Table of Contents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

** **
| **x**                                                   | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.** |
|---------------------------------------------------------|---------------------------------------------------------------------------------------------------------|
|                                                    |
| **For the quarterly period ended  March 31, 2010** |
|                                                    |
| **OR**                                                  |
|                                                    |
| **o**                                                   | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For the transition periodfrom                to                **

 

**Commission file number 001-33133**

 

**METABOLIX,INC.**

 

| **Delaware**                                                     | ** ** | **04-3158289**                         |
|------------------------------------------------------------------|------------|----------------------------------------|
| (State  or other jurisdiction of  incorporation or organization) |       | (I.R.S.  Employer  Identification No.) |
|                                                             |       |                                   |
| **21 Erie Street  Cambridge, MA**                                | ** ** | **02139**                              |
| (Address  of principal executive offices)                        |       | (Zip  Code)                            |

 

**(617) 583-1700**

(Registrant’stelephone number, including area code)

 

 

(Formername, former address and former fiscal year, if changed since last report.)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.  Yes x  No o

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files). Yes o  No o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act.

 

| Large  accelerated filer o                |   | Accelerated  filer x         |
|------------------------------------------------|--------|-----------------------------------|
|                                           |   |                              |
| Non-accelerated  filer o                       |   | Smaller  reporting company o |
| (Do  not check if a smaller reporting company) |   |                              |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes o  No x

 

The number of sharesoutstanding of the registrant’s common stock as of April 27, 2010 was26,734,942.

 

 

 

----

Table of Contents

 

**Metabolix, Inc.**

**Form 10-Q**

**For theQuarter Ended March 31, 2010**

** **

**Tableof Contents**

 
| ** **                              | **Page**                                                                                        |
|-----------------------------------------|-------------------------------------------------------------------------------------------------|
| **Part I.  Financial Information** | 3                                                                                               |
|                                    |                                                                                            |
| Item                                    |                                                                                            |
| 1.                                      | Consolidated  Financial Statements (Unaudited)                                                  | 3 |
|                                    | Consolidated  Balance Sheets at March 31, 2010, and December 31, 2009                 | 3 |
|                                    | Consolidated  Statements of Operations for the three months ended March 31, 2010 and  2009 | 4 |
|                                    | Consolidated  Statements of Cash Flows for the three months ended March 31, 2010 and  2009 | 5 |
|                                    | Notes  to the Consolidated Financial Statements                                                 | 6 |
| 2.                                      | Management’s  Discussion and Analysis of Financial Condition and Results of Operations     | 13 |
| 3.                                      | Quantitative  and Qualitative Disclosures About Market Risk                                     | 22 |
| 4.                                      | Controls and  Procedures                                                                        | 22 |
|                                    |                                                                                            |
| **Part II.  Other Information**    | 23                                                                                              |
|                                    |                                                                                            |
| Item                                    |                                                                                            |
| 1.                                      | Legal Proceedings                                                                               | 23 |
| 1A.                                     | Risk  Factors                                                                                   | 23 |
| 2.                                      | Unregistered  Sales of Equity Securities and Use of Proceeds                                    | 23 |
| 3.                                      | Defaults  Upon Senior Securities                                                                | 23 |
| 4.                                      | (Removed and Reserved)                                                                          | 23 |
| 5.                                      | Other Information                                                                               | 23 |
| 6.                                      | Exhibits                                                                                        | 23 |
|                                    |                                                                                            |
| **SIGNATURES**                          | 24                                                                                              |

 

2

----

Table of Contents

 

**PART I. FINANCIAL INFORMATION**

 

**ITEM 1.  CONSOLIDATED FINANCIALSTATEMENTS.**

 

**METABOLIX,INC.**

**CONSOLIDATEDBALANCE SHEETS**

**UNAUDITED**

**(inthousands, except share and per share data)**

 
| ** **                                                                                                                                                                                                                                            | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                                                                            | ** ** | **2010**           | ** ** | **2009**              | ** ** |
| **Assets**                                                                                                                                                                                                                                            |       |               |       |                  |       |
| Current Assets:                                                                                                                                                                                                                                       |       |               |       |                  |       |
| Cash and cash  equivalents                                                                                                                                                                                                                            |       | $                  | 13,802     |                  | $          | 10,814 |   |
| Short-term investments                                                                                                                                                                                                                                |       | 69,037             |       | 81,388                |       |
| Accounts receivable  (billed and unbilled)                                                                                                                                                                                                            |       | 1                  |       | 22                    |       |
| Due from related  parties                                                                                                                                                                                                                             |       | 270                |       | 365                   |       |
| Prepaid expenses and  other current assets                                                                                                                                                                                                            |       | 675                |       | 764                   |       |
| Total current assets                                                                                                                                                                                                                                  |       | 83,785             |       | 93,353                |       |
| Restricted cash                                                                                                                                                                                                                                       |       | 622                |       | 593                   |       |
| Property and equipment,  net                                                                                                                                                                                                                          |       | 3,172              |       | 3,513                 |       |
| Other assets                                                                                                                                                                                                                                          |       | 95                 |       | 95                    |       |
| Total assets                                                                                                                                                                                                                                          |       | $                  | 87,674     |                  | $          | 97,554 |   |
|                                                                                                                                                                                                                                                  |       |               |       |                  |       |
| **Liabilities  and Stockholders’ Equity**                                                                                                                                                                                                        |       |               |       |                  |       |
| Current Liabilities:                                                                                                                                                                                                                                  |       |               |       |                  |       |
| Accounts payable                                                                                                                                                                                                                                      |       | $                  | 27         |                  | $          | 626 |   |
| Accrued expenses                                                                                                                                                                                                                                      |       | 2,750              |       | 3,746                 |       |
| Current portion of  deferred rent and other current liabilities                                                                                                                                                                                       |       | 241                |       | 190                   |       |
| Total current  liabilities                                                                                                                                                                                                                            |       | 3,018              |       | 4,562                 |       |
| Deferred rent                                                                                                                                                                                                                                         |       | 511                |       | 552                   |       |
| Long-term deferred  revenue                                                                                                                                                                                                                           |       | 37,392             |       | 37,299                |       |
| Other long-term  liabilities                                                                                                                                                                                                                          |       | 100                |       | 97                    |       |
| Total liabilities                                                                                                                                                                                                                                     |       | 41,021             |       | 42,510                |       |
| Commitments and  contingencies (Note 11)                                                                                                                                                                                                              |       |               |       |                  |       |
| Stockholders’ Equity:                                                                                                                                                                                                                            |       |               |       |                  |       |
| Preferred stock ($0.01  par value per share): 5,000,000 shares authorized, no shares issued or outstanding                                                                                                                                            |       | —             |       | —                |       |
| Common stock ($0.01 par  value per share); 100,000,000 shares authorized at March 31, 2010 and  December 31, 2009; 26,591,662 and 26,514,076 shares issued and  outstanding at March 31, 2010 and December 31, 2009, respectively |       | 266                |       | 265                   |       |
| Additional paid-in  capital                                                                                                                                                                                                                           |       | 224,254            |       | 222,831               |       |
| Accumulated other  comprehensive income                                                                                                                                                                                                               |       | 9                  |       | 22                    |       |
| Accumulated deficit                                                                                                                                                                                                                                   |       | (177,876           | )          | (168,074              | )          |
| Total stockholders’  equity                                                                                                                                                                                                                      |       | 46,653             |       | 55,044                |       |
| Total liabilities and  stockholders’ equity                                                                                                                                                                                                      |       | $                  | 87,674     |                  | $          | 97,554 |   |

 

*Theaccompanying notes are an integral part of these interim consolidated financialstatements*

 

3

----

Table of Contents

 

**METABOLIX,INC.**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**UNAUDITED**

**(inthousands, except share and per share data)**

 
| ** **                                                    | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                    | ** ** | **March 31,**     | ** ** |
| ** **                                                    | ** ** | **2010**               | ** ** | **2009** | ** ** |
| Revenue:                                                      |       |                   |       |   |   |
| Research and  development revenue                             |       | $                      | 150        |   | $ | 6 |   |
| License fee and royalty  revenue from related parties         |       | 30                     |       | 25 |   |
| Grant revenue                                                 |       | —                 |       | 230 |   |
| Total revenue                                                 |       | 180                    |       | 261 |   |
|                                                          |       |                   |       |   |   |
| Operating expense:                                            |       |                   |       |   |   |
| Research and  development expenses, including cost of revenue |       | 6,168                  |       | 6,008 |   |
| Selling, general, and  administrative expenses                |       | 3,869                  |       | 3,714 |   |
| Total operating  expenses                                     |       | 10,037                 |       | 9,722 |   |
| Loss from operations                                          |       | (9,857                 | )          | (9,461 | ) |
|                                                          |       |                   |       |   |   |
| Other income (expense):                                       |       |                   |       |   |   |
| Interest income, net                                          |       | 55                     |       | 352 |   |
| Net loss                                                      |       | $                      | (9,802     | ) | $ | (9,109 | ) |
|                                                          |       |                   |       |   |   |
| Net loss per share:                                           |       |                   |       |   |   |
| Basic and Diluted                                             |       | $                      | (0.37      | ) | $ | (0.40 | ) |
|                                                          |       |                   |       |   |   |
| Number of shares used  in per share calculations:             |       |                   |       |   |   |
| Basic and Diluted                                             |       | 26,536,924             |       | 22,975,459 |   |

 

*The accompanying notes are anintegral part of these interim consolidated financial statements*

 

