUSINESS MODEL AND OPERATING STRATEGIES HAVE INHERENT RISKS

 

We have never built a commercial-scale plant or produced our products, including biosuccinic acid, in commercial volumes, and as a result we may encounter unforeseen difficulties in constructing a large scale facility.

 

Our first large-scale commercialization initiative is producing biosuccinic acid and selling it into the petrochemicals market as a chemical intermediate. To date, we have produced limited quantities of biosuccinic acid for customer/vendor sampling and validation. While we have reached performance targets for certain aspects of the commercial production of biosuccinic acid, we have not yet done so in a commercial-scale plant or in commercial volumes, and we may not be able to do so in a timely or cost-effective manner.

 

To commercialize our biosuccinic acid, we are constructing a 30 million pound, 392,000 square-foot plant at the Port of Lake Providence, Louisiana. Constructing a production facility of this type and size is a complex and

lengthy undertaking that requires sophisticated, multi-disciplinary planning and precise execution. Despite the detailed planning and the time and money that we have invested and will continue to invest in the construction of this plant, it may not perform as expected. For example, our biocatalyst may perform less efficiently than it did in smaller-scale production. Design parameters for mixing, heat transfer and flow rates may need to be adjusted to meet required product or volume specifications. Production rate, concentration and purity may vary dramatically from our expectations. We may need to install additional equipment to achieve desired specifications, which could delay commercialization and increase costs. In addition, contaminants in our feedstock could reduce the purity of the biosuccinic acid that we produce and require us to invest in more costly processes or equipment. We may encounter these or other operational challenges, and we may be unable to devise workable solutions. Furthermore, our processes require us to maintain certain levels of product purity to assure consistent product quality. In the event an impurity is introduced in a particular production batch of our biosuccinic acid, the product quality may be reduced or the product rendered unsalable, which would affect our profitability.

 

We have entered into an agreement pursuant to which, among other things, we are collaborating with ThyssenKrupp’s subsidiary Uhde GmbH, and its U.S. subsidiary, or Uhde, in the design, engineering and procurement for the Louisiana Plant. If Uhde does not perform as expected, we could experience significant delays and cost overruns.

 

Developing this plant also subjects us to many financial uncertainties. We have created financial forecasts for construction costs, construction time, output and operating costs of the plant. Our decision to proceed with the construction of the Louisiana Plant is based on our analysis of these forecasts. However, these forecasts are based on a variety of observations and assumptions, some involving considerable judgment on our part, which could prove to be inaccurate. Inherent risks associated with the novel nature of this project, inaccurate assumptions about our operating metrics and the fact that neither we nor anyone else has built or operated a biosuccinic acid facility at a commercial scale could result in:

 

 

We may experience unexpected challenges and setbacks in operating our Louisiana Plant.

 

Our success depends on our ability to operate the Louisiana Plant so as to produce biosuccinic acid efficiently and cost-effectively in a timely manner. We have never operated a commercial-scale biosuccinic acid facility and we may be required to expend significant time and money to develop our operational capabilities. Although our management team has significant experience in chemical intermediates and fermentation technology, the skills and knowledge gained in these fields and in operating smaller-scale biosuccinic acid production facilities may prove insufficient for successful operation of a commercial-scale biosuccinic acid facility. Accordingly, we may encounter significant difficulties in operating the Louisiana Plant.

 

The production of biosuccinic acid requires multiple, integrated steps, including:

 

 

The technological and logistical challenges associated with each of these and other processes involved in production, marketing, sale and distribution of biosuccinic acid are substantial. We may not be able to resolve any difficulties that arise in a timely or cost-effective manner.

 

In addition, while certain members of our management team have experience in procuring large quantities of feedstocks for other production facilities we have never sourced large quantities of feedstocks, and we have no experience storing and/or distributing significant volumes of biosuccinic acid. We may not be able to do so cost-effectively. We may also have difficulty in recruiting, training and retaining qualified personnel to operate the Louisiana Plant. Failure to meet the operational challenges of developing and managing our production processes would have a material adverse effect on our business, financial condition and results of operations.

 

We may not achieve overall profitability due to higher costs of producing biosuccinic acid and other biochemicals.

 

The cost to produce biosuccinic acid and other chemical intermediates is highly dependent on the cost and usage of various process chemicals, such as sulfuric acid and ammonia. Although the chemical and nutrient usage quantities are based on predictable chemical reactions, the actual consumption required to produce biosuccinic acid on a commercial scale may be greater, affecting production cost and impacting production volumes. Although there are indices that show the pricing of the process chemicals used for production that closely track to our end products, there are no assurances that the indices are valid or, if valid, that current prices will not later change. We cannot control the cost of these process chemicals, and we could underestimate the volume required to operate at commercial scale. These uncertainties could affect our costs and margins.

 

Moreover, our operating and other financial projections for our Louisiana Plant assume that we will sell 100% of the volume of ammonium sulfate, or AMS, that we will produce as a co-product of our biosuccinic acid manufacturing process. We have entered into a contract with Wilson Industrial Sales Company, Inc. to sell all of the AMS produced at the Louisiana Plant during the term of the contract. AMS is a co-product of our biosuccinic acid production process and is commonly used as a soil fertilizer. If the quality of the AMS co-product does not meet market specifications, we may not be able to sell AMS at the anticipated price or in the anticipated quantity. Also, if the nature and quantity of the wastewater generated in the manufacturing process is substantially higher than in pilot testing, our wastewater treatment design may be undersized, affecting our ability to operate the Louisiana Plant at full capacity, if at all.

 

Fluctuations in the price of feedstocks may affect our cost structure.

 

An increase in the price of feedstocks would change our cost structure and therefore our profit margins. At certain levels, prices may make our products uneconomical to produce, as we may be unable to pass the full amount of feedstock cost increases on to our customers. The prices of many of these feedstocks are cyclical and volatile. While our biocatalysts are able to process a variety of feedstocks to make chemical intermediates, our ability to deliver products to our customers in a timely and cost-effective fashion may be impacted by the need to substitute feedstocks because of price fluctuations.

 

We may experience delayed production, reduced output and reduced revenues if the cost or availability of feedstocks or other factors require us to change feedstocks.

 

The production of our products will require large volumes of feedstocks. Although our process can utilize a wide variety of feedstocks, we cannot predict the future availability of such feedstocks or be sure that our suppliers, who we expect to supply the feedstocks necessary to produce our products, will be able to supply it in sufficient quantities or in a timely manner. The supply of feedstocks might be impacted by growing-season disruptions, crop yields, crop disease, droughts, floods, infestations, natural disasters, farming decisions or government policies and subsidies. In particular, weather conditions have historically caused volatility in the sugar industries by causing crop failures or reduced harvests. Excessive rainfall can adversely affect the supply of certain feedstocks by reducing the sugar content and limiting growers’ ability to harvest the crop. Crop disease and pestilence can adversely affect growth, potentially rendering unusable all or a substantial portion

of affected harvests. The limited amount of time during which certain feedstocks retain their sugar content after harvest also limits our ability to substitute supply, if necessary.

 

We cannot assure you that our biochemicals, including biosuccinic acid, will be accepted by our target customers.

 

If we fail to successfully market our biosuccinic acid and other chemical intermediates to our target customers, our business, financial condition and results of operations will be adversely affected. The markets we intend to enter first are those for chemical intermediates used by large consumer products or chemical companies. In entering these markets, we intend to sell our products as alternatives to current petroleum-based intermediates. Although a significant market currently exists for succinic acid produced from petroleum, to our knowledge, biosuccinic acid has never been produced or sold at a commercial scale. Many potential chemical industry customers have invested substantial amounts of time and money in developing petroleum-based production channels. These potential customers for our products, including biosuccinic acid, generally have well-developed manufacturing processes and, in many instances, arrangements with suppliers of the components of their products. Pre-existing contractual commitments, unwillingness to invest in new infrastructure, distrust of new production methods and long-term relationships with current suppliers may all slow market acceptance of our biosuccinic acid and our other biochemicals. Furthermore, most producers of plastics and specialty chemicals that rely on succinic acid as a chemical intermediate have been producing their succinic acid requirements internally. As such, there is only a small merchant market for succinic acid.

 

We will be dependent initially on three customers.

 

We have supply agreements with three customers requiring that they purchase 100% of their succinic acid requirements from us. These supply agreements do not require these customers to purchase a minimum quantity of succinic acid from us. Although we expect that these purchasers will consume a substantial portion, and prospectively all, of the Louisiana Plant’s production capacity, we cannot be certain that these customers’ requirements will meet our expectations.

