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UNITED STATES

SECURITIES AND 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 September 30, 2014

OR

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to                

Commission file number 001-33133

METABOLIX, INC.

(617) 583-1700

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 registrant was required to submit and post such files). Yes x  No o

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

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

The number of shares outstanding of the registrant’s common stock as of November 10, 2014 was 135,182,140.

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Metabolix, Inc.

Form 10-Q

For the Quarter Ended September 30, 2014

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PART I.  FINANCIAL INFORMATION

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

METABOLIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

(in thousands, except share and per share data)

The accompanying notes are an integral part of these interim condensed consolidated financial statements

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METABOLIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

(in thousands, except share and per share data)

The accompanying notes are an integral part of these interim condensed consolidated financial statements

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METABOLIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

UNAUDITED

(in thousands)

The accompanying notes are an integral part of these interim condensed consolidated financial statements

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METABOLIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

(in thousands)

The accompanying notes are an integral part of these interim condensed consolidated financial statements

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METABOLIX, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

(All dollar amounts, except share and per share amounts, are stated in thousands)

1. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements are unaudited and have been prepared by Metabolix, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements have been condensed or omitted. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The consolidated financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the financial position and results of operations for the interim periods ended September 30, 2014 and 2013.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for any future period or the entire fiscal year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2013, which are contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2014.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions have been eliminated.

During the three months ended September 30, 2014, the Company’s Board of Directors approved a plan to discontinue the operations of the Company’s wholly owned subsidiary, Metabolix GmbH.  The financial statements have been presented reflecting this entity as a discontinued operation for the three and nine month periods ended September 30, 2014 and 2013.  See Note 14 for additional information.

The accompanying condensed consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern, and which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business.  However, with the exception of 2012, when the Company recognized $38,885 of deferred revenue from the terminated Telles joint venture, the Company has recorded losses since its inception, including for the fiscal quarter ended September 30, 2014.

As of September 30, 2014, the Company held unrestricted cash, cash equivalents and investments of $25,486. The Company’s present capital resources are not sufficient to fund its planned operations for a twelve month period, and therefore, raise substantial doubt about its ability to continue as a going concern. While the Company was successful in raising $25,000 during the third quarter of 2014 and anticipates reduced cash usage in 2015 as a result of the discontinuation of its German operations, restructuring of its U.S. organization and other cost-containment measures, the Company will require significant additional funding during 2015 to continue to fund its operations and to support its capital needs. The timing, structure and vehicles for obtaining future financing are under consideration by the Company and such financing may be accomplished in stages. The Company’s goal is to use future financings to continue building an intermediate scale specialty biopolymers business based on polyhydroxyalkanoate (“PHA”) additives that will serve as the foundation for its longer range plans and future growth of its business, but there can be no assurance that financing efforts will be successful.

The Company continues to face significant challenges and uncertainties and, as a result, its available capital resources may be consumed more rapidly than currently expected due to (a) lower than expected sales of its biopolymer products as a result of slow market adoption; (b) increases in capital costs and operating expenses related to the establishment and start-up of commercial manufacturing operations either on its own or with third parties; (c) changes the Company may make to the business that affect ongoing operating expenses; (d) changes the Company may make to its business strategy; (e) changes in the Company’s research and development spending plans; and (f) other items affecting the Company’s forecasted level of expenditures and use of cash resources. If the Company issues equity or debt securities to raise additional funds, (i) the Company may incur fees associated with such issuance, (ii) its existing stockholders will experience dilution from the issuance of new equity securities, (iii) the Company may incur ongoing interest expense and be required to grant a security interest in Company assets in connection with any debt issuance, and (iv) the new equity or debt securities may have rights, preferences and privileges senior to those of the Company’s existing stockholders. In addition, utilization of the Company’s net operating loss and research and development credit carryforwards most likely will be subject to significant annual limitations under Section 382 of the Internal Revenue Code of 1986 due to cumulative ownership changes resulting from financing transactions, including the Company’s recently completed equity offering. If the Company raises additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to its potential products or proprietary technologies, or grant licenses on terms that are not favorable to the Company.

The condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

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2. ACCOUNTING POLICIES

There have been no material changes in accounting policies since the Company’s fiscal year ended December 31, 2013, as described in Note 2 to the consolidated financial statements included in its Annual Report on Form 10-K for the year then ended with the exception of the Company’s adoption of ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, as described in Note 3.

Research and Development

All costs associated with internal research and development as well as research and development services conducted for others are expensed as incurred. Research and development expenses include direct costs for salaries, employee benefits, subcontractors, product trials, facility related expenses, depreciation, and stock-based compensation. Costs related to revenue-producing contracts and government grants are recorded as research and development expenses.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash and cash equivalents and short-term investments. The Company has historically invested its cash equivalents in highly rated money market funds, corporate debt, federal agency notes and U.S. treasury notes. Investments are acquired in accordance with the Company’s investment policy which establishes a concentration limit per issuer. At September 30, 2014, the Company’s cash equivalents are invested solely in money market funds.

The Company provides credit to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary. At September 30, 2014, the Company’s accounts and unbilled receivables include $219 or 46% from U.S., Canadian and German government grants and $141 or 29% from customer product sales. At September 30, 2014, the Company’s REFABB grant with the Department of Energy represented 38% of total grant receivables.

At December 31, 2013, the Company’s worldwide accounts and unbilled receivables include $552 or 46% from government grants and $528 or 44% from customer product sales. At December 31, 2013, the Company’s REFABB grant with the Department of Energy represented 56% of total receivables.

3. RECENT ACCOUNTING PRONOUNCEMENTS

In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which changes the criteria for determining which disposals can be presented as discontinued operations and modifies the related disclosure requirements. Under the new guidance, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results and is disposed of or classified as held for sale. The standard also introduces several new disclosures. The guidance applies prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date. ASU 2014-08 is effective for annual and interim periods beginning after December 15, 2014, with early adoption permitted. The Company has elected early adoption of ASU 2014-08 and has applied the new guidance in connection with its plan to discontinue the operations of its wholly-owned subsidiary, Metabolix GmbH, and to sell all or part of the operations of Metabolix GmbH in connection with the continuing shift in the Company’s focus to commercializing performance additive solutions based on PHA biopolymers.  See Note 14, Discontinued Operations.

During the quarter ended September 30, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes all existing revenue recognition requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. It also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  The new standard will be effective for annual and interim periods beginning on or after December 15, 2016, and will be effective for

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the Company beginning on January 1, 2017. The amendment allows for two methods of adoption, a full retrospective method or a modified retrospective approach with the cumulative effect recognized at the date of initial application. Early adoption is not permitted. We are currently evaluating the method of adoption and potential impact that Topic 606 may have on our financial position and results of operations.

In August 2014, the FASB issued an amendment that requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The amendments in this update provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern for one year after the date that the financial statements are issued and to provide related footnote disclosures. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The amendments in this update apply to all entities and are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.  The Company is currently reviewing the potential impact of adopting the new guidance.

4. BASIC AND DILUTED NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding. Common stock equivalents include stock options and warrants. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of dilutive common shares outstanding during the period. Diluted shares outstanding is calculated by adding to the weighted shares outstanding any potential (unissued) shares of common stock from outstanding stock options and warrants based on the treasury stock method.  In periods when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods when a loss is reported there is no difference in basic and diluted loss per share.

The Company follows the two-class method when computing net loss per share, as it had issued shares that meet the definition of participating securities.  The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participating rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based on their respective rights to receive dividends, as if all income for the period has been distributed or losses to be allocated if they are contractually required to fund losses.  There were no amounts allocated to participating securities in the three or nine months ended September 30, 2014, as the Company was in a loss position.

The number of shares of potentially dilutive common stock related to options, convertible preferred stock and warrants that were excluded from the calculation of dilutive shares since the inclusion of such shares would be anti-dilutive for the three and nine months ended September 30, 2014 and 2013, respectively, are shown below:

On August 22, 2014, the Company completed a private placement of $25,000 of Company securities.  The securities issued included 50,000 shares of Series B Convertible Preferred Stock.  Each share of Preferred Stock automatically converted to 1,000 shares of Common Stock on October 30, 2014, upon the Company’s filing of a charter amendment to increase the number of authorized shares of Common Stock to 250,000,000.  The potentially dilutive common stock equivalent of the Preferred Shares at September 30, 2014, on a post-conversion basis, was 50,000,000 shares.  See Note 15, Capital Stock.

