YIELD10 BIOSCIENCE, INC. (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 Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 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. Although we believe that our expectations are based on reasonable assumptions within the limits of our knowledge of our business and operations, these 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 concerning our business plans and strategies; expected future financial results and cash requirements; statements related to the coronavirus pandemic and its potential adverse impacts; the impact from the war inUkraine and the resulting economic and other sanctions imposed onRussia ; plans for obtaining additional funding; plans and expectations that depend on our ability to continue as a going concern; and plans for development and commercialization of our Yield10 technologies. 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, risks related to the execution of our business plans and strategies, 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 the Company's Annual Report on Form 10-K for the year ended December 31, 2021 and in our other filings with theSEC . 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.
Unless the context otherwise requires, all references in this Quarterly Report
on Form 10-Q to "
Overview
Yield10 Bioscience, Inc. ("Yield10" or the "Company") is an agricultural bioscience company that is developing the oilseed Camelina sativa ("Camelina") as a platform crop for large scale production of low carbon sustainable seed products to address: •petroleum replacement markets, in which we are developing Camelina oil for use as a biofuel feedstock and PHA Bioplastics produced in Camelina seed for use as a biodegradable bioplastic; and •food and nutrition markets, in which we are developing omega-3 (EPA, DHA+EPA) oils produced in Camelina seed for aquaculture, nutraceuticals and protein meal for animal feed markets. 21 -------------------------------------------------------------------------------- Our commercial plan is based on developing and releasing a series of proprietary elite Camelina seed varieties incorporating genetic traits from our development pipeline which offer improved on-farm performance that we anticipate will lead to increased acreage adoption and grain product revenue. We also plan to create additional value for our shareholders by licensing yield and seed oil traits from our pipeline to large seed companies for commercialization in major food crops, including corn, soybean and canola. We have initiated small scale commercial Camelina grain production this fall for the renewable diesel market using third-party growers for seed multiplication of our winter Camelina plant varieties. These plants were harvested this past summer and shipped to a commercial seed conditioner for processing and packaging before being provided to farmers for planting. Yield10's commercial team is in the process of establishing an initial grower network for this first production of Camelina grain that will be harvested in the summer of 2023. We plan to sell this grain harvest into the renewable diesel market. We anticipate that future acreage under contract for the production of Camelina grain will expand over time as we increase our grower network and ramp up commercial operations for both spring and winter growing seasons. Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including changes in inflation, interest rates and overall economic conditions and uncertainties. For instance, for the twelve months endedSeptember 30, 2022 , theU.S. Bureau of Labor Statistics reported that the Consumer Price Index for All Urban Consumers increased 8.2 percent. If the inflation rate continues to increase, for example due to increases in the costs of labor and supplies, it will affect our expenses and it might make it more expensive for us to continue our research and development. Inflation could also adversely affect the ability of growers to enter into and fulfill their obligations under Camelina grain production agreements with us.
Yield10 is headquartered in
Government Grants
OnFebruary 26, 2021 ,Yield10 Oilseeds Inc. ("YOI"), the Company's wholly-owned Canadian research subsidiary, received a research grant through theIndustrial Research Assistance Program administered byNational Research Council Canada ("NRC"). The objective of the grant was to provide financial research assistance to innovative, early-stage small and medium-sized enterprises. Under the terms of the agreement, NRC agreed to contribute up to a maximum of$39 for payroll costs incurred by YOI during the period fromDecember 20, 2020 toMarch 13, 2021 . During the first quarter of 2021, YOI submitted claims for eligible payroll costs and recognized grant revenue for the full amount of the award. During 2018, we entered into a sub-award withMichigan State University ("MSU") to support aDepartment of Energy ("DOE") funded grant entitled "A Systems Approach to Increasing Carbon Flux to Seed Oil." Our participation under this five-year grant has been awarded incrementally on an annual basis with the first year commencing onSeptember 15, 2017 . Cumulative funding for this sub-award for the full grant amount of$2,957 was appropriated by theU.S. Congress through the contractual year ending inSeptember 2022 . During the three and nine months endedSeptember 30, 2022 , we recognized$111 and$363 , respectively, from the sub-award. During the three and nine months endedSeptember 30, 2021 , we recognized$92 and$423 in grant revenue, respectively, from the sub-award. As ofSeptember 30, 2022 , proceeds of$146 remain to be recognized under our MSU sub-award as shown in the table below. DuringJune 2022 , the parties amended the sub-award to extend its termination date toSeptember 14, 2023 , allowing Yield10 time to utilize the remaining grant funds. These remaining contractual funds include amounts for reimbursement to our subcontractors, as well as reimbursement for our employees' time, benefits and other expenses related to future performance. Total revenue Remaining recognized amount to be through recognized as Funding Total Government September 30, of September Contract/Grant Program Title Agency Funded Appropriations 2022 30, 2022 Expiration Subcontract from Michigan State Department of $ 2,957$ 2,811 $ 146 September 2023 University project funded by DOE Energy entitled "A Systems Approach to Increasing Carbon Flux to Seed Oil" Funding from National Research National 39 39 - March 2021
Council
Council Canada
(NRC-IRAP) entitled "Innovation
Assistance Program - Round 2.5"
Total $ 2,996 $ 2,850 $ 146
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Critical Accounting Estimates and Judgments
The discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP for interim financial information. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, stock-based and performance-based compensation, measurement of right-of-use assets and lease liabilities, the recognition of lease expense and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The critical accounting policies and the significant judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements for the three and nine months endedSeptember 30, 2022 , were consistent with those discussed in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates and Judgments."