 

Two of these customer contracts require us to negotiate initial pricing of our product and to renegotiate pricing on a quarterly basis. These and other provisions of these contracts could result in disputes or stand-offs with these customers, disrupting our product sales. We are in discussions with these customers to agree on a pricing formula, but we may not succeed in doing so.

 

In addition, substantially all of our revenues will be derived, initially and for the foreseeable future, from these three customers. This customer concentration increases the risk of volatility in our revenues and operating results. Moreover, under specified circumstances, these customers are permitted to cancel their agreements with us. The loss or reduction of business from any one or more of these customers could materially adversely affect our revenues, financial condition and results of operations. We have indications of interest from others to purchase quantities of our biosuccinic acid. However, even if one of these substitute purchasers were willing to purchase excess supply, we would likely experience a temporary disruption in product sales, which would adversely affect our revenues.

 

We have limited experience in structuring arrangements with customers for the purchase of our biochemicals, including biosuccinic acid, and we may not be successful in this essential aspect of our business.

 

To date, we have generated limited revenues from sales of our commercial products and have limited experience operating in our customers’ industries and interacting with the customers that we are targeting. Developing that expertise may take longer than we expect and will require that we expand and improve our sales and marketing infrastructure. These activities could delay our ability to capitalize on the opportunities that our technology and products present, and may prevent us from achieving commercialization of our initial products. Our target customers are generally much larger than we are and have substantially longer operating histories in the specialty chemicals industry than we have. As a result, we may not be effective in negotiating

or managing the terms of our relationships with these companies, which could adversely affect our future results of operations.

 

We may be unable to produce biosuccinic acid and other biobased intermediates in accordance with customer specifications.

 

It is critically important that we are able to meet customers’ product and volume specifications. If we fail to do so, prospective customers will not purchase from us and existing customers could terminate their agreements with us. While our biosuccinic acid will be sold in various grades, failure to successfully meet the specifications of our customers and potential customers for biosuccinic acid and other chemical intermediates would decrease demand for our production and significantly hinder market adoption of our product.

 

Even if we produce our products at our contractual or targeted specifications, as the case may be, we may face delays or reduced demand for our product related to current or future customer qualification trials that could take several months. For our biosuccinic acid to be accepted, our customers may need to test and certify it for use in their processes and, in some cases, determine whether products that contain our biosuccinic acid satisfy additional third-party specifications. We may need to demonstrate to our customers that our biosuccinic acid does not contain impurities that cause our product to behave differently than the petroleum-based equivalent in a way that impacts their end product quality. Our customers, in turn, may need to validate the use of our biosuccinic acid in products produced for third parties. Meeting these suitability standards could be a time-consuming and expensive process, and we may invest substantial time and resources into such qualification efforts without ultimately securing approval by our customers. This could materially and adversely impact revenues until customer qualification is achieved and maintained.

 

A significant decline in the price of petroleum and petroleum-based products may reduce demand for our biosuccinic acid.

 

Based on our current financial modeling, if the price of oil falls below $45 per barrel for a sustained period, we will be unable to manufacture biosuccinic acid as a cost-effective alternative to competing petroleum-based products, which will result in lost sales and would adversely impact our operating results. We anticipate that biosuccinic acid will be marketed as an alternative to corresponding petroleum-based products. World prices for oil have fluctuated widely in recent years. For example, during 2008 the average market price per barrel of West Texas Intermediate crude oil ranged from a low of $30.81 to a high of $145.66 and was $98.14 as of July 20, 2011. We expect that prices will continue to fluctuate in the future. Declining oil prices, or the perception of a future decline in oil prices, may adversely affect the prices we can obtain from our potential customers or prevent potential customers from entering into agreements with us to buy our products.

 

We expect to face competition for our biochemical intermediates, often from companies with greater resources and experience than us.

 

In the industrial biochemical market, we expect to face vigorous competition from both the traditional, largely petroleum-based chemicals that are currently used in our target markets and from alternatives to these existing products, such as other biobased chemicals. We may not compete effectively against incumbent petroleum-based products. Petroleum-based products have dominated the market for many years, and there is substantial existing infrastructure designed for petroleum-based intermediates, which may impede our ability to establish a position in these markets. Producers of these incumbent products include global oil companies, large international chemical companies and other companies specializing in specific chemicals. We may also compete in one or more of these markets with products that are offered as alternatives to the traditional petroleum-based or other traditional products being offered in these markets. Our potential customers generally have well-developed manufacturing processes and arrangements with suppliers of the chemical components of their products and may resist changing these processes and components. Many of our prospective competitors are better capitalized, with larger research and development departments and budgets, and have well-developed distribution systems and networks for their products.

 

In addition, our potential customers frequently impose lengthy and complex product qualification procedures on their suppliers, influenced by consumer preference, manufacturing considerations such as process changes and capital and other costs associated with transitioning to alternative components, supplier operating history, regulatory issues, product liability and other factors. Satisfying these processes may take many months or years. If we are unable to convince these potential customers that our biosuccinic acid and our other chemical intermediates are comparable or superior to the alternatives that they currently use, we will not be successful in entering these markets.

 

We believe the primary competitive factors in the industrial biochemical market are:

 

 

We believe that for our biochemicals to succeed in the market, we must demonstrate that our products are comparable, attractive alternatives to existing products and to any alternative products that are being developed for the same markets based on some combination of product cost, availability, performance and consumer preference characteristics. We may not be able to compete effectively against these other products.

 

Technological innovation could render our products and processes obsolete.

 

The biochemical industry is characterized by rapid technological change. Our success will depend on our ability to maintain a competitive position with respect to technological advances. Our technologies and products may be rendered obsolete or uneconomical by technological advances, more efficient and cost-effective biocatalysts or entirely different approaches developed by one or more of our competitors.

 

WE ARE HIGHLY DEPENDENT ON THIRD PARTIES WITH WHICH WE HAVE ENTERED INTO, OR ARE SEEKING TO ENTER INTO, STRATEGIC COMMERCIAL RELATIONSHIPS

 

Our commercialization strategy relies heavily on negotiating a definitive agreement with Davy Process Technology.

 

We plan to market our biosuccinic acid as a drop-in chemical intermediate for use in established processes for the production of industrial and specialty chemicals. In February 2011, we signed a non-binding memorandum of understanding with Davy Process Technology Limited, or Davy, to enter into a definitive joint development agreement. Under the agreement, Davy would test and approve our biosuccinic acid as a drop-in feedstock replacement for petroleum-derived maleic anhydride within Davy’s process for the production of butanediol, or BDO.

 

The proposed joint development agreement would require Davy to perform, at its expense, the engineering, development and pilot plant work necessary for it to guarantee to its customers that our biosuccinic acid will work for existing Davy process production facilities. We cannot be certain that Davy would be satisfied with its findings, that Davy would offer the guarantee sought or, if the use of our biosuccinic acid is guaranteed for Davy BDO process licensees, that Davy would expend the resources necessary to continue to guarantee our biosuccinic acid for use in its process. If we do not enter into the proposed joint development agreement, our business and prospects could be materially and adversely affected.

 

BDO producers that use Davy’s process represent a substantial portion of our target customer base. If Davy will not guarantee that our biosuccinic acid will work in the Davy BDO process, our market for biosuccinic acid will be dramatically reduced.

 

Our plant construction and project finance strategy relies heavily on our relationship with Uhde.

 

In September 2009 and October 2009, we signed two Alliance Agreements with Uhde. These contracts require that Uhde and we work collaboratively and exclusively to incorporate each party’s proprietary technology in the development of our plant. Pursuant to the Alliance Agreements, Uhde will integrate our fermentation technology with its separation technology in the plant design and, on a project-by-project basis, provide process and performance guarantees on mutually agreeable terms for our biochemical plants around the world. If we and Uhde are unable to agree upon the terms and conditions by which Uhde would provide process and performance guarantees for the operational outputs of our plant, we could have difficulty performing our obligations to our customers, and it could become more difficult for us to secure and maintain project financing for our proposed industrial biochemical plants on terms favorable to us, if at all. Since adapting our technology to commercial-scale production and building plants to use our technology is a major part of our commercialization strategy, losing our exclusive alliance with Uhde would likely slow our technological and commercial development. It could also force us to find a new contractor with less experience than Uhde in designing and building industrial biochemical plants or to invest the time and resources necessary to build plants on our own. This could substantially hinder our ability to expand our production capacity and could severely impact our performance. If Uhde fails to fulfill its obligations to us under our agreements or our competitors obtain access to Uhde’s expertise, our ability to realize continued development and commercial benefits from our alliance could be impaired. Accordingly, if we lose our exclusive alliance with Uhde or Uhde terminates or breaches its agreements with us, our business and prospects could be adversely affected.