5. INVENTORY

The components of biopolymer inventories of the Company’s continuing operations are as follows:

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Included within finished goods at September 30, 2014 and December 31, 2013, are $261 and $476, respectively, of inventory that the Company has sold and shipped to customers for which the Company has not yet recognized revenue under its product revenue recognition policy. On a quarterly basis, the Company uses consistent methodologies to evaluate inventory for net realizable value; reducing the value of inventory for excess and obsolete inventory based upon certain assumptions made about future customer demand, quality and possible alternative uses. During the three and nine months ended September 30, 2014, the Company recorded charges of $657 and $886, respectively, to cost of product revenue for raw material and finished goods inventory that it determined was unlikely to be sold.  The Company also recorded a charge of $891 during the quarter ended September 30, 2014, within discontinued operations for the write-down of inventory to its estimated fair value.

6. INVESTMENTS

Investments consist of the following:

The Company had no investments at September 30, 2014, and therefore there were no marketable securities available-for-sale as of that date.

7. FAIR VALUE MEASUREMENTS

The Company has certain financial assets recorded at fair value which have been classified as either Level 1 or 2 within the fair value hierarchy as described in the accounting standards for fair value measurements. Fair value is the price that would be received from the sale of an asset or the price paid to transfer a liability in an orderly transaction between independent market participants at the measurement date.  Fair values determined by Level 1 inputs utilize observable data such as quoted prices in active markets. Fair values determined by Level 2 inputs utilize data points other than quoted prices in active markets that are observable either directly or indirectly. Fair values determined by Level 3 inputs utilize unobservable data points in which there is little or no market data, which require the reporting entity to develop its own assumptions. The fair value hierarchy level is determined by the lowest level of significant input.  At September 30, 2014, the Company did not own any Level 2 or Level 3 financial assets. At December 31, 2013, the Company did not own any Level 3 financial assets.

The Company’s financial assets classified as Level 2 at December 31, 2013, were initially valued at the transaction price and subsequently valued utilizing third party pricing services. Because the Company’s investment portfolio may include securities that do not always trade on a daily basis, the pricing services use many observable market inputs to determine value including reportable trades, benchmark yields and benchmarking of like securities. The Company validates the prices provided by the third party pricing services by reviewing their pricing methods and obtaining market values from other pricing sources. After completing the validation procedures, the Company did not adjust or override any fair value measurements provided by these pricing services as of December 31, 2013.

The tables below present information about the Company’s assets that are measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013 and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value.

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The Company considers all highly liquid investments purchased with an original maturity date of ninety days or less at the date of purchase to be cash equivalents, and investments purchased with an original maturity date of ninety days or more at the date of purchase and a maturity date of one year or less at the balance sheet date to be short-term investments.  All other investments are classified as long-term. There were no long or short-term investments as of September 30, 2014, and no long-term investments at December 31, 2013.

8. ACCRUED EXPENSES

Accrued expenses consisted of the following at:

9. STOCK-BASED COMPENSATION

Employee and Director Stock Options

The Company recognized stock-based compensation expense related to employee stock option awards of $533 and $1,912 for the three and nine months ended September 30, 2014, respectively.  Stock-based compensation expense related to employee stock option awards was $764 and $2,441 for the three and nine months ended September 30, 2013, respectively. At September 30, 2014, there was approximately $2,528 of pre-tax stock-based compensation expense, net of estimated forfeitures, related to unvested awards not yet recognized, which is expected to be recognized over a weighted average period of 2.5 years.

The Company’s Board of Directors granted on December 19, 2013, a stock option for the purchase of 1,150,000 shares of common stock to its Chief Executive Officer in connection with his agreement to serve as a member of the Company’s Board on that date and as an inducement for him to accept employment with the Company starting in January 2014. This option was not granted under any of the Company’s stock option plans. The option has an exercise price equal to the fair market value of the Company’s common stock at the date of grant, and it has a four-year vesting schedule (subject to certain accelerated and continued vesting events) in which 25%, 25% and 50% of the option vests on the 2nd, 3rd and 4th anniversary dates, respectively, of his commencing employment on January 2, 2014.  The shares underlying this option were registered with the Securities and Exchange Commission on March 28, 2014.