Results of Operations
Comparison of the Three Months Ended
Revenue
Three Months Ended
September 30,
2022 2021 Change
Grant revenue $ 111 $ 92 $ 19 Grant revenue was consistent at
We anticipate that grant revenue will decrease during the year endedDecember 31, 2022 in comparison to the year endedDecember 31, 2021 , as a result of lower grant appropriations remaining to be earned from the final appropriation of our MSU sub-award that was originally scheduled to end inSeptember 2022 . During the three months endedSeptember 30, 2022 , the MSU sub-award was amended to extend the termination date throughSeptember 2023 in order to utilize remaining funds of$146 available from the final contract year. We currently cannot assess whether additionalU.S. or Canadian government research grants will be awarded to us during the next year. We have contracted with growers inCanada and theU.S. for small scale Camelina winter grain production this fall, for approximately 1,000 acres, to supply the renewable diesel fuel market. Harvest of this first winter commercial grain production is expected to occur in the summer of 2023, at which time we anticipate that we may begin to recognize grain revenue in amounts scaled to the grain yield and the number of acres under contract. Future grain revenues will be based, among other things, on our ability to scale up commercial seed production, engage with growers and enter into offtake agreements with customers in the renewable diesel market. Expenses Three Months Ended September 30, 2022 2021 Change
Research and development expenses
1,547 (29)
Total expenses $ 3,601 $ 3,183 $ 418 Research and Development Expenses
Research and development expenses increased from$1,636 during the three months endedSeptember 30, 2021 to$2,083 during the three months endedSeptember 30, 2022 . The$447 , or 27 percent increase, is primarily due to higher 23 -------------------------------------------------------------------------------- employee compensation and benefit expenses and costs associated with crop trials and pre-commercial Camelina seed production. Employee compensation and benefits increased by$157 from$865 during the three months endedSeptember 30, 2021 to$1,022 during the three months endedSeptember 30, 2022 , and was primarily the result of a$127 increase in payroll expense generated from annual employee compensation increases and our hiring of research and development staff. During the three months endedSeptember 30, 2022 , we incurred$124 in expense for pre-commercial Camelina seed production, including seed multiplication, cleaning, treatment and storage costs. We did not incur similar expenses during the three months endedSeptember 30, 2021 . Crop trial expense increased by$104 during the three months endedSeptember 30, 2022 as a result of greater fieldwork being conducted to evaluate Camelina plant varieties, including the development of herbicide tolerant Camelina plant varieties. Based on current planning and forecasting, we anticipate that our research and development expenses during the years endedDecember 31, 2022 andDecember 31, 2023 will continue at levels above those incurred during the year endedDecember 31, 2021 , as we continue our efforts to develop and commercialize Camelina plant varieties for the following markets: feedstock oil for renewable diesel, PHA bioplastics, omega-3 oil for nutraceuticals and aquaculture fish feed and as a protein meal to be used in animal feed markets. The increased expenses will include employee compensation and benefits from recent and future personnel hiring, seed scale up operations and pre-commercial Camelina production activities. Our forecast related to research and development expense is subject to change and may be impacted by our ability to raise additional cash to support our planned operations, the potential impact of the COVID-19 pandemic or the advent of new third-party collaborations or other business opportunities that could alter our plans.