 

Our potential relationship with PTTCH may have a substantial impact on us.

 

We are negotiating a joint venture agreement and licensing arrangement with PTT Chemical Public Company Limited, or PTTCH, a large Thailand-based petrochemical producer and the parent company of our largest stockholder, which we envision we will finalize and execute shortly. As part of the joint venture, we would grant a license to the joint venture under our intellectual property to commercialize our technology exclusively within the ASEAN countries. The license agreement under discussion would provide for payments to us with respect to royalties based on product sales, maintenance fees and our pro rata share of joint venture earnings. The joint venture also calls for a research and development collaboration between us and PTTCH to, among other things, validate and optimize our biocatalysts and regional feedstocks for use in the ASEAN countries.

 

The consummation of our joint venture and licensing agreement with PTTCH is subject to the negotiation and execution of transaction documentation, including intellectual property licenses and sublicenses. We may not enter into the joint venture and licensing agreement with PTTCH on the timing we expect or at all. If the joint venture company is formed, we do not know whether we will receive any benefits from it. If the proposed joint venture and licensing agreement with PTTCH is not consummated, our business and prospects could be adversely affected.

 

We rely on our other strategic partners and collaborators, and our failure to successfully manage these relationships could delay us from developing and commercializing many of our products and achieving or sustaining profitability.

 

We expect that our ability to maintain and manage collaborations in our markets, like those we intend to establish with Davy, Uhde and PTTCH, will be significant factors to the success of our business. We have limited or no control over the amount or timing of resources that any third party commits to negotiating a collaboration with us or, if negotiated and entered into, the timing or amount of resources that a collaboration partner will commit. Davy, PTTCH or any other third party with which we are in negotiations may experience a change of policy or priorities and may discontinue negotiations with us. Any of our strategic partners or collaborators may fail to perform their obligations as expected. These strategic partners and collaborators may breach or terminate their agreements with us or otherwise fail to conduct their collaborative activities successfully and in a timely manner. Further, our strategic partners and collaborators may not develop products arising out of our collaborative arrangements or devote sufficient resources to the development, manufacture, marketing, or sale of our existing and future products. Moreover, disagreements with a strategic partner or

collaborator regarding strategic direction, economics of our relationship, intellectual property or other matters could develop, and any such conflict could reduce our ability to enter into future collaboration agreements and negatively impact our relationships with one or more existing strategic partners or collaborators. If any of these events occur, or if we fail to maintain our agreements with our strategic partners and collaborators, we may not be able to commercialize our existing and future products, further develop our business, or generate sufficient revenues to support our operations.

 

Additionally, our business could be negatively impacted if any of our strategic partners or collaborators undergoes a change of control or assigns the rights or obligations under any of our agreements. If any of our strategic partners or collaborators were to assign these agreements to our competitors or to a third party who is not willing to work with us on the same terms or commit the same resources as the current strategic partner or collaborator, our business and prospects could be adversely affected.

 

OTHER RISKS ASSOCIATED WITH OUR BUSINESS OPERATIONS

 

We may not be successful in identifying market needs for new technologies and in developing new products to meet those needs.

 

The success of our business model depends in part on our ability to identify additional market opportunities for our biochemicals. The materials and manufacturing technologies we research and develop are new and continuously changing and advancing. The biochemicals that are derived from these technologies may not be applicable or compatible with demands in existing or future markets. Furthermore, we may not be able to identify new opportunities as they arise for our products since future applications of any given product may not be readily determinable, and we cannot reasonably estimate the size of any markets that may develop. If we are not able to successfully develop new products, we may be unable to expand our business beyond biosuccinic acid.

 

Ethical, legal and social concerns about genetically engineered products and processes, and similar concerns about feedstocks that could be used for food production, could limit or prevent the use of our products, processes and technologies and limit our revenues.

 

The use of genetically-engineered products and processes is subject to laws and regulations in many countries, some of which are new or still evolving. Public attitudes about the safety and environmental hazards of genetically-engineered products and processes, and ethical concerns over genetic research, could influence public acceptance of our technology, process and products.

 

Our ability to develop and commercialize one or more of our technologies, products, or processes could be limited by the following additional factors:

 

 

The subjects of genetically engineered organisms and food versus fuel have received negative publicity, which has aroused public debate. This adverse publicity could lead to greater regulation and trade restrictions on imports of genetically engineered products or feedstocks grown on land suitable for food production. These trends could result in increased expenses, delays or other impediments to our programs or the public acceptance and commercialization of our products.

 

Our initial production of biosuccinic acid will be conducted at a single location, which makes us susceptible to disasters.

 

Our biosuccinic acid production will initially be conducted at a single location in Lake Providence, Louisiana. We plan to take precautions to safeguard this facility from natural and other disasters, through insurance, hazard protection, health and safety protocols and off-site storage of critical research results and computer data. However, a natural disaster, such as a fire, flood, hurricane, tornado, earthquake or an international act of sabotage or terrorism, could cause substantial delays in our operations, damage or destroy our manufacturing equipment, feedstocks, or product inventory, and cause us to incur additional expenses. The insurance we maintain against natural disasters may not be adequate to cover our losses in any particular case. For example, the Louisiana Plant will be located on a site adjacent to the Mississippi River. Recent flooding on the river has brought disastrous results to businesses, farms and residences located in the vicinity. While to date we have experienced no flooding, we could be affected by similar events in the future.

 

If we lose key personnel or are unable to attract and retain additional key personnel, it could harm our research and development efforts, delay the commercialization of our products, delay launch of products in our development pipeline and impair our ability to meet our business objectives.

 

Our business involves complex operations spanning a variety of disciplines and demanding a management team and employee workforce that is knowledgeable in the many areas necessary for our operations. The loss of any key member of our management team or key research and development or operational employees, or the failure to attract and retain such employees, could prevent us from developing and commercializing our products for our target markets and executing our business plans.

 

We may not be able to attract or retain qualified employees due to the intense competition for qualified personnel among biotechnology and other technology-based businesses, particularly in the biorenewables area, or due to the scarcity of personnel with the qualifications or experience necessary for our business. Hiring, training and successfully integrating qualified personnel into our operation is lengthy and expensive. The market for qualified personnel is very competitive because of the limited number of people available with the necessary technical skills and understanding of our technology and anticipated products. If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience staffing constraints that will adversely affect our ability to support our internal research and development programs or satisfy customer demands for our products. In particular, our product development and research and development programs are dependent on our ability to attract and retain highly skilled scientific, technical and operational personnel. Competition for such personnel from numerous companies and academic and other research institutions may limit our ability to do so on acceptable terms, or at all. All of our employees are at-will employees, which means that either the employee or we may terminate their employment at any time.

 

We use hazardous materials in our business and must comply with applicable environmental laws and regulations. Any claims relating to improper handling, storage or disposal of these materials or noncompliance with applicable laws and regulations could be time consuming and costly and could adversely affect our business and results of operations.

 

We use hazardous chemicals and biological materials in our business and are subject to a variety of federal, state and local laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these materials both in the U.S. and overseas. Although we have implemented safety procedures for handling and disposing of these materials and waste products, we cannot be sure that our safety measures are compliant with legal requirements or adequate to eliminate the risk of accidental injury or contamination. In the event of contamination or injury, we could be held liable for any resulting damages, and any liability could exceed our insurance coverage. There can be no assurance that we will not violate environmental, health and safety laws as a result of human error, accident, equipment failure or other causes. Compliance with applicable environmental laws and regulations is expensive and time consuming, and the failure to comply with past, present, or future laws could result in the imposition of fines, third-party property damage, product liability and personal injury claims, investigation and remediation costs, the suspension of production, or a cessation of operations. Our liability in such an event may exceed our total assets. Liability under

environmental laws can be joint and several and without regard to comparative fault. Environmental laws could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with violations, which could impair our research, development or production efforts and harm our business. Accordingly, violations of present and future environmental laws could restrict our ability to expand facilities, or pursue certain technologies, and could require us to acquire equipment or incur potentially significant costs to comply with environmental regulations.

 

WE ARE SUBJECT TO A VARIETY OF UNCERTAINTIES AND RISKS RELATING TO OUR AND THIRD PARTIES’ INTELLECTUAL PROPERTY

 

Our patent rights may not provide commercially meaningful protection against competition.

 

Our success will depend in part on our ability to obtain patents and other intellectual property rights to protect our products from competition. We have adopted a strategy of seeking patents and patent licenses in the U.S. and in certain foreign countries with respect to certain technologies used in, or relating to, our products and processes.