The Company’s Chief Executive Officer also agreed to purchase 250,000 shares of the Company’s common stock at a price 10% below the closing price of the Company’s common stock on December 19, 2013 (subject to a one-year holding period). This represented an option that was agreed to pursuant to his employment agreement and not under any of the Company’s stock option plans.  In January 2014, the Chief Executive Officer purchased the shares for an aggregate price of $300,000.

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A summary of option activity for the nine months ended September 30, 2014 is as follows:

For the nine months ended September 30, 2014 and 2013, the Company determined the fair value of stock options using the Black-Scholes option pricing model with the following assumptions for option grants, respectively:

Restricted Stock Units

On January 2, 2014, the Company awarded 600,000 restricted stock units to its Chief Executive Officer.  These restricted stock units contain both market and performance conditions which are based on the achievement of certain stock price and revenue targets, respectively.  The restricted stock units vest in various percentages over three years (subject to certain accelerated and continued vesting events) once the agreed-upon stock price and/or revenue based targets are achieved.  To the extent that the market or performance conditions are not met by January 2, 2016, the restricted stock units will be forfeited.

The Company estimated the fair value and derived service period of the awards using a Monte Carlo valuation model.  The Company is recognizing compensation expense for this award over its requisite service period, which is equal to the cumulative time expected to achieve one of the triggering conditions followed by a three year post-triggering event vesting period.

10. COMMITMENTS AND CONTINGENCIES

Litigation

From time to time, the Company may be subject to legal proceedings and claims in the ordinary course of business. The Company is not currently 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 the results of operations.

11. GEOGRAPHIC AND SEGMENT INFORMATION

The accounting guidance for segment reporting establishes standards for reporting information on operating segments in annual financial statements. The Company operates in one segment, which is the business of developing and commercializing technologies for the production of PHA performance biopolymers. The Company’s chief operating decision-maker does not manage any part of the Company separately, and the allocation of resources and assessment of performance are based on the Company’s consolidated operating results.

As of September 30, 2014, 2% of the combined total assets of the Company’s continuing operations were located outside of the United States and the reported net income (loss) from continuing operations outside of the United States for the three and nine months ended September 30, 2014 and 2013 was less than 1% of the combined net loss of the consolidated Company.

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The geographic distribution of the Company’s revenues and long-lived assets from continuing operations is summarized as follows:

Foreign revenue is based on the country in which the Company’s subsidiary that earned the revenue is domiciled. During the three and nine months ended September 30, 2014, revenue earned from the Company’s REFABB grant with the U.S. Department of Energy totaled $290 and $898, respectively, and represented 46% and 46% of total revenue for the three and nine months ended September 30, 2014, respectively.  During the three and nine months ended September 30, 2013, revenue earned from the Company’s REFABB grant with the U.S. Department of Energy totaled $362 and $1,213, respectively, and represented 57% and 32%, respectively, of total revenue. Product customers comprising 10% or more of the Company’s total revenues include one customer at 10% for the three months ended September 30, 2014.  There were none during the three months ended September 30, 2013 or during the nine months ended September 30, 2014 and September 30, 2013.

The geographic distribution of the Company’s long-lived assets is summarized as follows:

12. INCOME TAXES

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using future enacted rates.  A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized.

For the three and nine months ended September 30, 2014 and 2013, the Company did not recognize any tax expense or benefit due to its continued net operating loss position.  Due to the uncertainty surrounding the realization of favorable tax attributes in future tax returns, the Company has recorded a full valuation allowance against its otherwise recognizable net deferred tax assets.

The Company follows the accounting guidance related to income taxes including guidance which addresses accounting for uncertainty in income taxes. This guidance prescribes a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. The Company had no amounts recorded for any unrecognized tax benefits as of September 30, 2014 or December 31, 2013.