General and Administrative Expenses
General and administrative expenses for the three months endedSeptember 30, 2022 andSeptember 30, 2021 remained consistent, decreasing by$29 , or 2%, from$1,547 to$1,518 . Based on current planning and forecasting, we expect that our general and administrative expenses during the year endedDecember 31, 2022 will remain slightly higher than expenses incurred during the previous year. We also anticipate that our general and administrative expenses will increase modestly during the year endedDecember 31, 2023 , as we ramp up support for our Camelina commercial operations. Our forecast related to these expenses is subject to change and may be impacted by our ability to raise additional cash to support our plans, the potential impact of the COVID-19 pandemic or new third-party collaborations or other business opportunities that could alter our plans. Other Income (Expense), Net Three Months Ended September 30, 2022 2021 Change Gain on investment in related party $ -$ 700 $
(700)
Other income (expense), net 10 (1)
11
Total other income (expense), net$ 10 $ 699 $
(689)
Gain on Investment in
During 1999, Yield10 entered into a technology sublicense agreement withTepha, Inc. ("Tepha"), a privately held related party engaged in the development of medical products. Yield10 received 648,149 shares of Series A Convertible Preferred Stock of Tepha ("Tepha Shares") during 2002 as consideration for outstanding license payments due to Yield10 totaling$700 . During 2005, the Company determined the value of the Tepha Shares was impaired resulting in their write off through a charge to other income (expense). InMay 2021 , the board of directors of Tepha approved and authorized the merger of Tepha withBecton Dickinson Global Holdings, Inc. ("Becton Dickinson") and onJuly 26, 2021 , Yield10 received cash consideration of$700 in exchange for the surrender of its Tepha Shares upon the closing of the sale of Tepha to Becton Dickinson. As a result, the Company recorded the$700 as a gain on investment in related party within other income (expense) during the three months endedSeptember 30, 2021 .
Other Income (Expense), net
Other income (expense) for the three months ended
24
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Comparison of the Nine Months Ended
Revenue
Nine Months Ended
September 30,
2022 2021 Change
Grant revenue $ 363 $ 462 $ (99)
Grant revenue was $363 and $462 for the nine months ended September 30, 2022 and
September 30, 2021 , respectively. All of the grant revenue recorded during the
nine months ended September 30, 2022 was derived from the Company's DOE
sub-award with MSU. During the nine months ended September 30, 2021 , grant
revenue of $423 and $39 was recognized from the DOE sub-award and the short-term
NRC grant that was awarded in February 2021 , respectively.
Expenses
Nine Months Ended
September 30,
2022 2021 Change
Research and development expenses
$ 10,610 $ 9,186 $ 1,424
Research and Development Expenses
Research and development expenses increased from$4,603 during the nine months endedSeptember 30, 2021 to$5,862 during the nine months endedSeptember 30, 2022 . The$1,259 , or 27 percent year-to-date increase, is primarily due to higher employee compensation and benefits expenses, expanded crop trial costs, higher third-party research services and costs associated with pre-commercial Camelina seed production. Employee compensation and benefits increased by$499 from$2,677 during the nine months endedSeptember 30, 2021 to$3,176 during the nine months endedSeptember 30, 2022 . The increase is primarily the result of a$451 increase in payroll charges generated from annual employee compensation increases and our hiring of additional staff. Stock-based employee compensation expense also increased by$93 during the nine months endedSeptember 30, 2022 due to employee stock options awarded in the past year. Lower recruiting related expenses of$110 offset a portion of these increased employee related expenses. Crop trial expense increased by$145 during the nine months endedSeptember 30, 2022 in comparison to the same nine months of the previous year and primarily stems from our evaluation of Camelina plant varieties, including those demonstrating herbicide tolerance. Third-party research services increased by$167 during the nine months endedSeptember 30, 2022 in comparison to the nine months endedSeptember 30, 2021 , and is the result of DNA sequencing and other analytical work undertaken for regulatory purposes. During the nine months endedSeptember 30, 2022 , we also incurred$252 in charges for pre-commercial Camelina seed production, including seed multiplication, cleaning, treatment and storage costs. We did not have similar expenses during the nine months endedSeptember 30, 2021 .