 

The scope and validity of patents and success in prosecuting patent applications involve complex legal and factual questions, and the issuance, scope, validity, and enforceability of a patent cannot be predicted with any certainty. Patents issued or licensed to us may be challenged, invalidated or circumvented. Moreover, third parties could practice our inventions in secret and in territories where we do not have patent protection. Such third parties may then try to sell or import products made using our inventions in and into the U.S. or other territories. We may be unable to prove that such products were made using our inventions. Additional uncertainty may result from patent reform legislation proposed by the U.S. Congress and other national governments and from legal precedent as handed down by the U.S. Court of Appeals for the Federal Circuit, the U.S. Supreme Court and the courts of other countries, as they determine legal issues concerning the scope, validity and construction of patent claims. Because patent applications in the U.S. and many foreign jurisdictions are typically not published until 18 months after filing, or in some cases not at all, and because publication of discoveries in the scientific literature often lags behind the actual discoveries, there is additional uncertainty as to the inventorship, and therefore the validity, of any issued patents. Accordingly, we cannot be certain that any of our patent applications will result in issued patents, or even if issued, be sure of their validity or enforceability. Moreover, we cannot predict whether any of our patent rights will be broad enough in scope to provide commercial advantage and prevent circumvention. In any event, patents are enforceable only for a limited term.

 

We may not be able to enforce our intellectual property rights throughout the world.

 

We plan in the future to build, or partner with others in building, manufacturing facilities using our technologies in countries other than the United States. However, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the U.S. Many companies have encountered significant problems in protecting and enforcing intellectual property rights in certain foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to bioindustrial technologies. This could make it difficult for us to stop the infringement of our patents or misappropriation of our other intellectual property rights. Proceedings to enforce our patents and other proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to enforce our intellectual property rights in such countries may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop.

 

We may not be able to operate our business without infringing third-party patents.

 

Our ability to commercialize our proposed products depends on our ability to develop, manufacture, market and sell our proposed products without infringing the proprietary rights of third parties. Numerous U.S. and foreign patents and pending patent applications owned by third parties exist in fields that relate to our proposed products and our underlying methodologies and discoveries. Third parties may allege that our

proposed products or our methods infringe their intellectual property rights. If we are found to infringe their intellectual property rights, we could be prohibited from commercializing the infringing product unless we obtain a license to use the technology covered by the patent or are able to design around the patent. We may be unable to obtain a license on terms acceptable to us, if at all, and we may not be able to redesign our products, biocatalysts or processes to avoid infringement. Even if we are able to redesign our products, biocatalysts or processes to avoid an infringement claim, our efforts to design around the patent may lead to an inferior or more costly product. A court could also order us to pay compensatory damages for any infringement, plus prejudgment interest and could, in addition, treble the compensatory damages and award attorney fees. These damages could be substantial and could harm our reputation, business, financial condition and operating results. A court also could enter orders that temporarily, preliminarily or permanently prohibit us and our customers from making, using, selling or offering to sell one or more of our products, or could enter an order mandating that we undertake certain remedial activities.

 

In addition to our patent rights, we rely in part on trade secrets to protect our technology. Trade secrets can be difficult to protect and enforce.

 

We rely on trade secrets to protect some of our technology, particularly where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to maintain and protect. Our strategy for scale-up of production requires us to share confidential information with our business partners and other parties. Our business partners’ employees, consultants, contractors or scientific and other advisors may unintentionally or willfully disclose our proprietary information to competitors. Enforcement of claims that a third party has illegally obtained and is using trade secrets is expensive, time consuming and uncertain. In addition, foreign courts are sometimes less willing than U.S. courts to protect trade secrets. If our competitors independently develop equivalent knowledge, methods and know-how, we would not be able to assert our trade secrets against them. Our failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

 

If our biocatalysts, or the genes that code for our biocatalysts, are stolen, misappropriated or reverse engineered, others could use these biocatalysts or genes to produce competing chemical intermediates.

 

A number of third parties, including various collaborators, tolling plant operators, university scientists and researchers, customers and those involved in the shipping and handling of our biocatalysts and our primary fermentation products, have access to our proprietary biocatalysts. If our biocatalysts, or the genes that code for our biocatalysts, were stolen, misappropriated or reverse engineered based on our disclosures in our patent applications, they could be used by other parties for their own commercial gain. If this were to occur, it could be difficult for us to discover or challenge this type of use, especially in countries with limited intellectual property protection.

 

Our rights to key intellectual property are licensed to us. Termination of the related agreements would be highly detrimental to us.

 

We are a party to certain license agreements, including our license agreements with the University of Florida Research Foundation, Inc., pursuant to which we license key intellectual property underlying technology used in our business. These license agreements impose various diligence, milestone, payment, royalty, insurance and other obligations on us. If we fail to comply with any of these obligations, the licensors may have the right to reduce an exclusive license of intellectual property to a nonexclusive license or to terminate the license completely, in which case our competitors may gain access to these important licensed technologies or we may be unable to develop or market products covered by the licensed intellectual property. If we lose rights that are important to our biosuccinic acid or other biochemical production, our business would be materially adversely affected. We may enter into additional licenses in the future, and if we fail to comply with obligations under those agreements, we could suffer similar consequences.

 

Certain colleges and universities that license intellectual property to us receive funding from U.S. government agencies, which could negatively affect our intellectual property rights.

 

Some of the research undertaken by the university technology offices with which we have relationships have been funded by grants from U.S. government agencies. When new technologies are developed with U.S. government funding, the government obtains certain rights in any resulting patents and technical data, generally including, at a minimum, a nonexclusive license authorizing the government to use the invention or technical data for noncommercial purposes. U.S. government funding must be disclosed in any resulting patent applications, and our rights in such inventions will normally be subject to government license rights, periodic progress reporting, foreign manufacturing restrictions and march-in rights. March-in rights refer to the right of the U.S. government, under certain limited circumstances, to require us to grant a license to technology developed under a government grant to a responsible applicant, or, if we refuse, to grant such a license itself. March-in rights can be triggered if the government determines that we have failed to work sufficiently towards achieving practical application of a technology or if action is necessary to alleviate health or safety needs, to meet requirements of federal regulations or to give preference to U.S. industry. If we breach the terms of our grants, the government may gain rights to the intellectual property developed in our related research.

 

Furthermore, the terms of our research grants from U.S. government agencies may prohibit us from using the new technologies we have developed using those grants in non-U.S. manufacturing plants, which could adversely affect our business. Under the Bayh-Dole Act of 1980, a party that acquires an exclusive license for an invention that was funded in whole or in part by a federal research grant is subject to the following government rights:

 

 

If we fail to meet these guidelines, we would lose our exclusive rights to these inventions and we would lose potential revenue derived from these inventions.

 

We may not retain exclusive rights to intellectual property created as a result of our collaborations.

 

We are negotiating a joint development agreement with Davy and a joint venture and licensing arrangement with PTTCH and have established a partnership with Uhde, each of which involves, or would involve if a binding agreement were signed, joint venture research and development efforts. We share, and would share, to various degrees, intellectual property we jointly develop. Such provisions may limit our ability to gain commercial benefit from some of the intellectual property we develop and may lead to costly or time-consuming disputes with parties with whom we have commercial relationships over rights to certain innovations.

 

Patent disputes and litigations can be expensive.

 

Because of the uncertainties involved in the issuance and enforcement of patents, and the value of a broadly interpreted patent, patent disputes and litigations are common. We may become involved in patent disputes relating to infringement of our technology, with third-parties asserting “blocking patents,” with our licensors or licensees, with collaborators and with employees, among others. Patent disputes can take years to resolve, can be very costly and can result in loss of rights, injunctions and substantial penalties. Moreover, patent disputes and related proceedings can distract management’s attention and interfere with running the business.

 

FINANCING UNCERTAINTIES CREATE RISKS FOR US

 

We may require substantial additional financing to achieve our goals. If we cannot raise capital when needed or on acceptable terms, we could be forced to delay, limit, reduce or terminate our development and commercialization efforts.

 

Since our inception, most of our resources have been dedicated towards research and development and otherwise investigating the technological and commercial feasibility of our technology in our laboratories and at third-party tolling facilities. We have consumed substantial amounts of capital since our inception in 2009 for our research and development activities. For the year ended December 31, 2010, we used $9.4 million to fund our operating and investing activities. Although we believe our existing cash resources of $50.7 million as of March 31, 2011, including the $15.2 million of restricted cash for the Louisiana Plant, plus the proceeds of this offering, will be sufficient to fund our anticipated cash requirements for at least the next 24 months, we may require significant additional financing in the future to fund our operations. We believe that we will continue to expend substantial resources for the foreseeable future on further developing our technologies and developing commercial-scale industrial biochemical plants. These expenditures will include costs associated with research and development, developing, building and operating industrial biochemical plants, acquiring or constructing storage facilities and negotiating agreements for the purchase of feedstocks and the sale of biosuccinic acid and other biochemicals that we plan to produce. In addition, unanticipated costs may arise. Because the costs of developing our technology at a commercial scale are highly uncertain, we cannot estimate with certainty the amounts necessary to successfully commercialize our production.