The tax years 2011 through 2013 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in the U.S. Additionally, the Company can be audited for any loss year up to three years after the year in which the loss is utilized to offset taxable income.  This would include loss years prior to 2011.

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The Company’s policy is to record estimated interest and penalties related to uncertain tax positions in income tax expense. As of September 30, 2014, and December 31, 2013, the Company had no accrued interest or penalties recorded related to uncertain tax positions.

At December 31, 2013, the Company had net operating loss carryforwards (NOLs) for federal and state income tax purposes of approximately $236,705 and $148,783, respectively. Included in the federal and state net operating loss carryforwards is approximately $19,213 of deductions related to the exercise of stock options subsequent to the adoption of amended accounting guidance related to stock-based compensation. This amount represents an excess tax benefit as defined under the amended accounting guidance related to stock-based compensation and has not been recorded as a deferred tax asset. The Company’s existing federal and state net operating loss carryforwards begin to expire in 2019 and 2014, respectively. The Company also had available research and development credits for federal and state income tax purposes of approximately $5,281 and $3,920, respectively. These federal and state research and development credits will begin to expire in 2019 and 2016, respectively. As of December 31, 2013, the Company also had available investment tax credits for state income tax purposes of $86, which begin to expire in 2014. Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of net operating loss carryforwards and research and development credits. Under the applicable accounting standards, management has considered the Company’s history of losses and concluded that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets.

Utilization of the net operating loss and research and development credit carryforwards most likely will be subject to significant annual limitation under Section 382 of the Internal Revenue Code of 1986 due to cumulative ownership changes that have occurred previously or that may occur in the future in connection with the Company’s financing plans. Such ownership changes could limit the amount of net operating loss and research and development credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. The Company completed an evaluation of its ownership changes through December 31, 2012 and has determined that its NOL and R&D credit carryforwards as of that date were not subject to an annual limitation under Section 382. Although an evaluation of ownership changes through September 30, 2014 has not been completed, the Company’s NOL and R&D credit carryforwards most likely will be limited as a result of the equity offering completed in August 2014 and other cumulative ownership changes.

No additional provision has been made for U.S. income taxes related to the undistributed earnings of the wholly-owned subsidiaries of Metabolix, Inc. or for unrecognized deferred tax liabilities for temporary differences related to investments in subsidiaries. As such, earnings are expected to be permanently reinvested, the investments are essentially permanent in duration, or the Company has concluded that no additional tax liability will arise as a result of the distribution of such earnings. A liability could arise if amounts are distributed by such subsidiaries or if such subsidiaries are ultimately disposed. It is not practical to estimate the additional income taxes related to permanently reinvested earnings or the basis differences related to investment in subsidiaries. Unremitted earnings at December 31, 2013 approximated $273.

13. RELATED PARTIES

The Company engaged in various transactions with Tepha, Inc., a related party, and recorded $127 and $194 of license and royalty revenue during the three months and nine months ended September 30, 2014, respectively. During the three and nine months ended September 30, 2013, the Company recorded license and royalty revenue from Tepha of $27 and $118, respectively. As of September 30, 2014, the Company had $75 of outstanding receivables due from Tepha for royalties. There was an outstanding receivable of $51 due from Tepha at December 31, 2013. At September 30, 2014, the Company had a total balance of $44 due for reimbursement of amounts paid in connection with the short-term disability of one of the Company’s executive officers.  The Company expects to receive $20 from the Company’s short-term disability insurance carrier and the remaining balance from the executive.

14. DISCONTINUED OPERATION

On September 30, 2014, the Company’s Board of Directors approved a plan to discontinue the operations of the Company’s wholly-owned German subsidiary, Metabolix GmbH, and authorized the sale of substantially all of the assets of Metabolix GmbH in connection with the continuing strategic shift in the Company’s focus to commercializing performance additive solutions based on PHA biopolymers.  Assets of the discontinued operation available for sale at September 30, 2014, and December 31, 2013, of $292 and $2,153, respectively, primarily consist of commercial inventory and are shown in the Company’s consolidated balance sheet under the caption “assets of disposal group classified as held for sale”.

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The following represents the major items comprising loss from discontinued operations for the three and nine months ended September 30, 2014 and 2013.