General and Administrative Expenses
General and administrative expenses for the nine months endedSeptember 30, 2022 andSeptember 30, 2021 increased by$165 from$4,583 to$4,748 . The 4 percent year-to-date increase is primarily due to increases in employee compensation and benefits expenses. Employee compensation and benefits expense increased by$209 from$2,069 during the nine months endedSeptember 30, 2021 to$2,278 during the nine months endedSeptember 30, 2022 , and is primarily the result of a$108 increase in payroll expenses generated from annual employee compensation increases and our hiring of additional staff. During the nine months endedSeptember 30, 2022 , stock-based compensation also increased by$190 due to employee stock awards issued during the past year. Recruiting expenses were down$86 during the nine months endedSeptember 30, 2022 compared to the first nine months of 2021. 25 --------------------------------------------------------------------------------
Other Income (Expense), Net
Nine Months Ended
September 30,
2022 2021 Change
Gain on investment in related party $ - $ 700 $ (700)
Other income (expense), net 11 (2) 13
Total expenses $ 11 $ 698 $ (687) Gain on Investment in
InMay 2021 , the board of directors of Tepha, a related party, approved and authorized the sale of Tepha toBecton Dickinson Global Holdings, Inc. The merger closed onJuly 21, 2021 and Yield10 received cash consideration of$700 for the surrender of its Tepha Shares. As a result, the Company recorded the$700 as a gain on investment in related party within other income (expense) during the three months endedSeptember 30, 2021 .
Other Income (Expense), net
Other income (expense) for the nine months ended
Liquidity and Capital Resources
Currently, we require cash to fund our working capital needs, to purchase capital assets, and to pay our operating lease obligations and other operating costs. The primary sources of our liquidity have historically included equity financings, government funded research grants and income earned on cash and investments. Since our inception, we have incurred significant expenses related to our research, development and product commercialization efforts. With the exception of 2012, we have recorded losses since our initial founding, including the three and nine months endedSeptember 30, 2022 . As ofSeptember 30, 2022 , we had an accumulated deficit of$396,394 . Our unrestricted cash, cash equivalents and investments are held primarily for working capital purposes and as ofSeptember 30, 2022 , totaled$7,405 compared to cash, cash equivalents and investments of$15,990 atDecember 31, 2021 . As ofSeptember 30, 2022 , we had restricted cash of$264 , consisting of$229 held in connection with the lease agreement for ourWoburn, Massachusetts facility and$35 held in connection with our corporate credit card program. As ofSeptember 30, 2022 , we continued to have no outstanding debt. Our management is currently evaluating different strategies to obtain the required funding for our operations. These strategies may include, but are not limited to: public and private placements of equity and/or debt, licensing and/or collaboration arrangements and strategic alternatives with third parties, or other funding from the government or third parties. Our ability to secure funding is subject to numerous risks and uncertainties, including the impact of the COVID-19 pandemic, geopolitical turmoil, and economic uncertainty related to rising inflation and disruptions in the global supply chain. As a result, there can be no assurance that these funding efforts will be successful. The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. If we raise funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to our technologies or products or grant licenses on terms that are not favorable to us. Additional capital may not be available on reasonable terms, or at all. Investments are made in accordance with our corporate investment policy, as approved by our Board of Directors. The primary objective of this policy is to preserve principal. Consequently, our investments are limited to high quality corporate debt,U.S. Treasury bills and notes, money market funds, bank debt obligations, municipal debt obligations and asset-backed securities. The policy establishes maturity limits, concentration limits, and liquidity requirements. As ofSeptember 30, 2022 , we were in compliance with this policy. 26 --------------------------------------------------------------------------------
Material Cash Requirements
We currently anticipate net cash usage of$12,000 to$12,500 to fund operations during the full year 2022, including our expanded research and development activities and our preparations for the future commercial launch of our Camelina products. We routinely enter into contractual commitments with third parties to support our operating activities. The more significant of these commitments includes real estate operating leases for our office, laboratory and greenhouse facilities located in theU.S. andCanada . In addition, we typically enter into annual premium funding arrangements through our insurance broker that allows us to spread the payment of our directors' and officers' liability and other business insurance premiums over the terms of the policies. Our material commitments also include annual arrangements with third party growers located inNorth and South America for the execution of crop trials and seed scale-up activities to further our trait development goals and to progress the commercial development of our Camelina plant varieties. The aggregate cost of these contracted crop activities is substantial. In the fall of 2022, we also began entering into Camelina grain production contracts for the winter 2022/2023 season containing minimum guaranteed payments per acre as an incentive for growers to work with us. From time-to-time, we also enter into exclusive research licensing and collaboration arrangements with third parties for the development of intellectual property related to trait development. These long-term agreements typically include initial licensing payments and future contingent milestone payments associated with regulatory filings and approvals as well as potential royalty payments based on future product sales. Generally, these licensing arrangements contain early termination provisions within the terms of the respective agreements.
The Company has no off-balance sheet arrangements as defined in Item 303(b) of Regulation S-K of the Securities Exchange Act of 1934.
Going Concern
We follow the guidance of ASC Topic 205-40, Presentation of Financial Statements-Going Concern, in order to determine whether there is substantial doubt about our ability to continue as a going concern for one year after the date our financial statements are available to be issued. Based on our current cash forecast, we expect that our present capital resources will not be sufficient to fund our planned operations for at least that period of time, which raises substantial doubt as to the Company's ability to continue as a going concern. This forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of expenses could vary materially and adversely as a result of a number of factors. Our ability to continue operations after our current cash resources are exhausted will depend upon our ability to obtain additional financing through, among other sources, public or private equity financing, secured or unsecured debt financing, equity or debt bridge financing, warrant holders' ability and willingness to exercise the Company's outstanding warrants, additional government research grants or collaborative arrangements with third parties, as to which no assurances can be given. We do not know whether additional financing will be available on terms favorable or acceptable to us when needed, if at all. If additional funds are not available when required, we will be forced to curtail our research efforts, explore strategic alternatives and/or wind down our operations and pursue options for liquidating our remaining assets, including intellectual property and equipment. If we issue equity or debt securities to raise additional funds, (i) we may incur fees associated with such issuances, (ii) our existing stockholders will experience dilution from the issuance of new equity securities, (iii) we may incur ongoing interest expense and be required to grant a security interest in our 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 our existing stockholders. In addition, utilization of our net operating loss and research and development credit carryforwards may be subject to significant annual limitations under Section 382 of the Internal Revenue Code of 1986 due to ownership changes resulting from future equity financing transactions. If we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our potential products or proprietary technologies or grant licenses on terms that are not favorable to us.
Cash Usage During the Nine Months Ended
Net cash used for operating activities during the nine months endedSeptember 30, 2022 was$8,342 , compared to net cash used for operating activities during the nine months endedSeptember 30, 2021 of$6,768 . Net cash used for operating activities during the nine months endedSeptember 30, 2022 primarily reflects the net loss of$10,263 , cash payments made to reduce lease liabilities of$385 and our payment of 2021 bonus compensation of$378 during early 2022. Non-cash charges offsetting a portion of the net loss include depreciation and amortization expense of$197 , our 401(k) matching contribution in common stock of$111 , stock-based compensation expense of$1,458 , and non-cash lease expense of$291 . Net cash used for operating activities during the nine months endedSeptember 30, 2021 was$6,768 and primarily reflects the net loss of$8,051 , 27 --------------------------------------------------------------------------------
cash payments made to reduce lease liabilities and to pay 2020 bonus
compensation of
Net cash of$7,022 was provided by investing activities during the nine months endedSeptember 30, 2022 , primarily as a result of receiving proceeds of$8,371 from investments reaching maturity and converting into cash, partially offset by our purchase of$1,195 in new investments. During the nine months endedSeptember 30, 2022 , we also purchased$154 in laboratory equipment. During the nine months endedSeptember 30, 2021 ,$2,229 in net cash was provided from investing activities. During the nine months of 2021, we purchased$147 of laboratory equipment and$3,874 in new investments, offset by cash proceeds of$6,250 from maturing investments. Net cash of$37 was used by financing activities during the nine months endedSeptember 30, 2022 , compared to net cash of$15,746 provided by financing activities during the nine months endedSeptember 30, 2021 . During the nine months endedSeptember 30, 2021 , we completed a public offering of 1,040,000 shares of our common stock at a price of$12.25 per share, receiving proceeds of$12,740 , before issuance costs of$747 . Also, during the nine months endedSeptember 30, 2021 , a total of 481,973 Series A and Series B warrants issued in ourNovember 2019 securities offering were exercised by warrant holders, providing$3,856 in cash proceeds. During the nine months endedSeptember 30, 2022 , no warrants were exercised by warrant holders.
Recent Accounting Pronouncements
See Note 2, "Accounting Policies," to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a full description of recent accounting pronouncements.
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