 

To date, we have funded our operations primarily through equity issuances, debt and government awards. We believe that the net proceeds from this offering, together with our existing cash and cash equivalents and government awards, will allow us to take a substantial step toward implementing our strategy. However, based on our current plans and expectations, we will require additional funding to achieve our production and sales objectives for the next several years. In addition, the cost of preparing, filing, prosecuting, maintaining and enforcing patent, trademark and other intellectual property rights and defending ourselves against potential claims by others that we are violating their intellectual property rights may be significant. Moreover, our plans and expectations may change as a result of factors currently unknown to us, and we may need additional funds sooner than planned. We may also choose to seek additional capital sooner than required due to favorable market conditions or strategic considerations.

 

Our future capital requirements will depend on many factors, including:

 

 

 

Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If needed funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate:

 

 

Additional financing may not be available to us when and if we need it, on commercially reasonable terms, or at all. Until we can generate significant continuing revenues, we expect to satisfy our future cash needs through strategic collaborations, private or public sales of our securities, debt financings, governmental awards, or by licensing our technology. Further, additional funding may significantly dilute existing stockholders.

 

Our government award from the DOE is subject to certain conditions and obligations.

 

We are the recipient of an award from the U.S. Department of Energy providing for a 50/50 cost share for our Louisiana Plant, with up to $50 million reimbursable by the DOE. We have already received and spent $10.4 million under this award as of March 31, 2011. The terms of this award require us, and we intend, to use the funds to design, build and operate our Louisiana Plant to develop U.S.-based production capabilities for renewable chemicals derived from grain sorghum and other lignocellulosic feedstocks for a period of approximately 1,100 hours, which we anticipate will not have an impact on our overall business plan. Under this award, we are required to fund an additional $39.6 million in cost-sharing expenses to build the Louisiana Plant and to reserve $15.2 million in cash contingency. Generally, government award agreements have fixed terms and may be terminated, modified or recovered by the granting agency under certain conditions. If the Department of Energy later terminates its funding agreement with us, our ability to complete the construction of the Louisiana Plant could be impaired, which could harm our business.

 

The planned expansion of our Louisiana Plant will depend on infrastructure improvements that will be paid for and undertaken by the Lake Providence Port Commission and the State of Louisiana.

 

The Lake Providence Port Commission and the State of Louisiana have committed a combined total of $16 million to support infrastructure improvements at the site of our Louisiana Plant, $6 million of which has already been spent on engineering and related fees. These infrastructure improvements will be necessary to support the proposed expansion of the Louisiana Plant. If the Lake Providence Port Commission or the State of Louisiana later terminate their commitments to provide funding for and make the infrastructure improvements referenced above, production prospects could be impaired, which could harm our business.

 

We may seek to obtain additional government awards and subsidies in the future to offset all or a portion of the costs of building or retrofitting new biochemical manufacturing plants and research and development activities. We cannot be certain that we will be able to secure any such additional government awards or subsidies. Our existing funding or any new government awards that we may obtain may be terminated, modified or recovered by the granting governmental body under certain conditions. Various governments have grant, loan and subsidy programs focused on the development of clean technologies, including alternatives to petroleum-based products and the reduction of carbon emissions. Such government programs could lead to increased funding for our competitors or a rapid increase in the number of competitors within those markets.

 

We may experience shortfalls in our funding of the Louisiana Plant.

 

We expect to pay for the completion of the Louisiana Plant, including construction and start-up costs, with the net proceeds of the $50 million award from the DOE and $10 million in infrastructure improvements from the Lake Providence Port Commission and the State of Louisiana and the balance from our own funds. We have estimated the $103 million cost to complete the Louisiana Plant, which includes working capital, fees and expenses, based upon a competitive bidding process for various equipment and construction packages designed by our engineering partners. Most of the equipment and construction packages were provided on a lump sum basis, so the costs for these are firm, but are subject to additional costs for design changes. Cost overruns or other unexpected difficulties could result in additional costs in excess of the amount that we have reserved for construction contingencies, which could require additional funding. Such funds may not be available when we need them, on terms that are acceptable to us or at all, which could delay or prevent our initial commercial production of biosuccinic acid. If there are difficulties, delays or other unforeseen issues relating to the construction or operation of the Louisiana Plant, our total investment in the plant may increase significantly and the revenue from sales, if any, of biosuccinic acid and our other biochemical intermediates produced at the plant and the distribution of profits, if any, may be delayed.

 

OTHER RISKS YOU WOULD FACE AS AN INVESTOR

 

A significant portion of our total outstanding shares of common stock is restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

 

Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares of common stock intend to sell shares, could reduce the market price of our common stock. When this offering is completed, assuming the sale of           shares of common stock in this offering, our three largest stockholders as of           , 2011 will beneficially own, collectively, approximately     % of our outstanding common stock. If one or more of them were to sell a substantial portion of the shares they hold, it could cause our stock price to decline.

 

Upon completion of this offering we will have           outstanding shares of common stock, which excludes shares subject to outstanding options and warrants. All of the shares we sell in this offering (except any acquired by our affiliates) will be freely tradable.          shares of common stock will be subject to a 180-day contractual lock-up with the underwriters (which lock-up period may be released at any time and as to any number of shares by the underwriters). Upon expiration of the lockup agreements, these shares will be eligible for immediate resale, subject in some cases to the volume and other restrictions of Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. These shares represent a substantial majority of our total shares outstanding, and sales of these shares upon expiration of the lock-up could significantly depress our share price.

 

In addition, as of March 31, 2011, there were 1,534,975 shares issuable under currently outstanding options and warrants (of which 639,170 warrants were exercised on April 12, 2011 at an exercise price of $0.01 per share) that if issued will become eligible for sale in the public market to the extent permitted by any applicable vesting requirements, the lock-up agreements and Rules 144 and 701 under the Securities Act. Moreover, after this offering, the holders of an aggregate of approximately           shares of our outstanding common stock (including shares of our common stock issued and issuable upon the exercise of options or warrants), will have rights, subject to some conditions, to require us to file registration statements covering their shares and to include their shares in registration statements that we may file for ourselves or other stockholders.

 

We also intend to register           shares of common stock that have been reserved for issuance under our 2011 Omnibus Incentive Plan and our 2011 employee stock purchase plan. To the extent any of these registered shares are issued, subject to any applicable vesting requirements they can be freely sold in the public market subject to the 180-day lock-up periods under the lock-up agreements described in the “Underwriting” section of this prospectus.

 

Concentration of ownership among our existing officers, directors and principal stockholders may prevent other stockholders from influencing significant corporate decisions and depress our stock price.

 

Assuming that           shares are sold in this offering, our officers, directors and existing stockholders who beneficially own at least 5% of our stock will together beneficially own approximately      % of our outstanding common stock following the completion of this offering. As of March 31, 2011, PTT Chemical International Private Limited, a wholly-owned subsidiary of PTTCH, Plainfield Finance II LLC/Plainfield Direct LLC and Norwood LDK, LLC, the entity through which our chief executive officer, Stephen J. Gatto, holds his shares in the company, beneficially owned approximately 47.9%, 26.4% and 13.9% of our common stock, respectively. 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 control matters requiring stockholder approval, including the election of directors and approval of mergers or other business combination transactions. The interests of this concentration of ownership may not always coincide with our interests or the interests of other stockholders. For instance, officers, directors, and principal stockholders, acting together, could cause us to enter into transactions or agreements that we would not otherwise consider. Similarly, this concentration of ownership may have the effect of delaying or preventing a change in control of our company otherwise favored by our other stockholders. This concentration of ownership could depress our stock price.

 

Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

 

The initial public offering price in this offering will be substantially higher than the tangible book value per share of shares of our common stock immediately after the offering. Tangible book value means the total value of our tangible assets less our total liabilities divided by the number of shares of our common stock outstanding. We call the difference between the price per share paid by investors in this offering and the tangible book value per share immediately after this offering “book value dilution,” or simply “dilution.” To the extent outstanding options and warrants to purchase shares of common stock are exercised, there will be further dilution. For further information on this calculation, see “Dilution” elsewhere in this prospectus.

 

We have broad discretion in the use of net proceeds from this offering and may not use them effectively.

 

Although we currently intend to use the net proceeds from this offering in the manner described in “Use of proceeds” elsewhere in this prospectus, we will have broad discretion in the application of the net proceeds. Our failure to apply these net proceeds effectively could affect our ability to continue to develop and sell our products and grow our business, which could cause the value of your investment to decline.

 

We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

 

We have never operated as a public company. As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as related rules implemented by the Securities and Exchange Commission, or the SEC, and The Nasdaq Stock Market, impose various requirements on public companies. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more expensive for us to maintain director and officer liability insurance.

 

If we fail to maintain an effective system of internal controls, we might not be able to report our financial results accurately or prevent fraud; in that case, our stockholders could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our stock.

 

Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. In addition, SEC rules implemented in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 will

require us to evaluate and report on and, in the event we become an “accelerated filer” as defined in SEC rules, our independent registered public accounting firm to attest to, our internal control over financial reporting beginning with our Annual Report on Form 10-K for the year ending December 31, 2012. The process of implementing our internal controls and complying with Section 404 will be expensive and time consuming and will require significant attention of 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. Even if we conclude, and our independent registered public accounting firm concurs, that our internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, 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 determine a “material weakness,” as defined in SEC rules, exists in our internal control over financial reporting, the disclosure of that determination, even if quickly remedied, could reduce the market’s confidence in our financial statements and harm our stock price. In addition, non-compliance with Section 404 could subject us to a variety of administrative sanctions, including SEC action, ineligibility for short form resale registration, the suspension or delisting of our common stock from the stock exchange on which it is listed and the inability of registered broker-dealers to make a market in our common stock, which would further reduce our stock price and could harm our business.

 

We are subject to anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law that could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders.

 

Provisions in our second amended and restated certificate of incorporation, our amended and restated bylaws and Delaware law may delay or prevent an acquisition of us. These provisions may also frustrate or prevent any attempts 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. 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. These provisions are described in detail under the caption “Description of capital stock.”

 

Our share price may be volatile and you may be unable to sell your shares at or above the offering price.

 

The initial public offering price for our shares will be determined by negotiations between us and representatives of the underwriters and may not be indicative of prices that will prevail in the trading market. The market price of shares of our common stock could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including:

 

 

 

Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of shares of our common stock. If the market price of shares of our common stock after this offering does not exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment. 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, which could seriously harm our business.

 

A significant portion of our total outstanding shares of common stock is restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

 

This prospectus contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are contained principally in the sections entitled “Prospectus summary,” “Risk factors,” “Management’s discussion and analysis of financial condition and results of operations” and “Business.” These statements relate to future events or our future financial or operational performance and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. These risks and uncertainties are contained principally in the section entitled “Risk factors.”

 

Forward-looking statements include all statements that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,” or the negative of those terms, and similar expressions and comparable terminology intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as guarantees of future events. These forward-looking statements represent our estimates and assumptions only as of the date of this prospectus and, except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this prospectus.

 

In particular, forward-looking statements in this prospectus include statements about:

 

 

 

We estimate that we will receive net proceeds of approximately $      million from the sale of           shares of common stock in this offering based on an assumed initial public offering price of $      per share (the mid-point of the price range set forth on the cover page of this prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $      per share (the mid-point of the price range set forth on the cover page of this prospectus) would increase (decrease) the net proceeds to us from this offering by $      million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their option to purchase           additional shares, we estimate that our net proceeds will be approximately $      million based on an assumed initial public offering price of $      per share (the mid-point of the price range set forth on the cover page of this prospectus).

 

We currently intend to use all or a portion of the net proceeds of this offering, together with $      million of remaining proceeds from a government award, $10 million in infrastructure improvements to be contributed by the Lake Providence Port Commission and the State of Louisiana and $      million of existing cash, cash equivalents and restricted cash to complete the 30 million pound per year plant at the Port of Lake Providence, Louisiana, or the Louisiana Plant (approximately $103 million, which includes working capital, fees and expenses), to fund our expected equity contribution to the expansion of the Louisiana Plant to 170 million pounds per year (approximately $60 million, which includes working capital, fees and expenses), to pay the dividend accruing on the Class A common stock upon the closing of this offering (which totaled $1,025,753 as of March 31, 2011) and to fund research and development expenses (which we estimate will be approximately $25.5 million in the aggregate for the two fiscal years following the completion of this offering) and for working capital and other general corporate purposes, which will include expenses and the costs associated with being a public company. We may also use a portion of the net proceeds to acquire other complementary businesses, products or technologies or to make other strategic investments. Although we do not have any current plans or agreements for any specific acquisitions or investments at this time, we believe opportunities may exist from time to time to expand our current business through strategic investments or acquisitions with other companies, products or technologies.

 

The potential uses of net proceeds from this offering represent our current intentions based upon our present business plans and business conditions. We cannot guarantee the specific amount of the net proceeds that will be used to develop, construct and operate our biochemical production capabilities globally, fund working capital or be used for other general corporate purposes.

 

Until we apply the net proceeds of this offering to its intended uses, we intend to invest the net proceeds in interest-bearing demand deposit accounts or short-term investment-grade securities. We cannot predict whether these temporary investments of the net proceeds will yield a favorable return, or any return at all.

 

We have never declared or paid cash dividends on shares of our common or convertible common stock and currently do not plan to declare or pay cash dividends in the foreseeable future, other than the dividend accruing on the Class A common stock at the rate per annum of 8% per share compounded annually on a cumulative basis, which is to be paid upon the conversion of Class A common stock into common stock upon the closing of this offering. As of March 31, 2011, accrued Class A common stock dividends totaled $1,025,753. We expect to retain our future earnings, if any, for use in the operation and expansion of our business. The payment of cash dividends in the future, if any, will be at the discretion of our board of directors and will depend upon such factors as earnings levels, capital requirements, requirements under the Delaware General Corporation Law, restrictions and covenants pursuant to any other credit facilities or debt indentures we may enter into, our overall financial condition and any other factors deemed relevant by our board of directors.

 

The following table sets forth our cash, cash equivalents and restricted cash and our capitalization as of March 31, 2011:

 

 

The pro forma and pro forma, as adjusted, information below is illustrative only and our capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements and the accompanying notes appearing elsewhere in this prospectus.

 

Each $1.00 increase or decrease in the assumed initial public offering price of $      per share (the mid-point of the price range set forth on the cover page of this prospectus) would increase (decrease), our pro forma, as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $      million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

 

The number of shares of common stock shown as issued and outstanding in the table set forth above is based on the number of shares outstanding as of March 31, 2011, and excludes:

 

 

If you invest in our common stock, your interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the pro forma, as adjusted net tangible book value per share of our common stock after this offering.

 

Our pro forma net tangible book value at March 31, 2011 was $56.1 million, or $2.38 per share of common stock. Pro forma net tangible book value per share represents total tangible assets less total liabilities, divided by the number of outstanding shares of common stock on March 31, 2011, after giving effect to the conversion of all of our outstanding Class A common stock and Class B common stock into shares of our common stock upon completion of this offering, the exercise on April 12, 2011 of 639,170 warrants at an exercise price of $0.01 per share, or the Warrant Exercise, and the related warrant liability transfer to Additional Paid in Capital in the amount of $2,198,745. Our pro forma, as adjusted net tangible book value at March 31, 2011, after giving effect to the Warrant Exercise and the sale by us of           shares of common stock in this offering at an assumed initial public offering price of $      per share (the mid-point of the price range set forth on the cover page of this prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, would have been approximately $      million, or $      per share. This represents an immediate increase in pro forma, as adjusted net tangible book value of $      per share to existing stockholders and an immediate dilution of $      per share to new investors purchasing shares of our common stock in this offering at the assumed initial public offering price of $      per share (the mid-point of the price range set forth on the cover page of this prospectus), subject to adjustment to reflect the actual offering price. The following table illustrates this per share dilution:

 

 

If the underwriters exercise their over-allotment option in full, the pro forma as adjusted net tangible book value will increase to $     per share, representing an immediate increase to existing stockholders of $      per share and an immediate dilution of $     per share to new investors.

 

A $1.00 increase (decrease) in the assumed initial public offering price of $      per share (the mid-point of the price range set forth on the cover page of this prospectus) would increase (decrease) our pro forma, as adjusted net tangible book value by $      million, the pro forma, as adjusted net tangible book value per share by $      per share and the dilution in the pro forma net tangible book value to new investors in this offering by $      per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

The following table shows, as of March 31, 2011, the number of shares of common stock purchased from us, the total consideration paid to us and the average price paid per share by existing stockholders and by new investors purchasing common stock in this offering at an assumed initial public offering price of $      per share (the mid-point of the price range set forth on the cover page of this prospectus), before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The discussion and tables in this section regarding dilution are based on 23,580,169 shares of common stock issued and outstanding as of March 31, 2011 and the $6.00 and $10.00 per share warrant exercise and assumes the conversion of all of our

Class A common stock and Class B common stock into an aggregate of 14,259,858 shares of our common stock upon the completion of this offering and inclusion of the 186,491 shares of restricted stock.

 

 

The table above, and the information below, assumes that our existing stockholders do not purchase any shares in this offering.

 

A $1.00 increase (decrease) in the assumed initial public offering price of $      per share (the mid-point of the price range set forth on the cover page of this prospectus) would increase (decrease) total consideration paid by new investors, total consideration paid by all stockholders and the average price per share paid by all stockholders by $      million, $      million and $     , respectively, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and before deducting the underwriting discount and estimated offering expenses payable by us.

 

The discussion and tables in this section regarding dilution assume the obligatory exercise of warrants exercisable for 17,134 shares of common stock at an exercise price of $6.00 per share and warrants exercisable for 89,656 shares of common stock at an exercise price of $10.00 per share assuming an initial public offering in excess of 1.5 times the exercise price of the warrants, and exclude:

 

 

If the underwriters exercise their option to purchase additional shares in full, the following will occur:

 

 

To the extent that outstanding options or warrants are exercised, you will experience further dilution. If all options and warrants outstanding as of March 31, 2011 had been exercised on such date, our pro forma net tangible book value as of March 31, 2011 would have been $60.3 million, or $2.48 per share, and the pro forma, as adjusted net tangible book value after this offering would have been $      million, or $      per share, causing dilution to new investors of $      per share.

 

In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities would result in further dilution to our stockholders.

 

The following selected historical financial data should be read together with our historical consolidated financial statements and the accompanying notes, included elsewhere in this prospectus, and “Management’s discussion and analysis of financial condition and results of operations.” The selected historical financial data in this section is not intended to replace our historical financial statements and the accompanying notes. For purposes of the disclosure contained in this section, “Myriant”, “Company”, “we”, “us” and “our” refer only to Myriant Corporation and its subsidiaries.

 

We derived the historical financial statement data as of and for the fiscal year ended December 31, 2008 and for the period from January 1, 2009 to July 15, 2009 from the audited consolidated financial statements of BioEnergy International, LLC, or the Predecessor Company, included elsewhere in this prospectus, and as of December 31, 2009 and 2010, for the period from July 16, 2009 (inception) to December 31, 2009, and for the fiscal year ended December 31, 2010 from our audited consolidated financial statements, included elsewhere in this prospectus. We derived the financial statement data for the years ended December 31, 2007 and 2006 from the Predecessor’s unaudited financial statements, which are not included in this prospectus.

 

The consolidated statements of operations data for the three months ended March 31, 2010 and 2011 and the consolidated balance sheet data as of March 31, 2011 are derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The unaudited interim consolidated financial statements have been prepared on the same basis as our audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly our financial position as of March 31, 2011 and results of operations for the three months ended March 31, 2010 and 2011. Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011. The data should be read in conjunction with the consolidated financial statements, related notes, and other financial information included elsewhere in this prospectus.

 

The table below sets forth our and the Predecessor Company’s respective consolidated results of operations for the periods shown. The inception of the Company was July 16, 2009. The 2008 results reflect the results of the Predecessor Company for the year ended December 31, 2008. The 2009 results reflect the results of the Predecessor Company for the period from January 1, 2009 through July 15, 2009, which we refer to as the 2009 Predecessor Period, and for us for the period from July 16, 2009 to December 31, 2009, which we refer to as the 2009 Successor Period.

 

The operations of the Predecessor Company and our company were substantially the same as all assets and liabilities transferred from the Predecessor Company to us, with the exception of certain of the Predecessor Company’s debt and the Predecessor Company’s investment in BioEnergy Holding LLC, as described above. The most notable changes that resulted from the transfer of the chemical intermediates business from the Predecessor Company to us are as follows:

 

 

Based on our analysis, we concluded that (i) the results of the Predecessor Company’s operations for the year ended December 31, 2008 were comparable to the results of the operations for the 2009 Predecessor Period combined with the 2009 Successor Period and (ii) the results of operations for the 2009 Predecessor Period combined with the 2009 Successor Period were comparable to our results of operations for the year ended December 31, 2010.

The financial statements included in this prospectus do not reflect results of operations, financial position and cash flows as if the Predecessor Company’s biochemical business had been operated as a stand-alone company during all periods presented prior to July 16, 2009 (inception).

 

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes and the historical consolidated financial statements and related notes of our Predecessor Company included elsewhere in this prospectus. In addition to historical financial information, the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk factors.”

 

OVERVIEW

 

We are an industrial biotechnology company focused on becoming a low-cost producer of high-value biochemicals that “drop-in” and substitute for traditional petroleum-based industrial chemicals. We have developed a proprietary technology platform that we believe will enable us to manufacture a variety of drop-in chemicals and replacement chemicals for large and growing markets using a broad range of low-cost, renewable and readily available feedstocks. Our technology platform, which we have validated in our laboratories and third-party tolling facilities and commercialized with our licensee, Purac Biochem BV, or Purac, a wholly-owned subsidiary of CSM N.V., is based on a single-step anaerobic fermentation process that allows our microorganisms to grow and simultaneously produce the target product, resulting in greater productivity and yield relative to other known bioproduction processes. We believe that we can produce our target high-value chemical intermediates at an average of half the cost of traditional petrochemical intermediates at a wide range of oil and industrial sugar prices without relying on government subsidies.

 

We have entered into or intend to enter into strategic relationships with international companies to accelerate the global commercialization of our products and development of our biochemical production capabilities. For example, we signed a non-binding memorandum of understanding, or MOU, to enter into a definitive joint development agreement with Johnson Matthey PLC’s subsidiary Davy Process Technology Limited, or Davy, a developer and licensor of advanced process technologies. Under that agreement, Davy would, upon successful completion of testing and engineering using our biobased succinic acid, or biosuccinic acid, guarantee to its butanediol process licensees that they could use our biosuccinic acid in their butanediol process in place of petroleum-derived maleic anhydride without significant additional capital expenditures. We have also signed exclusive alliance agreements with ThyssenKrupp’s subsidiary Uhde GmbH, or Uhde, a chemical plant engineering company, and its U.S. subsidiary, under which Uhde will integrate our fermentation technology with its separation technology in the plant design and, on a project-by-project basis, provide process and performance guarantees for our future plants on mutually agreeable terms. In addition, we plan to leverage our partnership with PTT Chemical International Private Limited, or CH Inter, our largest stockholder and a subsidiary of PTT Chemical Public Company Limited, or PTTCH, a large Thailand-based petrochemical producer, to access CH Inter’s and PTTCH’s breadth of commercial and technical expertise and extensive knowledge and infrastructure in Asian markets.

 

Our technology platform enables us to manufacture a variety of drop-in chemicals and replacement chemicals using a broad range of renewable feedstocks. Our proprietary microorganisms can metabolize diverse sugars to create various chemical intermediates such as biosuccinic acid, lactic acid, fumaric acid and acrylic acid. We have in-licensed patent rights relating to certain core technologies from the University of Florida. Prior to our spin-off, the Predecessor Company, BioEnergy International, LLC, a Delaware limited liability company, developed a process to produce D(−) lactic acid using our technology and licensed this process, with associated patent rights, to Purac. These licenses were assigned to us as part of the restructuring described above. The D(−) lactic acid made and sold by Purac represents the first commercial product utilizing our biobased, fermentation technology.

 

We have signed contracts with three customers who have agreed to buy 100% of each of their annual requirements of succinic acid from us. We expect these three customers will consume a substantial portion, and prospectively all, of this plant’s annual production capacity, based on the customers’ current stated forecasts of their demand. We intend to enter into similar supply arrangements in connection with the planned

expansion of our Louisiana Plant to an annual production capacity of 170 million pounds. In addition to biosuccinic acid, we plan to sell ammonium sulfate, or AMS, commonly used as a soil fertilizer, which is generated as a co-product of our process. We signed a contract with Wilson Industrial Sales Company, Inc. to sell all of the AMS produced at the Louisiana Plant during the term of the contract.

 

We estimate that the total cost to complete our Louisiana Plant will be approximately $103 million, which includes working capital, fees and expenses. We, along with the Lake Providence Port Commission and the State of Louisiana, have already invested over $13 million to prepare the plant’s site for construction. In addition, we were awarded $50 million from the U.S. Department of Energy, or the DOE, in federal cost-share funding under the American Recovery and Reinvestment Act of 2009, which will enable us to complete the Louisiana Plant. This award was made in two phases. The first phase of engineering and piloting, referred to as Budget Period 1, or BP1, was completed on December 31, 2010 and we have received the $10.4 million maximum amount allowed for BP1. The second construction phase, referred to as Budget Period 2, or BP2, with an allowable amount under the award of $39.6 million, is ongoing. Costs eligible for reimbursement in BP2 include those related to the Louisiana Plant’s construction, equipment purchases, testing and operation. As of March 31, 2011, we have not received any of the $39.6 million allowable for BP2. Once the Louisiana Plant is completed, we plan to make significant investments in infrastructure to accommodate the planned expansion. We intend to finance our equity contribution to the expansion of our Louisiana Plant with a combination of cash on hand and a portion of the net proceeds received from this initial public offering of our common stock. We may implement other financing plans if financially attractive options become available.

 

We may also use a portion of the net proceeds to acquire other complementary businesses, products or technologies or to make other strategic investments. Although we do not have any current plans or agreements for any specific acquisitions or investments at this time, we believe opportunities may exist from time to time to expand our current business through strategic investments or acquisitions with other companies, products or technologies.

 

The potential uses of net proceeds from this offering represent our current intentions based upon our present business plans and business conditions. As of the date of this prospectus, we cannot guarantee the specific amount of the net proceeds that will be used to develop, construct and operate our biochemical production capabilities globally, fund working capital or be used for other general corporate purposes.

 

We have also signed a memorandum of understanding with China National BlueStar (Group) Co. Ltd., or BlueStar, to develop a proposal for a jointly-owned 220 million pound biosuccinic acid plant in Nanjing, China, the biosuccinic acid requirements of which would be exclusively supplied by the Company. BlueStar is currently producing BDO utilizing a process licensed from Davy.

 

We scaled up the production of our biosuccinic acid from an initial fermentation vessel of five liters to 50,000 liters from January 2008 to February 2011 at various locations. This process was completed at the tolling plant owned by Fermic, S.A. de C.V., or Fermic, in Mexico City. This scale-up of biosuccinic acid was executed in ten fold increments over prior capacity and validated assumed commercial-scale cost metrics to be cost-competitive down to $45 per barrel of oil. The Fermic tolling facility has operated under our supervision for over a year and a half and produced 24 metric tons of biosuccinic acid for us in support of our internal customer/vendor sampling and testing programs.

 

We were formed in Delaware in April 2009 as a limited liability company for the purpose of succeeding to the chemical intermediates business of our Predecessor Company. The Predecessor Company was focused on the development of proprietary biocatalysts to produce renewable fuels and biobased chemical intermediates for use by energy companies, specialty chemical companies and manufacturers of a wide range of consumer products. To differentiate the biochemical business from its renewable fuels business, the Predecessor Company underwent a restructuring in July 2009 whereby the Predecessor Company assigned to us the assets and liabilities of the chemical intermediates business while leaving the renewable fuels business, along with its related assets and liabilities, consisting principally of an investment in BioEnergy Holding LLC and debt, with the Predecessor Company. Following this assignment, our ownership interests were distributed pro rata to the Predecessor Company’s investors.

Following our spin-off, we have focused on developing our technology to produce biosuccinic acid, lactic acid, fumaric acid and acrylic acid. We are currently building a 30 million pound biosuccinic acid plant in Lake Providence, Louisiana, or the Louisiana Plant, which we expect will begin commercial operations during the first quarter of 2013. We intend to expand the annual production capacity of this plant to approximately 170 million pounds by the end of the first quarter of 2014.

 

We are a development stage company. To date, we have generated minimal revenues and no product sales. We and the Predecessor Company have incurred losses since our inception, including losses of $10.5 million in 2008, $17.2 million in 2009 and $16.2 million in 2010, as well as a loss of $17.5 million for the three months ended March 31, 2011. As of that date, we had an accumulated deficit of $17.5 million which reflects our conversion to a subchapter C corporation in January 2011. Our cumulative losses (including those of our Predecessor Company) total $72.4 million. We expect most of our expenditures over the next 24 months will go towards constructing and expanding the Louisiana Plant and designing and planning additional manufacturing facilities. We do not expect to record meaningful product revenue until the Louisiana Plant becomes operational, which we project will occur in the first quarter of 2013. We expect to incur losses and negative cash flow from operating activities for the foreseeable future.

 

The financial statements and data included in this prospectus represent the financial position and results of operations:

 

 

Since our spin-off from the Predecessor Company, we have committed substantial resources to the development of our biobased fermentation technology, including the construction of our Louisiana Plant, and expect our operations to diverge substantially from those of the Predecessor Company in the future. As such, the historical results of operations set forth in this prospectus do not necessarily provide a reliable basis against which our future performance can be measured.

 

OPERATING RESULTS DISCUSSION

 

As described above, our historical results of operations are not representative of our expected future financial results. Set forth below is a description of our principal items of historical revenues and expenses as well as a description of factors we expect to be important to our future financial position and results of operations. Please refer to “Special note regarding forward-looking statements” for cautionary information relating to the forward-looking statements included in the discussion below.

 

Revenues and Operating Expenses

 

Revenues

 

The historical revenues we report in this prospectus were derived from the following sources:

 

 

We expect that, once we begin commercial production, our revenues will be largely derived from product sales of biosuccinic acid and, to a lesser extent, ammonium sulfate. Product sales will be largely dependent on:

 

 

Cost of goods sold

 

To date, the cost of license fee revenue has been our sole cost of goods sold and represents royalty and other amounts paid to the University of Florida, or the University, under our license agreement with it. We are obligated to pay the University royalties on product sales at a rate that declines with increasing volume. We are also obligated to share with the University any license fees we receive from sublicensing the relevant patent rights. We do not expect these payments to represent a substantial cost to us.

 

Upon completion of our Louisiana Plant, our cost of goods sold will depend principally on:

 

 

Gross Margin

 

Our gross margins will depend principally on the factors described above. While our operations will have a significant fixed-cost component, we do not expect that under-utilization of our manufacturing facilities will be a principal driver of our gross margins, since we are designing our manufacturing facilities to run at full capacity based on customer demand. For example, we currently have signed agreements with customers that, based on their current stated forecasts, would consume a substantial portion, and prospectively all, of our expected capacity of the Louisiana Plant’s initial 30 million pound annual production capacity.

 

Research and Development Expenses

 

Research and development expenses represent costs incurred for internal projects. These costs include salaries and other personnel-related expenses, travel costs, facility costs, piloting costs, supplies and depreciation of laboratory equipment, as well as research consultants and the cost of funding research at universities and other research institutions. These costs are expensed as incurred. Costs to acquire technologies that are utilized in research and development and that have no alternative future use are expensed when incurred.

 

Sales and Marketing

 

We do not currently record a material amount of sales and marketing expense. We expect that these costs will grow significantly in conjunction with future revenue growth.

 

General and Administrative Expenses

 

General and administrative expenses represent personnel-related costs, travel costs, consulting, marketing and professional fees, depreciation and occupancy-related costs not associated with our research and development facility. After completion of this offering, we anticipate incurring a significant increase in general and administrative expenses as we incur additional compliance costs as a public company. These increases will likely include increased costs for insurance, costs related to the hiring of additional personnel and payments to consultants, lawyers and accountants. We also expect to incur significant costs to comply with corporate governance, internal controls and similar requirements applicable to public companies.

 

Results of Operations

 

The following table sets forth consolidated results of operations for us and the Predecessor Company for the periods shown. Our inception date is July 16, 2009. The 2008 results of operations set forth in this prospectus reflect the results of the Predecessor Company. The 2009 results reflect the Predecessor Company’s results for the period from January 1, 2009 through July 15, 2009, which we refer to as the 2009 Predecessor Period, and our results from July 16 (inception) through year end, which we refer to as the 2009 Successor Period.

 

Our operations and those of the Predecessor Company were substantially the same, as all assets and liabilities were contributed from the Predecessor Company to us with the exception of certain of the Predecessor Company’s debt and the Predecessor Company’s investment in BioEnergy Holding LLC, as described above. The most notable changes that resulted from the transfer of the chemical intermediates business from the Predecessor Company to us are set forth below:

 

 

Based on our analysis, we concluded that (i) the results of the Predecessor Company’s operations for the year ended December 31, 2008 were comparable to the combined results of the operations for the 2009 Predecessor Period and the 2009 Successor Period, and (ii) the combined results of operations for the 2009

Predecessor Period and the 2009 Successor Period were comparable with our operations for the year ended December 31, 2010.

 

For the reasons stated under “Overview — Operating Results Discussion,” our historical results of operations are not representative of our expected future operating results.