On October 20, 2014, the Company completed a sale of substantially all of the assets of Metabolix GmbH to AKRO-PLASTIC GmbH, a German manufacturer of engineering plastics compounds.  The Company will not have significant involvement in the operations formerly conducted by Metabolix GmbH.

15: CAPITAL STOCK

Common and Preferred Stock Issuances

On August 22, 2014, the Company completed a private placement of Company securities.  Proceeds received from the transaction were $24,913, net of issuance costs of $87.  Investors participating in the transaction purchased a total of 50,000,000 units of the Company’s securities at a price of $0.50 per unit.  Each unit consisted of one share of the Company’s common stock and one one-thousandth of a share of the Company’s Series B Convertible Preferred Stock, for a total of 50,000,000 shares of common stock and 50,000 shares of Series B Convertible Preferred Stock.  Each share of the preferred stock issued in the transaction was non-voting, was not redeemable, had no liquidation preference and the only conversion rights were that each share was automatically convertible into 1,000 shares of common stock upon the effectiveness of the filing by the Company of a charter amendment to increase the number of shares of authorized common stock to not less than 150,000,000.  On October 30, 2014, following stockholder approval of a charter amendment to increase the number of authorized shares of the Company’s common stock to 250,000,000 and the effectiveness of such charter amendment, each share of preferred stock issued in the private placement automatically converted into 1,000 shares of common stock, for a total of 50,000,000 additional shares of common stock.

16. SUBSEQUENT EVENT

In October 2014, the Company initiated a restructuring of its U.S. organization to reflect the Company’s strategic focus on PHA performance biopolymers and to modify staffing to the level the Company believes necessary to support successful implementation of its current business strategy.   The scope of the restructuring also reflects the Company’s decision, consistent with its current business strategy, to suspend work in its chemicals program. The Company expects to record restructuring charges of approximately $685 during its fourth fiscal quarter of 2014, related to post-employment benefits in accordance with ASC 420-10, Exit or Disposal Cost Obligations.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

(All dollar amounts are stated in thousands)

Forward Looking Statements

This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to our future plans, objectives, expectations and intentions and may be identified by words such as “may,” “will,” “should,” “expects,” “plans,” “anticipate,” “intends,” “target,” “projects,” “contemplates,” “believe,” “estimates,” “predicts,” “potential,” and “continue,” or similar words.

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Although we believe that our expectations are based on reasonable assumptions within the limits of our knowledge of our business and operations, the forward-looking statements contained in this document are neither promises nor guarantees. Our business is subject to significant risk and uncertainties and there can be no assurance that our actual results will not differ materially from our expectations. These forward looking statements include, but are not limited to, statements regarding the Company’s business plans and strategies; expectations for establishing commercial PHA biopolymer manufacturing; expected market demand and commercialization plans for the Company’s PHA biopolymer products; expected future financial results and cash requirements; plans for obtaining additional funding; plans and expectations that depend on the Company’s ability to continue as a going concern; and expectations for future research, product development and collaborations. Such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated including, without limitation, risks related to our limited cash resources, uncertainty about our ability to secure additional funding, dependence on establishing a manufacturing source for our products, risks related to the development and commercialization of our PHA performance biopolymers, risks related to the execution of our business plans and strategies and risks associated with the protection and enforcement of our intellectual property rights, as well as other risks and uncertainties set forth  under the caption “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2013.

The forward-looking statements and risk factors presented in this document are made only as of the date hereof and we do not intend to update any of these risk factors or to publicly announce the results of any revisions to any of our forward-looking statements other than as required under the federal securities laws.

Overview

Metabolix is an advanced biomaterials company focused on delivering sustainable solutions to the plastics industry. We have core capabilities in microbial genetics, fermentation process engineering, chemical engineering, polymer science, plant genetics and botanical science, and we have assembled these capabilities in a way that has allowed us to integrate our biotechnology research with real world chemical engineering and industrial practice. In addition, we have created an extensive intellectual property portfolio to protect our innovations which, together with our technology, serves as a valuable foundation for our business and future industry collaborations.