4

----

Table of Contents

 

**METABOLIX,INC.**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**UNAUDITED**

**(inthousands)**

 
| ** **                                                               | ** ** | **Three Months Ended** | ** ** |
|--------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                               | ** ** | **March 31,**     | ** ** |
| ** **                                                               | ** ** | **2010**               | ** ** | **2009** | ** ** |
| **Cash  flows from operating activities**                                |       |                   |       |   |   |
| Net loss                                                                 |       | $                      | (9,802     | ) | $ | (9,109 | ) |
| Adjustments to  reconcile net loss to cash used in operating activities: |       |                   |       |   |   |
| Depreciation and  amortization                                           |       | 435                    |       | 629 |   |
| Charge for  401(k) company common stock match                       |       | 133                    |       | 160 |   |
| Stock-based  compensation                                                |       | 1,110                  |       | 1,019 |   |
| Gain on sale of equipment                                                |       | —                 |       | (70 | ) |
| Changes in operating  assets and liabilities:                            |       |                   |       |   |   |
| Receivables (billed and  unbilled)                                       |       | 21                     |       | 76 |   |
| Due from related party                                                   |       | —                 |       | (44 | ) |
| Prepaid expenses and  other assets                                       |       | 89                     |       | (340 | ) |
| Accounts payable                                                         |       | (599                   | )          | (822 | ) |
| Accrued expenses                                                         |       | (1,024                 | )          | (203 | ) |
| Deferred rent                                                            |       | (41                    | )          | (41 | ) |
| Deferred revenue                                                         |       | 239                    |       | 119 |   |
| Net cash used in  operating activities                                   |       | (9,439                 | )          | (8,626 | ) |
|                                                                     |       |                   |       |   |   |
| **Cash  flows from investing activities**                                |       |                   |       |   |   |
| Purchase of property  and equipment                                      |       | (94                    | )          | (137 | ) |
| Change in restricted  cash                                               |       | (29                    | )          | — |   |
| Proceeds from the sale  of equipment                                     |       | —                 |       | 70 |   |
| Purchase of short-term  investments                                      |       | (7,541                 | )          | (37,979 | ) |
| Proceeds from the sale  and maturity of short-term investments           |       | 19,879                 |       | 33,853 |   |
| Net cash provided by  (used in) investing activities                     |       | 12,215                 |       | (4,193 | ) |
|                                                                     |       |                   |       |   |   |
| **Cash  flows from financing activities**                                |       |                   |       |   |   |
| Proceeds from options  exercised                                         |       | 212                    |       | 20 |   |
| Net cash provided by  financing activities                               |       | 212                    |       | 20 |   |
|                                                                     |       |                   |       |   |   |
| Net increase (decrease)  in cash and cash equivalents                    |       | 2,988                  |       | (12,799 | ) |
| Cash and cash  equivalents at beginning of period                        |       | 10,814                 |       | 26,194 |   |
| Cash and cash  equivalents at end of period                              |       | $                      | 13,802     |   | $ | 13,395 |   |

 

*The accompanying notes are anintegral part of these interim consolidated financial statements*

 

5

----

Table of Contents

 

**METABOLIX,INC.**

**NOTESTO THE CONSOLIDATED FINANCIAL STATEMENTS**

**UNAUDITED**

 

*(Alldollar amounts, except per share amounts, are stated in thousands)*

 

**1. BASIS OF PRESENTATION**

 

The accompanying consolidated financial statements areunaudited and have been prepared by Metabolix, Inc. (the “Company”) inaccordance with accounting principles generally accepted in the United Statesof America (“GAAP”) and pursuant to the rules and regulations of the U.S.Securities and Exchange Commission (“SEC”). Certain information and footnotedisclosures normally included in the Company’s annual consolidated financialstatements have been condensed or omitted. The year-end consolidated balancesheet data was derived from audited financial statements, but does not includeall disclosures required by GAAP. The consolidated financial statements, in theopinion of management, reflect all adjustments (consisting only of normalrecurring adjustments) necessary for a fair statement of the financial positionand results of operations for the interim periods ended March 31, 2010 and2009.

 

The results of operations for the interim periods arenot necessarily indicative of the results of operations to be expected for anyfuture period or the entire fiscal year. These interim consolidated financialstatements should be read in conjunction with the audited consolidatedfinancial statements for the year ended December 31, 2009, which arecontained in the Company’s Annual Report on Form 10-K filed with the SEC.

 

**2. ACCOUNTING POLICIES**

 

There has been no material change in accountingpolicies since the Company’s fiscal year ended December 31, 2009, asdescribed in Note 2 to the consolidated financial statements included in itsAnnual Report on Form 10-K for the year then ended.

 

**3. RECENT ACCOUNTING PRONOUNCEMENTS**

 

From time to time, new accounting pronouncements areissued by the Financial Accounting Standards Board (FASB) or other standardsetting bodies that are adopted by the Company as of the specified effectivedate. Unless otherwise discussed, the Company’s management believes that theimpact of recently issued standards that are not yet effective will not have amaterial impact on its consolidated financial position or results of operationsupon adoption.

 

***Recently AdoptedAccounting Standards***

 

Effective January 1, 2010, the Company adopted anewly issued accounting standard which provides guidance for the consolidationof variable interest entities and requires an enterprise to determine whetherits variable interest or interests give it a controlling financial interest ina variable interest entity. This amended consolidation guidance for variableinterest entities replaces the existing quantitative approach for identifyingwhich enterprise should consolidate a variable interest entity, which was basedon which enterprise is exposed to a majority of the risks and rewards, with aqualitative approach, based on which enterprise has both (1) the power todirect the economically significant activities of the entity and (2) theobligation to absorb losses of, or the right to receive benefits from, theentity that could potentially be significant to the variable interest entity.The Company evaluated the Telles joint venture as a variable interest entityand determined that it is not required to consolidate Telles under thisaccounting standard. As a result, the adoption of this standard did not have animpact on the Company’s financial position or results of operations.Determination about whether an enterprise should consolidate a variableinterest entity is required to be evaluated continuously and changes toexisting relationships or future transactions may result in the Companyconsolidating the Telles joint venture or other arrangements.

 

In January 2010, the Company adopted a newlyissued accounting standard which requires additional disclosure about theamounts of and reasons for significant transfers in and out of Level 1 andLevel 2 fair value measurements. This standard also clarifies existingdisclosure requirements related to the level of disaggregation of 

 

6

----

Table of Contents

 

fair value measurements for each class of assets andliabilities and disclosures about inputs and valuation techniques used tomeasure fair value for both recurring and nonrecurring Level 2 andLevel 3 measurements. As this newly issued accounting standard only requiresenhanced disclosure, the adoption of this standard did not impact the Company’sfinancial position or results of operations. In addition, effective for interimand annual periods beginning after December 15, 2010, this standard willrequire additional disclosure and require an entity to present disaggregatedinformation about activity in Level 3 fair value measurements on a grossbasis, rather than as one net amount.

 

In June 2009, a new accounting standard wasissued relating to information that a reporting entity must provide in itsfinancial reports about a transfer of financial assets; the effects of atransfer on its financial position, financial performance, and cash flows; anda transferor’s continuing involvement in transferred financial assets.Specifically, among other aspects, this standard amends previously issuedaccounting guidance, modifies the financial-components approach and removes theconcept of a qualifying special purpose entity when accounting for transfersand servicing of financial assets and extinguishments of liabilities, andremoves the exception from applying the general accounting principles for theconsolidation of variable interest entities that are qualifying special-purposeentities. This new accounting standard is effective for transfers of financialassets occurring on or after January 1, 2010. The adoption of thisstandard did not have an impact on the Company’s  financial position or results of operations.

 

***Recently IssuedAccounting Standards***

 

In October 2009, a new accounting consensus wasissued for multiple-deliverable revenue arrangements. This consensus amendsexisting revenue recognition accounting standards. This consensus providesaccounting principles and application guidance on whether multiple deliverablesexist, how the arrangement should be separated and the consideration allocated.This guidance eliminates the requirement to establish the fair value ofundelivered products and services and instead provides for separate revenuerecognition based upon management’s estimate of the selling price for anundelivered item when there is no other means to determine the fair value ofthat undelivered item. Previously the existing accounting consensus requiredthat the fair value of the undelivered item be the price of the item eithersold in a separate transaction between unrelated third parties or the pricecharged for each item when the item is sold separately by the vendor. Under theexisting accounting consensus, if the fair value of all of the elements in the arrangementwas not determinable, then revenue was deferred until all of the items weredelivered or fair value was determined. This new approach is effectiveprospectively for revenue arrangements entered into or materially modified infiscal years beginning on or after June 15, 2010. The Company is in theprocess of evaluating whether the adoption of this standard will have amaterial effect on its financial position, results of operations or cash flows.

 

**4. COMPREHENSIVE LOSS**

 

Comprehensive loss is comprised of net loss and netunrealized gains or losses on marketable securities. Total comprehensive lossfor the three months ended March 31, 2010 and 2009 is as follows:

 
| ** **                                | ** ** | **Three Months Ended** | ** ** |
|-------------------------------------------|------------|------------------------|------------|
| ** **                                | ** ** | **March 31,**     | ** ** |
| ** **                                | ** ** | **2010**               | ** ** | **2009** | ** ** |
| Net loss                                  |       | $                      | (9,802     | ) | $ | (9,109 | ) |
| Other comprehensive  income:              |       |                   |       |   |   |
| Change in unrealized  gain on investments |       | (13                    | )          | (166 | ) |
| Total other  comprehensive income         |       | (13                    | )          | (166 | ) |
| Comprehensive loss                        |       | $                      | (9,815     | ) | $ | (9,275 | ) |

 

7

----

Table of Contents

 

**5. BASIC AND DILUTED NET LOSS PERSHARE**

 

Basic net loss per share is computed by dividing netloss by the weighted-average number of common shares outstanding, excluding thedilutive effects of common stock equivalents. Common stock equivalents includestock options and warrants. Diluted net loss per share is computed by dividingnet loss by the weighted-average number of dilutive common shares outstandingduring the period. Diluted shares outstanding is calculated by adding to theweighted shares outstanding any potential (unissued) shares of common stockfrom outstanding stock options and warrants based on the treasury stock method.In periods when a net loss is reported, all common stock equivalents areexcluded from the calculation because they would have an anti-dilutive effect,meaning the loss per share would be reduced. Therefore, in periods when a lossis reported there is no difference in basic and dilutive loss per share.

 

The number of shares of potentially dilutive commonstock related to options and warrants that were excluded from the calculationof dilutive shares since the inclusion of such shares would be anti-dilutivefor the three months ended March 31, 2010 and 2009, respectively, areshown below:

 
| ** ** | ** ** | **Three Months Ended** | ** ** |
|------------|------------|------------------------|------------|
| ** ** | ** ** | **March 31,**     | ** ** |
| ** ** | ** ** | **2010**               | ** ** | **2009** | ** ** |
| Options    |       | 3,273,239              |       | 2,735,107 |   |
| Warrants   |       | 4,086                  |       | 4,086 |   |
| Total      |       | 3,277,325              |       | 2,739,193 |   |

 

**6. STOCK-BASED COMPENSATION**

 

The Company recognized stock-based compensationexpense, related to employee stock option awards, of $1,104 and $1,107 for thethree months ended March 31, 2010 and 2009, respectively. At March 31,2010, there was approximately $8,917 of pre-tax stock-based compensationexpense, net of estimated forfeitures, related to unvested awards not yetrecognized which is expected to be recognized over a weighted average period of2.6 years.

 

A summary of option activity for the three monthsended March 31, 2010 is as follows:

 
| ** **                                                                                                    | ** ** | **Number of** | ** ** | **Weighted Average** | ** ** |
|---------------------------------------------------------------------------------------------------------------|------------|---------------|------------|----------------------|------------|
| ** **                                                                                                    | ** ** | **Shares**    | ** ** | **Exercise Price**   | ** ** |
| Outstanding at  December 31, 2009                                                                        |       | 3,138,829     |       | $                    | 11.04      |   |
| Granted                                                                                                       |       | 342,400       |       | 9.79                 |       |
| Exercised                                                                                                     |       | (68,372       | )          | 3.10                 |       |
| Cancelled                                                                                                     |       | (139,618      | )          | 14.21                |       |
| Outstanding at  March 31, 2010                                                                           |       | 3,273,239     |       | 10.94                |       |
|                                                                                                          |       |          |       |                 |       |
| Options exercisable at  March 31, 2010                                                                   |       | 1,870,096     |       |                 |       |
|                                                                                                          |       |          |       |                 |       |
| Weighted average grant  date fair value of options granted during the three months ended  March 31, 2010 |       |          |       | $                    | 6.64       |   |

 

8

----

Table of Contents

 

For the three months ended March 31, 2010 and2009, the Company determined the fair value of stock options using theBlack-Scholes option pricing model with the following assumptions for optiongrants, respectively:

 
| ** **                       | ** ** | **Three Months Ended** | ** ** |
|----------------------------------|------------|------------------------|------------|
| ** **                       | ** ** | **March 31,**     | ** ** |
| ** **                       | ** ** | **2010**               | ** ** | **2009** | ** ** |
| Expected  dividend yield         |       | —                 |       | — |   |
| Risk-free  rate                  |       | 2.35%  - 2.59%         |       | 1.67%  - 2.00% |   |
| Expected  option term (in years) |       | 5.6                    |       | 5.4 |   |
| Volatility                       |       | 80%                    |       | 81% |   |

 

**Non-employee Stock Option Awards**

 

The compensation expense related to non-employee stockoptions is generally recognized over a period of four years. The grantsgenerally vest quarterly and such vesting is contingent upon future servicesprovided by the consultants to the Company. The Company recorded a non-employeestock-based compensation expense of $6 for the three months ended March 31,2010. For the three months ended March 31, 2009 the Company recorded abenefit of $88. Options remaining unvested for non-employees are subject toremeasurement each reporting period prior to vesting in full. Since the fairmarket value of the options issued to non-employees are subject to changes inthe future, the compensation expense recognized in each quarter may not beindicative of future compensation charges.

 

**7. SIGNIFICANT COLLABORATION**

 

On November 3, 2004, the Company signed anagreement with ADM Polymer Corporation (“ADM”), a subsidiary of Archer DanielsMidland Company, to establish an alliance whereby the Company would providetechnology, licenses and research and development services, and ADM wouldprovide manufacturing services and capital necessary to produce**polyhydroxyalkanoate (“PHA”) polymers ona commercial scale.

 

On July 12, 2006, ADM exercised an option toenter into a commercial alliance for further research, development, manufacture,use and sale of PHA polymers on the terms and conditions set forth in theCommercial Alliance Agreement. The first product of this alliance is a familyof bioplastics branded under the name MirelTM.

 

The Commercial Alliance Agreement specifies the termsand structure of the relationship between the Company and ADM. The primaryfunction of this agreement is to establish the activities and obligations ofthe Company and ADM by which the parties will commercialize Mirel. Theseactivities include: the establishment of a joint sales company, which has beennamed Telles, to market and sell Mirel, the construction of a manufacturingfacility capable of producing 110 million pounds of material annually (the“Commercial Manufacturing Facility”), the licensing of technology to Telles andto ADM, and the conducting of various research, development, manufacturing,sales and marketing, compounding and administrative services by the parties.

 

Telles is a limited liability company, formed andequally owned by the Company and ADM, and is intended to: (i) serve as thecommercial entity to establish and develop the commercial market for Mirel, andconduct the marketing and sales in accordance with the goals of the commercialalliance, (ii) assist in the coordination and integration of themanufacturing, compounding and marketing activities, and (iii) administerand account for financial matters on behalf of the parties. The Company and ADMeach have 50% ownership and voting interest in Telles.

 

A summary of the key activities under this agreementis as follows: (i) ADM will arrange for, finance the construction of, andown, a facility in which it will manufacture Mirel under contract to Telles; (ii) theCompany will either arrange for and finance the acquisition or construction ofa facility in which it will compound Mirel or it will arrange for third partiesto compound Mirel; and (iii) the Company, acting in the name and on behalfof Telles, will establish the initial market for Mirel. The Company will alsocontinue its research and development efforts to 

 

9

----

Table of Contents

 

further advance the technology and expand and enhancethe commercial potential of Mirel. Subject to certain limitations, ADM willfinance the working capital requirements of Telles.

 

The Commercial Alliance Agreement called for Telles topay the Company quarterly support payments of $1,575 each. The last of fourteenquarterly support payments was received as of June 30, 2009. All quarterlysupport payments received from ADM on behalf of Telles, totaling $22,050, havebeen recorded as deferred revenue on the Company’s balance sheet.

 

During the “Construction Phase” of the agreement allpre-commercial material production expenses incurred by ADM and the Company areshared equally. Accordingly, from the execution of this agreement in July 2006through March 31, 2010, ADM has reimbursed the Company $8,864. All amountsreceived from ADM, prior to the “Commercial Phase,” relating to this agreementare recorded as deferred revenue. The Company will continue to deferrecognition of these and future payments received from ADM during theConstruction Phase of the agreement.

 

The Construction Phase of the commercial alliance willend, and the Commercial Phase will begin, upon the achievement of a milestonereferred to in the Commercial Alliance Agreement as “First Commercial Sale.”Achievement of this milestone requires the sale by Telles to third parties ofat least one million pounds of Mirel manufactured at the CommercialManufacturing Facility. Qualifying sales must meet certain criteria, includinga minimum order size, product acceptance by the customers in accordance withthe terms of their contracts, and receipt of payment, in order for such salesto contribute towards the First Commercial Sale milestone.

 

During the Commercial Phase of the agreement Telleswill pay the Company royalties on sales of Mirel. In addition, if Tellesengages the Company to perform certain services, and the Company accepts theservice arrangement, Telles will reimburse the Company for the cost of theservices provided pursuant to the Commercial Alliance Agreement.

 

While Telles is a fifty-fifty joint venture, ADM hasadvanced a disproportionate share of the financial capital needed to constructthe Commercial Manufacturing Facility and to fund its activities. Therefore,under the agreement all profits, after payment of all royalties, reimbursementsand fees, from Telles will first be distributed to ADM until ADM’s cost ofconstructing the Commercial Manufacturing Facility and any negative net cashflow of Telles funded by ADM have been returned. Once ADM has recovered suchamounts, the profits of Telles will be distributed in equal amounts to theparties.

 

The Commercial Alliance Agreement provides forexpansion of the operations of Telles beyond the initial license of110 million pound annual production through an equally-owned jointventure. While certain principles of the joint venture have been agreed to, thedetailed terms and conditions will not be determined until a later date.

 

Revenue recognition for amounts deferred through March 31,2010 is expected to commence when the Commercial Phase of the alliance begins.The deferred amounts will be recognized on a straight line basis over theestimated period, of approximately ten years, in which the Company’sobligations are fulfilled in accordance with the Commercial Alliance Agreement.The Company also expects to receive payments from Telles for the compoundingservices it provides as well as royalty payments. The compounding payments androyalty payments will be due to the Company as Telles sells product to itscustomers. These payments will be recognized as revenue during the period inwhich they are earned.

 

The Commercial Alliance Agreement and relatedagreements include detailed provisions setting out the rights and obligationsof the parties in the event of a termination of the Commercial AllianceAgreement. These provisions include the right for either party to terminate theCommercial Alliance Agreement upon a material default of a material obligationby the other party after a notice and cure period has expired. The parties arealso permitted to terminate the Commercial Alliance Agreement if a change incircumstances that is not reasonably within the control of a party makes theanticipated financial return from the project inadequate or too uncertain. Theparties have specific obligations to fulfill in the event of termination or ifthey file for bankruptcy protection.

 

10

----

Table of Contents

 

**8. INCOME TAXES**

 

The Company follows the accounting guidance related toincome taxes including guidance which addresses accounting for uncertainty inincome taxes. This guidance prescribes a threshold for the financial statementrecognition and measurement of a tax position taken or expected to be taken ina tax return. It also provides guidance on derecognition, classification,interest and penalties, accounting in interim periods, disclosures andtransitions. The Company had no amounts recorded for any unrecognized taxbenefits as of March 31, 2010 or March 31, 2009.

 

The tax years 2006 through 2009 remain open toexamination by major taxing jurisdictions to which the Company is subject,which are primarily in the U.S.

 

The Company’s policy is to record estimated interestand penalties related to uncertain tax positions in income tax expense. As of March 31,2010, and December 31, 2009, the Company had no accrued interest orpenalties recorded related to uncertain tax positions.

 

At December 31, 2009 the Company had netoperating loss carryforwards (NOLs) for federal and state income tax purposesof $105,427 and $75,080, respectively. Included in the federal and state netoperating loss carryforwards is approximately $18,935 of deduction related tothe exercise of stock options subsequent to the adoption of amended accountingguidance related to stock-based compensation. This amount represents an excesstax benefit as defined under the amended accounting guidance related tostock-based compensation and has not been recorded as a deferred tax asset. TheCompany’s existing federal and state net operating loss carryforwards began toexpire in 2010. The Company also had available research and development creditsfor federal and state income tax purposes of approximately $3,947 and $2,447,respectively. The federal and state research and development credits will beginto expire in 2014 and 2016, respectively. As of December 31, 2009 theCompany also had available investment tax credits for state income tax purposesof $92 which also began to expire in 2010. Management of the Company hasevaluated the positive and negative evidence bearing upon the realizability ofits deferred tax assets, which are comprised principally of net operating losscarryforwards and research and development credits. Under the applicableaccounting standards, management has considered the Company’s history of lossesand concluded that it is more likely than not that the Company will notrecognize the benefits of federal and state deferred tax assets. Accordingly, afull valuation allowance has been established against the deferred tax assets.

 

Utilization of the net operating loss and research anddevelopment credit carryforwards may be subject to a substantial annuallimitation under Section 382 of the Internal Revenue Code of 1986 due toownership change limitations that have occurred previously or that could occurin the future. These ownership changes may limit the amount of net operatingloss and research and development credit carryforwards that can be utilizedannually to offset future taxable income and tax, respectively. The Company hasnot currently completed an evaluation of ownership changes through March 31,2010 to assess whether utilization of the Company’s NOL or R&D creditcarryforwards would be subject to an annual limitation under Section 382of  the Internal Revenue Code of 1986. Tothe extent an ownership change occurs in the future, the net operating loss andcredit carryforwards may be subject to limitation.

 

**9. ACCRUED LIABILITIES**

 

Accrued liabilities consisted of the following at:

 
| ** **                           | ** ** | **March 31, 2010** | ** ** | **December 31, 2009** | ** ** |
|--------------------------------------|------------|-------------------------|------------|----------------------------|------------|
| Employee compensation  and benefits  |       | $                       | 1,271      |                       | $          | 2,505 |   |
| Material production  cost            |       | 339                     |       | 279                        |       |
| Professional services                |       | 264                     |       | 193                        |       |
| Contracted research and  development |       | 71                      |       | 10                         |       |
| Other                                |       | 805                     |       | 759                        |       |
| Total accrued expenses               |       | $                       | 2,750      |                       | $          | 3,746 |   |

 

11

----

Table of Contents

 

**10. SEGMENT INFORMATION**

 

The Company operates in one segment. There have beenno changes in the segment information since the fiscal year ended December 31,2009, as described in Note 2 to the financial statements included in theCompany’s Annual Report on Form 10-K for the year ended December 31,2009.

 

**11. COMMITMENTS AND CONTINGENCIES**

 

**LegalProceedings**

 

From time to time, the Company may be subject to legalproceedings and claims in the ordinary course of business. The Company is notcurrently aware of any such proceedings or claims that it believes will have,individually or in the aggregate, a material adverse effect on the business,financial condition or results of operations.

 

**Joint Research Agreement with TheCooperative Research Centre for Sugar Industry Innovation through Biotechnology**

 

The Company entered a joint research arrangement,known as the Cooperative Research Centre for Sugar Industry Innovation throughBiotechnology, with the Commonwealth of Australia and various other parties forthe purpose of developing and gaining access to certain intellectual property.The Commonwealth of Australia established the program to enhance the transferof research outputs into commercial or other outcomes of economic,environmental or social benefit to Australia. The terms of the contractstipulate that the contract commenced on January 1, 2007, and the Company’sfunding obligation continues until July 1, 2010. In connection with thisagreement the Company was obligated to provide funding in the form of cash inthe amount of $805 Australian dollars and in kind contribution in the amount of$2,287 Australian dollars. As of March 31, 2010 the remaining cash portionof the Company’s obligation, denominated in U.S. dollars, is $53 and the totalremaining amount of in kind contribution the Company is committed to is $156,denominated in U.S. dollars. The in kind contribution consists of salaries andoverhead attributable to research associated with the joint research agreement.The cash and in kind contributions are recorded as research and developmentexpense as incurred, in the consolidated statement of operations.

 

**12. FAIR VALUE MEASUREMENTS**

 

The Company has certain financial assets recorded at fairvalue which have been classified as Level 1, 2 or 3 within the fair valuehierarchy as described in the accounting standards for fair value measurements.Fair values determined by Level 1 inputs utilize observable data such asquoted prices in active markets. Fair values determined by Level 2 inputsutilize data points other than quoted prices in active markets that areobservable either directly or indirectly. Fair values determined byLevel 3 inputs utilize unobservable data points in which there is littleor no market data, which require the reporting entity to develop its ownassumptions.

 

The tables below present information about the Company’sassets that are measured at fair value on a recurring basis as of March 31,2010 and December 31, 2009 and indicate the fair value hierarchy of thevaluation techniques utilized to determine such fair value.

 

The Company’s financial assets classified asLevel 2 have been initially valued at the transaction price andsubsequently valued typically utilizing third party pricing services. Becausethe Company’s investment portfolio may include securities that do not alwaystrade on a daily basis, the pricing services use many observable market inputsto determine value including reportable trades, benchmark yields andbenchmarking of like securities. The Company validates the prices provided bythe third party pricing services by reviewing their pricing methods andobtaining market values from other pricing sources. After completing thevalidation procedures, the Company did not adjust or override any fair valuemeasurements provided by these pricing services as of March 31, 2010 or December 31,2009.

 

12

----

Table of Contents

 

The following tables set forth the Company’s financialassets that were recorded at fair value as of March 31, 2010 and December 31,2009. To conform prior year figures to current year presentation, $8,116 ofmoney market funds have been reclassified from Level 2 to Level 1 as of December 31,2009.

 
| ** **                        | ** ** | **Fair value measurements at reporting date using**   | ** ** | ** **                                         | ** ** |
|-----------------------------------|------------|-------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                        | ** ** | **Quoted prices in  active markets for  identical assets** | ** ** | **Significant other  observable inputs** | ** ** | **Significant  unobservable  inputs** | ** ** | **Balance as of** | ** ** |
| **Description**                   | ** ** | **(Level 1)**                                                                  | ** ** | **(Level 2)**                                 | ** ** | **(Level 3)** | ** ** | **3/31/10** | ** ** |
| Cash equivalents:                 |       |                                                                                |       |                                               |       |   |   |   |   |
| Money Market funds                |       | $                                                                                   | 9,494      |                                               | $          | — |   | $ | — |   | $ | 9,494 |   |
| Short-term investments:           |       |                                                                                |       |                                               |       |   |   |   |   |
| Treasuries                        |       | —                                                                              |       | 10,372                                             |       | — |   | 10,372 |   |
| Government-sponsored  enterprises |       | —                                                                              |       | 58,665                                             |       | — |   | 58,665 |   |
|                              |       | $                                                                                   | 9,494      |                                               | $          | 69,037 |   | $ | — |   | $ | 78,531 |   |

 
| ** **                        | ** ** | **Fair value measurements at reporting date using**   | ** ** | ** **                                         | ** ** |
|-----------------------------------|------------|-------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                        | ** ** | **Quoted prices in  active markets for  identical assets** | ** ** | **Significant other  observable inputs** | ** ** | **Significant  unobservable  inputs** | ** ** | **Balance as of** | ** ** |
| **Description**                   | ** ** | **(Level 1)**                                                                  | ** ** | **(Level 2)**                                 | ** ** | **(Level 3)** | ** ** | **12/31/09** | ** ** |
| Cash equivalents:                 |       |                                                                                |       |                                               |       |   |   |   |   |
| Money Market funds                |       | $                                                                                   | 8,116      |                                               | $          | — |   | $ | — |   | $ | 8,116 |   |
| Government-sponsored  enterprises |       | —                                                                              |       | 1,490                                              |       | — |   | 1,490 |   |
| Short-term investments:           |       |                                                                                |       |                                               |       |   |   |   |   |
| Treasuries                        |       | —                                                                              |       | 8,939                                              |       | — |   | 8,939 |   |
| Government-sponsored  enterprises |       | —                                                                              |       | 72,449                                             |       | — |   | 72,449 |   |
|                              |       | $                                                                                   | 8,116      |                                               | $          | 82,878 |   | $ | — |   | $ | 90,994 |   |

 

**13. RELATED PARTIES**

 

The Company recorded $30 and $25 of license androyalty revenue from Tepha, Inc., a related party, during the three monthsended March 31, 2010 and 2009, respectively. The Company had nooutstanding receivable balance due from Tepha as of March 31, 2010 or December 31,2009. The Company also had various transactions with its alliance partner ADM,a related party, during the three months ended March 31, 2010 and 2009.The Company had an outstanding receivable balance of $270 and $365 due from ADMat March 31, 2010 and December 31, 2009, respectively. For moreinformation on the Company’s related party transactions, please see Note 8 tothe Company’s audited financial statements included in its Annual Report on Form 10-Kfor the year ended December 31, 2009.

 

**ITEM2.****         ****MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS.**

 

*(Alldollar amounts are stated in thousands)*

 

**Forward Looking Statements**

 

This quarterly report on Form 10-Q contains “forward-lookingstatements” within the meaning of 27A of the Securities Act of 1933, asamended, and Section 21E of the Securities Exchange Act of 1934, asamended. In particular, statements contained in the Form 10-Q, includingbut not limited to, statements regarding our future results of operations andfinancial position, business strategy and plan prospects, projected revenue orcosts and objectives of management for future research, development oroperations, are forward-looking statements. These statements relate to ourfuture plans, objectives, expectations and intentions and may be identified bywords such as “may,” “will,” “should,” “expects,” “plans,” “anticipate,” “intends,”“target,” “projects,” “contemplates,” “believe,” “estimates,” “predicts,” “potential,”and “continue,” or similar words.

 

13

----

Table of Contents

 

Although we believe that our expectations are based onreasonable assumptions within the limits of our knowledge of our business andoperations, the forward-looking statements contained in this document areneither promises nor guarantees. Our business is subject to significant riskand uncertainties and there can be no assurance that our actual results willnot differ materially from our expectations. These forward looking statementsinclude, but are not limited to, statements concerning: future financialperformance and position, management’s strategy, plans and objectives forfuture operations, plans and objectives for product development andcommercialization, plans and objectives for present and future research anddevelopment and results of such research and development, plans and objectivesfor manufacturing, the commercialization of environmentally sustainable,economically attractive alternatives to petroleum-based plastics, chemicals andenergy, the commercialization of MirelTM bioplastic (“Mirel”) through ouralliance with Archer Daniels Midland Company (“ADM”), sales of Mirel as analternative to petroleum-based plastics, the construction, start-up andexpansion of the Commercial Manufacturing Facility, the production of Mirel atthe Commercial Manufacturing Facility, the commercial success of Mirel, thefeasibility of extractin*g*bioplastics from plant crops, the commercial viability of plant-producedplastics, recognition of revenue, and management’s plans and expectations forrevenue, expenses and capital and working capital requirements. Suchforward-looking statements are subject to a number of risks and uncertaintiesthat could cause actual results to differ materially from those anticipatedincluding, without limitation, the following risks: (1) we may not be ableto successfully manufacture Mirel at commercial scale in a timely or economicalmanner, (2) we may not be successful in the development of plant crops forproduction of plastics or bio-engineered chemicals, (3) if initial sales ofMirel are slower than anticipated, our financial results will be negativelyaffected, (4) we may not be able to develop manufacturing capacitysufficient to meet demand in an economical manner or at all, (5) we maynot achieve market acceptance of our products, (6) we may not besuccessful in the development of commercial formulations of Mirel, (7) wehave limited marketing and sales experience and capabilities, which may makethe commercialization of our products difficult, (8) we rely heavily onADM and may rely heavily on future collaborative partners, (9) our successwill be influenced by the price of petroleum, the primary ingredient inconventional petroleum-based plastics, relative to corn sugar, the primaryingredient in Mirel, (10) our future profitability is uncertain, and wehave a limited operating history on which you can base your evaluation of ourbusiness, (11) we may need to secure additional funding and may be unableto raise additional capital on favorable terms or at all, (12) if we losekey personnel or are unable to attract and retain necessary talent, we may beunable to develop or commercialize our products under development, (13) wemay not be able to obtain rights to intellectual property developed by othersusing our information and technology, which could limit our ability to compete,(14) intellectual property protection for our products is important anduncertain, (15) a substantial portion of the technology used in ourbusiness is owned by or subject to retained rights of third parties,(16) third parties may claim that we infringe their intellectual property,and we could suffer significant litigation or licensing expense as a result,(17) if we are unable to manage our growth effectively, our business couldbe adversely affected, (18) we may not be successful in identifying marketneeds for new technologies and developing new products to meet those needs,(19) our products are made using genetically-engineered systems and maybe, or may be perceived as being, harmful to human health or the environment,(20) we face and will face substantial competition in several differentmarkets that may adversely affect our results of operations, (21) we aresubject to significant foreign and domestic government regulations, includingenvironmental and health and safety regulations, and compliance or failure tocomply with these regulations could harm our business, (22) we may nothave adequate insurance and may have substantial exposure to payment of productliability claims, (23) potential future acquisitions could be difficult tointegrate, divert the attention of key personnel, disrupt our business, dilutestockholder value and impair our financial results, and (24) each segmentof our operations is currently conducted at a single location, which makes ussusceptible to disasters or other disruptions.

 

The forward-looking statements and risk factorspresented in this document are made only as of the date hereof and we do notintend to update any of these risk factors or to publicly announce the resultsof any revisions to any of our forward-looking statements other than asrequired under the federal securities laws.

 

**Overview**

 

We are an innovation-driven bioscience company whichis focused on bringing environmentally friendly solutions to the plastics,chemicals and energy industries. We have core capabilities in microbialgenetics, fermentation process engineering, chemical engineering, polymerscience, plant genetics and botanical science, and we have assembled thesecapabilities in a way that has allowed us to integrate biotechnology withchemical engineering and industrial practice.

 

14

----

Table of Contents

 

Our first platform, which we are commercializingthrough Telles, LLC (Telles), a joint venture with Archer Daniels MidlandCompany, or ADM, is a proprietary, large-scale microbial fermentation systemfor producing a versatile family of polymers known as polyhydroxyalkanoates(PHA’s), which we have branded under the name MirelTM. Through Telles, we intendto sell these bioplastics as biobased and biodegradable, but functionallyequivalent, alternatives to petroleum-based plastics. Mirel offers superiorbiodegradability characteristics and can be used in a wide range of commercialapplications, including products used in agriculture and horticulture, compostand organic waste diversion bags, marine and aquatic applications, consumerproducts, business equipment and durable goods, and general packagingmaterials. Mirel is now being produced in a new commercial scale plant locatedin Clinton, Iowa (the Commercial Manufacturing Facility) designed for an annualcapacity of 110 million pounds. ADM completed construction of the initialphase of the Commercial Manufacturing Facility in 2009. The CommercialManufacturing Facility produces biobased and biodegradable Mirel plastic usingcorn sugar, an abundant agriculturally-produced renewable resource.

 

Our second technology platform, which is in an earlystage, is a biomass biorefinery system using plant crops to co-produce bothbioplastics and bioenergy. For this system, we intend to extract polymer fromthe engineered plant crop, so that the remaining plant material can be used asa biomass feedstock for the production of bioenergy products includingelectricity and biofuel. We are engineering switchgrass to produce bioplasticsin the leaf and stem of the plant. We have also collaborated with theAustralian Cooperative Research Centre to do the same in sugarcane, and withthe Donald Danforth Plant Science Center to develop an advanced industrialoilseed crop for co-production of bioplastics along with vegetable oil,biodiesel fuel, or oleochemicals. Switchgrass is a commercially and ecologicallyattractive, non-food energy crop that is indigenous to North America and isgenerally considered to be a leading candidate for cellulose-derived productionof ethanol and other biofuels. Sugarcane is an established energy crop that iswell suited for tropical regions of the world. We believe that using thesecrops to co-produce bioplastics with bioenergy products can offer superioreconomic value and productivity as compared to single product systems thatproduce them individually. We have been working on our biomass biorefineryplatform using switchgrass for several years, and we believe that we are ascientific leader in this field. Our goal for this program is to havecommercially viable plant varieties in pre-commercial field trials within two years.We may also seek to establish alliances with partners to commercially exploitthis platform.

 

As demonstrated by our first two technology platforms,we take an integrated systems approach to our technology development. We arefocused on developing entire production systems from gene to end product asopposed to developing specific technologies (for example, gene sequencing,shuffling or directed evolution) or singular aspects of a product’s production(for example, providing a key enzyme, catalyst or ingredient). We believe thissystems approach optimizes manufacturing productivity and, when commercialized,will enable us to capture more economic value from any platform that we pursue.

 

For our third platform we intend to apply our corecapabilities in microbial engineering to develop biological routes to otherchemicals and chemical intermediates. During 2009 we completed all work underour U.S. Department of Commerce National Institute of Standards and Technologygrant, a $2 million grant aimed at producing four-carbon (“C4”) chemicalsfrom renewable sources. C4 chemicals are a large family of chemicals enabling awide range of end use applications, including engineering resins, urethanes,solvents, and personal care products. We were able to achieve all of thetechnical milestones outlined in this grant. Based on these accomplishments, webelieve we have the technical foundation for an attractive C4 chemicalsbusiness. During 2009, we conducted a detailed review of the C4 externaleconomic and competitive landscape, and as a result we are prioritizing thespecialty C4 chemicals segment for commercialization. Discussions withpotential partners were initiated in 2009 with the goal of commencing scale-updevelopment activities during 2010.

 

To exploit our first technology platform, we plan towork closely with ADM to bring the Commercial Manufacturing Facility inClinton, Iowa to full operations and capacity in advance of customer demand forMirel. The biodegradable bioplastics that this facility is beginning to produceare highly versatile and range in properties from hard and strong to soft andflexible. These properties allow for a wide variety of commercial applications,offering a biobased alternative to petroleum-derived synthetic materials whichare not biodegradable. Through Telles we are positioning Mirel as a premiumpriced specialty material catering to customers who want to match thefunctionality of petroleum-based plastic with the added dimension ofenvironmental responsibility for their products and brands.

 

15

----

Table of Contents

 

As of March 31, 2010, we had an accumulateddeficit of $177,876 and total stockholders’ equity was $46,653.

 

**Collaborative Arrangements**

 

Our strategy for collaborative arrangements is toretain substantial participation in the future economic value of our technologywhile receiving current cash payments to offset research and development costsand working capital needs. By their nature, these agreements are complex andhave multiple elements that cover a variety of present and future activities.

 

In 2004, we entered into the “Technology Alliance andOption Agreement” with ADM Polymer Corporation, or ADM Polymer, a subsidiary ofADM. The goal of the Technology Alliance and Option Agreement was todemonstrate the capabilities of our fermentation and recovery technologies atcommercial scale and to prepare a master plan and budget for the construction ofa commercial facility with a 110 million pound annual capacity. Uponachievement of such goals, ADM Polymer had the option to enter into acommercial alliance with us through execution of the “Commercial AllianceAgreement,” for further research, development, manufacture, use, and sale ofbioplastics. In July 2006, ADM Polymer exercised its option under ourTechnology Alliance and Option Agreement and entered into a Commercial AllianceAgreement with us. Upon entering into the Commercial Alliance Agreement, theTechnology Alliance and Option Agreement terminated pursuant to its terms.

 

The Commercial Alliance Agreement called for Telles topay the Company quarterly support payments of $1,575 each. The last of fourteenquarterly support payments was received as of June 30, 2009. All quarterlysupport payments received from ADM on behalf of Telles, totaling $22,050, havebeen recorded as deferred revenue on the Company’s balance sheet and we willcontinue to defer recognition of these payments received from ADM during the “ConstructionPhase” of our agreement. We expect to begin recognizing this deferred revenueat the time of the achievement of a milestone referred to in the CommercialAlliance Agreement as the “First Commercial Sale.” The deferred revenue will berecognized on a straight line basis over a period of approximately ten years inwhich our contractual obligations are fulfilled in accordance with the terms ofthe Commercial Alliance Agreement. Achievement of the First Commercial Salerequires the sale by Telles to third parties of at least one million pounds ofMirel manufactured at the Commercial Manufacturing Facility. Qualifying salesmust meet certain criteria, including a minimum order size, product acceptanceby the customers in accordance with the terms of their contracts and  receipt of payment, in order for such salesto contribute towards the First Commercial Sale milestone. We also expect toreceive payments from Telles for the compounding services we provide as well asroyalty payments. The compounding payments and royalty payments are due to usas Telles sells product to its customers. These payments will be recognized asrevenue during the period in which they are earned.

 

We received the following payments from thesearrangements to offset operating cash needs:

 

·upfront payment of $3,000 from ADM in November 2004;

 

·milestone payments of $2,000 from ADM in May 2006;

 

·support payments of $22,050 from ADM, on behalf of Telles, through June 30,2009;

 

·cumulative cost sharing payments from ADM forpre-commercial manufacturing plant construction and operations made inaccordance with the Technology Alliance and Option Agreement of $1,209; and

 

·cumulative cost sharing payments from ADM forpre-commercial manufacturing plant construction and operations made inaccordance with the Commercial Alliance Agreement of $8,864.

 

During the commercial alliance, ADM is responsible forthe construction, financing and operation of the Commercial ManufacturingFacility which ADM Polymer owns, through a manufacturing agreement with Telles.We will provide or procure compounding services to convert the output from theCommercial Manufacturing Facility into forms that are suitable for variouscommercial applications.

 

16

----

Table of Contents

 

Although Telles is a separate legal entity ownedequally by us and ADM, ADM will disproportionately fund the activities of thejoint venture. Specifically, the cost of the Commercial Manufacturing Facility,the working capital requirements of the joint venture and the support paymentsto us will exceed the investments made by us to establish compoundingoperations for the joint venture. In order to rebalance the respectiveinvestments made by the parties, a preferential distribution of cash flow willbe used whereby all profits, after payment of all royalties, reimbursements andfees, from the joint venture will be distributed to ADM until ADM’s disproportionateinvestment in the joint venture, including the costs of constructing theCommercial Manufacturing Facility, have been returned to ADM. Once ADM hasrecouped such amounts, the profits of the joint venture will be distributed inequal amounts to the parties. In order to track the disproportionateinvestments ADM has made, a Ledger Account has been established to record therespective investments made by the parties. As of March 31, 2010 thebalance of the ADM Ledger Account was $372,499 and this balance is expected toincrease as the remaining manufacturing equipment and systems are broughtonline at the Commercial Manufacturing Facility and until Telles achievespositive cash flow from its operations.

 

**United States Government Grant**

 

As of March 31, 2010, expected gross proceeds of$341 remain to be received under our government grant, which includes amountsfor reimbursement to our subcontractors, as well as reimbursement for ouremployees’ time, benefits and other expenses related to future performanceunder the various contracts.

 

The status of our United States government grant is asfollows:

 
| ** **                                       | ** ** | ** **                | ** ** | **Total**      | ** ** | **Total received**      | ** ** | **Remaining amount**     | ** ** | ** **         | ** ** |
|--------------------------------------------------|------------|---------------------------|------------|----------------|------------|------------------------------|------------|-------------------------------|------------|--------------------|------------|
| ** **                                       | ** ** | **Funding**               | ** ** | **Government** | ** ** | **through**                  | ** ** | **available as of** | ** ** | **Contract/Grant** | ** ** |
| **Program Title**                           | ** ** | **Agency**                | ** ** | **Funds**      | ** ** | **March 31, 2010** | ** ** | **March 31, 2010**  | ** ** | **Expiration**     | ** ** |
|                                             |       |                      |       |           |       |                         |       |                          |       |               |       |
| Blow Molded Bioproducts  From Renewable Plastics |       | Department of Agriculture |       | $              | 349        |                         | $          | 8                             |       | $                  | 341        |   | September 2010 |   |
| Total                                            |       |                      |       | $              | 349        |                         | $          | 8                             |       | $                  | 341        |   |   |   |

 

**Critical Accounting Estimates andJudgments**

 

The discussion and analysis of our financial conditionand results of operations are based upon our consolidated financial statements,which have been prepared in accordance with accounting principles generallyaccepted in the United States of America (“GAAP”) for interim financialinformation. The preparation of these financial statements requires us to makeestimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses, and related disclosure of contingent assetsand liabilities. On an ongoing basis, we evaluate our estimates, includingthose related to revenue recognition and stock-based compensation. We base ourestimates on historical experience and on various other assumptions that webelieve to be reasonable under the circumstances, the results of which form thebasis for making judgments about the carrying value of assets and liabilitiesthat are not readily apparent from other sources. Actual results may differfrom these estimates. The significant accounting policies used in preparationof these condensed consolidated financial statements for the three  months ended March 31, 2010 areconsistent with those discussed in Note 2 to the consolidated financialstatements in our Annual Report on Form 10-K for the year ended December 31,2009. The critical accounting policies and the significant judgments andestimates used in the preparation of our consolidated financial statements forthe three months ended March 31, 2010 are consistent with those discussedin our Annual Report on Form 10-K for the year ended December 31,2009 in the section captioned “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations—Critical Accounting Estimates andJudgments.”

 

17

----

Table of Contents

 

**Results of Operations**

 

**Comparisonof the Three Months Ended March 31, 2010 and 2009**

 

**Revenue**

 
| ** **                                            | ** ** | **Three Months Ended** | ** ** | ** ** | ** ** |
|-------------------------------------------------------|------------|------------------------|------------|------------|------------|
| ** **                                            | ** ** | **March 31,**     | ** ** | ** ** | ** ** |
| ** **                                            | ** ** | **2010**               | ** ** | **2009**   | ** ** | **Change** | ** ** |
| Research and  development revenue                     |       | $                      | 150        |       | $          | 6 |   | $ | 144 |   |
| License fee and royalty  revenue from related parties |       | 30                     |       | 25         |       | 5 |   |
| Grant revenue                                         |       | —                 |       | 230        |       | (230 | ) |
| Total revenue                                         |       | $                      | 180        |       | $          | 261 |   | $ | (81 | ) |

 

Total revenue was $180 and $261 for the three monthsended March 31, 2010 and 2009, respectively. During the three months endedMarch 31, 2010 we recognized $150 of research and development revenuecompared to $6 for the respective period in 2009. Research and developmentrevenue was derived primarily from the delivery of product samples to potentialcustomers. The increase was caused by several larger shipments of samplematerial shipped to customers in late 2009 for which revenue recognition wasdeferred until customer acceptance occurred during the first three months of2010. There was no grant revenue earned during the first three months of 2010because we had only one active grant, the Blow Molded Bioproducts fromRenewable Plastics grant, and there was no billable activity related to thisgrant during the period. During the first three months of 2009 grant revenueprimarily consisted of revenue derived from the Integrated Bio-EngineeredChemicals grant, which was completed during the fourth quarter of 2009.

 

We expect grant revenue to continue to be low in 2010,compared to 2009, as we currently have only one grant with total remainingfunding of $341. In addition we expect research and development revenue todecline during 2010 as the sale of product produced at the CommercialManufacturing Facility will be recorded as revenue by Telles, not Metabolix.

 

**Expenses**

 
| ** **                                                    | ** ** | **Three Months Ended** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------|------------|------------------------|------------|------------|------------|
| ** **                                                    | ** ** | **March 31,**     | ** ** | ** ** | ** ** |
| ** **                                                    | ** ** | **2010**               | ** ** | **2009**   | ** ** | **Change** | ** ** |
| Research and  development expenses, including cost of revenue |       | $                      | 6,168      |       | $          | 6,008 |   | $ | 160 |   |
| Selling, general, and  administrative expenses                |       | 3,869                  |       | 3,714      |       | 155 |   |
| Total operating  expenses                                     |       | $                      | 10,037     |       | $          | 9,722 |   | $ | 315 |   |

 

***Research anddevelopment expenses, including cost of revenue***

 

Research and development expenses, including cost ofrevenue, were $6,168 and $6,008 for the three months ended March 31, 2010and 2009, respectively. The increase of $160 was primarily due to an increasein employee compensation and related benefit expense partially offset by adecrease in depreciation.  Employeecompensation and  related benefitexpenses increased to $3,280 for the three months ended March 31, 2010compared to $2,879 for the respective period in 2009. The increase of $401 wasprimarily attributable to annual salary and bonus increases  and an increase in stock-based compensationexpense, resulting from annual employee stock option awards issued in February 2010.Depreciation expense declined to $407 during the three months ended March 31,2010 from $589 during the three months ended March 31, 2009 as a result ofreaching full depreciation on equipment and facility improvements at ourpre-commercial manufacturing facility at the end of 2009.

 

We expect to incur increased research and developmentexpenses through the remainder of the Construction Phase of the ADM agreementfor technology improvements and product development activities as we continueto develop, test, and refine product to meet the specification requirements ofour customers. Upon commencement of the Commercial Phase of the ADM agreement,expenses relating to development of Mirel are expected to decrease 

 

18

----

Table of Contents

 

significantly as these expenses will be transferred toTelles. Until then, we will continue to bear these expenses. We also expect toincur increased expenses related to research and development in connection withour other technology platforms.

 

***Selling, general,and administrative expenses***

 

Selling, general, and administrative expenses were$3,869 and $3,714 for the three months ended March 31, 2010 and 2009,respectively. The increase of $155 is primarily due to an increase in employeecompensation and related benefit expense partially offset by overall costreductions resulting from effective cost management. Employee compensation andrelated benefit expense increased to $2,507 for the three months ended March 31,2010 compared to $2,213 for the respective period in 2009.

 

We expect to incur increased selling, general, andadministrative expenses through the Construction Phase of the ADM agreement aswe increase our market development activities related to Mirel. Upon thecommencement of the Commercial Phase of the agreement, selling, general, andadministrative expenses are expected to decrease substantially as these Mirelrelated costs will be transferred to Telles. During the transition periodbetween the initial start-up of the Commercial Manufacturing Facility and thecommencement of the Commercial Phase, we will continue to bear these expenses.We also expect to incur increased patent expenses in connection withsafeguarding our intellectual property.

 

**Other Income (Net)**

 
| ** **                | ** ** | **Three Months Ended** | ** ** | ** ** | ** ** |
|---------------------------|------------|------------------------|------------|------------|------------|
| ** **                | ** ** | **March 31,**     | ** ** | ** ** | ** ** |
| ** **                | ** ** | **2010**               | ** ** | **2009**   | ** ** | **Change** | ** ** |
| Total other income  (net) |       | $                      | 55         |       | $          | 352 |   | $ | (297 | ) |
|                           |            |                        |            |            |            |  |  |  |  |  |

 

Other income (net) was $55 and $352 for the threemonths ended March 31, 2010 and 2009, respectively. Other income (net)during both periods consisted of investment income. The overall decrease of$297 was primarily due to a decline in investment income earned on our U.S.Treasury and government agency debt investments.

 

**Liquidity and Capital Resources**

 

Currently, we require cash to fund our working capitalneeds, to purchase capital assets and to pay our operating lease obligations.

 

The primary sources of our liquidity have been:

 

·equity financing;

 

·our strategic alliance with ADM;

 

·government grants; and

 

·interest earned on cash and short-term investments.

 

We have incurred significant expenses relating to ourresearch and development efforts. As a result, we have incurred net lossessince our inception. As of March 31, 2010, we had an accumulated deficitof $177,876. Our total unrestricted cash, cash equivalents and short-terminvestments as of March 31, 2010 were $82,839 as compared to $92,202 at December 31,2009. As of March 31, 2010, we had no outstanding debt.

 

19

----

Table of Contents

 

Our cash and cash equivalents at March 31, 2010were held for working capital purposes. We do not enter into investments fortrading or speculative purposes. The primary objective of our investmentactivities is to preserve our capital. As of March 31, 2010 we hadrestricted cash of $622. Restricted cash consists of $522 held in connectionwith the lease agreements for our Cambridge Massachusetts facilities and $100held in connection with our corporate credit card program. Short-terminvestments are made in accordance with our corporate investment policy, asapproved by our Board of Directors. Investments are limited to high qualitycorporate debt, U.S. Treasury bills and notes, bank debt obligations, municipaldebt obligations and asset-backed securities. The policy establishes maturitylimits, concentration limits, and liquidity requirements. At March 31,2010, we were in compliance with this policy.

 

We believe that our cash, cash equivalents andshort-term investments and interest we earn on these balances will besufficient to meet our anticipated cash requirements, including cashrequirements with respect to the commercial launch of Mirel, for at least thenext 24 months. If our available cash, cash equivalents, and short-terminvestments are insufficient to satisfy our liquidity requirements, or if wedevelop additional products, we may need to sell additional equity or debtsecurities or obtain a credit facility. The sale of additional equity and debtsecurities may result in dilution to our stockholders. If we raise additionalfunds through the issuance of debt securities or preferred stock, thesesecurities could have rights senior to those of our common stock and couldcontain covenants that would restrict our operations. We may require additionalcapital beyond our currently forecasted amounts. Any such required additionalcapital may not be available on reasonable terms, if at all. If we are unableto obtain additional financing, we may be required to reduce the scope of,delay or eliminate some or all of our planned research, development andcommercialization activities, which could harm our business.

 

Net cash used in operating activities was $9,439 forthe three months ended March 31, 2010 compared to $8,626 for therespective period in 2009. The cash used during the three months ended March 31,2010 primarily reflects the net loss for the period. The increase in cash usedin operating activities during the three months ended March 31, 2010 ascompared to the respective period in 2009 was primarily due to the increase innet loss and the timing associated with payments to vendors at the end of eachquarter.

 

After the Commercial Phase of the ADM alliance begins,Telles will reimburse us for the costs of services provided pursuant to theCommercial Alliance Agreement, including research and development, productdevelopment and sales and marketing. During the transition period between theinitial start-up of the Commercial Manufacturing Facility, which occurred in December 2009,and the commencement of the Commercial Phase, we will continue to bear thesecosts. If there are difficulties, delays or other unforeseen issues with thestart-up of the Commercial Manufacturing Facility or with the ramp-up ofcommercial sales, we may incur additional unreimbursed pilot manufacturing,product development, sales and marketing costs until the Commercial Phase ofthe alliance begins.

 

Net cash of $12,215 was provided by investingactivities during the three months ended March 31, 2010, compared to netcash of $4,193 used in investing activities for the respective period in2009.  Net cash used for investingactivities, during the three months ended March 31, 2010, included $94used to purchase equipment and $7,541 used to purchase short-term investments,partially offset by $19,879 provided by the sale and maturity of short-terminvestments.

 

Net cash of $212 and $20 was provided by financingactivities for the three months ended March 31, 2010 and 2009,respectively. The cash provided by financing activities during the three monthsended March 31, 2010 and 2009 was solely attributable to the proceedsreceived from the exercise of stock options.

 

20

----

Table ofContents

 

**Contractual Obligations**

 

The following table summarizes our contractualobligations at March 31, 2010 and the effects such obligations areexpected to have on our liquidity and cash flows in future periods:

 
| ** **                   | ** ** | ** ** | ** ** | **Payments Due by Period** | ** ** | ** ** | ** ** |
|------------------------------|------------|------------|------------|----------------------------|------------|------------|------------|
| ** **                   | ** ** | ** ** | ** ** | **Less than**              | ** ** | **2-3**    | ** ** | **4-5** | ** ** | **More than** | ** ** |
| ** **                   | ** ** | **Total**  | ** ** | **1 year**                 | ** ** | **years**  | ** ** | **years** | ** ** | **5 years** | ** ** |
| Purchase obligations         |       | $          | 218        |                       | $          | 118        |       | 50 |   | 50 |   | $ | — |   |
| Operating lease  obligations |       | 4,792      |       | 1,340                      |       | 2,381      |       | 1,071 |   | — |   |
| Total                        |       | $          | 5,010      |                       | $          | 1,458      |       | $ | 2,431 |   | $ | 1,121 |   | $ | — |   |
|                              |            |            |            |                            |            |            |            |  |  |  |  |  |  |  |  |  |

 

**Off-Balance Sheet Arrangements**

 

As of March 31, 2010, we had no off-balance sheetarrangements as defined in Item 303(a) (4) of the Securities andExchange Commission’s Regulation S-K.

 

**Related Party Transactions**

 

We recorded $30 and $25 of license and royalty revenuefrom Tepha, Inc., a related party, during the three months ended March 31,2010 and 2009, respectively. We also had various transactions with our alliancepartner ADM, a related party, during the three months ended March 31, 2010and 2009. We had an outstanding receivable balance of $270 and $365 due fromADM at March 31, 2010 and December 31, 2009, respectively. Formore information on our related party transactions, please see Note 8 to ouraudited financial statements included in our Annual Report on Form 10-Kfor the year ended December 31, 2009.

 

**Recent Accounting Pronouncements**

 

From time to time, new accounting pronouncements areissued by the Financial Accounting Standards Board (FASB) or other standardsetting bodies that are adopted by the Company as of the specified effectivedate. Unless otherwise discussed, management believes that the impact ofrecently issued standards that are not yet effective will not have a material impacton our consolidated financial position or results of operations upon adoption.

 

***Recently AdoptedAccounting Standards***

 

Effective January 1, 2010, we adopted a newlyissued accounting standard which provides guidance for the consolidation ofvariable interest entities and requires an enterprise to determine whether itsvariable interest or interests give it a controlling financial interest in avariable interest entity. This amended consolidation guidance for variableinterest entities replaces the existing quantitative approach for identifyingwhich enterprise should consolidate a variable interest entity, which was basedon which enterprise is exposed to a majority of the risks and rewards, with aqualitative approach, based on which enterprise has both (1) the power todirect the economically significant activities of the entity and (2) theobligation to absorb losses of, or the right to receive benefits from, theentity that could potentially be significant to the variable interest entity.We evaluated the Telles joint venture as a variable interest entity anddetermined that we are not required to consolidate Telles under this accountingstandard. As a result, the adoption of this standard did not have an impact onour financial position or results of operations. Determination about whether anenterprise should consolidate a variable interest entity is required to beevaluated continuously and changes to existing relationships or futuretransactions may result in us consolidating our Telles joint venture or otherarrangements.

 

In January 2010, we adopted a newly issuedaccounting standard which requires additional disclosure about the amounts ofand reasons for significant transfers in and out of Level 1 andLevel 2 fair value measurements. This standard also clarifies existingdisclosure requirements related to the level of disaggregation of fair valuemeasurements for each class of assets and liabilities and disclosures aboutinputs and valuation techniques used to measure fair value for both recurringand nonrecurring Level 2 and Level 3 measurements. As this newlyissued 

 

21

----

Table of Contents

 

accounting standard only requires enhanced disclosure,the adoption of this standard did not impact our financial position or resultsof operations. In addition, effective for interim and annual periods beginningafter December 15, 2010, this standard will require additional disclosure andrequire an entity to present disaggregated information about activity inLevel 3 fair value measurements on a gross basis, rather than as one netamount.

 

In June 2009, a new accounting standard wasissued relating to information that a reporting entity must provide in itsfinancial reports about a transfer of financial assets; the effects of atransfer on its financial position, financial performance, and cash flows; anda transferor’s continuing involvement in transferred financial assets.Specifically, among other aspects, this standard amends previously issuedaccounting guidance, modifies the financial-components approach and removes theconcept of a qualifying special purpose entity when accounting for transfersand servicing of financial assets and extinguishments of liabilities, andremoves the exception from applying the general accounting principles for theconsolidation of variable interest entities that are qualifying special-purposeentities. This new accounting standard is effective for transfers of financialassets occurring on or after January 1, 2010. The adoption of thisstandard did not have an impact on our financial position or results ofoperations.

 

***Recently IssuedAccounting Standards***

 

In October 2009, a new accounting consensus wasissued for multiple-deliverable revenue arrangements. This consensus amendsexisting revenue recognition accounting standards. This consensus providesaccounting principles and application guidance on whether multiple deliverablesexist, how the arrangement should be separated and the consideration allocated.This guidance eliminates the requirement to establish the fair value ofundelivered products and services and instead provides for separate revenuerecognition based upon management’s estimate of the selling price for anundelivered item when there is no other means to determine the fair value ofthat undelivered item. Previously the existing accounting consensus requiredthat the fair value of the undelivered item be the price of the item either soldin a separate transaction between unrelated third parties or the price chargedfor each item when the item is sold separately by the vendor. Under theexisting accounting consensus, if the fair value of all of the elements in thearrangement was not determinable, then revenue was deferred until all of theitems were delivered or fair value was determined. This new approach iseffective prospectively for revenue arrangements entered into or materiallymodified in fiscal years beginning on or after June 15, 2010. We are inthe process of evaluating whether the adoption of this standard will have amaterial effect on our financial position, results of operations or cash flows.

 

**ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**

 

There have been no material changes in informationregarding our exposure to market risk, as described in Item 7A of our AnnualReport on Form 10-K for the year ended December 31, 2009.

 

**ITEM 4. CONTROLS ANDPROCEDURES.**

 

**Evaluation of Disclosure Controls andProcedures**

 

Our management (with the participation of ourPrincipal Executive Officer and Principal Financial Officer) evaluated theeffectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended (the “ExchangeAct”)), as of March 31, 2010. Disclosure controls and procedures aredesigned to ensure that information required to be disclosed by the Company inthe reports it files or submits under the Exchange Act is recorded, processed,summarized and reported on a timely basis and that such information isaccumulated and communicated to management, including the Principal ExecutiveOfficer and Principal Financial Officer, as appropriate, to allow timelydecisions regarding required disclosure. Based on this evaluation, ourPrincipal Executive Officer and Principal Financial Officer concluded thatthese disclosure controls and procedures are effective.

 

22

----

Table of Contents

 

**Changes in Internal Control overFinancial Reporting**

 

There was no change in our internal control overfinancial reporting (as defined in Rules 13a-15(f) and 15d-15(f) underthe Exchange Act) during the quarter ended March 31, 2010 that hasmaterially affected, or is reasonably likely to materially affect, our internalcontrol over financial reporting.

 

**PART II— OTHER INFORMATION**

 

**ITEM 1. LEGAL PROCEEDINGS.**

 

From time to time, we may be subject to legalproceedings and claims in the ordinary course of business. We are not currentlyaware of any such proceedings or claims that we believe will have, individuallyor in the aggregate, a material adverse effect on the business, financialcondition or the results of operations.

 

**ITEM 1A. RISK FACTORS.**

 

There have been no material changes in informationregarding our risk factors as described in Part 1, Item 1A of our AnnualReport on Form 10-K for the year ended December 31, 2009.

 

**ITEM 2.  UNREGISTERED SALESOF EQUITY SECURITIES AND USE OF PROCEEDS.**

 

**RecentSales of Unregistered Securities**

 

On January 25, 2010, the Company issued 9,214shares of common stock to participants in its Metabolix, Inc. 401(k) Planas a matching contribution. The issuance of these securities is exempt fromregistration pursuant to Section 3(a)(2) of the Securities Act of1933 as exempted securities.

 

**Issuer Purchases of Equity Securities**

 

During the three months ended March 31, 2010,there were no repurchases made by us or on our behalf, or by any “affiliatedpurchasers,” of shares of our common stock.

 

**ITEM 3.  DEFAULTSUPON SENIOR SECURITIES.**

 

None.

 

**ITEM 4. (REMOVED AND RESERVED).**

 

**ITEM 5. OTHER INFORMATION.**

 

None.

 

**ITEM 6. EXHIBITS.**

 
| 31.1   |   | Certification Pursuant to Rule 13a-14(a)/15d-14(a) of  the Securities Exchange Act of 1934 of the Principal Executive Officer  (furnished herewith). |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                           |
| 31.2   |   | Certification Pursuant to  Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 of  the Principal Financial Officer (furnished herewith). |
|   |   |                                                                                                                                                           |
| 32.1   |   | Section 1350 Certification (furnished  herewith).                                                                                                         |

 

23

----

Table of Contents

 

**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 
|             | METABOLIX, INC. |
|------------------|-----------------|
|             |            |
|             |            |
| May 3, 2010 | By:             | /s/ RICHARD P. ENO |
|             |            | Richard P. Eno |
|             |            | *President and Chief Executive  Officer* |
|             |            | *(Principal Executive Officer)* |
|             |            |   |
| May 3, 2010 | By:             | /s/ JOSEPH D. HILL |
|             |            | Joseph D. Hill |
|             |            | *Chief Financial Officer* |
|             |            | *(Principal Financial and  Accounting Officer)* |

 

24

----