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; 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, 2020 and in our other filings with theSEC , including in Part II, Item 1A of this Report on Form 10-Q. 22 -------------------------------------------------------------------------------- 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 "Yield10 Bioscience ," "Yield10," "we," "our," "us," "our company" or "the company" refer toYield10 Bioscience, Inc. , aDelaware corporation, and its subsidiaries. OverviewYield10 Bioscience, Inc. is an agricultural bioscience company that is using its differentiated trait gene discovery platform, (the "Trait Factory "), to develop improved Camelina varieties to produce proprietary products, and to produce other high value genetic traits for the agriculture and food industries. We are headquartered inWoburn, Massachusetts and have anOilseed Center of Excellence inSaskatoon, Saskatchewan, Canada . Our goals are to efficiently develop and commercialize a high value crop products business by developing superior varieties of Camelina for the production of feedstock oils, nutritional oils, and PHA bioplastics, and to license our yield traits to major seed companies for commercialization in major row crops, including corn, soybean and canola. As ofMarch 31, 2021 , we held unrestricted cash, cash equivalents and investments of$22,730 . 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 issued. Based on our current cash forecast, we expect that our present capital resources will be sufficient to fund our planned operations and meet our obligations, when due, into the first quarter of 2023. Our ability to continue operations after our current cash resources are exhausted depends on 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 adequate additional funds are not available when required, we may 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 in the future, (i) we may incur fees associated with such issuances, (ii) our existing stockholders may 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 due to ownership changes resulting from 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. Government Grants OnFebruary 26, 2021 ,Metabolix Oilseeds, Inc. ("MOI"), 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 MOI during the periodDecember 20, 2020 -March 13, 2021 . During the three months endedMarch 31, 2021 , MOI submitted claims for eligible payroll costs and recognized 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 projected five-year grant is being awarded on an annual basis with the first year commencing onSeptember 15, 2017 . Cumulative funding for this sub-award in the amount of$2,403 has been appropriated by theU.S. Congress through the fourth contractual year ending inSeptember 2021 . We anticipate that the final option year throughSeptember 14, 2022 will be awarded to Yield10 during 2021 for total sub-award funding of$2,957 , provided theU.S. Congress continues to appropriate funds for the program, we are able to make progress towards meeting grant objectives and we remain in compliance with other terms and conditions of the sub-award. During three months endedMarch 31, 2021 andMarch 31, 2020 , we recognized$157 and$179 , respectively, in revenue related to this sub-award. 23 -------------------------------------------------------------------------------- As ofMarch 31, 2021 , proceeds of$374 remain to be recognized through the end of the fourth contractual year under our MSU sub-award as shown in the table below. This includes amounts for reimbursement to our subcontractors, as well as reimbursement for our employees' time, benefits and other expenses related to future performance. Remaining amount Total revenue to be recognized Funding Total Government recognized through as of Contract/Grant Program Title Agency Funded Appropriations March 31, 2021 March 31, 2021 Expiration Subcontract from Michigan State Department of $ 2,403 $ 2,029 $ 374 September 2021 University project funded by DOE Energy entitled "A Systems Approach to Increasing Carbon Flux to Seed Oil" Funding from National Research National 39 39 -
Council Canada
(NRC-IRAP) entitled "Innovation
Assistance Program - Round 2.5"
Total $ 2,442 $ 2,068 $ 374
Critical Accounting Estimates and Judgments
The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with GAAP for interim financial information. The preparation of
these 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 condensed
consolidated financial statements for the three months ended March 31, 2021 , are
consistent with those discussed in our Annual Report on Form 10-K for the
year ended December 31, 2020 , 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 March 31, 2021 and 2020
Revenue
Three Months Ended
March 31,
2021 2020 Change
Grant revenue $ 196 $ 179 $ 17
Grant revenue was $196 and $179 for the three months ended March 31, 2021 and
March 31, 2020 , respectively. Grant revenue recorded during each of these
periods was primarily derived from the Company's DOE sub-award with MSU.
We anticipate that MSU grant revenue will fluctuate slightly during the year
ended December 31, 2021 as a result of varying annual budget appropriations
awarded under the MSU sub-award and our application of company resources to the
grant. Our forecast related to grant revenue is subject to change, should we
receive new grants or if our ability to earn revenue from our existing grant is
negatively impacted by the COVID-19 pandemic.
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Expenses
Three Months Ended
March 31,
2021 2020 Change
Research and development expenses
1,387 45
Total expenses $ 2,748 $ 2,847 $ (99)
Research and Development Expenses
Total research and development expenses decreased from $1,460 during the three
months ended March 31, 2020 to $1,316 during the three months ended March 31,
2021 . The $144 , or 10 percent, decrease is primarily due to a reduction in
research and development facility related expenses of $73 and our non-recurring
write off of $141 in leasehold improvements and office furniture during the same
period last year when we amended our Woburn, Massachusetts lease to return
excess space to the landlord. Partially offsetting these reductions in expense
was an increase in employee compensation and benefits of $88 as a result of
higher stock-based compensation and employee payroll expenses.
Based on our current planning and budgeting, we anticipate that research and
development expenses will increase during the year ending December 31, 2021 as
we continue to expand our plant field trials and continue to prepare our
Camelina germplasm for future commercial launch. Our forecasts related to
research and development expenses are subject to change due to the potential
impact of the COVID-19 pandemic, or as new collaborative and other business
opportunities arise that alter our plans.
General and Administrative Expenses
General and administrative expenses for the three months ended March 31, 2021
and March 31, 2020 increased by $45 from $1,387 to $1,432 . The 3 percent
increase, is primarily due to an increase in compensation and benefits expense
of $144 , including an increase in stock-based compensation of $117 as a result
of stock awards issued during the quarter. Professional fees, which includes
legal and accounting services, decreased by $69 during the three months ended
March 31, 2021 compared to the three months ended March 31, 2020 , partially
offsetting the increase in stock-based compensation expense.
Based on our current planning and budgeting, we anticipate that general and
administrative expenses will increase during the year ended December 31, 2021 as
we add regulatory support and senior operations and business development
resources to our Company in connection with the future commercial launch of our
Camelina products. Our forecasts related to general and administrative expenses
are subject to change due to the potential impact of the COVID-19 pandemic, or
as new collaborative and other business opportunities arise that alter our
plans.
Other Income (Expense), Net
Three Months Ended
March 31,
2021 2020 Change
Change in fair value of warrants $ - $ (957) $ 957
Other income (expense), net (1) 33
(34)
Total other income (expense), net$ (1) $ (924) $
923
Change in Fair Value of Warrants
The fair value of the liability classified warrants issued in ourNovember 2019 securities offerings were subject to mark-to-market adjustment on subsequent balance sheet dates. OnJanuary 15, 2020 , we remeasured the fair value of the warrant liability in connection with the Company's 1-for-40 reverse stock split, recording a loss from the change in fair value of$957 . The reverse stock split increased the number of shares of common stock available for issuance resulting in reclassification of the warrants from a liability to equity. 25 --------------------------------------------------------------------------------
Other Income (Expense), net
Other income (expense) for the three months endedMarch 31, 2021 andMarch 31, 2020 was derived primarily from investment income earned from the Company's cash equivalents and investments offset by interest expense and investment management fees incurred during the period. 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 research grants and income earned on cash and short-term investments. Since our inception, we have incurred significant expenses related to our research, development and commercialization efforts. With the exception of 2012, we have recorded losses since our initial founding, including the three months endedMarch 31, 2021 . As ofMarch 31, 2021 , we had an accumulated deficit of$377,661 . Our total unrestricted cash, cash equivalents and investments as ofMarch 31, 2021 , were$22,730 as compared to cash, cash equivalents and investments of$9,702 atDecember 31, 2020 and are held primarily for working capital purposes. As ofMarch 31, 2021 , 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 ofMarch 31, 2021 , we continue to have no outstanding debt. 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, and 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 ofMarch 31, 2021 , we were in compliance with this policy. We anticipate net cash usage during 2021 within a range of$10,000 to$11,000 and estimate that our current cash resources will be sufficient to fund operations and meet our obligations, when due, into the first quarter of 2023. 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 issued. Based on our cash forecast, we expect that our present capital resources will be sufficient to fund our planned operations for at least that period of time. 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 adequate additional funds are not available when required, we may 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. OnMarch 28, 2021 , we filed a shelf registration statement on Form S-3 (File No. 333-254830) with theSEC , which was declared effective onApril 2, 2021 (the "Shelf Registration Statement"). The Shelf Registration Statement contained a prospectus which covers the offering, issuance and sale by the Company of up to a maximum aggregate offering price of$100,000 of our common stock, preferred stock, warrants and subscription rights, which securities may be sold either individually or in units. 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 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. Net cash used for operating activities during the three months endedMarch 31, 2021 was$2,637 , compared to net cash used for operating activities during the three months endedMarch 31, 2020 of$2,288 . Net cash used for operating activities 26
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during the three months endedMarch 31, 2021 primarily reflects the lower net loss of$2,561 , cash payments made to reduce the Company's lease liabilities of$109 and our payment of 2020 bonus compensation of$460 . Non-cash charges offsetting a portion of the net loss include depreciation and amortization expense of$54 , the Company's 401(k) matching contribution in common stock of$44 , stock-based compensation expense of$324 , and non-cash lease expense of$87 . Net cash used for operating activities during the three months endedMarch 31, 2020 was$2,288 and primarily reflects the net loss of$3,600 and cash payments made to reduce the Company's lease liabilities and to pay 2019 bonus compensation of$236 and$344 , respectively, partially offset by non-cash expenses included in the net loss, such as the loss recorded from the revaluation of its warrant liability of$957 , losses from the disposal of fixed assets of$206 , stock-based compensation expense of$137 , and non-cash lease expense of$151 . Net cash of$2,030 was provided by investing activities during the three months endedMarch 31, 2021 , primarily as a result of our receiving proceeds of$3,000 from investments reaching maturity and converting back into cash, partially offset by our purchase of$869 in new investments. During the three months endedMarch 31, 2021 , we also purchased$101 in laboratory equipment, including new plant growth chambers. During the three months endedMarch 31, 2020 ,$215 in cash was provided from investing activities. Net cash of$15,766 was provided by financing activities during the three months endedMarch 31, 2021 , compared to net cash of$928 provided by financing activities during the three months endedMarch 31, 2020 . During the three months endedMarch 31, 2021 , the Company completed a public offering of 1,040,000 shares of its common stock at a price of$12.25 per share, receiving proceeds of$11,993 net of issuance costs of$747 . Also during the three months endedMarch 31, 2021 , a total of 481,973 Series A and Series B warrants issued in the Company'sNovember 2019 securities offering were exercised by warrant holders, providing$3,856 in cash proceeds. During the three months endedMarch 31, 2020 , we recorded cash proceeds of$928 from the exercise of warrants. 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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