Metabolix was formed to leverage the ability of natural systems to produce complex biopolymers from renewable resources. We have focused on a family of biopolymers found in nature called PHAs, which occur naturally in living organisms and are chemically similar to polyesters. We have demonstrated the production of PHAs at industrial scale for biopolymers. We have also demonstrated the production of PHA precursors to certain biobased industrial chemicals and polyhydroxybutyrate (“PHB”), a subclass of PHAs, in agriculturally significant non-food crops.

In 2014, we conducted a comprehensive strategic review of our business and determined to focus the Company’s resources on commercializing PHA performance biopolymers.  This will result in specifically targeting our research, development and commercial resources on the use of our Mirel PHA biopolymers as performance additives in target applications where they can improve performance and or reduce cost in other material systems such as PVC and PLA. We also expect to address applications where the performance, biodegradability, biobased content and other attributes of our PHA biopolymers provide unique functional advantages, such as biodegradation, required by such applications, including PHA coated paper and PHA micropowders. In connection with this more focused business strategy, we also decided to discontinue our operations in Germany, to suspend work in our chemicals program and we are planning to spin out our crops program.

On October 20, 2014, we completed the sale of substantially all of the assets of our wholly-owned German subsidiary, Metabolix GmbH, to AKRO-PLASTIC GmbH (“Akro”), a German manufacturer of engineering plastics compounds.  Metabolix GmbH had been engaged primarily in the marketing and sale of compounded resins used in compostable film and bag applications. In the sale transaction, Akro acquired our technology for MveraTM  B5010 and B5011 compostable resin products for film, as well as certain inventory, certain contracts, and the MveraTM  trademark.  Akro also took over the Metabolix GmbH employees and office space.  The purpose of this sale was to simplify our business structure and focus resources on the success of our core biopolymers business based on PHA performance additives.

In October 2014, we also implemented a restructuring of our U.S. organization to reflect our more narrow strategic focus on PHA biopolymers and to modify staffing to the level we believe necessary to support successful implementation of our business strategy.   The scope of the restructuring also reflects our decision to suspend work in our chemicals program.

From 2004 through 2011, we developed and began commercialization of our PHA biopolymers through a technology alliance and subsequent commercial alliance with a wholly-owned subsidiary of Archer Daniels Midland Company (“ADM”). Under the commercial alliance, ADM was responsible for resin manufacturing, and we were primarily responsible for product development, compounding, marketing and sales. Through this alliance, the companies established a joint venture company, Telles, LLC (“Telles”), to commercialize PHA biopolymer products. ADM terminated the Telles joint venture early in 2012.  We retained significant rights

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and assets associated with the PHA biopolymers business.  We hold exclusive rights to the Metabolix technology and intellectual property used in the joint venture. We also acquired all of Telles’s inventory and compounding raw materials, all product certifications and all product trademarks including MirelTM and MveraTM .

During 2012, we evaluated the potential applications for our biopolymer products and narrowed our market development focus to certain high value market segments: (i) performance additives, including film and bag applications; and (ii) functional biodegradation. In 2012 and 2013, we developed and launched a range of new products including compounded compostable film grade resins and polymeric modifiers for polyvinyl chloride (“PVC”) and poly lactic acid (“PLA”).

We have supplied customers with PHA inventory manufactured under the Telles joint venture since 2012.   In addition, we have supplemented this inventory with PHA materials derived from our pilot manufacturing capability, as well as other materials purchased from third parties.   We have begun implementing a plan to establish intermediate-scale commercial PHA manufacturing capacity of 2.5 to 5.0 kilo tonnes per year in late 2015.  In the third quarter of 2014, we moved forward with a preliminary engineering study and implementation planning for the retrofit of an existing contract manufacturing facility we have targeted for commercial PHA production.  In this detailed evaluation of the site, we are developing an operational budget, capital budget and construction timeline.   Our goal is to sign a contract manufacturing agreement with the owner of the site by the end of 2014.  Once our PHA supply chain is fully established, we expect to transition away from using inventory acquired from Telles and supply performance PHA additives to our customers from this new captive capacity.

As noted above, we are suspending work in our biobased chemicals program. In this program, we were exploring the use of our PHA technology platform to produce C4 and C3 chemicals from biobased PHA precursors, as opposed to the fossil fuels that are used to produce most industrial chemicals today. Although we believe that developing and commercializing biobased C4 and C3 chemicals could represent an attractive future application of our technology, we have decided to focus our resources on the development of our PHA performance biopolymers business.

For more than 13 years, Metabolix has conducted a research program in crop science with the intent to harness the renewable nature of plants to make renewable chemicals and bioenergy from crops.  Historically, the focal point of our crop technology efforts is around PHB, the simplest member of the PHA family of biopolymers. While applications for PHAs have focused mainly on their use as biodegradable bioplastics, these polymers have a number of other unique attributes that allow potential use in other applications, such as the production of chemical intermediates, as value-added animal feeds or to produce energy. In our crops research program we have been working to create proprietary systems to produce PHB in high concentration in the leaves of biomass crops or in the seeds of oilseed crops for these applications.

Metabolix has secured several grants to support its crop science research program.   In 2011, Metabolix was awarded a $6 million grant by the U.S. Department of Energy (“DOE”) to engineer switchgrass to produce 10 percent PHB, by weight, in the whole plant and to develop methods to thermally convert the PHB-containing biomass to crotonic acid and a higher density residual biomass fraction for production of bioenergy.  During 2012 and 2013, Metabolix was awarded additional grants for leading-edge crop research targeting multi-gene expression and transformation of plants including important biofuel and food crops. In 2014, we have continued to conduct crop research under grants, focused primarily on increasing PHB production in switchgrass and developing a thermal conversion process to recover crotonic acid.

In conjunction with conducting research to increase the yield of PHB in switchgrass and camelina, we have been developing tools and intellectual property around enhancing the photosynthetic capacity of plants, a core capability for improved crop yield. The computational methods and technology for identifying and expressing gene transcription factors in plants which we developed in our crop science program may have the potential to increase plant photosynthesis, leading to increases in biomass, seed yield, starch and oil content. We have validated a model system in switchgrass showing the potential for increased photosynthetic efficiency, increased biomass and significantly higher production of sugar and starch levels versus controls.  We believe this research may have applicability to a range of food, feed and biomass crops where there is a focus on improving crop yield. In connection with our broader plan to focus the Company’s resources on our PHA performance biopolymers business, we are seeking to spin out our crops program to allow further development and commercialization of this technology under a different ownership structure.. However, there can be no assurance that we will be successful in establishing or maintaining suitable business arrangements for the spin out of this activity.

On August 22, 2014, the Company completed a private placement of equity securities. Proceeds received from the private placement were $24,913, net of issuance costs of $87. This was an important step towards our goal of raising $50,000 to $60,000.  Even with this financing, and anticipated reduced cash usage in 2015 as a result of the discontinuation of our German operations, restructuring of our U.S. organization and other cost-containment measures, we will require significant additional funding during 2015 to continue to fund our operations and to support our capital needs. The timing, structure and vehicles for obtaining future financing are under consideration by the Company and such financing may be accomplished in stages. Our goal is to use future financings to

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continue building an intermediate scale specialty biopolymers business based on PHA additives that will serve as the foundation for our longer range plans and future growth of our business, but there can be no assurance that additional financing efforts will be successful.

As of September 30, 2014, we had an accumulated deficit of $295,820 and total stockholders’ equity was $24,395.

Collaborative Arrangements

We are not currently participating in any collaborative arrangements. Our historical strategy for collaborative arrangements has been to retain substantial participation in the future economic value of our technology while receiving current cash payments to offset research and development costs and working capital needs. By their nature, our collaborative agreements have been complex, containing multiple elements covering a variety of present and future activities.

Government Grants

As of September 30, 2014, expected gross proceeds of $1,750 remain to be received under our U.S. and foreign government grants, which includes amounts for reimbursement to our subcontractors, as well as reimbursement for our employees’ time, benefits and other expenses related to future performance.  Our German AiF Project grant was terminated in October 2014, in connection with our plan to discontinue the operations of Metabolix GmbH. Total government funds related to AiF Project grant has been adjusted to reflect the early termination.

The status of our United States and foreign government grants is as follows: