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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ý☒ | | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2017;2022
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o☐ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 001-33133
YIELD10 BIOSCIENCE, INC.
(Exact name of registrant as specified in its charter)
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Delaware (State or other jurisdiction of incorporation or organization) | | 04-3158289 (I.R.S. Employer Identification No.) |
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19 Presidential Way, Woburn, MA (Address of principal executive offices) | | 01801 (Zip Code) |
(Registrant's telephone number, including area code): (617) 583-1700
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock par value $.01 per share
| YTEN | The Nasdaq StockCapital Market LLC
(Nasdaq Capital Market) |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o☐ No ý☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o☐ No ý☒
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 ý☒ No o☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 ý☒ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer"filer," "smaller reporting company," and "smaller reporting"emerging growth company" in Rule 12b-2 of the Exchange Act:
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Large accelerated filero | ☐ | Accelerated filero | ☐ |
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Non-accelerated filero (Do not check if a smaller reporting company) | ☒ | Smaller reporting companyx | ☒ |
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If an emerging growth company, indicate by check mark if the registrant elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o☐ No ý
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold on the Nasdaq Capital Market on June 30, 20172022 was $6,559,519.$8,867,945.
The number of shares outstanding of the registrant's common stock as of March 8, 201813, 2023 was 9,865,355
5,074,085.
DOCUMENTS INCORPORATED BY REFERENCE
Pursuant to General Instruction G to Form 10-K, the information required by Part III, Items 10, 11, 12, 13 and 14 is incorporated herein by reference from the Company's proxy statement for the Annual Meeting of Stockholders to be held on May 23, 2018,25, 2023, which is expected to be filed not later than 120 days after the fiscal year end covered by this Form 10-K10-K.
YIELD10 BIOSCIENCE, INC.
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 20172022
INDEX
Forward-Looking Statements
This annual reportAnnual Report on Form 10-K contains "forward-looking statements" within the meaning of 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended.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, the forward-looking statements contained in this document are neither promises nor guarantees. Our business is subject to significant risks and uncertainties and there can be no assurance that our actual results will not differ materially from our expectations. These forward lookingforward-looking statements include, but are not limited to, statements concerning our business plans and strategies; the expected results of our strategic restructuring to focus on Yield10 Bioscience as our core business; expected future financial results and cash requirements; 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 crop yield traits, technologies and intellectual property. 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 and uncertainties associated with our restructuring plans, 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 below under the caption "Risk Factors" in Part I, Item 1A, of this report.
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 Annual Report on Form 10-K to "Yield10 Bioscience," "Yield10," "we," "our," "us," "our company" or "the company" refer to Yield10 Bioscience, Inc., a Delaware corporation and its subsidiaries.
PART I
(With the exception of stock prices and earnings per share disclosures, all dollar amounts throughout this report are shown in thousands unless otherwise indicated.)
ITEM 1. BUSINESS
Overview
Yield10 Bioscience, Inc. ("Yield10" or the "Company") is an agricultural bioscience company focusingfocused on the developmentlarge-scale production of new technologies to enable step-change increases in crop yield to enhance global food security. We consider 10-20 percent increases in crop yield to be step-change increases. According to a United Nations report, food production must be increased by over 70 percent inlow carbon sustainable products from processing Camelina seed using the next 35 years to feed the growing global population, which is expected to increase from 7 billion to more than 9.6 billion by 2050. During that time period, there will be a reduction in available arable landoilseed Camelina sativa ("Camelina") as a resultplatform crop. These seed products include:
•Camelina oil for use as a low carbon biofuel feedstock
•Omega-3 oils for nutrition
•PHA Bioplastics for biodegradable zero waste packaging solutions
The co-product from producing these seed products is Camelina meal which has a protein content of infrastructure growthover 40% and increased pressureis currently approved for use in a range of animal feed rations.
Our commercial plan is based on scarce water resources. Harvestable food production per acredeveloping and per growing season must be increasedreleasing a series of proprietary elite Camelina seed varieties incorporating genetic traits from our development pipeline which are being designed to meet this demand. At the same time, in light of the increasing focus on health and wellness, food safety and sustainability in developed countries,offer improved on-farm performance that we anticipate a rise in demand for new varieties of foodwill lead to increased acreage adoption and food ingredients with improved nutritional properties. Further, concerns about food safety have led to the concept of “seed to plate” or “farm to fork,” with a focus on stringent quality control along the entire value chain. If this concept takes hold with consumers, it is likely to require identity preservation from seed to harvest and involve contract farming. This concept has been implemented in Agricultural Biotechnology ("Ag biotech"), in products such as high oleic canola and soybean. Consumer demand for identity preserved specialty ingredients is also expected to rise, and we believe that Yield10's crop yield technologies and crop gene editing platform could be useful in this emerging field.
The foundation technology ofproduct revenue. Yield10 was based on using two proprietary advanced biotechnology trait gene discovery platforms to improve fundamental crop yield through enhanced photosynthetic carbon capture and increased carbon utilization efficiency to increase seed yield. These platforms are based on the principle that plants which capture and utilize carbon more efficiently will enable more robust crops capable of increased seed yield. Yield10 is working to develop, translate and demonstrate the commercial value of a number of novel yield trait genes from these discovery platforms in major crops. We have also identified or in-licensed a number of genome editing targets for improved crop performance in several key food and feed crops, including canola, soybean, rice and corn. Included in the genome editing targets are several
genes with the potential to increase seed oil content, a key economic value driver in major oilseed crops such as canola and soybean. Yield10 is currently combining the two trait gene discovery platforms to create an integrated system for identifying key plant gene combinations for modification using genome editing to improve crop performance. New tools for genome editing continue to develop at a fast pace and be deployed against known targets which for the most part are focused on changing seed or seed oil composition. However, identifying gene combinations remain an unmet need.
Yield10 Bioscience is headquartered in Woburn, Massachusetts and has an additional agricultural science facility with greenhousesa Canadian subsidiary, Yield10 Oilseeds Inc., located in Saskatoon, Saskatchewan, Canada.
Yield10 BioscienceCamelina, an annual oilseed plant in the mustard family, was foundedselected as Metabolix, Inc.our platform crop based on its unique attributes, including its excellent agronomic traits such as low water and fertilizer input, drought resistance and short life cycle, making it suitable as a rotation crop within the U.S. Northwest and regions of Canada, as well as a relay or cover crop
with corn and soybean in 1992the U.S. Midwest.We estimate there is the potential for over 30 million acres of Camelina production in North America.Camelina, is in the same plant family as canola and originally focusednaturally produces a relatively abundant harvest of oil-containing protein-rich seeds. Camelina is highly amenable to advanced genetic engineering and genome-editing technologies.Over the last twelve years, we have been developing improved Camelina seed varieties through identification and deployment of our gene trait discoveries followed by performance evaluation in field tests.Our new seed product traits include the PHA bioplastic trait developed by us and the omega-3 (EPA, DHA+EPA) oil traits on redirecting carbon flowwhich we secured exclusive rights to a commercial license option in living systems2020.
Our capital light business model is based on contracting with growers to produce Camelina grain using our proprietary Camelina seed. Yield10 will have the exclusive right to purchase the harvested grain from these growers for downstream processing to separate and sell the seed products into the different markets. Our commercial launch plan is to leverage the growing global demand for biofuels to decarbonize the transportation sector, and in particular, the renewable diesel ("RD") and sustainable aviation fuel ("SAF") markets. We recognized early on that we could play an important role in the biofuel value chain through the use of our advanced Camelina platform to address a key industry bottleneck; the significant shortfall in the supply of low carbon intensity feedstock oil. The establishment of downstream value chain partnerships represents a critical step towards enabling Yield10 to scale this business. We expect to build the operating foundation of our products business by securing offtake agreements with downstream oilseed processing/biofuel partners. Sources of revenue from our first Camelina seed product will be based on the financial terms negotiated with these biofuel offtake partners. Here our goal is to link the base oil price for other commodity seed oils, such as soybean, and share in the economic value of the lower carbon intensity score of the Camelina oil. Initial revenue growth from this business will scale up based on increasing the number of acres of our Camelina planted during each growing season. Feedback from our grower outreach has identified weed control and soil residues from the herbicides used on prior crop as key limitations to the adoption of existing Camelina varieties. To achieve our revenue targets, improved Camelina varieties with new genetic traits are being accelerated through our development pipeline in order to offer farmers weed control and a seamless integration into their current crop rotations. We expect to be able to substantiate increasing revenue for our growers by introducing proprietary performance traits from the Yield10 pipeline, including higher seed oil content and seed yield traits that can increase the per acre harvest value of the Camelina grain. Improved grower income is expected to lead to increasing numbers of growers under contract, increased acres planted and higher product revenue and income for the Company.
Advancements in Camelina varieties, seed operations capabilities, grower network and supply chain developed for biofuels and underwritten by biofuel partnerships will position Yield10 for the subsequent launch of its second Camelina seed product omega-3 oils and in the future, PHA bioplastics.
As a first stage in our initial Camelina commercialization, during the third quarter of 2022, we engaged growers in contracts for the production of Camelina grain and Camelina seed having a total acreage of approximately 1,000 acres. These growers are located in the U.S. and Canada with each grower planting between 30 and 160 acres of our WDH2 (winter, cold tolerant) and WDH3 (winter, early maturing) seed varieties, with harvest expected to occur in the summer of 2023. We intend to use the seed harvest for toll crushing and further seed production that will provide us with seed inventory for future grower contracts during 2023 and beyond. Also, during 2022, we contracted with other growers to plant our E3902 (spring, high oil yield), WDH2 (winter, increased cold tolerance) and WDH3 (winter, early flowering) Camelina plant varieties to produce commercial planting seed. This activity is an essential part of our business model to produce commercial seed inventory for future grower contracts. We expect future grower contracts to cover Camelina grain production for large-scale grain processing to supply low-carbon intensity feedstock oil for the biofuel market and high-protein meal for the animal feed market.
We are currently pursuing the development of elite Camelina germplasm exhibiting herbicide tolerance, disease resistance and other traits that we believe in the near future, will form improved elite Camelina varieties for the biofuel market and will later be combined with the new seed product traits in development to expand our markets. We ultimately expect to have three types of elite Camelina seed varieties in contracted production to address our product markets.
We believe the market opportunity for biofuel feedstocks from our elite Camelina varieties, as well as our other proprietary seed products in development, including performance traits for use in other crops, is significant.We are targeting uses for our Camelina seed products in commercial applications such as: low-carbon feedstock oils for renewable diesel and sustainable aviation fuel, PHA bioplastics, and biobased chemicals. omega-3 oils for aquaculture and nutrition.In 1997, Metabolix startedJuly 2022, we signed a crop science research programnonbinding memorandum of understanding ("MOU") with the intentMitsubishi Corporation to produce the microbial bioplastic polyhydroxybutyrate (“PHB”) in high concentration in the seeds of oilseed crops or in the leaves of biomass crops where it acts as an additional carbon sink or carbon store. As we made progress on our crop program, we learned that the rate of carbon supply from photosynthesis was insufficient to support both plant growth and polymer production, so we initiated a series of exploratory programs to develop new technologies to fundamentally increase the plants’ ability to fix and capture more carbon. These early research programs resulted inevaluate the establishment of a partnership to supply, offtake and market Camelina as a low-carbon feedstock oil for biofuel, and in February 2023, we signed another nonbinding MOU with American Airlines to collaborate in the development of the value chain for Camelina
as a low-carbon feedstock oil for sustainable aviation fuel. We believe performance traits from our cropgene discovery and development platform (the "Trait Factory") and value-added product strategy will provide strong differentiation for Yield10's elite Camelina seed varieties, making them preferred by growers to address large product market opportunities as illustrated below. These traits will also be made available to leading seed companies for use in other crops to create licensing revenue.
1.Internal Company estimates of 2030 product revenue potential.
Our Camelina platform and each of our seed product targets are well-aligned with global trends in reducing carbon emissions and improving sustainability, including the need for:
•Producing low-carbon intensity biofuel feedstock oil for renewable diesel and aviation biofuel.
•Increasing the production of cover crops to reduce the climate change impact from agriculture.
•Producing PHA bioplastics to enable single use food service items and packaging with zero waste.
•Increasing global food security by:
◦producing land-based omega-3 (EPA, DHA+EPA) fatty acid oils for use in aquaculture and nutraceuticals;
◦increasing high quality protein production from Camelina seed; and
◦developing performance traits to increase yield and/or seed oil per acre for major food crops.
We have a pipeline of more than 10 novel yield and/or seed oil content performance traits currently in research and development. Today, we also have research agreements in place for a number of our yield trait gene discovery platformscandidates, including agreements with GDM Seeds (“GDM”) and the identification of a series of promising proprietary yield trait genes.
Based on encouraging early results from these gene discovery programs, we refocused our crop science efforts to yield improvement in major food and feed crops in 2015 and rebranded the effort as Yield10 Bioscience. In 2016, we sold our biopolymers assets and restructured theJR Simplot Company around our crop science mission. In January 2017, we completed this transition and changed the name of the company to Yield10 Bioscience, Inc. We are developing proprietary, breakthrough plant biotechnologies to improve crop productivity and seed yield based on two proprietary discovery platforms:
the “Smart Carbon Grid for Crops Platform,” - in which we are working to eliminate bottlenecks in plant photosynthesis and carbon metabolism by harnessing new metabolic capabilities from non-plant systems including microbes and algae, and;
the “T3 Platform,” - in which we have identified three powerful global regulator genes in plants which control complex regulatory networks and gene cascades resulting in step-change increases in photosynthetic carbon fixation and biomass yields.
In our work to date, our team has demonstrated step-change yield increases in Camelina and canola seed production and in switchgrass biomass production. We(“Simplot”).These companies are currently progressing the development of our lead yield trait genestraits in soybean and potato.Our plan is to support these licensees as they work to generate proof points using our traits in their crops of interest.We also plan to find partners for our traits in canola, soybean, ricecorn and corn to provide step-change crop yield solutions for enhancing global food security.other crops as we generate additional data and new trait leads using our Trait Factory.
With these two platforms, we have established a series of proprietary trait genes to enhance carbon dioxide capture and fixation in both C3 and C4 photosynthetic plants for yield improvement. C3 photosynthesis, the simplest type of plant photosynthetic system, exists in most agricultural crops used for human consumption, and includes canola, soybean, rice, wheat and potato. C4 photosynthesis is a more complex system. Plants using the C4 system have evolved an additional distinctive cellular structure, in which carbon dioxide is concentrated for the main photosynthesis enzyme RUBISCO through a series of metabolic and metabolite transports known as the C4 pathway. Corn, sorghum and sugarcane are part of the C4 photosynthetic plant family. In general, C4 photosynthetic plants have inherently higher yield than plants in the C3 photosynthetic family. This difference in plant yield is a result of evolution, which has led plant scientists to consider the possibility that new genetic enhancements can be created to fundamentally improve the photosynthetic system in C3 plants.
We are currently integratingbuilding an intellectual property portfolio around our two technology platforms into a next generation platform (“GRAIN”) with the objectivecrop technologies and traits.As of creating a predictive toolDecember 31, 2022, we own or hold exclusive rights to identify combinations of plant gene modifications (“Smart Targets")19 patent families, including 15 issued patents and 41 pending patent applications, related to advanced technologies for improvement of any aspect ofincreasing crop performance. We envision that GRAIN will be a powerful tool for further optimizing the seed yieldperformance and seed oil contentcomposition traits we currently have in developmentoils and for identifying new gene targets. Successes in Ag biotech, based mostly on innovations from the 1990’s, were achieved by introducing single microbial genes into crops to add new functionality such as herbicide tolerance or pest resistance. Over the last 20 years, the Ag industry majors have made significant investments in testing thousands of single plant genes and have generated billions of data points from these studies as well as traditional breeding programs. However, there have been very few new Ag biotech traits launched during that period indicating the need for multi-gene solutions. This conclusion is supported by the fact that domestication of modern corn from the ancient teosinte plant was due to changes in the activity of 5-6 regulatory or transcription factors genes over a period of 9,000 years. Plant scientists now have powerful genome editing tools, such as the CRISPR/Cas9 system which enable multi-gene changes to be made in major crops; the challenge is knowing what combinations of genes to edit. The 2016 corn harvestPHA bioplastics, in the United States and throughout the world. As part of our agreement with Rothamsted Research Limited ("Rothamsted"), we have an exclusive option to license two patent families, including six issued patents and four pending applications, including both the original patent filing for the production of EPA, DHA+EPA oil in Camelina and for an improvement patent filed after the agreement was valued at around $50 billion. signed.In November 2022, Yield10 and Rothamsted agreed to extend the exclusive option and license agreement until December 31, 2023.
The recent breakthroughs in genome editing now makeUnmet Need: Global Food Supply, Reducing Carbon Emissions and Producing Sustainable Products
significantly increasing, and perhaps doubling corn yield an achievable goal, if we knew what 5-6 genesAccording to change. In the absence of this knowledge, however, we are left with the technically unrealistic prospect of experimentally testing every combination of genes. For example, testing just the 2,400 predicted gene regulators or transcription factors of corn with a single type of change in all possible pairs would require almost 3 million experiments.
There is clearly an unmet need to create advanced computational tools like GRAIN for predicting the right combinations of plant genes to modify for improvement of crop performance. There are two key components in plants, metabolic pathways and gene regulators called transcription factors. We find it useful to compare the flow of carbon through a plant to the flow of traffic in a major city. Using this analogy, metabolic pathways constitute the carbon conversion "infrastructure" and transcription factors constitute the genetic “traffic” lights that direct changes in plant metabolism in response to environmental or developmental conditions. Our “Smart Carbon Grid for Crops” metabolic engineering platform has already proven useful in identifying a number of studies, including a report entitled “The Future of Food: Complexities and Compromises,” published December 6, 2020, by Morgan Stanley, the world's agri-food system needs to transform in order to produce 50% more food, eliminate malnutrition and cut 13 gigatons of greenhouse gas emissions by the year 2050. Agriculture will also need to become a source of low-carbon feedstocks for fuels, chemicals and plastics.This will result in a significant increase
in demand for feed grains, seed oils, protein, and farmed seafood with an increasing emphasis on sustainable growth metrics and climate change, as highlighted in the Morgan Stanley report.
Regulatory Incentives to Reduce Carbon Emissions:Converting biomass feedstocks to biofuels is an environmentally friendly process.When renewable biodiesel is used instead of traditional petroleum diesel, it helps reduce carbon emissions.Camelina oil has a particular advantage because of its low carbon footprint.The regulatory environment for carbon emissions is rapidly changing.Currently, there are existing regulatory incentives from regional greenhouse gas reduction mandates established for fuel producers.This includes California's Low Carbon Fuel Standards market, which measures the specific carbon index, or CI, of every type of fuel, assigns a credit/deficit for every gallon of fuel produced based on its CI, and requires all fuel producers selling into California to purchase enough credits to keep their portfolio CI score below an established baseline.Biofuel manufacturers are highly motivated to utilize compatible feedstocks with a low-carbon footprint in order to meet the regulatory standards to lower carbon emissions. As a benchmark, petroleum diesel has a reported CI of 100, soybean oil has a CI of 56, and in the case of Camelina oil, Sustainable Oils, a subsidiary of Global Clean Energy Holdings, Inc., recently reported a CI of 23.
Renewable Diesel and Sustainable Aviation Fuel: As part of the energy transition, a substantial increase in renewable diesel capacity in the United States and Canada is currently underway, with proposed and funded renewable diesel facilities having a total capacity of over 6 billion gallons of biofuels per year.Renewable diesel expansion has surged due to its low carbon footprint, federal and local subsidies, and its ability to be used as a drop-in replacement for petroleum diesel.Renewable diesel feedstock is supplied primarily from used cooking oil, animal fats (e.g., tallow), and vegetable oil, with the former two feedstock sources in short supply due to limited production capacity. Yield10 therefore expects the increase in demand for renewable diesel feedstock over the next few years will be filled by vegetable oils, which have a current global production and consumption demand of 50 billion gallons per year.Moreover, a third of vegetable oils produced globally today are palm oils, which do not qualify for many biofuels subsidies because of their high carbon footprint.Numerous studies and regulatory approvals have shown Camelina oil’s usefulness as a low-carbon feedstock oil for renewable diesel and sustainable aviation fuel.Residual Camelina protein meal remaining after oil extraction using cold crushing has been approved by regulatory authorities for use in animal feed applications in the U.S. and Canada.Camelina’s low-carbon footprint, and ability to be grown as a cover crop on otherwise fallow land, makes it an attractive choice to fill the renewable diesel feedstock supply gap.Based on the assumption of 60-100 gallons of Camelina oil per acre, 1 billion gallons of feedstock oil would require 10 to 15 million acres of Camelina production.When we later launch our C3000 serieselite PHA Camelina product, we estimate Camelina acreage could more than double.For comparison purposes, canola is currently grown on approximately 20 million acres per year in Canada.Although we have described the case for renewable diesel, feedstock demand for biodiesel and renewable aviation biofuel may also increase demand for Camelina oil.
Cover Crops: To meet growing demand for oils and protein, and to mitigate the negative environmental impacts of traits,current farming practices, particularly in the corn belt, the development of cash cover crops or relay crops is another means to increase land productivity and address growing demand.Cover or relay crops are planted between harvest and sowing of major commodities, such as soybean, in effect increasing the number of harvests per growing season.Yield10 believes that Camelina, with its short growing season, has considerable potential to be used as a cover crop to reduce soil erosion, improve soil quality, and control diseases and pests and nutrient run-off from land that is used for row crop production. Camelina can also be used in crop rotation with other crops such as wheat, cereals, corn and soybean. Third party estimates indicate that Camelina has up to 30 million acres of potential as a cover crop in the United States midwest, and we believe that the product value-add from Yield10’s proprietary products will be a key differentiator for farmers making planting decisions.We plan to evaluate the CI of Camelina oil from cover cropping where we anticipate there may be further CI improvements from the positive environmental impact of cover cropping in general, although this remains to be demonstrated.
PHA Bioplastic, Alternatives to Plastic: Global plastic production today is estimated at 380 million tonnes per year.The largest market for this plastic is for packaging materials and food service items, which accounts for nearly half of all plastic waste generated globally, most of which is never recycled or incinerated.As a result, there is growing pressure from consumers, major brand owners and the “T3 Platform,”financial sector to develop alternative materials and alternative end-of life solutions for plastics.This has resulted in additional capital investment to produce compostable materials like polylactic acid ("PLA") and fermentation based PHA bioplastics.PHA bioplastics are natural microbial high molecular weight polymeric storage
polymers.The value chain from microbial production to plastic product manufacturing, performance in use and end of life based on mining transcription factor network data sets identified our C4001, C4002natural biodegradation has already been validated.PHAs can be recovered from the microbes which produce them, processed into standard plastic pellets and C4003 global transcription factor gene traits. These gene traits enabled usused in existing plastics processing equipment to engineer switchgrass plants with high ratesmake a range of photosynthesisfood service items and increased biomass yield. We are currently repeating our work with C4001 and C4003 in rice and wheat and plan to do so in corn.
GRAIN is an integrated platformpackaging product forms.The commercialization of PHAs based on key elements of our “Smart Carbon Grid for Crops” metabolic engineering platformfermentation technologies continues to receive considerable investment, even though this approach has very high capital investment and our “T3” platforms. Advanced metabolic flux analysis forms the foundation of the GRAIN platform we are developing based on Yield10 scientists unique 20-plus years of experience successfully deploying advanced metabolic flux analysis to address critical bottlenecks in carbon metabolism. Plant growth at its core is a series of chemical reactionsoperating costs that will limit supply and these can be modeled to determine the best ways to optimize the yield of the targeted end product. Advanced metabolic modeling based on flux-balance analysis and enzyme reaction thermodynamics and kinetics enables us to make predictions about which reaction modifications are most likely to achieve targeted performance improvements. However, as with all modeling approaches, the tool is only useful alongside the means and the data to test it in real plants. Here Yield10 makes use of metabolic and transcriptome data generated from its high-photosynthesis, high-yield engineered plants as well as from academic publications and other public data to project optimal gene targets for modifications. By integrating the transcriptome network capabilities of the T3 Platform, we expect to be able to identify transcription factor genes whose activity profiles can be altered to optimize multiple steps in metabolic pathways or the flow of carbon in plant tissues of interest. In a crop like modern hybrid corn, which already produces vastly more seed than it needs to reproduce, our initial objective is to reduce or even eliminate the activity of the transcription factors that restrict further seed production. Accordingly, our approach is to turn down the sequence of transcription factors (or “red lights”) which block the plant from sending more carbon to the seed.
Based on elements of the GRAIN platform that we are already working on, we have identified the C4004 - C4027 series of transcription factor genes that are down-regulated in our high-photosynthesis engineered switchgrass plants as well as a number of new gene targets related to our lead C3003 yield trait. In many cases these gene targets can be modified by genome editing, opening the potential for the traits to not be regulated by USDA-APHIS, or in some cases, genes from the microbial world can be introduced to develop regulated traits. We believe our integrated GRAIN platform can be leveraged in the near term to secure research and development funding from industry partners.
We have consolidated our crop science intellectual property position with 15 patent filings in prosecution, identified additional novel gene targets for improving crop performance and yield through genetic engineering or genome editing, formed a scientific advisory board with leaders in plant science, conducted several greenhouse studies and conducted two years of Fast Field Testing of traits from our “Smart Carbon Grid for Crops” discovery platform. We have reported encouraging data for our lead yield trait gene, C3003 in field tests of Camelina and canola and are conducting additional studies in Camelina, canola, soybean and rice.
In 2017, we intensified our efforts to evaluate genome editing targets for improving seed yield, seed composition and/or biomass yield in commercial crops. market penetration.We believe that strategies basedin longer term, the direct production of PHA bioplastics in Camelina seed would represent a disruptive manufacturing technology for PHA bioplastics due to its significantly lower production costs and very large-scale potential.This opportunity could provide significant additional economic returns for farmers and would justify large acreage adoption of elite PHA Camelina as a cover crop and would support broad adoption of PHA Camelina materials for large markets including water treatment and sustainable biodegradable plastics replacement applications.
PHA Bioplastic, Water Treatment: In water treatment, the PHA biomaterial acts as a growth substrate and energy source for the denitrifying of bacteria, which convert nitrate, a primary cause of water pollution and algal growth, to nitrogen gas, which returns to the air.This application is technically straight-forward, requiring only the production and shipment of PHA biomaterials in pellet form.The model for this business is to supply the continuous replenishment of the PHA pellets.We believe that this application is less demanding on C3004,the purity and quality of the PHA produced and represents a trait that complements C3003, and on C3007, an oil content boosting trait that we have an option to in-license from the University of Missouri, have the potential to provide afavorable technical path to initial commercialization based on achieving “nonregulated” status from United States Department of Agriculture - Animal and Plant Health Inspection Service ("USDA-APHIS"). If this status is achieved, this could significantly reduce the time and cost of launching new yield traits. We achieved this status for PHA Camelina.This application may also serve as a genome edited Camelina line in 2017 through a submission to USDA-APHIS. We developed this genome edited Camelina line together with our wholly owned Canadian subsidiary, Metabolix Oilseeds, Inc. Researchers used the CRISPR genome editing tool to inactivate an enzyme expected to increase seed oil content in Camelina, a trait we have designated as C3008. This trait may have further applications when used in combination with other traits that we are developing that are expected to increase seed oil content. We are currently evaluating combinations of the genome editing targets to optimize oil content in Camelina and
canola, and plan to do so in soybean with the objective of achieving non-regulated status from USDA-APHISmarket for additional plant lines. In addition, we are advancing research with a number of genome editing targets which could provide new strategies to increase biomass yield in forage and other crops.
In our 2017 fast field test program conducted at two sites in Canada, we tested both first and second generation versions of C3003 in Camelina as well as first generation C3003 in canola, an important North American oilseed crop. In the field tests, we monitored key agronomic and growth parameters of the plants throughout the field test and collected yield data including yield of seed per area planted, individual seed weight, and seed oil content in our transformed plants as compared to control plants. In January 2018, we reported encouraging results from our field tests of the C3003 gene in Camelina and canola. The main objectives of the studies were to evaluate the performance of C3003 in Camelina and canola using different genetic constructs, which are used to optimize when and wherePHA produced in the plantfuture for bioplastic applications, which do not meet the geneproduct specifications or ultimately as a way to generate value by “upcycling” post-consumer PHA bioplastic.Yield10 is activated to providein the best performance. Yield10 researchers transformed plants with genetic constructs intended to optimize expression of C3003 during differentearly stages of plant and seed development and tested these events indeveloping the field tests.business model for this opportunity.
Omega-3 (EPA, DHA+EPA) Oils:The best events for second generation C3003 in Camelina produced improvements in seed yield (up to 7.7 percent), harvest index and overall agronomic performance as compared to control plants. Harvest index, the ratio of seed to biomass (leaf, stems) is a critical parameter for improving seed yield and increasing harvest index is one of the major objectives of our technologies. The best events for first generation C3003 in canola produced improvements in seed yield (up to 13.1 percent) as compared to control plants. The studies also met the objective for bulking up seed to enable further evaluation of C3003 in Camelina and canola in field tests planned for spring 2018. A new second generation construct using a different seed specific promoter was tested in the minicage plots, used for seed bulk up, and produced plants showing indications of strong agronomic performance and seed yield which we plan to explore further in our 2018 field tests.
According to the National Oilseed Processors Association, soybean is the leading North American oilseed crop. Accordingly, we accelerated deployment of both first and second generation C3003 into soybean in 2016 and through a collaborator generated early greenhouse data in late 2017. Preliminary observations with a small number of lines suggest that results for C3003 previously obtained in Camelina and canola are translating into soybean. Consistent with previous results, first generation C3003 produced seeds with lower individual weight while typical individual seed weight was observed with second generation C3003 in soybean. Further, our greenhouse results show that there is an increase in branching in the plants for some of the events tested. We believe this is significant because more branching provides more sites on the soybean plant for seed pods to develop. We expect additional development workaquaculture sector will continue in soybean during 2018.
In 2017, we granted a non-exclusive research license to Monsanto Company to evaluate our novel C3003 and C3004 yield traits in soybean. Under the license, Monsanto has the non-exclusive right to begin work with C3003 in its soybean program as a strategy to improve seed yield. Monsanto also may conduct research with our C3004 yield trait, a trait accessible through genome editing, in combination with C3003 to evaluate the effect of the combination to improve seed yield in soybean.
Results from our studies with C3003 to date suggest that it may provide an entirely new strategy to improve seed yield in oilseeds and other C3 photosynthetic crops by bringing in unique metabolic functionality from non-plant systems. We plan to continue to generate data on C3003 in field tests and greenhouse studies in 2018.
Metabolix Oilseeds, Inc., signed a two-year collaboration with the National Research Council of Canada in 2017 to improve yield and drought tolerance in wheat. The collaboration will focus on new trait discovery in wheat using our T3 Platform technology. Under the collaboration, we will provide access to our proprietary C4000 series of traits, which include global regulatory genes, or global transcription factors (“GTFs”). We have shown that these GTFs have the potential to significantly increase photosynthesis and yield in certain crops. Research with the C4000 series of traits will allow the discovery of additional gene targets in wheat that could enhance the yield and/or drought tolerance of the crop. Wheat is a major global staple food crop where significant yield increases could play a major role in feeding the world.
In 2017, we were selected as a subawardee on a new U.S. Department of Energy (DOE) Grant to conduct research aimed at boosting oilseed yield in Camelina. The 5-year, $10 million grant, which was recently awarded to Michigan State University (MSU) will be led by MSU and will involve a multidisciplinary team of researchers from MSU, North Carolina State University and Yield10 Bioscience as the industry partner. Under the grant, the team of scientists will integrate metabolic and gene expression models to predict in detail the gene combinations and pathways used by the Camelina plant to convert sucrose, the primary product of photosynthesis, into oil. Our work under the award will involve the use of our T3 gene discovery platform to identify novel global regulatory genes that are designed to increase oil and seed yield. The identification of new genetic targets to boost seed yield in Camelina may allow for the broader cultivation of Camelina for commercial use, and may have further application to other oilseed crops, such as canola and soybean.
Crop yield is the primary driver of the agriculture value chain. Yield can make the difference between a profitable season and losses for growers. As such, technologies to protect crop yield or increase it are the primary determinant of the seed buying decision by growers at the start of the season. This in turn determines both revenue and market share for the major seed players. Yield10’s goal is to discover, optimize and translate our yield trait gene innovations into major food and feed crops and demonstrate the economic value to growers and seed companies. In all cases our trait genes will be introduced using genetic engineering technologies either to introduce new genes, to introduce additional copies of genes from the same crop species with modified regulatory sequences from that crop species or by using genome editing technologies to reduce or eliminate the function of specific plant gene targets in individual crops. The method by which we deploy our yield trait genes has significant regulatory implications, which, in turn can affect the timelines and cost of their commercialization. We intend to create high-value assets in the form of proprietary yield gene technologies and to de-risk these assets by progressing them along the path to commercial development with increasingly larger scale field tests and multi-site field trials in major crops. We are deploying our yield trait genes into canola, soybean and corn. We are engineering these traits into the major crops with the goal that they will be suitable for the regulatory approval process and in crop varieties (germplasm) such that our traits can be readily introduced into the industry’s elite crop lines by plant breeding.
The Unmet Need: Global Population Growth Outpacing Anticipated Global Food Supply
Yield10 is targeting a critical unmet need in agriculture based on the future disconnect between agricultural supply andmeeting the growing global population. According to a United Nations study, the global population is expected to exceed 9.6 billion people by 2050 and therefore there is a need to increase global food production to meet this demand. Thisdemand for fish, an important high value protein source in human diets.Sustainable land-based sources of key feed ingredients will need to be achieveddeveloped and adopted to support this demand.This includes high value specialty ingredients, including in the faceparticular new sources of increased pressure on land and water resourcesomega-3 oils to replace oil from stagnating supplies of ocean-harvested fish used in additionfeed production.Fish oil supplied from ocean-harvested fish is particularly important for farmed salmon.The Atlantic salmon aquaculture sector is expected to increasingly variable weather patterns. Solving this problem is a major global challenge requiring new crop innovation and technologies to fundamentally enhance crop productivity.
grow at 4% CAGR through 2026, reaching an annual harvest of over 3 million tonnes.The Yield Gap
According to several studies described in an article published in the Public Library of Science in 2013, crop yields may no longer be increasing in different regionsgrowth of the globe, and current rates of crop yield increasesalmon farming sector along with additional demand from new nutraceutical markets for direct human consumption are expected to fall significantly behindexceed the levels neededworld's sustainable supply.In 2021, 4.7 million metric tonnes of fish feed was used globally for salmon aquafarming.Although it can vary by geographic location, during 1990 fish oil represented 24% of the contents making up fish feed. This equates to meet2,487 million pounds of oil (fish and other sources of omega-3 rich oil) consumed annually in salmon feed production. Some industry experts predict the demand for global food production. The researchers found that the top four global crops - maize (corn), rice, wheat and soybean - are currently witnessing average yield improvements of only between 0.9 to 1.6 percentomega-3 will increase by more than 7% per year far slower thanover the required rates to double their production by 2050 solelynext 5 years. The demand from incremental yield gains. At these rates, global production of maize, rice, wheat and soybean crops may be required to increase by about 67 percent, 42 percent, 38 percent and 55 percent, respectively, by 2050, in order to meet the anticipated increase in demand for food production caused by population growth. For corn and soybean, the benefits of currently available Genetic Modification ("GM") traits were already factored into the data cited in the studies referenced above. The yield increases needed to meet the demands of the growing global population show that a significant “yield gap” exists for each of the crops evaluated in the study.
Yield10 is focused on addressing the yield gap for major crops by utilizing modern biotechnology strategies, including metabolic engineering (synthetic biology approaches) to “build better plants,” in which technology is deployed to make the process of photosynthesis within plants more efficient at capturing atmospheric carbon and depositing that carbon in seed or biomass, with the effect of improving the overall yield of important food crops. Enhancement of the photosynthetic capacity of major crops is fundamentally important to crop science and an essential first step to increase the seed and/or biomass yield of plants and, therefore, food production. We have been working in the area of increasing photosynthetic carbon capture and crop yield technologies since 2012. As a result, we have identified a number of exciting genes for increasing yield or improving crop performance.
Health and Wellness, Food Safety and Sustainability
At the same time, in light of the increasing focus on health and wellness, food safety and sustainability in developed countries, we anticipate a rise in demand for new varieties of food and food ingredients with improved nutritional properties. Further, concerns about food safety have led to the concept of "seed to plate," with a focus on stringent quality control along the entire value chain. If this concept takes hold with consumers, it is likely to require identity preservation from seed to harvest and involve contract farming. This concept is currently being implemented in Ag biotech, in both canola and soybean which have been modified to alter the composition of the oil produced. High oleic canola and soybean oils are being marketed as a "healthier" approach which will typify this space where the value driver is the ability to make marketing claims directly to the consumer. Consumer demand to be able to identify preserved specialty ingredientssalmon farming alone is expected to rise,grow by approximately 4% per year going forward, according to the 2022 Salmon Farming Industry Handbook. Fish oil is also the key raw material source for producing purified omega-3 fatty acids for the growing use of these omega-3 acids in the nutrition, nutraceutical and pharmaceutical markets.
High Protein Meal: There is a growing global demand for additional protein sources for animal feed and food applications. Camelina seed can be processed using existing oilseed processing facilities to extract the oil, and the residual meal that remains is a high-quality protein.On a dry basis, the meal contains approximately 30-35% protein with a good amino acid profile for animal feed applications.Camelina meal has been approved for use in some animal feed applications, and we believeexpect that Yield10's crop yield technologieswith additional accelerated breeding using genome editing, the meal quality can be further enhanced to further improve its feed value and crop gene editing targets could be useful inexpand this emerging field. Yield10application.
believes that these types of small acreage specialty crops have the potential for a broader range of partner prospects along the entire value chain.
Business Strategy
Our goal is to build a successful agricultural biotechnology company centered on demonstrating the value ofTrait Development and Licensing: Using our yield traits in major food and feed crops. WeGRAIN system, we have identified and are evaluating novel yield trait genes to improve the field performance of Camelina that we have discovered usingwill be used in our two technology platforms. We believe we have extensive and unique metabolic engineering capabilitiesproducts business.These traits will be made available to leading seed companies for use in other crops to create licensing revenue.
Business Strategy
In defining our business strategy, it is important to understand that can be deployed to help address the growing global yield gap in food and feed crops. As the primary driver of financial returns each season, crop yield is the key decision variable for farmers in making seed buying decisions, and as a result is critical to the seed industry. Improvements in yield to the levels targeted by Yield10, for example 10-20 percent increases, can be expected to generate significant value to the seed and crop industry. For example, Yield10 is targeting an approximately 20 percent increasenot a seed company in canola and soybean yields, which, if successfully deployed across North American acreage, would result in annual incremental crop valuethe traditional sense of $10 billion. By ultimately increasingdeveloping new seed varieties solely for sale to growers. Our goals are to 1) commercialize a series of seed products
based on developing proprietary varieties of Camelina seed for contract production, the output of which will enable the supply chain for our seed products, and 2) license our yield and seed oil content gene traits to major seed companies for other crops including corn, soybean and canola.Although our Camelina products will address key sustainability drivers, we believe they should reward farmers and increase profitability across the value chain.We also believe that any sustainability benefits will provide a marketing advantage for our future customers along with a potential upside from any available government credits.We also plan to continue to seek non-dilutive financing opportunities from government grants and funded partnerships.Although our Trait Factory may enable multiple commercial opportunities going forward, we will maintain our capital efficient approach, focusing internal resources on developing elite varieties of Camelina germplasm for biofuel feedstock, omega-3 oils and PHA bioplastics.Although we have relied primarily on Rothamsted to continue to develop and improve the omega-3 oil trait for Camelina, during 2023 we expect to become more directly involved in establishing the path to commercialization.Given our focus on establishing and growing our Camelina seed products business, we plan to rely on granting research licenses to interested seed companies for the development of our traits in the major food crops.Using this approach, we are developing the following three potential revenue streams:
•Camelina grain production to be sold into the biofuel oil markets; including the low carbon renewable diesel feedstock and feed cropsthe sustainable aviation fuel markets;
•Omega-3 Camelina grain production for high EPA omega-3 oil for nutrition and potentially reducing strainspharmaceutical markets; and
•R&D revenue from government grants and/or partners.
Target Crop:The Oilseed Camelina
Camelina was grown extensively in Europe, Russia and Central Asia since medieval times for oil and protein but was replaced by cultivation of rapeseed during the 1940s. Camelina has the potential to replicate the development of modern canola from rapeseed on scarce natural resources, we believe that Yield10’san accelerated timeline based on modern biotechnologies, both components of our Trait Factory.Starting in the 1960s, the breeding of canola from rapeseed to the first generation was not completed until 1982, and was based on improving the oil for human consumption (low euricic acid in oil) and improving the protein meal (low glucosinolates) for use in animal feed.This was followed by incorporating herbicide tolerance and hybrid technologies will also contributein the 1990s.Today, canola is grown on 20 million acres in Canada and is estimated to addressing global food security.generate around $25 billion for the Canadian economy, according to the Canola Council of Canada.
RecognizingCamelina has not been subject to intensive plant breeding efforts or crop production improvements, so the highly concentrated naturefull potential of this crop has not yet been achieved.Initial interest in using Camelina oil in biofuels resulted in additional investment in the development of the crop in North America.This work demonstrated that Camelina has several beneficial attributes; it is amenable to production practices used for canola, grows on marginal lands, has enhanced drought and cold tolerance, demonstrates early maturation and requires fewer inputs than other oilseed crops.Camelina is also naturally resistant to diseases that impact canola and its fast growing cycle makes this crop suitable for spring and winter planting in the Northwest U.S. and into Canada as an alternative rotation crop where the relatively overall short growing season would make double cropping very challenging. Further south, the longer overall growing season in the upper mid-west together with Camelina’s short growing season makes it an attractive winter oilseed for relay or cover cropping in corn and soybean rotations. Although the double cropping scenario is where we see the greatest long-term potential for Camelina, our current varieties and capabilities are better positioned for the initial commercial launch geography in the Northwest U.S. and western Canada.
Our vision is to complete development of Camelina lines containing herbicide tolerance ("HT") and downy mildew resistance ("DMR") traits, and to combine these new lines with our proprietary performance traits to increase Camelina seed business,oil content and yield for the prevalenceexisting oil and protein meal markets. We recognized early on the need to develop Camelina lines optimized for seamless integration into both crop and chemical rotations in our target geographies. For the Northwest U.S. and Canada, the herbicide tolerance traits selected for accelerated development were chosen to address critical farmer issues in our launch geography. The first requirement is for broadleaf and grassy weed control. An ideal herbicide trait package for growers would have the following key elements:
•Control of cross-licensinggrassy weeds (GW-HT)
•Control of broadleaf weeds (BW-HT)
•Tolerance to soil residues of Group 2 herbicides of which there are two different types: sulfonylureas (SU-HT) and imidazolonones (IMI-HT) when combined SU/IMI-HT.
Camelina is already naturally tolerant to the grass herbicide Clethodin, so there is no need to develop traits in Camelina to provide tolerance to the chemical.
The BW-HT trait offers farmers an important tool for fighting broadleaf weeds that, if left uncontrolled, can reduce crop yields significantly and increase weed pressure on that land for subsequent crop plantings. Building on encouraging field trial results generated in the spring of 2022, we conducted contra-season field tests of our lead BW-HT trait in Camelina which also demonstrated herbicide tolerance. To speed up development we also selected potential commercial Camelina BW-HT lines displaying strong tolerance to the herbicide with no impact on seed yield for seed scale-up activities to produce seed for larger field tests planned for the spring of 2023.Our goal is to have elite HT Camelina varieties entering commercial production in the next few years followed shortly thereafter by triple stacked commercial BW-HT/SU/IMI-HT Camelina varieties.
SU-HT and IMI-HT are being developed to enable Camelina to be tolerant to Class 2 herbicides commonly used in that region for certain cereals and other crops. These weed control chemistries persist for longer in the soil which results in plant back restrictions for the next crop in the rotation and in some cases, this can be up to two years. Camelina is very sensitive to these herbicide residues which can prevent seed emergence and severely impair seed yields. Based on discussions with farmers we know the stacked HT/SU/IMI-HT trait package will be an important enabler for large acre adoption in this region.For these reasons we are advancing the development of Camelina lines with stacked HT/SU/IMI-HT traits. These traits and the needavailability of Clethodin for grassy weed control will provide Yield10 with an ideal herbicide package for the chosen commercial launch region.Greenhouse studies have already identified lead candidate lines with the stacked herbicide requirements and we are in the planning process to stack multipleenable initial field trials in 2023.
Downy mildew is a common name for a widespread plant disease (pathogen) that if left uncontrolled, can generate significant losses in crop yields.In the near-term there are fungicide treatments that can control downy mildew disease. However, this approach adds grower cost so we are also developing genetic solutions using breeding,genetic modification and genome-editing to incorporate DMR traits into the plants.Development of our elite Camelina lines with HT and DMR traits is an important criteria needed for broad-based commercial acceptance of our Camelina plant varieties.
In the longer term, we believe optimizing the production of the PHA bioplastics in elite seed germplasm to provide the best options for farmers forCamelina will enable large acreage commodity crops, Yield10 does not expectproduction, initially in spring varieties, and over time, in winter varieties for use as a cash cover crop.Some estimates from the United States Department of Agriculture ("USDA") indicate a potential of up to become an integrated seed company. The current major seed players dominate the GM crop space based largely on the early technology innovations that resulted in herbicide and pest resistance traits and have a very successful operating track record30 million acres of Camelina in the sector. Therefore, rather than replicating the downstream elements of these operations and developing our own regulatory, crop breeding or seed production capabilities, we intend to seek industry collaborations and partnerships to leverage these existing core competenciesupper corn belt of the current seed industry. Yield10 will focus on its core competency,U.S., which is breakthrough science and technology innovation.
The typewould potentially make PHA Camelina the third largest crop in the U.S.Concurrent with this development of collaborations and partnerships we seek will depend on the specific anticipated path to market for the crop. For large acreage GM crops including canola, soybean and corn,PHA Camelina, we plan to develop proof pointsthe high value omega-3 regulated trait based on our November 2020 agreement with Rothamsted.This omega-3 Camelina is at a high technology readiness level, and we are now progressing in early commercialization activities for this program.
To summarize, Camelina is an attractive choice of crop for the following reasons:
•Camelina, as an underdeveloped crop, has high technology upside potential to improve agronomics (including herbicide tolerance), seed yield, and seed value.
•There is a growing demand for crops that diversify the crop landscape, have a lower environmental footprint and have the potential to produce high value secondary products, opening new opportunities for farmers.
•Camelina is readily segregated from the major row crops and readily engineered using genetic engineering tools, making it an ideal platform for producing novel seed products.
•Yield10 has demonstrated that Camelina can be readily engineered to incorporate well-proven herbicide trait technologies with the potential to take advantage of the more favorable regulatory systems in place in the U.S. under the SECURE rule and under development in Canada.
•Camelina has been engineered to produce high levels of omega-3 (EPA and DHA+EPA) fatty acids as a drop-in replacement oil for fish oil in aquafeed markets as well as for use in nutraceutical and pharmaceutical applications.
•Camelina has potential to become a high value crop with very large non-traditional markets in water treatment and plastics.We first demonstrated proof-of-concept for PHA bioplastics in Camelina in our 2020 field tests, and the result was confirmed in our 2021 and 2022 field tests.This ability to produce PHA in Camelina is providing us with the potential to link a new high value Camelina crop with very large non-traditional markets in water treatment and plastics.Our internal analysis indicates this could drive very large acreage adoption.The higher per acre value enabled by Yield10's agronomic and product traits could make Yield10 the preferred production contractor for growers.
Production of Camelina seed in double cropping situations results in a favorable CI for the oil, making it an attractive feedstock for renewable diesel in geographies such as California where there are low carbon fuel standards in place and the economic value of carbon savings can be substantial.Low-carbon fuel standards are being established in other regions of the U.S., Canada and the E.U., which is increasing demand for renewable diesel feedstocks.
Camelina Seed Products Business
Our long-term vision is to develop and commercialize three types of elite Camelina varieties (Elite Camelina, Elite PHA Camelina, and Elite Omega-3 Camelina) as large acreage cover crops that will increase farm revenue and support the production of low carbon sustainable seed products with the additional positive environmental impact of reducing nutrient pollution from fertilizer use and increasing soil carbon content.Our plan is to:
•develop proprietary elite Camelina varieties offering superior returns to farmers and increased seed product revenue and margins to Yield10,
•contract production of Camelina grain with farmers for processing into seed products, and
•enter into offtake agreements for the Camelina grain products in each market segment.
To achieve this, Yield10 has been developing proprietary Camelina seed lines which are being progressed to elite Camelina variety status and ultimately to product commercialization.Gene traits currently in our development pipeline fall into three categories:
•input traits including traits for HT and DMR,
•performance traits from our GRAIN platform including traits to increase seed oil content and seed yield, and
•new seed product traits including PHA bioplastics and omega-3 (EPA, DHA+EPA) oil.
We plan to launch the new Camelina varieties incorporating these traits in the sequence illustrated below with the E3902/WD-HT Camelina being closest to commercial launch following the completion of two successful seasons of field trials. The trait demonstrated excellent tolerance to the herbicide which we plan to use for commercial production with no impairment of seed yield. The lead lines are now in seed scale up phase while our application for non-regulated status using the RSR process is pending with USDA-APHIS. In addition, we are progressing discussions with the herbicide producers to have Camelina added to their labels, an essential step towards enabling growers to use the herbicide with Yield10's new varieties.
The spring E3902/WD-HT varieties will be closely followed by winter WD-HT lines and then by lines containing stacked WD/IMI/SU-HT to enable broadleaf weed control and tolerance to soil residues of previously used herbicides.
We expect that our best Camelina lines currently progressing to elite variety status will be suitable for our yieldinitial commercial launch and the first tens of thousands of acres of contract production.These first Camelina seed varieties will be replaced over the next 2-4 years when the next generation varieties incorporating input traits, as a basisincluding herbicide tolerance and disease resistant genes, are available. We believe that successful implementation of the input traits will be important in order to achieve broad-based farmer adoption of our elite Camelina and to achieve expansion of production in the hundreds of thousands to millions of acres scale.Input traits currently progressing separately in our pipeline will eventually be combined, or “stacked,” into our highest performing elite Camelina varieties in the future.Our goal is to have elite Camelina varieties enter commercial production in the next few years with stacked tolerance to three herbicides, stacked HT/SSU/IMI-HT traits and DMR.This development process with sequential release of improved elite Camelina varieties is illustrated above using our E3902 spring line.A similar process is being carried out in parallel for licensing to the Ag majors with a focus on capturing downstream value. According to industry estimates, the timeline from discovery to fullour lead winter Camelina lines.We have begun progressing early commercialization of a GM trait in a commodity crop can be up to 13 years at a cost of up to $130 million. Our C3003 yield trait is an algal genethe business based on the current best Camelina lines and the first seed product launch will be regulatedto supply feedstock oil for the renewable fuel market with the residual protein meal going into animal feed.We are currently working on seed scale up of our non-regulated spring and winter varieties of Camelina to establish our products operating business.Our commercial team has outreach to growers underway to build a grower network and to execute production contracts albeit at small scale.These activities are complemented by extensive business development outreach to seed processing facilities and prospective oil and protein meal offtake partners.
Our plan is to execute the sequential launch of our products from our Camelina oilseed platform as follows:
Products Produced by Processing Camelina Grain from Yield10 Varieties
Biofuel feedstock oil: Elite Camelina - stacked input traits and performance traits on current best varieties.In launching our Camelina products business, we plan to provide our seed to growers under contracts with Yield10, to use existing third-party oilseed processing assets through toll arrangements and to enter into offtake agreements with end users for the oil and protein meal to address current markets, including low-carbon feedstock oil for the biofuels and protein meal for animal feed.Our technology team will continue to develop improved varieties of elite Camelina germplasm with herbicide tolerance, disease resistance, seed yield and oil content traits currently progressing through our trait pipeline.Elite Camelina varieties will serve current markets and represent a GM trait. Asfoundation for the future commercialization of our PHA bioplastic and omega-3 traits, which we arewill develop separately and introduce into the elite varieties by plant breeding.In order to position Yield10 to execute on this plan, we harvested our first 50 acres of Camelina seed grown under contract in Montana in 2020.During 2021 and 2022, we conducted seed scale up activities with both spring and winter Camelina lines.During August 2022, we harvested 17 acres of winter Camelina seed grown under contract in Saskatoon that we have processed and provided to growers in the construct optimization/event selection stage, we are about half way along the anticipated development timeline for C3003. Our strategy is to make it attractiveU.S. and Canada under contracts for the Ag majors2022/2023 winter season.
Nutritional Products
Omega-3 (EPA, DHA+EPA):Elite Omega-3 Camelina - omega-3 trait.Omega-3 fatty acids are found in foods such as fish and plant oils (flaxseed, soybean, canola and Camelina oils).The three main omega-3 fatty acids are alpha-linolenic acid ("ALA"), eicosapentaenoic acid ("EPA"), and docosahexaenoic acid ("DHA").ALA is found primarily in plant oils and DHA and EPA are found in fish and other seafood.Omega-3 fatty acids provide many health benefits, including preventing and managing heart disease.The American Heart Association recommends that everyone eat fish at least twice a week, such as salmon that is high in omega-3 acids and/or adding fish oils supplements to invest financialtheir diets.The availability of ocean wild caught fish containing omega-3 oil used in nutritional oils and technical resourcesaquafarming is declining due to introduce our traitsoverfishing.We intend to launch a proprietary Camelina omega-3 seed product into their elite germplasm for event selection and evaluation. In 2017, we signed a non-exclusive research license with Monsanto Company to test C3003 and C3004 in soybean. We may sign additional non-exclusive research licenses on a crop by crop basis at minimal cost, allowing the licensees to invest their resources on progressing the trait. Our focus is on securing a share of the upside value of our traits when we finalize the economic terms of license agreements at the point where the value of the trait is well understood.
For small acreage specialty oil crops, we believe we can leverage our unique skill set to add value to the development of specialty oils focused on nutrition and aquaculture feed. In general, these crops cost more to produce because of the unique supply chain needed to ensure identity preservation for the crop from seed planting through final product. In this area, there may be opportunities for establishing partnerships and license agreements with consumer facing companies in the food and nutrition market based on the omega- 3 trait developed over the last 10 years by the Rothamsted Institute in the UK.Yield10 signed an Exclusive Collaboration and Option Agreement for this technology with Rothamsted in November 2020.In November 2022, Yield10 and Rothamsted agreed to extend this exclusive collaboration and option agreement until December 31, 2023.Rothamsted has progressed the omega-3 trait beyond the proof of concept stage with their completion of multiple field trials, oil production, and product validation in aquaculture feed sector. Our highand human nutrition studies.Under its agreement with us, Rothamsted is responsible for making improvements and further optimization of this exciting trait at their facilities in the UK.We believe the current omega-3 trait is already at a sufficient technology readiness level to begin commercialization activities for the aquaculture and nutrition markets.Yield10 will continue its focus on developing elite Camelina varieties with herbicide tolerance, disease resistance, higher yield and oil content, traits developed through genome editing maywith the intent to breed the Rothamsted omega-3 product trait into this germplasm in the future.In the near term, Yield10 is working on the business strategy for this technology to enable production of elite omega-3 Camelina in Canada as early as the 2025 spring planting season.
PHA bioplastic:Elite PHA Camelina - PHA bioplastic trait.The second proprietary product we are developing as a sustainable replacement to petroleum-based products is the result of new technology for the large scale, low-cost production of natural biodegradable PHA bioplastic.By genetically reprogramming our Elite Camelina to produce PHA bioplastic in the seed, the harvested seed can be processed to simultaneously produce three coproducts: feedstock oil, PHA bioplastic and protein meal for animal feed.The typical costs for producing edible oils are a useful benchmark for the potential long-term cost structure for crop-based PHA bioplastics.In this scenario, crop-based PHAs could have shorter timelines to commercialization (3-6 years) if deployed in specialty oil crops. a cost advantage over petroleum-based plastics.We aresuccessfully field tested prototype PHA bioplastic trait Camelina lines during the 2020 and 2021 growing seasons.In the 2022 growing season, we planted our best prototype PHA Camelina line at acre-scale for seed process development and plastic prototyping, however, we recognize that this version of our PHA trait is at an early stagetechnology readiness level.In parallel, we are developing the next generation versions of developingthe PHA trait targeting 10% to 20% of total seed weight as PHA bioplastic and expect to achieve initial proof of concept for two PHA copolymer targets.We believe that by producing PHA bioplastic in Camelina seed as a third seed product along with processing the seed to produce oil and protein meal, we can achieve a cost structure with the benefits of integrated economics that optimize revenue as each market fluctuates with customer demand.
Protein meal for animal feed:Camelina meal is a high-quality and high-protein meal that has been approved by the U.S. Food and Drug Administration ("FDA"), as well as by the Canadian Food Inspection Agency ("CFIA") for feed use in poultry.It has also been approved by the FDA for feed use in beef cattle and by the CFIA for feed use in salmon and trout.Cold-pressed Camelina meal, which is the residual coproduct remaining after removing most of the oil, has been extensively studied for use in animal feed and proven to be well-tolerated by livestock.The meal also provides substantial health benefits when used as an animal feed.We believe Camelina meal, as a coproduct of our strategyElite Camelina, Elite PHA Camelina and Elite Omega-3 Camelina plant varieties, may represent a significant additional source of revenue.
R&D Revenue from Government Grants and/or Partners
Yield10 has historically sought and participated in this area but believe it may have considerable potential for Yield10.
Yield10 plansgovernment grants in collaboration with leading academic institutions to build on its core strengths bringing new technology approaches to exploit an innovation gap in the agricultural biotechnology space that exists due to reduced investment in basic research and development resulting from the ongoing consolidation and restructuring in the agricultural sector. Yield10’s mission is to translate and optimize our step-change yield traitdevelop early crop innovations in the major food and feed crops, and demonstrate their economic value to farmers and seed companies. We intend to create high-value assets in the form of proprietary yield trait gene technologies and to de-risk these assets by progressing them along the pathsecure rights to commercial development with increasingly larger scale field tests and multi-site field trials in major crops. intellectual property.We are currently deployinga participant in a grant from the Department of Energy with Michigan State University, which is currently our yield trait genes into canola, soybean, rice, wheat and corn, by designing and progressing genetically engineered events suitable for the regulatory approval process which can be readily bred into the industry’s elite crop lines by plant breeding. We expect the customers for Yield10’s innovationsprimary source of grant revenue.As of December 31, 2022, $0.1 million remained to be the large and mid-size agriculturalearned under this sub-award.It is our intention to continue this practice where grant opportunities are consistent with progressing our commercial goals.Other potential sources of non-
product revenue include funded partnerships or collaborations with companies that would either license or acquire rights to Yield10’s yield trait genes and incorporate them into their proprietary commercial crop lines for subsequent commercialization.
We are focused on identifying and developing technologies that will enable us to produce step-change improvements to crop yield.
Yield10 is targeting a critical unmet need in agriculture based on the anticipated disconnect between agricultural supply and the growing global population. Food production must be increased by over 70 percentinterested in the next 35 yearsuse of our GRAIN platform to feedidentify gene targets for traits in crops of commercial interest and potential partners or customers in the growing global population, whichCamelina products value chain.
Camelina Grain Product Revenue
In fall 2022, we signed growers' contracts with multiple growers for production at small scale ranging from 30 to 160 acres.The harvest of thisgrain production is expected to increase from 7 billion to more than 9.6 billion by 2050. Global climate change is also resulting in regional shifts to historical growing conditions. Given the projection for population growth, recent studies show a “yield gap” for major food and feed crops that studies show cannot be addressed by incremental improvements to yield brought about by traditional plant breeding and existing GM traits. Current GM traitsbegin in the industry aresummer of 2023, at which time we anticipate that we will begin to recognize grain revenue in amounts scaled to the number of acres under contract.Future grain revenues will be based, primarilyamong other things, on using microbial-sourced genesour ability to impart yield protection through herbicide, pest, diseasescale-up commercial seed production, engage with growers and even drought resistance, whereas Yield10 is focused on increasing fundamental crop yield through enhanced carbon captureseed retailers, and utilization.
Yield10 is fundamentally focused on “building better plants” based on using genetic engineering technologies to deploy new yield trait genes that improve the efficiency of photosynthesis and the efficiency of converting fixed carbon to seed and/or introducing targeted genetic changesenter into offtake agreements with customers in the plant genome that allow the plant to make more seed or biomass.renewable diesel market.
Our History
We have a significant track record and expertise in the metabolic engineering (synthetic biology) of microbes and have made significant progress translating this capability to plants.
As part of the legacy biopolymers and biobased chemicals business of ourOur predecessor company Metabolix, co-founded by our research teamCEO, was a pioneer in synthetic biology for the development of advanced PHA bioplastics production and applications technology using engineered microbes and fermentation, and as a result developed an advanced metabolic engineering capability to alter key biochemical pathways and redirectdeep experience across the flow of carbon metabolic intermediates in microbes resulting in the production of the biomaterial polyhydroxyalkanoate or PHA at a level of more than 80 to 90 percent by weight of microbial cells that normally did not produce any PHA. Through our experience producing PHA in plants we have demonstrated that our experience with re-engineering the metabolism of microbes can be translated to “building better plants.” bioplastics value chain.In 1997,addition, Metabolix initiatedsupported a crop science research program to produce renewable bioplasticsPHA bioplastic in crops as a potential low-cost production system and chemicals from agricultural crops. it was this crop science activity that became the foundation of Yield10.Historically, these efforts were focused on producing the simplest member of the PHA family, known as PHB, which is a microbial carbon storage biopolymer, in high concentration inwithin the seeds of oilseed crops or inwithin the leaves of biomass crops such as switchgrass.PHA bioplastics are useful as biodegradable alternatives for petroleum-based plastics in many single use packaging and food service products.
As we made progress onOur Approach
Our GRAIN platform provides us with a unique approach for discovering novel yield trait genes and producing PHBhigher value sustainable products in plants, we learned that basic carbon supply from photosynthesis was a bottleneck. To address this carbon shortfall, we began developing newCamelina.
We have integrated advanced metabolic engineering and bioinformatics approachesflux modeling capabilities with transcriptome network analysis to enhancing basic crop photosynthetic carbon capture. Discoveries from these two approaches becameform the foundation of our “Smart Carbon Grid for Crops” and “T3 Platform” crop traitGene Ranking Artificial Intelligence Network ("GRAIN") big data mining gene discovery platforms, respectively. We also began building intellectual property on novel yieldplatform.GRAIN is the gene discovery tool in our trait gene technologies discovereddevelopment platform, which encompasses three components:GRAIN target gene identification; modification of the target gene activity in these programs. Photosynthesis is the most important biological process responsible for global food production. For example, accordingCamelina using CRISPR genome-editing or traditional genetic engineering; and Camelina field testing.We refer to the USDA,integrated system as the outputTrait Factory, however, the GRAIN discovery tool is unique to Yield10.In the case of U.S. farms contributed $177 billion, or one percent, to GDP in 2014. Improvingcrops, the photosynthetic capacity of plants is an essential first step to increase the performance of cropslevers to increase seed and/yield are the metabolic infrastructure through which carbon flows from photosynthesis to seed production and the gene regulators or biomass yieldtranscription factors, which control various pathways of plant metabolism.Over the last 20 years, the agricultural sector has generated vast numbers of data points.During this same period, however, there have been very few new crop traits produced.GRAIN is a next generation crop big data mining system based on over 30 years of advanced synthetic biology expertise and therefore, food production. We must develop plants which on a per acre basis duringis protected by the growing season fix more carbon and ultimately target that additional fixed carbon to seed. Key to achieving this is increasing the rate of net photosynthetic carbon capture. Once a plant has fixed carbon, that fixed carbon can be directed to three different places in the plant: it can be used to make roots, leaf and stem tissue of biomass, used for seed or it can be released again as CO2 through normal metabolic processes.
Since 2015, we have made significant progress applying our “Smart Carbon Grid for Crops” platform to plants. Using this technology platform, which we establishedCompany as a resulttrade secret.The system efficiently mines big data sets and prioritizes actionable gene targets to improve crop productivity.We have employed this approach to discover a range of a series of government funded internal programs and external academic collaborations, we have developed metabolic engineering strategies using microbial genes to introduce new functionality into plants to increase photosynthesis by making key metabolic pathways in plants more efficient, and to eliminate bottlenecks to efficient carbon usage. This approach is similar to what has been the bedrock of the agricultural biotech seed industry, the introduction of genes from non-plant systems to enable new functionality in the form of herbicide, pest resistance and drought tolerance. Our approaches led not only to the identification of novelpotential yield trait genes but also encouraging early yieldand used the data from the traits generated in Camelina to create interest in our traits for major food crops through research license agreements.As an example, our new oil content gene trait target C3020 was previously an uncharacterized gene.GRAIN was able to select this gene target out of tens of thousands of Camelina genes and we consider the experimental results achieved with C3020 Camelina as a good proof point for the value of this platform.
We believe Camelina has high potential to become a large acreage commercial crop for producing low-carbon biofuel feedstock oils, PHA bioplastics and nutritional oils including omega-3 (EPA, DHA+EPA) oils in North and South America.
As part of an evolution to sustainable energy, a substantial increase in renewable diesel capacity in the United States and Canada is currently underway, with proposed and funded renewable diesel facilities having a total capacity of over 6 billion gallons of biofuels per year.Renewable diesel expansion has surged due to its low-carbon footprint, federal and local subsidies to reduce carbon emissions, and its ability to be used as a drop-in replacement for petroleum diesel.Renewable
diesel feedstock is supplied mainly from used cooking oil, animal fats (e.g., tallow), and vegetable oil, with the former two feedstock sources in short supply due to limited production capacity.Yield10 therefore expects to meet the demand of the increase in renewable diesel feedstock over the next few years.Moreover, a third of vegetable oils globally produced today are palm oils, which do not qualify for many biofuels subsidies because of their high carbon footprint.Numerous studies and regulatory approvals have shown Camelina oil’s usefulness as a low-carbon feedstock oil for renewable diesel and sustainable aviation fuel.Residual Camelina protein meal remaining after oil extraction is approved by regulatory authorities for use in animal feed applications in the U.S. and Canada.Camelina’s low-carbon footprint and its ability to be grown as a cover crop on otherwise fallow land make it an attractive choice to fill the renewable diesel feedstock supply gap.Based on the assumption of 60 to 100 gallons of Camelina oil per acre, 1 billion gallons of feedstock oil would require 10 to 15 million acres of Camelina production.For comparison purposes, canola production is currently around 20 million acres per year in Canada.
Camelina also has the potential to be a platform crop for the production of proprietary crop products.It is proven to be amenable to genetic engineering through Yield10’s GRAIN platform, resulting in a number of oil and yield traits with demonstrated field studiestrial success.Yield10 has also demonstrated proof-of-concept PHA bioplastic production in Camelina, both in the greenhouse in 2019, and in successful field trials in 2020 and 2021 producing 6% PHA bioplastic in the seed.In November 2020, Yield10 also signed an Exclusive Collaboration and Option Agreement with Rothamsted for an advanced trait technology for the production of omega-3 (EPA, DHA+EPA) oils in Camelina.
We believe that our Camelina development capabilities, together with our lead yield and oil content trait geneimprovements, enable a strong competitive advantage in building an attractive Camelina products business focused on low-carbon biofuels feedstock oils.In the industrial oilseed Camelina.
Our Approach
We have two unique, proprietary technology platforms for identifying novel yield trait genes.
Our unique approach consists of two core technology platforms. The first is based on our 30 years of experience optimizing the flow of carbon intermediates in living systems and is called the “Smart Carbon Grid for Crops.” Using this approach and working with our partners in academia, Yield10 has demonstrated major step-changes in seed yield in the industrial oilseed Camelina. We currently have four novel trait genes impacting seed yield, which we refer to as the C3003 series of traits, and we are progressing our lead yield trait gene C3003 in our key crop targets canola, soybean and corn. Recently, we reported seed yield increases of up to 23% in early field tests conducted in 2016 with Camelina and up to 13% in early field tests conducted in 2017 with canola.
In our second platform, the “T3 Platform,” we developed a proprietary computational process to identify global transcription factor (GTF) genes, or master switches, which algorithms predicted could both up-regulate or down-regulate multiple gene cascades withlong term, the potential for increasing photosynthesis, reducing bottlenecksproduction of PHA biomaterials in central metabolism and positively impacting plant and biomass yield. We have tested the three lead gene targets experimentally and have shown that they produced average increases of over 40 percent in photosynthetic carbon fixation, flow of carbon through central metabolism and biomass levels in our experiments with switchgrass. In some cases the biomass yield has been increased upCamelina could provide economic returns for farmers to 75-100 percent in preliminary greenhouse tests, a notable finding given that switchgrass is a high yielding C4 photosynthetic crop. Although it is ajustify very useful model for C4 photosynthesis plants, switchgrass is not a food crop, so we identified the corresponding genes in major food crops including our key targets, rice and corn, and work continues in this area.
Our work with the Smart Carbon Grid for Crops and the T3 Platform has identified promising potential targets for genome editing. We believe that these approaches may be subject to less regulatory complexity in the U.S. during development and along the path to commercialization, and may provide opportunities for licensing.
Genome editing techniques, including CRISPR, which involve making small targeted changes to the DNA of a target organism, have been of interest to the agricultural biotechnology industry because this approach is believed tolarge acreage adoption.PHA biomaterials also have the potential to significantly reduce development coststhe CI of feedstock oils from carbon savings derived through the replacement of petroleum plastics and regulatory timelinesthe low-cost production of these products.PHA biomaterials with the right cost structure have applications in very large markets not currently served by agriculture, including water treatment and biodegradable bioplastic applications.We believe crop-based production will enable broad-based global adoption of these materials.
We have assembled a pipeline of crop performance traits for crop trait development and market introduction. Announcements from DuPont and USDA-APHIS regarding a clarification on the regulatory path for a genetically edited corn line indicated that this line will not be subject to regulations typically used for genetically modified crops on the basis that while the plant DNA was edited, the final plant did not contain any remaining foreign DNA (i.e. DNA sequences not from the plant being engineered) from the procedure used to edit the plant. This industry example suggests that crops that are genome edited may not be subjectapplicable to certain GMO regulationsboth Camelina and major commercial crops and have established research agreements with major seed companies.
Our unique approach to crop yield or seed oil content trait discovery utilizing our GRAIN platform, which integrates advanced metabolic engineering concepts to address critical bottlenecks in carbon metabolism, has enabled us to discover a series of yield genes with potential use for producing step-change improvements in crop yield.Through our research and early development efforts we have identified and begun characterizing our C3000 and C4000 series of traits.To initially characterize the U.S., an outcome supported by recent developmentspotential of yield or seed oil content trait genes, we test our trait candidates using our Camelina platform.Our objective is to identify novel yield traits that act at a fundamental level in the USDA APHIS review of the current regulatory process for crops made using genetic engineering. This has openedcrop metabolism to provide the potential for Yield10 to exploit a second tier of novel traits addressable with genome editing. The challenge now for the agricultural biotechnology sector will be to identify gene targets for genome editing which can generate economic value.
Yield10 has identified from its internal discovery platforms and in-licensed through academic collaborations a number of gene targets for genome editing in crops. In the coursebroad deployment of our traits across multiple crop types.Following our work we have introducedwith these trait genes coding for new metabolic pathway enzymes or global transcription factors producing high yield lines with higher rates of photosynthetic carbon fixation. We are studying our high yield plants at the molecular level using advances in high throughput analytical systems at the whole genome level to look at what happens to every other gene in the plant as a result of the changes we have engineered in, focused specifically on which native plant genes are turned on or off. Genes whose activity is turned on in the high yield lines are worth further study on their own and genes whose activity is turned off are interesting candidates for genome editing. This type of molecular analysis of the high yielding lines where the flow of carbon is higher has given us insights into key steps to target for further improvement. We recently made progress deploying genome editing technology based on our C3008 trait in Camelina, which in 2017 was deemed non-regulated by USDA-APHIS. Plants that are not regulated by USDA-APHIS may be subjectwe seek to regulation by FDAenter into license agreements or EPA. We expect to increaseform collaborations with major agricultural companies so they can incorporate our level of effort in this area in other crops, particularly canola, over the course of 2018, eventually expandingnovel yield traits into soybean, rice and corn. their seed products.
We believe our genome editing targets as well as the improved crops we develop using this approach may enablebusiness model will allow us to form collaborations or license arrangements with a broader set of commercial partners and bring these forward into development in the near-term.
We plan to use any revenues we generate from license agreements around our genome editing targets to support our ongoing research and development efforts to enable step-changes in crop yield.
We are developing the Camelina Fast Field Test model system to evaluate and de-risk novel yield trait genes.
One of the challenges the agricultural industry has faced over the years is translating early crop science discovery into value generating traits. In part this is because results from greenhouse studies in model plants have not translated well into field results in major crops. This is also in part because the plants used for discovery research have not been suitable for studies in the field and are not representative of the advanced seed or crop varieties (germplasm) used in commercial production, which have been subject to decades of intensive breeding to improve yield. Translating success when introducing non-plant genes into major crops has been very successful and the current biotech seed sector, which accounted for 457 million acres of crops worldwide in 2016, is based on using microbial genes in plants. The long timelines to progress early discoveries successfully into major crops and generate field data adds to the challenge.
For these reasons, Yield10 has put in place a process we call “Fast Field Testing” based ondevelop our Camelina oilseed platform. We believe that over time this will become a valuable tool in the trait discovery to translation effort. Camelina is an industrial oilseed well-suited to field trials,products business and we believe it is a good modelcapture value for identifying promisingimportant new yield traits for canola and soybean. It is also very fastmajor crops.
We are working to modify and develop genetically stableadvance our own trait developments in Camelina for our seed sufficient for field planting. Ideally, we hopeproducts business as well as to be ableform business alliances to progress from trait identificationour traits through development, launch and commercialization in major food crops.Key to field planting in about 12 months. Our processour strategy is to identify trait genesretain control of interest in Camelinatimelines and immediately begin putting them into canola and soybean,to maximize, where the timelines to transform plants and generate field data are much longer. We can then progress the Fast Field Testing in Camelina and generate field data and a complete molecular analysis of plant material from the field. These results and data can then be used to inform how we progress the previously transformed canola and soybean.
We believe that this will providepossible, the opportunity for go-no-go decisions in some casesfuture value creation.We are focused on identifying and in other cases allow ussigning additional research and development collaborations to update our approach based on the resultsaccelerate commercial development of our Fast Field Testing in Camelina. For example with the longer development timelines neededpromising yield traits.Based on this strategy, Yield10 intends to get canolafocus internal resources on trait gene discovery and soybean ready for field testing, we expect to initiate additional modifications earlier in these crops, having identified the potential to further improve the outcome based on the resultsdeveloping improved versions of our Fast Field Testing in Camelina.elite Camelina varieties for our seed products business.
In our 2017 field test program, we tested both first and second generation versions of C3003 in Camelina, and we also tested first generation C3003 in canola, an important North American oilseed crop. Overall, our findings in canolaWe have signed non-exclusive research licenses for first generation C3003 mirror closely our observations of the trait in Camelina, underscoring the value of Camelina as a predictive system for understanding the performance of our novel yield traits in development.with agriculture industry leaders.
We are using our Camelina Field Test model system
Yield10'sapproach to de-risk and acceleratecapturing value from the demonstrationutilization of the trait gene valueits proprietary traits in major crops. As a particular trait is de-risked there is the potential for inflection points in value. If we can establish a strong correlation between the results from the Camelina system with future field data first from canola and then with soybean, then we may be able to leverage this to enter partnership and licensing discussions earlier while preserving the opportunity to capture a meaningful share of the upside value.
If results of testing new yield traits in our Camelina Fast Field Testing model are shown to be predictive of results that can be obtained in other C3 crops, we may be able to accelerate translation of new traits into important food and feed crops.
We developedcrops is to enter into research licenses with large seed companies to maximize the numbers of acres in which the traits are adopted.Our capital efficient approach for trait development in major food and feed crops is to utilize field results obtained from our Camelina Fast Field Testing model as a system to develop and optimize yield traits based on novel metabolic pathways. We have significant expertise in the genetic transformation and analysis of Camelina. We believe that if we can show that the results we obtain for potential yieldwork with traits in Camelina are directionally predictiveto create interest from large seed companies.We then execute non-exclusive research licenses for traits of interest, enabling these companies to progress our traits within their crop(s) of interest.These research agreements have a limited term and require data sharing with Yield10.If the results we obtain in other oilseed and C3 crops, then we will be ablework performed under these research agreements is successful, the seed companies have the right to use the system to effectively screen for novel traits and accelerate their deployment into additional crops having the C3 photosynthetic system, including canola, soybean, rice and wheat. For this reason, our Camelina Fast Field testing system may prove to benegotiate a valuable tool for novel yield trait discovery facilitating translation into commercially important crops.
Our Oilseed Operation based in Canada provides us with unique capabilities in the development of oilseed crops.
We established our oilseeds subsidiary in Canada in 2010 to produce robust oilseed germplasm with engineered value-added traits for commercial crop production in western North America. Our oilseeds team is based in Saskatoon, Saskatchewan, with laboratories in the National Research Council (NRC) - Saskatoon facility and commercial greenhouse and laboratory facilities at nearby Innovation Place. Our team has developed and implemented technology to improve and accelerate engineering and trait evaluation of Camelina and canola. The team also plays a key role in designing and conducting greenhouse and field tests required to effectively evaluate novel yield traits.
agreement.
We have established a lean organizational footprint which is capablenetwork of evaluatingcommercial science advisors and collaborators to provide us with insight and opportunities to advance our initial novel yield traits in greenhouse and field tests while maintaining efficient use of cash resources.
As of December 31, 2017, we had 20 full-time employees, with the majority directly involved with ourindustry alliances, crop research and development, activities. We believe that our organizational capabilities are aligned with our research priorities and are complemented by our use of third party infrastructure and certain service providers. With this approach we can leverage third party infrastructure and capability without having to spend the time and capital needed to recreate them in-house. This will allow us to focus our limited resources on deploying our core strengths against our key development goals. We expect to grow our research and development operations over time commensurate with building value in our business and advancing our traits through development while at the same time tightly managing overhead costs.
We have established a Scientific Advisory Board which provide us with opportunities to access government grant revenue to support our research as well as key intellectual property.
Yield10 has pursued academic collaborations that have led to the discovery of novel yield trait genes. Researcher Danny Schnell, Ph.D. discovered the C3003 trait in an ARPA-e funded collaborative project at the University of Massachusetts in which Yield10 was a partner. In 2015, Prof. Schnell moved to Michigan State University where he is Chairperson, Department of Plant Biology2018 and remains a collaborator on C3003. Heike Sederoff, Ph.D. Professor, Department of Plant and Microbial Biology at North Carolina State University developed the C3004 and C3005 traits with ARPA-e funding which Yield10 is now progressing under a license agreement. Both Dr. Schnell and Dr. Sederoff are members of our Scientific Advisory Board. In early 2017,2019, Yield10 announced taking an option to asigning global license agreement fromagreements with the University of Missouri for advanced technology to boost oil content in oilseed crops. This license covers two gene targets,crops, including C3007, C3010, and C3012, which are based on the recent discovery of a key regulatory mechanism controlling oil production in oilseed crops and which can be used to increase oil content. Oil content isIn conjunction with the key economic driverRothamsted collaboration agreement, Prof. Johnathan Napier, a world-leading scientist in crops such as canola, sunflower and safflower. We plan to exercise this option and in-license the technology in 2018. Dr. Jay J. Thelen, Ph.D., Professordevelopment of Biochemistry at University of Missouri, who discovered this new mechanism, became a member ofsustainable plant omega-3 (EPA, DHA+EPA) oil traits, also joined our Scientic Advisory Board in early 2018.advisory team.
We plan to seek U.S. and Canadian government grants and/or partners to support our research and development goals.
Yield10 has historically sought and participated in government research grants in collaboration with leading academic institutions to develop early crop innovations and to secure rights to intellectual property.We have been awarded grants over the last several years supporting research on strategies to improve the efficiency of photosynthesis,increase seed oil content, identify novel yield traits, and to test these novel traits in Camelina.This work is valuable because traits developed in Camelina also have the potential to be developed and deployed in other oilseed crops.For example, in 2017, we were selected as a subawardeesub-awardee on a new U.S. Department of Energy (DOE)DOE grant letled by MSU that is expected to commence during the Company's first quarter of 2018Michigan State University to conduct research aimed at boosting oilseed yield in Camelina.During 2020 and 2021, we received three small Canadian government research grants awarded through the Industrial Research Assistance Program administered by National Research Council Canada.We plan to continue to pursue government grants to defray research costs associated with our research and development activities.Other potential sources of non-product revenue include 1) potential partners or customers in the Camelina products value chain, and 2) funded partnerships or collaborations with companies interested in the use of our GRAIN platform to identify gene targets for traits in crops of commercial interest.
We plan to deploy our novel yield trait genes to generate proof points acrossare operating with a range of crops.
Current biotech-generated crop protection traits such as “Roundup Ready” and insect resistance are deployed broadly in the Americas in the canola, soybean and corn crops. For novel yield trait genes, such as C3003, we envision deployment of the trait in C3 photosynthetic oilseed crops such as Camelina, canola and soybean and potentially in other C3 crops such as rice, alfalfa, cotton, potato and wheat. We are currently testing C3003 and C4003 in rice where genetically modified plants have not yet been widely introduced commercially. We also believe therelean organizational footprint, which is an opportunity to deployevaluating our novel yield traits in greenhouse and field tests while maintaining efficient use of cash resources.
As of December 31, 2022, we had 30 full-time employees, with the majority directly involved with our research and development activities.We believe that our organizational capabilities align with our research priorities and are complemented by our use of third-party infrastructure and certain service providers.With this approach we can leverage third-party infrastructure and capability without having to spend the time and capital needed to recreate them in-house.This allows us to focus our limited resources on deploying our core strengths against our key development goals.We expect to grow our research and development operations and commercial seed operations over time commensurate with building value in our business and advancing our traits through commercialization while at the same time tightly managing overhead costs.
We are building capabilities in seed scale-up and certified seed production to build an inventory of Camelina seed to supply to growers under contract for producing grain suitable for offtake into existing GM cropsthe biofuels market.
As we advance field testing of our Camelina varieties, we will choose Camelina lines as “stacked traits” included in branded seeds marketedlead and soldback-up candidates for commercialization.For instance, field tests can be conducted for a Camelina line with 20 to farmers. “Stacked traits” refers100 grams of seed.As a line is selected for possible commercial sales, inventory of the seed must then be ramped up.The rule of thumb we use is that a one-acre planting of Camelina will produce sufficient seed to the practiceenable planting of adding multiple biotech traits150 to an elite plant200 acres.In 2021/2022 we conducted seed scale-up activities for WDH3, our winter short cycle Camelina line as well as for WDH2, our winter cold tolerant line. During the third quarter of 2022, we engaged growers in contracts for the production of our WDH2 and WDH3
Camelina grain and Camelina seed having a strategytotal acreage of approximately 1,000 acres.These growers are located in the U.S. and Canada and planted between 30 and 160 acres each, with harvest expected to occur in the summer of 2023.We intend to use the seed harvest for toll crushing and further increase value.
Metabolix Oilseeds, Inc. signed a two-year collaboration with the National Research Council of Canada in 2017 to improve yield and drought tolerance in wheat. The collaboration will focus on new trait discovery in wheat using our T3 Platform technology. Under the collaboration, weseed production that will provide access to our proprietary C4000 series of traits, which include global regulatory genes, or global transcription factors (“GTFs”). We have shown that these GTFs have the potential to significantly increase photosynthesisus with seed inventory for future grower contracts during 2023 and yieldbeyond.
For certain spring and winter varieties in development for commercialization, including WDH2, WDH3, E3902 and certain crops. Research with the C4000 series of traits will allow the discovery of additional gene targetscandidate herbicide tolerant lines, we are conducting contract seed scale-up and production in wheat that could enhance the yield and/or drought tolerance of the crop. Wheat is a major global staple food crop where significant yield increases could play a major rolecontra-season at sites in feeding the world.
In addition, we view our genome editing targets as a complement to plant breeding techniquesSouth America and plan to test our genome editing targetscontinue seed scale-up activities in oilseed crops, as well as in rice, corn and forage crops as a way to improve seed yield and/or biomass and generate opportunities for licensing or collaboration with established industry partners.
We believe our business model will allow us to capture value for our discoveries and provide a path to commercialization for important new yield traits for major crops.
We are positioning Yield10 as a discovery company whereby we will work to advance our own developments as well as form business alliances to progress our traits through development and early commercialization. Our goal is to capture an attractive share of the added economic value resulting from the deployment of our trait genes and technologies in key crops. We are currently working on the development and deployment of our trait genes into canola, soybean, rice and corn, an approach facilitated by the expiration of much of the early foundation patents in the agricultural biotechnology sector, and one of our key objectives in that regard is to demonstrate commercial proof points through multi-site field tests. Yield10 has a number of opportunities and models for value capture including partnering or licensing with established agricultural industry players. Key to our strategy is to retain, where practical, control of timelines and maximize, where possible, the opportunity for value creation and optionality around future exit strategies.
In 2017 we granted a non-exclusive global research license to Monsanto Company to evaluate our novel yield traits C3003 and C3004 in soybean. Under the license, Monsanto plans to research both traits in its soybean platform. Monsanto is a leader in the development and commercialization of GM soybean seed. This license provides a market leader in biotech seed with the opportunity to test our traits and develop data at its own expense; at any time during the term, they have the option to negotiate a broader agreement with us. At the same time, we have the right to sign licenses with other companies for C3003 in soybean or other traits. This structure allows us the flexibility to expand the testing of the trait with investment by another party and to potentially enter negotiations for a development and commercial license when the value of the trait is better understood. In 2018, we plan to explore additional opportunities to expand the testing of our traits through arrangements with other companies.
Technology Platforms
In the last decade there has been a dramatic expansion of new genetic engineering and systems biology tools: genomics data; metabolic engineering; high-throughput analytical tools, including whole organism gene expression analysis and metabolomics, and powerful genome editing technologies. At Yield10 we plan to build value by leveraging genome editing targets for revenue generation in the near-term while we independently work to demonstrate the economic value of our transformative genetic engineering based yield breakthroughs in the longer term. The recent expiration of early blocking patents on plant genetic engineering means we can now be more effective in research and development, leverage third party service providers and independently drive key proof points in major commercial crops such as canola, soybean and corn while focusing our resources on our core strengths. Yield10 is focused on increasing the inherent yield of major food and feed crops. With regard to forming collaborations, we recognize there are considerable headwinds to overcome in this sector, including industry skepticism based on disappointing outcomes from major investments made screening large numbers of single crop genes. This has resulted in a challenging environment for early crop innovations prior to demonstration of key proof points in commercial crops. Our goal is to “build better plants” which requires new approaches and innovation and in our view will most likely involve gene combinations and/or multi-gene systems.
Increasing crop yield is a complex two-step carbon optimization problem. Harvested seed is mostly carbon fixed from carbon dioxide in the air by photosynthesis with oxygen coming from water in the soil and smaller amounts of nitrogen and phosphate both of which are applied as fertilizer. To achieve increased yield, the rate at which crops can fix carbon has to be increased. Based on our experience optimizing carbon flow in living systems, we know that increasing seed yield will likely require multiple trait genes to increase carbon fixation by photosynthesis at the front-end and direct the increased fixed carbon to the seed. One analogy would be the fact that simply filling the gas tank in a car does not make it go faster. If successful in increasing photosynthesis, we expect to reach metabolic bottlenecks downstream, some of which will likely prevent some of the additional fixed carbon from reaching the seed. However, with new analytical tools available we expect to be able to identify bottlenecks and develop solutions to achieve our targeted outcomes, step-change increases in seed yield. This leads to our theme of enhanced carbon capture from photosynthesis and targeted carbon deposition to seed.
Plants can be categorized generally into two different groups based on their system of photosynthesis. C3 photosynthesis, the simplest type of plant photosynthetic system, exists in most agricultural crops used for human consumption, and includes canola, soybean, rice, wheat and potato. C4 photosynthesis is a more complex system. Plants using the C4 system have evolved an additional distinctive cellular structure, in which carbon dioxide is concentrated for the main photosynthesis enzyme RUBISCO through a series of metabolic and metabolite transports known as the C4 pathway. Corn and sugarcane are part of the C4 photosynthetic plant family. In general, C4 photosynthetic plants have up to five times inherently higher plant yield than plants in the C3 photosynthetic family. This difference in plant yield is a result of evolution,
which has led plant scientists to consider the possibility that new genetic enhancements can be created to fundamentally improve the photosynthetic system in C3 plants.
Smart Carbon Grid for Crops Technology Platform
Yield10 is leveraging over a decade of metabolic engineering experience to optimize photosynthetic carbon capture and utilization in plant systems, which is critical to increasing seed yield. The “Smart Carbon Grid for Crops” is an advanced metabolic engineering platform that we believe has the potential to address well known metabolic limitations in crops and in C3 crops in particular. Similar to the electric grid where much of the investment made to generate the power is lost in the distribution system, plants having the C3 photosynthetic system are similar in that they lose over half the carbon the grower has paid to fix in input costs due to metabolic inefficiencies. We plan to mirror an approach taken by many of the current herbicide and pest resistance GM traits where genes from non-plant sources were used successfully to impart new functionality to crops. In our case, we are exploiting non-plant genes such as genes from microbial or algal sources to fix or reduce the impact of well-understood carbon capture metabolic pathway limitations in C3 crops. For example, photorespiration is a wasteful side reaction or carbon capture inefficiency in crops having the C3 photosynthetic system which represent approximately 70 percent of the food consumed by humans and include wheat, rice, soybean, canola and potato. We believe impacting photorespiration should lead to improved net carbon fixation from photosynthesis and as a result, we would expect to see step-change increases in seed yield.
To illustrate the value creation potential, yield loss in C3 crops due to photorespiration was recently quantified in a paper published in the Annual Review of Plant Biology. The authors estimated that yield in U.S. soybean crops is reduced by 36 percent and the yield in U.S. wheat crops is reduced by 20 percent due to photorespiration. They also estimated that achieving a five percent reduction of photorespiration in soybean and wheat in the U.S. would add approximately $500 million per year of value. Some models suggest that photosynthesis could improve by 12 to 55 percent in the absence of photorespiration. Therefore, photorespiration has been a major topic in plant science and researchers have employed multiple strategies in attempts to reduce photorespiration in C3 plants as a means to improve yield.
Impacting photorespiration is one of the key targets of our Smart Carbon Grid for Crops technology platform. This platform is an innovative, systems based approach to boost yield by increasing the amount of carbon fixed by photosynthesis and targeting the increased carbon to harvestable seed. Our lead trait, C3003, has been shown to enhance carbon fixation and seed yield in the oilseed Camelina where it impacts photorespiration. C3003 is a scientific discovery made in one of our academic collaborations and Yield10 has exclusive rights to this technology. While our collaborator continues to work on characterizing the mechanism of this yield trait gene, current data suggests C3003 is a very unique gene that impacts photorespiration in an unexpected manner. New science also represents a key aspect of de-risking our technologies. If the science provides new insights or addresses a well-defined bottleneck in a key limiting pathway common to a large number of crops, then the expectations for broadly translating initial results should be higher. We are excited about the prospects of C3003 in reducing the well-known yield losses that occur through photorespiration in C3 crops. We are currently studying C3003’s effect in the food crops canola, soybean and rice. We know C3003 has increased the rate of photosynthetic carbon fixation in our Camelina plants and we have been able to study these plants at the molecular level. Consistent with our initial hypothesis that downstream bottlenecks can be identified, we have found that in high yielding plants expressing C3003, the expression of other genes, including our C3004 trait gene is changed. We believe the C3004 trait gene is involved in controlling the flow of fixed carbon to seed as part of the plants natural regulatory system. It is well known that the flow of carbon in plants is tightly controlled and we believe our approach to engineering the C3004 gene using genome editing has the potential to remove one of these control points and can be combined with the C3003 trait gene to further increase yield beyond what can be achieved with C3003 alone.
T3 Platform and Plant Targets for Genome Editing
In crops having the evolutionary advanced, more efficient C4 photosynthetic system, including corn, sugarcane and sorghum, the yield is already several-fold higher than in C3 crops. In this case, the hurdle to accomplish step-change increases in seed yield is higher as these crops are already more metabolically efficient. Leveraging the industry’s significant investment in crop genomics research over the last 20 years, we developed the “T3 platform,” which is an algorithm-based approach to “big data” mining of publicly available genomics data sets. We focused not on individual genes but on specific gene expression patterns. Gene expression patterns tell the researcher which genes are turned on and off under different growth conditions. With the T3 platform we wanted to identify and focus our activities on a small number of very important plant genes. Using this approach we were able to identify and select novel genes, which could function as global regulators or master switches to control cascades of other genes and metabolic systems. The strategy was to use the T3 platform to significantly narrow the number of candidate genes to be tested and then test them experimentally in our high throughput
gene transformation platform in our C4 photosynthetic crop model system, switchgrass. We validated the T3 platform approach by verifying with experimental results the positive yield impact of the three gene targets we identified computationally, an exceptional hit rate. These three yield genes, C4001, C4002 and C4003, significantly increased photosynthetic carbon capture and biomass production in our switchgrass plants. In this case our early experiments have been successful in demonstrating the potential to increase the rate of carbon fixation even in a high yielding C4 crop.
We believe Yield10 is in a unique position to expand our learning and discover additional gene targets, or genes that need to be modulated, to optimize the flow of carbon to seed in these plants and have made considerable progress in this regard. Molecular analysis of high yielding plants expressing the global transcription factors has allowed the identification of 71 downstream transcription factors that are differentially expressed in the high yielding lines and are themselves targets for genetic manipulation. The expression of some of these genes is down regulated in the high yielding plants making them exciting targets for genome editing through well-known approaches such as CRISPR. We are beginning to validate these second generation gene targets in switchgrass and have thus far validated the predicted role of the first three genes. We know the industry has struggled to deploy downstream transcription factors to improve crops particularly in hybrid corn. However, we are optimistic that we will be more successful introducing our global regulator genes given the impact we saw in our experiments, and we believe genome edited traits, particularly simple gene deletions, will be significantly easier to implement and translate across all varieties of a crop.
Integrating the Smart Carbon Grid and T3 Platform to Identify Plant Targets for Genome Editing
We are currently integrating our two technology platforms into a next generation platform (“GRAIN”) with the objective of creating a predictive tool to identify combinations of plant gene modifications (“Smart Targets") for improvement of any aspect of crop performance. We envision that GRAIN will be a powerful tool for further optimizing the seed yield and seed oil content traits we currently have in development and for identifying new gene targets. Successes in Ag biotech, based mostly on innovations from the 1990’s were achieved by introducing single microbial genes into crops to add new functionality such as herbicide tolerance or pest resistance. Over the last 20 years, the Ag industry majors have made significant investments in testing thousands of single plant genes and have generated billions of data points from these studies as well as traditional breeding programs. However, there have been very few new Ag biotech traits launched during that period indicating the need for multi-gene solutions. This conclusion is supported by, the fact that domestication of modern corn from the ancient teosinte plant was due to changes in the activity of 5-6 regulatory or transcription factors genes over a period of 9000 years. Plant scientists now have powerful genome editing tools, such as the CRISPR/Cas9 system which enable multi-gene changes to be made in major crops; the challenge is knowing what combinations of genes to edit. The 2016 corn harvest in the United States was valued at around $50 billion. The recent breakthroughs in genome editing now make significantly increasing, and perhaps doubling corn yield an achievable goal, if we knew what 5-6 genes to change. In the absence of this knowledge, however, we are left with the technically unrealistic prospect of experimentally testing every combination of genes. For example, testing just the 2400 predicted gene regulators or transcription factors of corn with a single type of change in all possible pairs would require almost 3 million experiments.
There is thus clearly an unmet need to create advanced computational tools like GRAIN for predicting the right combinations of plant genes to modify for improvement of crop performance. There are two key components in plants, metabolic pathways and gene regulators called transcription factors. We find it useful to compare the flow of carbon through a plant to the flow of traffic in a major city. Using this analogy, metabolic pathways constitute the carbon conversion "infrastructure" and transcription factors constitute the genetic “traffic” lights that direct changes in plant metabolism in response to environmental or developmental conditions. Our “Smart Carbon Grid for Crops” metabolic engineering platform has already proven useful in identifying a number of our C3000 series of traits, and the “T3 Platform,” based on mining transcription factor network data sets identified our C4001, C4002 and C4003 global transcription factor gene traits. These gene traits enabled us to engineer switchgrass plants with high rates of photosynthesis and increased biomass yield. We are currently repeating our work with C4001 and C4003 in rice and wheat and plan to do so in corn.
GRAIN is an integrated platform based on key elements of our “Smart Carbon Grid for Crops” metabolic engineering platform and our “T3” platforms. Advanced metabolic flux analysis forms the foundation of the GRAIN platform we are developing based on Yield10 scientists unique 20-plus years of experience successfully deploying advanced metabolic flux analysis to address critical bottlenecks in carbon metabolism. Plant growth at its core is a series of chemical reactions and these can be modeled to determine the best ways to optimize the yield of the targeted end product. Advanced metabolic modeling based on flux-balance analysis and enzyme reaction thermodynamics and kinetics enables us to make predictions about which reaction modifications are most likely to achieve targeted performance improvements. However, as with all modeling approaches, the tool is only useful alongside the means and the data to test it in real plants. Here Yield10 makes use of metabolic and transcriptome data generated from its high-photosynthesis, high-yield engineered plants as well as from
academic publications and other public data to project optimal gene targets for modifications. By integrating the transcriptome network capabilities of the T3 Platform, we expect to be able to identify transcription factor genes whose activity profiles can be altered to optimize multiple steps in metabolic pathways or the flow of carbon in plant tissues of interest. In a crop like modern hybrid corn, which already produces vastly more seed than it needs to reproduce, our initial objective is to reduce or even eliminate the activity of the transcription factors that restrict further seed production. Accordingly, our approach is to turn down the sequence of transcription factors (or “red lights”) which block the plant from sending more carbon to the seed.
Based on elements of the GRAIN platform that we are already working on, we have identified the C4004 - C4027 series of transcription factor genes that are down-regulated in our high-photosynthesis engineered switchgrass plants as well as a number of new gene targets related to our lead C3003 yield trait. In many cases these gene targets can be modified by genome editing, opening the potential for the traits to not be regulated by USDA-APHIS, or in some cases, genes from the microbial world can be introduced to develop regulated traits. We believe our integrated GRAIN platform can be leveraged in the near term to secure research and development funding from industry partners.
The same logic applies to the metabolic infrastructure, where we need to identify the combinations of genes in specific metabolic pathways. Yield10 scientists have over 20 years of experience successfully deploying advanced metabolic flux analysis to address critical bottlenecks in carbon metabolism. Advanced metabolic flux analysis is based on metabolic flux balance, enzyme reaction thermodynamics and kinetics to create predictive models of targeted changes with the potential to significantly increase crop performance. These predictions can then be challenged using both the scientific literature as well as transcriptome and metabolic data generated by Yield10 from its high photosynthesis-high yield engineered plants. This system provides leads to very specific combinations of gene targets for enzyme activities or transport proteins to modify to improve crop performance. We are currently working on a number of new gene targets related to our lead C3003 yield trait based on this type of analysis to further improve its performance. In many cases these Smart Targets can be modified by genome editing or in some cases by simply introducing a new gene from the microbial world. We also believe our GET-SET program can be leveraged in the near term to secure research and development funding from industry partners.
Fast Field Testing System in Camelina
One of the challenges the agricultural industry has faced over the years is translating early crop science discoveries into value generating traits. This is in part because most of the plants used for discovery research have not been suitable for studies in the field. In addition, the plant systems used for discovery are not representative of the advanced seed or germplasm used in commercial production which have been subject to decades of intensive breeding to improve yield. The long timelines to progress early discoveries successfully into major crops and generate field data adds to the challenge.
In 2010, we established a research and development operation in Saskatoon, Canada staffed with leading oilseed researchers. Our team established a model for testing novel trait genes called the “Fast Field Testing” system based on our Camelina oilseed platform. We believe that this system has the potential to become a valuable tool for our yield trait discovery and translation effort. Camelina is an industrial oilseed, with reasonable field performance providing a robust model for canola and soybean and is well suited to multi-site field tests and larger scale trials. Camelina is a plant that can be readily genetically modified and bred through the efforts of our skilled staff to deliver genetically stable seed sufficient for planting in field tests. We have shown that we can go from the identification of a potential yield trait gene or combinations of genes to field planting in about 12 months. In our Fast Field Tests, we collect and analyze a broad set of data on our transgenic plants including parameters such as stand establishment, flowering, maturity, seed weight, seed size, oil content and oil composition. We also perform molecular analysis on plants of interest. We are using our Camelina Fast Field Test system to identify and screen trait genes of interest while deploying them in parallel into canola, soybean and rice where the timelines to obtain stable plant lines and field data are longer.spring 2023.
Traits in Development
WithYield10 has established a strong pipeline of performance and product traits in development. In late 2020, we added programs for the benefitdeployment of more than five yearsinput traits including herbicide tolerance and disease resistance traits for Camelina into our pipeline and prioritized this development to enable larger scale production of investment,elite Camelina varieties for biofuel feedstock production.We also prioritized development of performance traits for increasing seed oil content ahead of seed yield traits.
INPUT TRAITS
Herbicide Tolerance and Downy Mildew Resistance
We are progressing the Companydevelopment of genetic traits for tolerance to Class 10 and Class 2 herbicides in Camelina. We plan to use the Class-10 herbicide glufosinate tolerance gene for management of broadleaf weeds for commercial production.We are developing glufosinate tolerant Camelina because it will fit in well with crop rotations.The genetic trait we are using has been ablea long history of safe use in other crops including canola.We believe this approach could potentially enable faster regulatory approvals for the trait in Camelina under the SECURE Rule in the United States.We have multiple candidate glufosinate tolerant Camelina lines in our pipeline.In spring 2022, we conducted our first field testing of candidate herbicide tolerant Camelina lines in order to launch itself as Yield10 Bioscience with ownership or licensedidentify lead and back up lines for commercial development and regulatory approval. We have selected lines for further testing and seed scale-up at two sites located in the southern U.S. over winter 2022/2023, and have plans to conduct further testing and seed scale up in spring 2023.
Class 2 herbicides (imidazolonones ("IMI") and sulfonyl ureas ("SU")) are used extensively in the geographic regions we are targeting for Camelina production.Soil residues from their use in the previous growing season can impair Camelina growth.For this reason, we are progressing Class 2 tolerance traits in our Camelina pipeline based on modified versions of the ALS gene ("acetolactate synthase") to produce tolerance to both types of Class 2 herbicides.Our approach is intended to leveragetrait genetics and the well-established roadmap from the successful development of IMI and SU resistance in other commercial crops.
We are progressing traits for tolerance to the fungal pathogen downy mildew, which can negatively impact Camelina seed yields.In 2021, we acquired the rights to several crop trait genesa Camelina line with DMR and plan to evaluate it in hand2023 on land having significant levels of this fungal pathogen.We also have two backup Camelina lines demonstrating partial resistance and a funded breeding program ongoing for producing additional DMR lines.
Each of these input traits are being developed independently, however once validated, our plan is to stack these traits into our current, best elite Camelina varieties.
In late 2020, we initiated an intensive effort to develop herbicide tolerance traits in Camelina. In our spring 2022 field testing program, we indicated that we would be evaluating over 30 candidate Camelina lines that have been engineered for tolerance to over-the-top spray of a commercial broadleaf weed herbicide. In August 2022, we reported that we observed good herbicide tolerance to an established broadleaf herbicide at 1 time or 2 times the spray rate that is typically applied commercially to herbicide tolerant canola.The over-the-top spraying consisted of 2 spray applications of the broadleaf herbicide at different times of the Camelina growth cycle. In February 2023, we reported that we retested our lead commercial candidate HT spring Camelina lines in field trials in the Southern U.S. and the previous successful results were replicated. We further reported these HT spring Camelina lines were also tolerant to the application of a grassy weed control product.
In our spring 2022 field test program, wealso tested a Camelina line for tolerance to IMIs.In August 2022, we reported that our candidate IMI tolerant line has normal growth in the presence of IMI soil residues applied to the soil at 1-time or 2-times the commercially used rates, whereas the control line shows impaired growth.In 2022, our researchers developed multiple E3902 spring Camelina lines with "stacked" herbicide tolerance traits. In February 2023, we reported results from greenhouse studies indicating that we have achieved proof-of-concept for creating E3902 Camelina lines with tolerance to both over-the-top herbicide application and soil residual herbicide. We plan to conduct our first field tests of stacked herbicide tolerant E3902 spring Camelina lines in spring 2023.Our researchers have also developed candidate broadleaf herbicide tolerant winter Camelina in WDH2 and WDH3 germplasm. In recently completed greenhouse studies, these candidate winter Camelina lines demonstrated tolerance to spray application of commercial levels of a commonly used broadleaf herbicide. These events are on-track for field testing in winter 2023/2024.We are also developing “stacked” herbicide tolerance traits in our winter Camelina lines with the leadgoal of conducting our first field tests in winter 2023/2024.
We plan to collect data on tolerance to the herbicides, seed yield trait gene C3003 well-positioned in terms of translation and demonstration in key crops. Yield10 has exclusive rights through ownership or licensing or is preparing to file patent applications covering the trait genes listedoil content data on these Camelina lines in the table below.months ahead.
Under our “Smart Carbon Grid for Crops” technology platform we have identified the C3000PERFORMANCE TRAITS
Seed Oil Enhancing Traits: C3007, C3008, C3009, C3010, C3012 and C3020
Yield10 is progressing a series of novel yield traits based on establishing new metabolic pathways in crops. We have tested our lead yield trait gene, C3003 in Camelina in both greenhouse and initial field tests and have reported results from these initial tests. We are moving this promising trait
forward in additional crops including canola, soybean and rice and expect to report data once additional greenhouse tests and/or field tests have been completed and analyzed.
Under our “T3 Platform” we have identifiedtargeted at increasing the C4000 series of novel yield traits and gene editing targets. We expect to progress in our C4 monocot model a select few of the C4000 series traits, global regulatory genes discovered through our T3 Platform research program which we have shown to significantly enhance photosynthesis and carbon capture in switchgrass. We are also progressing the C4003 trait gene in rice using our internal resources and we expect to report initial rice data once greenhouse tests have been completed and analyzed.
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SUMMARY OF OUR CROP YIELD TRAITS IN DEVELOPMENT |
R&D Area | Current Status |
Seed Yield Traits-Regulated1
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C3003 | Camelina 1st and 2nd generation in field testing
Canola 1st generation in field testing
Soybean and rice in development
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Oil Enhancing Traits-Non-Regulated2
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C3004 | Camelina testing underway |
C3007 | Camelina, canola editing underway |
C3008a | Camelina non-regulated status achieved4
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Non-regulated oil trait combinations - C3008a, C3008b and C3009 | Camelina, editing of all 3 gene targets completed |
Additional oil trait combinations | Research in progress |
Yield Improvement Discovery Platform3
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C4001 | Wheat program underway
Corn transformation next step Rice transformation underway
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C4002 | Corn transformation next step |
C4003 | Wheat program underway
Rice transformation underway
Corn transformation next step
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C4004 | Editing in rice underway |
C4004 plus 23 additional crop gene targets | Research with rice and wheat next step |
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(1) | C3003 consists of an algal gene and will likely be regulated by USDA-APHIS as a GMO Trait. |
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(2) | These traits are accessible using genome editing or other methods that do not result in the insertion of non-plant DNA. Such approaches have been deemed non-regulated by USDA-APHIS based on recent filings by ourselves and other groups. |
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(3) | Traits in this area were developed in our T3 platform and all are potentially deployable through approaches which may be non-regulated by USDA-APHIS. |
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(4) | Non-regulated status received from USDA-APHIS. Trait may be regulated by FDA or EPA. |
Novel Yield Trait Gene C3003
C3003 represents the lead novel yield trait gene in our “Smart Carbon Grid for Plants” technology platform. C3003 is a scientific discovery made in one of our academic collaborations funded by ARPA-e, a division of the Department of Energy. Our academic collaborator is continuing work to characterize C3003. C3003 appears to be a very unique gene that impacts photorespiration, a biochemical pathway in C3 plants, which is responsible for significant losses in yield. Yield10 is progressing the introduction of the C3003 trait gene as well as improvements to the C3003 trait in Camelina, canola, soybean and rice. During 2018 we plan to conduct greenhouse and field tests to continue to generate additional yield and agronomic data on C3003 in a variety of important crops.
Camelina
In the 2016 growing season, we conducted a small scale field test which was designed primarily to establish our Camelina Fast Field Testing platform for the evaluation of C3003 and other yield traits. As part of this study, we planted stable Camelina seed lines expressing first generation C3003. The results from the field test showed that first generation C3003 produced significant improvements in seed yield in which the best C3003 line produced a 23 percent increase as measured by average seed weight per hectare. This result was statistically significant (p<0.05) as compared to control plants. In addition, the highest yielding line expressing the C3003 gene matured an average of six days earlier than the control plants. Expression of C3003 did not change the percentage of oil content in the seed as measured by the weight of theCamelina.We are building significant capabilities and intellectual property around key oil in relation to the weight of the seed. While expression of first generation C3003 enabled some of the Camelina lines we tested to produce higher seed yields by weight per hectare, the individual seed weight in these lines was decreased as compared to controls, likely due to a change in carbon partitioning in the plant. This reduction in seed weight was expected based on data from prior greenhouse trials. We believe that the results of our 2016 field tests in Camelina are encouraging and suggest that our approach to engineering new metabolicbiosynthesis pathways in plants hasbased on technologies for increasing oil content in seeds.Improving the potential to produce step-changes inoil content and yield of Camelina seed would increase the value per acre for this crop yield.
Based on prior greenhouse data suggesting that constitutive expression of C3003 in Camelina could increase overall seed yield, but produce this increase withfor the production of lighter weight seeds, we produced a second generation C3003 where the C3003 gene is expressed only in seed tissue. We believe that the reasongeneric oils for the smaller seeds is that the added influx of carbon produced by C3003 produces a “bottleneck” in plant metabolism that resultsbiofuel markets in the production of more, but lighter weight seeds. In 2016, we tested second generation C3003 in Camelina in greenhouse studies. In early 2017, we reported preliminary greenhouse data showing that the second generation C3003 produced an increase in seed yield, while maintaining typical seed weight.
In our 2017 fast field test program, we tested both firstnear term and second generation versions of C3003 in Camelina. In the field tests, we monitored key agronomic and growth parameters of the plants throughout the field test and collected yield data including total harvested seed weight, individual seed weight and oil content in our transformed plants as compared to control plants. In January 2018, we reported encouraging results from our field tests of C3003 in Camelina. We conducted these field tests of C3003 at two sites in Canada. The main objectives of the studies were to evaluate the performance of C3003 in Camelina and canola. Yield10 researchers transformed plants with genetic constructs intended to optimize expression of C3003 during different stages of plant and seed development and tested these eventsomega-3 (EPA, DHA+EPA) oils in the field tests.The best events for second generation C3003 in Camelina produced improvements in seed yield (up to 7.7 percent), harvest index and overall agronomic performance as compared to control plants. The studies also met the objective for bulking up seed to enable further evaluation of C3003 in Camelina in field tests planned for spring 2018. A new second generation construct using a new promoter was tested in the minicage plots used for seed bulk up and produced plants showing indications of strong agronomic performance and seed yield. We plan to study two versions of second generation C3003 in Camelina in field tests planned for 2018.
future.Based on encouraging data produced in Camelina with first and second generation C3003, we are continuing to progress the evaluation of the C3003 yield trait gene in parallel in canola, soybean and rice, key target crops where step-change increases in seed yield would improve the prospects for global food security and we believe create considerable economic value.
Canola
Canola is an important North American oilseed crop harvested for its oil content. In our 2017 Fast Field Testing program, we studied first generation C3003 in canola. In these field tests, we monitored key agronomic and growth parameters of the plants throughout the field test and collected yield data including total weight of harvested seed, individual seed weight and oil content in our transformed plants as compared to control plants. In December 2017, we reported encouraging results from our field tests of C3003 in canola. The best events for first generation C3003 in canola produced improvements in seed yield (up to 13.1 percent) as compared to control plants. The studies also met the objective for bulking up seed to enable further evaluation of C3003 in canola in field tests planned for spring 2018. In 2018, we plan to repeat tests with first generation C3003 and, pending permitting and availability of seed, conduct initial tests with second generation C3003 in canola.
The results we obtained in canola were similar to results obtained in prior studiesobtain with Camelina, illustrating that our Fast Field Testing system in Camelinawe may be a valuable toolable to license these traits to seed companies for effectively screening novel yield trait genes and
dynamically adapting our approach to trait development as we work to translate these improvements into commercially important crops.
Soybean
Because soybean is the leading North American oilseed crop, we accelerated deployment of both first and second generation C3003 into soybeanuse in 2016 and through an academic collaborator generated early greenhouse data in late 2017. Preliminary observations based on a small number of events suggest that results for C3003 obtained in Camelina and canola are translating into soybean. First generation C3003 produced seeds with lower individual seed weight while typical individual seed weight was observed with second generation C3003 in soybean. Further, our greenhouse results show that there is an increase in branching in the plants for some of the events tested. This is significant because more branching provides more sites on the soybean plant for seed pods to develop which is associated with obtaining higher yielding plants. We expect additional development work will continue in soybean with our collaborator in 2018.
In December 2017, we granted a non-exclusive research license to Monsanto Company to evaluate our novel C3003 and C3004 yield traits in soybean. Under the license, Monsanto has begun work with C3003 in its soybean program as a strategy to improve seed yield. Monsanto also plans to conduct research with our C3004 yield trait, a trait accessible through genome editing, in combination with C3003 to evaluate the effect of the combination to improve seed yield in soybean.
Other Crops
Results from our studies with C3003 to date suggest that it may provide an entirely new strategy to improve seed yield in oilseeds and other C3 photosynthetic crops by bringing in new metabolic functionality from non-plant systems. We plan to continue to generate data on C3003 in field tests and greenhouse studies in 2018. Rice is an important staple food crop. We have initiated the introduction of the first and second generation versions of the C3003 yield trait gene in rice and expect to report our observations from those studies when testing has been completed and results have been analyzed. We plan to leverage third party services where the resources and infrastructure are already in place to transform and test novel traits in corn lines. We believe this will enable us to cost effectively expand our capabilities and enable us to progress our corn targets at least to the stage of initial corn hybrid field results.
Oil Enhancing Traits
In light of the increasing focus on health and wellness, food safety and sustainability in developed countries, we anticipate a rise in demand for new varieties of food and food ingredients with improved nutritional properties. This concept is currently being implemented in Ag biotech, in both canola and soybean which have been modified to alter the composition of the oil produced. High oleic canola and soybean oils are being marketed as a "healthier" than other oils; we believe the ability to make similar marketing claims directly to the consumer will be a feature of newly developed products in this space. We expect consumer demand for identity preserved specialty ingredients will rise, and we believe that Yield10's crop yield technologies and crop gene editing targets could be useful in this emerging field.
Based on our study of metabolic pathways in oilseed crops, we believe there is an opportunity to apply genome editing to gene targets involved in oil biosynthesis to significantly increase oil content in oilseed crops, including canola soybean, sunflower and safflower. soybean.
We began the technical work in Camelina during 2016 with our C3008a, C3008b and C3009 traits, which regulate the production and degradation of oils in oilseed crops.In 2017 and 2018, we received confirmation from USDA-APHIS’sthe U.S. Department of Agriculture - Animal and Plant Health Inspection Service's ("USDA-APHIS") Biotechnology Regulatory Services (BRS)("BRS") that two types of our genome-edited Camelina plant linelines developed using CRISPRCRISPR/Cas-9 genome editing technology for increased oil content doeswere not meet the definition of aconsidered to be regulated articlearticles under 7 CFR Partpart 340, regulations. Togetherclearing the way for field testing in the U.S.Edits to three different gene types were made to truncate the resulting encoded proteins.These edits were designed to enhance the production of oil and decrease its turnover in mature seeds.The best line containing these modifications is designated as our triple-edited, or C3008a, C3008b and C3009 trait containing spring Camelina line E3902.We completed our first field trial with our wholly owned Canadian subsidiary, Metabolix Oilseeds, Inc., we developed the genomethese edited Camelina line. Researchers usedlines in the CRISPR genome editing tool to inactivateU.S. during the 2019 growing season and these trials were repeated in 2020 and 2021 with the E3902 line consistently showing an enzyme expected toapproximately 4.7 percent increase in seed oil content as a percentage of overall seed weight.No significant change in oil composition was observed.In 2021, the Ministry of Agriculture, Livestock and Fisheries in Argentina indicated that Camelina a trait we have designated as C3008. This trait may have further applications when usedline E3902 would not be subject to regulation in combination with other traits that we are developing that are expected to increase seed oil content. country.We are currently evaluating combinationsperforming activities related to seed scale-up with Camelina line E3902 including pure seed production in anticipation of potential commercial use. In 2022, the genome editing targetsMinistry of Agriculture on Agricultural Protection in Chile indicated that Camelina line E3902 would not be subject to optimize oil contentregulation in Camelina and canola, and plan to do so in soybean with the objective of achieving non-regulated status from USDA-APHIS.Chile.
In 2017,2018, we took an option tosigned an exclusive global license fromagreement with the University of Missouri for advanced oilseed technology, including the C3007 and C3010 gene traits, which are promising targets focused on the central role of Acetyl-CoA Carboxylase ("ACCase") a related target involvedkey metabolic control point for oil production.We have produced several CRISPR genome edited versions of C3007 in both Camelina and canola.Camelina contains three copies of three different BADC genes, BADC-1, BADC-2 and BADC-3 while canola contains two versions of each gene.Through a series of submissions to USDA-APHIS, we have developed several lines of Camelina and canola that USDA-APHIS BRS does not consider to be regulated under 7 CFR part 340.In addition, in late 2021 the Ministry of Agriculture, Livestock and Fisheries in Argentina indicated that two C3007 Camelina lines would not be subject to regulation in that country.
Yield10 researchers achieved proof of concept showing that four novel gene targets identified using the GRAIN platform impact seed development and/or oil content.In greenhouse testing in 2020, one of the three targets, C3020, produced a 10% increase in seed oil content when engineered with increased activity in Camelina.Data obtained from increasing activity of the other three targets, C3019, C3021, and C3022 indicates these represent good targets for CRISPR
genome-editing.Pure field grown seed of C3020 was produced in 2021 for subsequent larger scale evaluation in field tests.Results from the 2021 field production showed up to a 9 percent increase in oil biosynthesis. content.
Novel Yield Trait Genes C3003 and C3004
Internal development work with performance traits C3003 and C3004 has been paused to focus resources on the development of our input traits and oil content traits.C3003 is an algal gene, in-licensed from the University of Massachusetts.We are conducting researchbelieve, based on GRAIN modeling and early positive results, that C3003 reduces the well-understood yield losses that occur through photorespiration, a side reaction of photosynthesis in C3 crops.Simplot is working with C3007 aloneC3003 in their potato programs.Our C3004 gene trait was identified based on molecular genetic analysis of C3003 Camelina.In studies conducted between 2018 and 2021, stable C3004 Camelina lines with increased expression of C3004 resulted in a significant increase in plant growth and vigor, increased branching and seed yield, and in combinationsome cases increased individual seed weight.We currently have research license agreements in place with other targetsseed companies to evaluate the Camelina C3004 gene in the oil biosynthesis pathway with the objective of increasing oil content through methods that could achieve non-regulated status with USDA-APHIS.
soybean and potato.
C4000 Series Traits
Simplot is testing the C4001 trait in potato.We have used our T3 Platform to study global transcription factors and identify novel yield traits. These traits may be powerful regulatorsexpect evaluation of plant growth and represent a potentially valuable resource for identifying genome editing traits for crops. We have recently shown that traits from the C4000 series can significantly increase photosynthetic efficiency as well as aboveground and belowground biomass productiontraits in our switchgrass plants. Our early experiments have been successful in demonstrating the potentialthese target crops will continue to increase the rate of photosynthesis even in a high yielding C4 crop. Initially, we have been able to progress the C4003 trait gene in rice using our internal resources and we expect to report initial rice data as soon as it is available. advance during 2023.Traits in this series alsoand the proof points we expect to generate may provide us with an opportunity to selectively partner with others for the development of these traits in row cropsmajor commercial food, feed, and forage crops.
PRODUCT TRAITS
PHA Bioplastic Trait
PHA bioplastics are produced today using sugar or vegetable oil feedstocks by fermentation of microorganisms. Fermentation-based production of PHAs is constrained by the high capital cost of manufacturing facilities and the high processing costs resulting from feedstock conversion losses due to the inefficiency of converting sugar or oils to PHA.For example, it requires over 3 pounds of sugar to produce 1 pound of PHA or 1.5 - 2 pounds of vegetable oil to produce 1 pound of PHA, making the feedstock cost alone very high.These types of processes also require other manufacturing inputs and are energy intensive.We believe crop-based production will enable an advantaged cost structure thereby eliminating a barrier to entry for large-scale adoption of PHA materials for use as wellrenewable, biodegradable plastic replacement in many single use food serviceware and packing applications.Another application of PHAs includes wastewater treatment.
Seeds are natural, stable storage sites for large amounts of oil and proteins deposited by plants to nourish seedlings following seed germination in the field.The stability of seeds at ambient temperatures allows them to be readily harvested, transported and stored prior to processing, and makes them the ideal vehicle for crop seed production of PHA bioplastics.The key concept is to introduce the PHA bioplastic as forage crops.a new component of the seed composition and by processing the PHA bioplastic producing seed, to produce oil, polymer, and protein rich seed meal.We believe this can be done in a capital efficient manner using incremental capital added to an existing oilseed facility.The combination of all three products improves the overall value proposition and we believe that in time this will result in PHA bioplastics costs ultimately in line with canola and soybean oils.Yield10 plans to develop and commercialize Camelina seed-based PHA bioplastics by selling a resin grade PHA bioplastic raw material to the bioplastics industry.The Company is actively pursuing business development opportunities to identify and secure partnerships for plastics replacement markets.
In June 2017,Yield10 filed a U.S. patent application in 2019 for new technology potentially enabling low-cost production of PHA biomaterials in the seeds of Camelina.The Yield10 patent application describes a discovery around maintaining the viability and vigor of Camelina seed programmed to produce high levels of the PHA biomaterial PHB.By introducing the three genes encoding the pathway for producing PHA from the plant metabolite acetyl-CoA, we reported that our novel C4001 trait, a global regulatory gene or transcription factor, has been shown to significantly increase plant biomass yield in switchgrass. Switchgrass plants expressing C4001 had significantly more aboveground biomass (75-100 percent increase in dry weight) as compared to controls and more root biomass (85-145 percent increase in dry weight) as compared to controls. The C4001 trait in switchgrass plants increased a key measure of photosynthetic efficiency, the electron transport rate, by approximately 75 percent. Yield10 researchers challenged the C4001 plants by engineering a novel carbon sink,have demonstrated the production of a biopolymer that typically reduces plant yield when expressedup to 10 percent PHB in seeds of Camelina with good seedling viability in growth chambers.We currently have two PHA biomaterial traits, C3014 and accumulated at high levelsC3015, in plants. Expression of C4001our development pipeline and we carried out successful field tests in biopolymer producing plants partially restored biomass production, yielding plants that were healthier in terms of size2020 and weight as compared to control plants, while producing the same amount of biopolymer. As a next step, we are planning to evaluate C4001‑like traits in forage crops and major commercial crops including corn and rice. 2021.We are currently evaluatingnow progressing to scale up the best prototype line, based on the C3015 trait, which showed PHA levels of up to 6%
seed weight, to begin early product prototyping and market development studies for feed and water treatment applications.In 2022, we completed a 3-acre scale-up of this line. In parallel, we have a research and development program underway to optimize and develop commercial quality PHA trait lines based on insights from the field tests and our GRAIN platform with a goal to achieve 10 - 20% PHA in rice in greenhouse studies, where we are seeing evidence of increased biomass and are awaiting results from ongoingseed.
Omega-3 (EPA, DHA+EPA) oil trait
The omega-3 (EPA, DHA+EPA) oil trait, for which Yield10 has secured an option to commercial rights, is being developed by the research to determine the impact on seed yield.
Metabolix Oilseeds, Inc., signed a two-year collaboration with the National Research Council of Canada in 2017 to improve yield and drought tolerance in wheat. The collaboration will focus on new trait discovery in wheat using our T3 Platform technology. Under the collaboration, we will provide access to our proprietary C4000 series of traits, which include global regulatory genes, or global transcription factors (“GTFs”). We have shown that these trait genes have the potential to significantly increase photosynthesis and yield in certain crops. Research with the C4000 series of traits will allow the discovery of additional gene targets in wheat that could enhance the yield and/or drought tolerance of the crop. Wheat is a major global staple food crop where significant yield increases could play a major role in feeding the world. We expect NRC will continue to conduct work with our traits in wheat in 2018.
Target Crops
Our initial work in our C3000 and C4000 series traits suggests that our technology may be applicable to a wide range of crops harvested for food and animal feed uses. We believe that if novel yield traits could be successfully developed and commercialized in any of these crops, farmers would be able to improve the productivityteam at Rothamsted as part of their land to meet rising demand for food and feed, creating significant economic value.
In considering our strategyprogram to develop our technologies we segregate our trait genes into two classes: trait genes based on using non-plant genes to add new functionality to crops which are by definition GM; and trait genes which we may be able to deploy outside of the GM regulations, which encompasses our trait genes which are based exclusively on plant genes. We see the opportunity to deploy our trait technologya sustainable drop-in replacement for fish oil used in a broader set of food and feed crops many of which are not currently GM. We plan to pursue our GM trait genes in crops which are currently GM and where the economics can sustain the cost and timelines for deregulation. We are aware of the current USDA-APHIS GM crop regulation review and the reality that GM likely will remain an issue for some NGO groups regardless of the science. For our GM yield trait genes, we are targeting seed yield increases on the order of 10 to 20 percent over the current elite seed lines, increases which reflect the order of magnitude step-changes necessary to address global food security.
The crops we are targeting for development are described below.
Camelina or Camelina sativa is an oilseed crop in limited cultivation in North America and Europe. Camelina has received recent attention as an industrial oilseed for the production of biofuels, novel industrial lipids,aquaculture feed.Yield10 is providing financial support to the ongoing Rothamsted program and oleochemicals. has secured an exclusive option to commercialize the technology and improvements made during the term of the agreement.In addition, its meal has been identifiedNovember 2022, Yield10 and Rothamsted agreed to a no-cost extension of the exclusive option and license agreement until December 31, 2023.
The most important omega-3 fatty acids for development as an animalhuman health are ALA, DHA and EPA and the primary source of these is fish feed supplement. While it is not currently a commercially significant crop, research suggests that effortsin the diet.These omega-3 fatty acids are produced by algae, where they are thought to improve seed yield,protect their cell membranes in cold water.The algal omega-3 oils progress up the food chain and accumulate in fish and eventually into the human diet.Northern Hemisphere fish oil contentcontains approximately 10% DHA and 10% EPA.Camelina oil already contains the omega-3 fatty acid composition,ALA and tolerance to heat stress may expand the commercial adoption and cultivationRothamsted Institute has developed engineered Camelina lines, which produce approximately 20% of Camelina.
Canola or Brassica napus is a cultivar of rapeseed which produces a higher value edible oil favored by consumers because it has a healthierDHA+EPA fatty acid profile than corn or soybean oil. The canola crop was developed in Canada where it is
primarily grown today with additional acreage grown in the U.S. Currently the vast majority of the canola grown in North America contains two seed enhancement technologies, herbicide tolerance and hybrid seed. Both Roundup Ready (Monsanto) and Liberty-Link (Bayer) varieties of canola are grown and were introducedacids, similar to the market in 1990s. Approximately 25.6 million acres were planted incomposition of Northern Hemisphere fish oil.A number of these Camelina lines have been successfully field tested by Rothamsted and us during the last four years at different locations within the UK, Canada and the U.S. with oil samples produced for salmon and human feeding studies.Rothamsted is continuing its research program to further improve the oil composition of Camelina oil with the goal of developing a land-based production system for a Camelina oil composition as a drop in replacement for Southern Hemisphere fish oils, which has an DHA+EPA fatty acid content in the 2017 growing season. Yield10 is targeting a 20 percent or greater increase in canola seed yield. With a 2017 harvestoil of 939 million bushels of canola (Statistics Canada) and assuming an average farm gate price of $10.00 per bushel, a 20 percent yield increase in canola represents a total potential added annual value of $1.9 billion that couldapproximately 30%.We believe there may be shared among the players in the canola value chain.
Soybean or Glycine max is an oilseed crop used for food, food ingredients, food additives and animal feed. The soybean can be harvested for oil used in food and industrial applications, and soybean meal is a significant source of protein for use mostly in animal feed but also for direct human consumption. Fermented soy foods include soy sauce and tempeh, and non-fermented food uses include soy milk and tofu. Soybeans are widely cultivated in North and South America, where a majority of the seed planted is genetically modified. An estimated 96.7 million acres of soybean will be planted in the U.S. and Canada in the 2017/2018 growing season. Accordingintellectual property challenges related to the USDA, the U.S., Brazil and Argentina together represent approximately 80 percent of global soybean production. Yield10 is targeting a 20 percent or greater increase in soybean seed yield. Assuming a 2017/2018 U.S. harvest of 4.4 billion bushels (USDA) and an average farm gate price of $10.00 per bushel, a 20 percent yield increase in soybean represents a total potential added annual value of $8.8 billion that could be shared among the players in the soybean value chain.
Corn is a crop grown globally and used for animal feed and for producing starch which can be used as a raw material for producing food ingredients and food additives, as well as for use in the production of paper, packaging materials and other items. GM maize was grown foromega-3 oils in crops in North America until certain existing patents in Canada expire during 2025.We are currently progressing business development activities to determine the first time infeasibility of progressing the U.S. and Canada in 1997. Currently, about 80 percent of maize/corn production in the U.S. is genetically modified. It was estimated that more than 86 million acres of corn were plantedomega-3 Camelina in North America in the 2017 growing season. The traits commonly used in today’s corn cultivars provide insect resistance and herbicide tolerance. In many GM seeds sold today, both of these traits are expressed (or “stacked” which refers to the practice of adding multiple traits to an elite plant line). Europe has limited production of GM corn, where Spain is a leading producer of GM corn. In this case, the most widely used GM trait (Bt) protects against the corn borer insect. Special protocols must be followed in Europe to avoid mixing of GM corn with conventional corn. Corn has the more efficient C4 photosynthesis system and Yield10 is targeting a 10 percent yield increase in corn. With a projected 2017/2018 U.S. harvest of 14.6 billion bushels and an average per bushel price of $3.50, a 10 percent yield increase in corn represents a total potential added annual value of $10.2 billion that could be shared among the playersnear term.However, in the corn value chain.
Rice isinterim, Yield10 will focus its research and development efforts on developing advanced Camelina germplasm with the staple food for over 50 percent ofintention to introduce the global population. World crop production of rice for 2017/2018 is estimated at approximately 485 million metric tons. Rice is grown in tropical and subtropical regions around the world. Rice cultivation takes place primarily in China, India and Southeast Asia. Typically, improvements to rice yield have been achieved through traditional plant breeding approaches. Genetic engineering approaches are being investigated to protect rice from weeds and insect pests. Additional biotechnology approaches are being taken to improve the nutritional value of rice. While Yield10 has not established a target for yield improvement in rice, early work is underway to evaluate the potential of our technologies in this globally important food crop.
Wheat is a species of grass cultivated broadly worldwide as a staple cereal crop. Wheat requires processing to be used as food, mainlyomega-3 trait in the form of flour for bread, baked goods and pasta. Wheat may also be used as an industrial starch, as a food additive or as a production component in the textile and paper industries. Improvements to wheat yield have typically been achieved through plant breeding approaches. Wheat production ranks third among U.S. field crops in planted acreage, production and gross farm receipts behind corn and soybeans. The planted area for wheat in the U.S. and Canada combined for 2017/2018 is projected at 57 million acres.future.
Forage crops are grown expressly for biomass used for feeding livestock. Typical forage crops include both annual and perennial crops such as various grasses, silage corn, alfalfa and sorghum. Biotechnology traits have been previously introduced into silage corn and alfalfa. Other forage crops could be amenable to gene editing strategies to increase biomass yield per acre. We believe that our technology and traits that increase biomass may have application to forage crops.
Regulatory Requirements
Since the first successful commercialization of a biotechnology-derived agricultural crop in the 1990s, many new GM crop varieties have been developed and made available to farmers in the U.S. farmers and farmers worldwide.U.S. farmers have rapidly adopted many of these new GM varieties, so thatbiotechnology-derived varieties.According to the USDA, in 2016, 922020 over 90 percent of theU.S. corn, 93 percent of theupland cotton and 94 percent of the
soybeans planted in the U.S. were varieties produced through traditional forms of genetic engineering.A significant percentage of the production of other crops planted and harvested in the U.S., such as alfalfa, papaya and sugar beet are also biotech-derived.biotechnology-derived.
Genetically modifiedBiotechnology-derived or genetically engineered ("GE") crops are subject to a significant amount of regulation in the U.S. and around the world. worldwide.Field tests and field trials of GMsuch crops need to ensure that traits in development do not escape or mix with native plants. plants, and crops that may be used in human and animal food chain must meet certain safety standards.Government regulations, regulatory systems and the political environment that influence them vary significantly among jurisdictions.
For purposes of this discussion, the term “GE” includes both biotechnology-derived or genetically engineered plants that are modified by the insertion of recombinant DNA (“Traditional Genome Modification”).Biotechnology-derived or genetically engineered plants can also be modified through the application of more modern techniques of genome editing.We have seed traits that fall within each of these two generalized categories of GE plants, as summarized above under the subheading “Traits in Development.”
United States Regulation
The U.S. Governmentgovernment agencies primarily responsible for oversight ofoverseeing the products of modern agricultural biotechnology are the United States Department of Agriculture,USDA, the U.S. Environmental Protection Agency (EPA),FDA and the U.S. Food and Drug Administration (FDA). EPA.Depending on its characteristics, a product may be subject to the jurisdiction of one or more of these agencies under the federal government’s 1986 Coordinated Framework for the Regulation of Biotechnology, (most recently updated in January 2017). as updated.Regulatory officials from the three agencies regularly communicate and exchange information to ensure that any safety or regulatory issues that may arise are appropriately resolved within the scope of authority afforded to each agency under their respective statutes.Other environmental laws or regulations also may be implicated,apply, depending on the specific product.product and its potential applications or intended uses.Our business strategy for major grain crops is to develop yield and performance traits for licensing to the major seed companies.
Our seed traits and any future products that are successfully developed containing our seed traits are subject to USDA, FDA and EPA regulatory requirements.Those requirements will vary depending on the particular seed trait and the type and intended use of any product that will be commercialized.Future products that we plan to produce and sell, for example deployment of herbicide tolerant traits, are likely to have EPA regulatory requirements, and the regulations relating to manufacturing and consumer protection will also need to be addressed.
Within USDA, APHIS is responsible for protecting agricultural plants from pests, diseases and noxious weeds. Underadministers the Plant Protection Act, USDA-APHIS has regulatory oversight over productsregulations in 7 CFR part 340, ‘‘Introduction of modern biotechnology that could pose such a risk. Accordingly, USDA-APHIS regulates organisms and products that are known or suspected to be plant pests or to pose a plant pest risk, including those that have been altered or produced through genetic engineering. engineering which are plant pests or which there is reason to believe are plant pests.’’These regulations govern the introduction (importation, interstate movement, or release into the environment) of certain GE organisms. Along with the EPA and the FDA, APHIS is responsible for the oversight and review of GE organisms.
On May 18, 2020, the USDA updated the biotechnology regulations in the Plant Protection Act (7 C.F.R. Part 340) and set up a new paradigm called the Sustainable, Ecological, Consistent, Uniform, Responsible, Efficient (“SECURE”) rule. This Act establishes updated regulations for importation, interstate movement, and environmental release of GE organisms and products. It provides exemptions for plants if the genetic modification is solely a deletion of any size, or the genetic modification is a single base pair substitution or if the genetic modification is solely introducing nucleic acid sequences from within the plant’s natural gene pool. Exemptions also apply if the modification is from editing nucleic acid sequences in a plant to correspond to a sequence known to occur in that plant’s natural gene pool or if the plant is an offspring of a GE plant and does not retain the genetic modification in the GE plant parent.In addition to the above, § 340.1(c) states that modified plants would not be subject to the regulations if they have plant-trait mechanism of action (“MOA”) combinations that are called “regulated articles.”the same as those of modified plants for which APHIS has conducted a regulatory status review and found not to be subject to the regulations under part 340. The focus rests on the organism itself rather than the methods and technologies used to generate it, which is important given improvements in delivery and genome editing modalities over the past 33 years.
Seed traits developed using Traditional Genome Modification, such as our C3003 yield trait that leverages the biological functions of an algal gene, are regulated under 7 CFR part 340.Regulated articles are subject to extensive USDA-APHIS regulates theoversight, including but not limited to permitting requirements for import, handling, interstate movement and release into the environmentenvironment.In recent years, we have obtained determinations from USDA-APHIS that some of regulated organismsour genome edited lines are exempted from the 7 CFR part 340 framework administered by the agency.In cases (i) through (iv) below, USDA-APHIS's Biotechnology Regulatory Services approved our petitions and confirmed that are productseach of biotechnology, including organisms undergoing confined experimental use or field trials. Regulated articles are reviewed to ensure that, under the proposed conditions of use, they dothese novel plant lines would not present a plant pest risk through ensuring appropriate handling, confinement and disposal. The developer may then petition USDA-APHIS for a determination of non-regulated status for the article. If the agency determines that the Genetically Engineered ("GE") plant is unlikely to present a greater plant pest risk than its unmodified counterpart, the new crop will no longer be subject to the permitting and other regulatory processes that are overseen by USDA-APHIS (i.e., it will no longer be treated as a potential plant pest).
In June 2017, we submitted anregulated article through the previous APHIS “Am I Regulated?” letter to USDA-APHIS’s Biotechnology Regulatory Services (BRS) to confirm that our genome-editedprocess.
(i) The single trait C3008 Camelina plant line, developed using CRISPR genome editing technology for increased oil content doescontent.
(ii) The triple-edited Camelina line E3902 that combines three gene traits, C3008a, C3008b and C3009, to increase oil production.
(iii) The Camelina CRISPR edited line edited for the C3007 trait for increased oil production in Camelina.
(iv) The canola CRISPR edited line edited for the C3007 trait for improved oil production in canola.
To our knowledge, our triple-edited Camelina line E3902 which was determined to not meet the definition of abe regulated article under 7 CFR Partpart 340 regulations, and in September 2017, we received2018, is the first CRISPR-edited triple-trait plant determined by the agency to be not to be regulated under 7 CFR part 340.Since 2018, our CRISPR-edited lines that are exempt from regulation by APHIS (under 7 CFR part 340) have been studied in field tests conducted in the U.S.We expect to continue to make appropriate use of SECURE Rule procedures to clarify the regulatory status of our new GE seed traits as they are developed.
In 2020, the regulatory exemptions and confirmation process under the SECURE rule took effect, representing the first comprehensive revision of APHIS’ biotechnology regulations since 1987. The revisions enable APHIS to regulate organisms developed using genetic engineering for plant pest risk with greater precision and reduces the regulatory burden for developers of organisms that are unlikely to pose plant pest risks. Once a specific plant developed through genetic engineering is found not to require regulation, new varieties of the BRS agrees with that conclusion. Together withplant containing the same genetic modification would similarly not be regulated. Since the new process was enacted, certain of our wholly owned Canadian subsidiary, Metabolix Oilseeds, Inc., we developed the genomeCRISPR edited Camelina line. Researchers used the CRISPR genome editing tool to inactivate an enzyme expected to increase seed oil contentC3007 lines have been confirmed by APHIS as being exempt from regulation by USDA-APHIS under 7 CFR part 340. In addition, in Camelina,2022 we filed a trait we have designated as C3008. There are three copies of this gene in the Camelina genome, and complete editing of all copies was achieved. This trait may have further applications when used in combination with other traits that we are developing that are expected to increase seed oil content, including C3007.
Subsequently, depending on the intended use of the non-regulated genetically engineered plant, the developer may need to work within separate EPA or FDA oversight rules before commercial introduction of the final product. EPA primarily regulates products of biotechnology that are intended for use as pesticides,request under the authorities granted toSECURE Rule for Regulatory Status Review (RSR) with USDA-APHIS Biotechnology Regulatory Services (BRS) for herbicide tolerant Camelina. As of March 2023, a response from the agency is pending.
The EPA byis responsible under the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA).for regulating pesticides with public health uses, as well as ensuring that these products do not pose unintended or unreasonable risks to humans, animals and the environment.For herbicide-tolerant crops the EPA regulates the herbicide while the USDA-APHIS regulates the crops.The EPA establishes tolerances for the allowable amount of herbicide residues that may remain on the crop.Tolerances, as defined by the EPA, are “the maximum amount of a pesticide allowed to remain in or on a food” as part of the process of regulating pesticides.
Separate from approval for genetic modifications from USDA-APHIS regulations under 7 CFR part 340, a GE plant also will be regulated by the FDA if it is the agency responsible for overseeing the safety of biotechnology-derived products that are intended to be used as human food or animal feed.The FDA regulates the safety of food or that may end up infor humans and animals, and foods derived from GE plants must meet the same food supply. safety requirements as foods derived from traditionally bred plants (also called “conventional foods”).
Since 1992, the FDA has had in place a voluntary consultation process for developers of bioengineered food. food (“Biotechnology Consultations”).Final agency decisions and other information from these Biotechnology Consultations are made publicly available by the FDA. Biotechnology Consultations are data-intensive and examine the new food product’s safety and nutritional profile, among other issues. Generally, the FDA has found that such food products do not pose unique health risks to humans or animals, but if a novel allergen or other distinction from the conventional food is present in the new plant variety, the agency may require specific label statements on the product to ensure that consumers are made aware of material differences between GE and conventional versions.The FDA primarily derives its regulatory power from the Federal Food, Drug, and Cosmetic Act, which has been amended over time by several subsequent laws.Among other oversight and inspection responsibilities, the FDA regulates ingredients, packaging, and labeling of foods, including nutrition and health claims and the nutrition facts panel.Foods are typically not subject to premarket review and approval requirements, with limited exceptions.
As part of a broader effort to modernize its regulatory approach to all biotechnology-derived products, the FDA is currently re-evaluating its regulatory approach in light of the increasing prevalence of certain genome edited plants.In January 2017, the FDA asked for public input to help inform its thinking about human and animal foods derived from new plant varieties produced using genome editing techniques.Among other things, the FDA’s request for comments asked for data and information in response to questions about the safety of foods from genome edited plants, such as whether certain categories of genome edited plants present food safety risks different from other plants produced through traditional plant breeding.
In October 2018, FDA leadership issued a document entitled the “Plant and Animal Biotechnology Innovation Action Plan” (the “Action Plan”) that identified three key priorities for the agency in this area: 1) advancing human and animal health by promoting product innovation and applying modern, efficient and risk-based regulatory pathways; 2) strengthening public outreach and communication regarding the FDA’s approach to innovative plant and animal biotechnology; and 3) increasing engagement with domestic and international partners on biotechnology issues.The Action Plan also stated that the FDA has reviewed the comments and other information it received in response to the January 2017 request for comments, and that it intends to develop guidance for the industry explaining how the FDA’s existing regulatory policy for foods derived from new plant varieties applies to foods produced using genome editing.The FDA also stated in the Action Plan that it intends to begin updating the existing procedures for voluntary Biotechnology Consultations to reflect the agency’s 25 years of experience with foods derived from biotechnology plants and to incorporate any additional issues related to genome editing of food crops.Such procedural updates are expected to be developed and implemented over the next two years.
Canadian Regulation
In Canada, the largest producer of GM canola, GMGE crops, and the food products into which they are incorporated, also are regulated by multiple government agencies under a federal framework for the regulation of biotechnology products that is similar to the U.S. system. First, the Canadian Food Inspection Agency (CFIA)CFIA is the lead agency for ensuring that a new agricultural biotechnology crop will not pose new risks to Canadian plants, animals, and other agricultural commodities. The CFIA’s Plant Biosafety Office (PBO)("PBO") is responsible for conducting environmental assessments of biotechnology-derived plants.plants, referred to as "plants with novel traits" ("PNT"). Authority for the PBO includes both approving confined field trials with the GM cropPNT through permits and authorizing their “unconfined release” as a first step towards commercialization.PNTs are defined in the Canadian Seeds Regulations (i) as plants into which a trait or traits have been intentionally introduced, and (ii) where the trait is new in Canada and has the potential to impact the environment.The CFIA also has in place a remutation policy, whereby plants containing the same mutation as a previously authorized plant of the same species are included in the authorization of the original PNT and are therefore subject to the same conditions.
Second, underUnder the Food and DrugsAct and related regulations, Health Canada is responsible for reviewing a pre-market safety assessment that must be submitted by the manufacturer or importer of a “novel food,” a term of art whichthat includes GMany PNT or other biotechnology-derived foods. The safety assessment should provide assurances that the novel food is safe when prepared or consumed according to its intended use. use before it enters the Canadian market and food system.A multi-disciplinary team of experts from Health Canada will evaluateevaluates the data and information about the novel food and make a determination regarding whether it is safe and nutritious before it can be sold in Canada, andas well as whether any restrictions are warranted under applicable law or the product’s safety profile. Health Canada’s final decision documents regarding the safety of these novel foods are made available to the public by the government.As in the U.S., approval of a PNT or a novel food product does not take into account the method with which such product was produced.Rather, Health Canada employs a product-based (as opposed to a process-based) approach to its regulatory oversight of such emerging foods and food ingredients.
As the lead agency for public health and safety, Health Canada also works in conjunction with the CFIA on food labeling oversight when it has identifiedidentifies a potential health or safety issues with a food that could be mitigated through labeling or other disclosures. For example, if the biotechnology-derived food contains a new allergen that is otherwise not present in the conventional version of the food, then specific label statements will beare required to alert consumers to that important health information. However, the CFIA has primary oversight over non-health issues related to food labeling, packaging, and advertising. Accordingly, the CFIA is the lead agency for ensuring that food labeling and advertising meet the legal requirements of the Food and Drugs Act, and that labeling representations do not create a potential risk of fraud or consumer confusion and are compliant with Canada’s voluntary disclosure standard for genetically engineeredGE food ingredients.
Finally, Environment Canada is also available to serve as a regulatory “safety net” if a novel product does not naturally fall within the jurisdiction of the CFIA, Health Canada, or the Pest Management Regulatory Agency that oversees pesticide products.
Our work involving the development, greenhouse testing, and field testing of novel yield trait genes in crop plants requires certain government and municipal permits, and we must ensure compliance with all applicable regulations, including regulations relating to GMGE crops. With laboratories and greenhousegreenhouses in both the U.S. and Canada, we are also subject to regulations governing the shipment of seeds and other plant material (including GMGE seeds and GMGE plant material) between our facilities in the U.S. and Canada, including USDA-APHIS and CFIA permits for the import and phytosanitary certificates for the export of plant materials that could pose a risk to domestic agriculture.
Having deployed our own research and development operations in Saskatoon, Canada in 2010, we have been conducting field studies of various yield traits in that country since 2016 under PNT permits issued by Canadian regulators. In recent years, we have conducted field studies in Canada of multiple traits including our PHA bioplastic trait, under PNT permits.
Regulation in Other Jurisdictions
Other jurisdictions and governmental authorities, including in South America and Asia, are increasingly taking an interest in regulating agricultural products of biotechnology.Regulatory approaches vary by jurisdiction, including the existing public health framework and phytosanitary laws in the country, and other less tangible factors such as cultural and religious norms that may have an impact on individual country risk assessments and decision-making.We cannot predict future changes in the global regulatory landscape regarding GE plants subjected to Traditional Genome Modification or GE
plants subjected to genome editing.Further, although U.S. and Canadian regulatory authorities have taken similar approaches to overseeing both traditional biotechnology-derived plants and genome edited plants under their national plant health and biosafety laws, regulation of all GE plants in the EU is significantly more stringent than in North America.U.S. and Canadian regulators have also determined that genome edited GE plants pose fewer risks that those subjected to Traditional Genome Modification.A July 2018, Court of Justice of the European Union legal ruling indicates that the existing European regulations for GE plants modified by the insertion of recombinant DNA should be strictly applied to genome edited plants as well.There is thus a sharp distinction between how European and North American regulatory agencies oversee novel seed traits, including those that are generated using the more modern techniques of genome editing. Although we are not currently targeting European markets for the development or commercialization of our products, the EU approach to regulating GE plants without regard to the scientific distinctions between Traditional Genome Modification and directed genome editing could be adopted by emerging oversight regimes for GE products in other jurisdictions.However, an increasing number of countries that dominate GE crop production such as Argentina, Brazil and China are adopting a more favorable regulatory approach towards genome edited plants that do not contain foreign DNA by equating the crops to conventionally bred varieties.This approach first implemented by Argentina, followed by many other countries, demonstrates the evolving landscape for GE crops informed by over 25 years of regulation and GE crop production.
In 2020, Japan published final guidelines for genome edited plants and food that state that these can be sold to the public, without the need for pre-market authorization provided they meet the criteria of being similar to products of traditional breeding.
In December 2021, Yield10 received a favorable determination from the Argentine Biosafety Commission that our genome edited Camelina lines, E3902 and the two C3007 lines, developed for increased oil content, were similar to conventional bred Camelina varieties and are not regulated under the biotechnology resolution No. 763/11 of the Ministry of Agriculture, Livestock and Fisheries in Argentina. In practice, the Argentinian authorities have confirmed that because the genome edited Camelina lines do not contain any foreign inserted DNA, these varieties can be marketed in Argentina like conventional Camelina varieties without the need for any pre-market authorizations.
In fourth quarter 2022, the Agricultural Protection Division – Forestry and Seeds in Chile indicated that our genome edited E3902 Camelina line is not under the scope of the Chilean Biotechnology Crops Resolution No. 1523 of 2001, and its amendments regarding GMOs confirming that this line is considered not regulated (non-GM) in Chile and can be cultivated like conventional crops.
In January 2022, the Chinese Ministry of Agriculture and Rural Affairs published new guidelines for the review and approval of genome edited crops and products paving the way for faster commercialization in that country.
In-License Agreements
Exclusive Collaboration Agreement with Rothamsted Research
On November 12, 2020, Yield10 signed an exclusive collaboration agreement with Rothamsted to support Rothamsted’s Flagship Program to develop omega-3 oils in Camelina. The technology developed by Rothamsted could enable the sustainable, plant-based production of omega-3 (EPA, DHA+EPA) nutritional oils that closely mimic the composition of Southern Hemisphere fish oil, an important ingredient in the production of aquaculture feed. Omega-3 oils are also essential for human nutrition and have demonstrated benefits in heart health. Rothamsted is a world-leading nonprofit research center based in Harpenden, UK, that focuses on strategic agricultural science to the benefit of farmers and society worldwide. Over the last decade, the team led by Professor Johnathan Napier, Ph.D., Science Director, has demonstrated the production of EPA, DHA+EPA oils in Camelina seed. In addition, Prof. Napier’s team has carried out multi-year field trials and multiple feeding studies with research partners using the EPA, DHA+EPA Camelina oil in different fish species. Their partners have included at least one major aquafeed company. Under the agreement, Yield10 has provided financial support for Prof. Napier’s ongoing research including further EPA, DHA+EPA trait improvement, field testing and nutritional studies. As part of the agreement, Yield10 received an exclusive two-year option to sign a global, exclusive or non-exclusive license agreement to the technology. In November 2022, Yield10 and Rothamsted agreed to extend the collaboration agreement, including the license option, without additional funding support, through December 31, 2023. Under this collaboration, Yield10 will monitor the ongoing progress by Rothamsted while developing the business plan for the initial commercial launch, which is expected to serve the salmon feed market in Chile.
License Agreement with the University of MassachusettsMissouri
Pursuant to a license agreement with the University of Massachusetts ("UMASS"Missouri (“UM”) dated as of June 30, 2015,May 17, 2018, we have an exclusive, worldwide license under certain patentsto two novel gene technologies to boost oil content in crops.Both technologies are based on significant new discoveries around the function and patent applicationsregulation of ACCase, a key rate-limiting enzyme involved in oil production.The first technology, named C3007, is a gene for a negative controller that inhibits the enzyme activity of ACCase.The second technology, named C3010, is a gene which, if over-expressed, results in increased activity of ACCase.The UM license was expanded during May 2019 to make, have made, use, offer for sale, sell, have sold and import any transgenic plant seed or plant grown there from or transgenic plant material developed for saleinclude an exclusive worldwide license to a farmer or grower for plantingthird gene in the field, which transgenic plant seed or plant grown therefrom or transgenic plant material is covered by, embodies or is derived from (in whole orACCase complex, that we have designated C3012, that may complement the activity of C3007 to boost oil content in part) one or more issued or pending claims ofcrops.
Pursuant to the licensed patents or patent applications. The licensed patent rights include issued patents covering our yield trait gene C3003.
WeUM license agreement, we are required to use diligent efforts to develop licensed products throughout the licensed field of use and to introduce licensed products into the commercial market.In that regard, we are obligated to fulfill certain research, development, and regulatory milestones relating to C3003,C3007, C3010 and C3012, including completion of multi-site field demonstrations of a crop species in which C3003 hasC3007, C3010 and C3012 have been introduced, and filing for regulatory approval of a crop species in which C3003 hasC3007, C3010 and C3012 have been introduced within a specified period.Our failure to achieve any milestone provided for under the license agreement would ifgive UM the right to terminate the license agreement or render it nonexclusive, unless we are unableable to reach agreement with UMASSUM as to athe potential adjustment of the applicable milestone, give UMASS the right to terminate the agreement, following a notice period.milestone.
We are obligated to pay UMASSUM a license execution payment, milestone payments relating to any regulatory filings and approvals covered by the license agreement, royalties on any sales of licensed products following regulatory approval, as well as a percentage of any sublicense incomeroyalties related to the licensed products.
We may terminate the license agreement at any time upon 90 daysdays’ prior written notice to UMASS.UM. Either party may terminate for material breach immediatelythe license agreement upon written notice for a breach that is not cured within 6030 days after receiving written notice of the breach.In addition, UMASSUM may terminate thisthe license agreement with respect to certain patent rights immediately upon written notice in the event we contest the validity or enforceability of such patent rights.
Competitive Landscape for our Business
•Camelina Oilseed and Alternative Cover Crops
•PHA Biomaterials
•Omega-3 Oil
•Trait Licensing: Agricultural Industry Landscape
Camelina Oilseed and Alternative Cover Crops: Camelina, because it is not currently a major food crop, has been of recent interest in North America for large-scale production of feedstock oil for biofuels, both renewable diesel and sustainable aviation fuel. We believe that there is a growing interest among oilseed crushers and energy companies in sourcing non-food, low CI feedstock oil for supplying the biofuel market. Camelina is attractive, not only as a spring rotation crop, but also as a winter cover crop, enabling a second oil harvest annually for each acre planted. The general interest in cover crops has been steadily increasing over the last several years. The companies focusing on Camelina include Sustainable Oils, S&W Seed, and Smart Earth. There have also been recent investments in oilseed cover crop alternatives to Camelina including the development of carinata by NuSeed and the efforts by CoverCress Inc. over the last several years to develop pennycress as a cover crop for the mid-west corn and soybean belt.
PHA Bioplastics: Third party PHA producers are pursuing fermentation-based production systems to produce PHA bioplastics for the biodegradables market.These producers include Cheil Jedang, or CJ, of South Korea (which acquired the fermentation and polymer processing technology from Yield10 in 2016 when we were still named Metabolix Inc.), Kaneka of Japan, and Danimer Scientific.Danimer has a bioplastics compounding business that produces PHAs from fermentation of seed oils and has developed revenuegenerating relationships with a number of brand owners and consumer products companies.There are also a number of smaller pre-commercial PHA bioplastic companies, all of which, to our knowledge, are based on fermentation platforms in North America and in China.Although these companies use genetically engineered microbes and feedstocks from GMO crops for their fermentation processes, some brand owners may prefer to accept the higher cost structure for the fermentation-derived PHA bioplastic as compared to PHA Camelina because they are not made from a GMO crop.
Omega-3 Oil:The growing demand for alternative sustainable sources of fish oil for human nutrition, pharmaceutical, and aquafeed applications has made this an attractive area for investment by several companies.Alternative sources include microbial fermentation processes commercialized by Veramaris (the joint venture between Evonic and DSM, with a production facility in Blair, Nebraska) and by Archer Daniels Midland Co. (with a production facility in Clinton, Iowa).On the crop-based production side, two different genetically engineered varieties of the oilseed canola have been developed and approved by USDA-APHIS to address this growing demand.BASF Plant Sciences has developed a canola variety that produces low amounts of the omega-3 fatty acid EPA and the Australian company Nuseed has developed a canola variety that produces the omega-3 fatty acid DHA in the oil.BASF currently has patents on genes for the production of omega-3 oils in canola dating back to applications made on or before 2005.NuSeed exclusively licensed patents on the production of omega-3 oils in canola from Australia’s Commonwealth Scientific and Industrial Research Organization (CSIRO).We believe the Rothamsted technology which enables production of omega-3 EPA, DHA+EPA oil has higher potential as a drop-in replacement for fish oil in aquafeed.
Trait Licensing: Agricultural Industry Landscape: Following advances in biotechnology in the 1970s through the early 1990s, the first genetically modifiedGM crops were commercially introduced in the U.S. in the years 1994 and 1995. mid-1990s.Today, the U.S. leads the world in the adoption of GM
crops in terms of crop value and acreage planted.GM crops (also referred to as GMO or Agbiotech) have had both their supporters and their detractors over the years.Consumer sentiment including concerns about the safety of GM crops have limited the introduction and adoption of GM crops in Europe.However, recent studies by the National Academy of Science continue to support the 20 year20-year history of safe use of GM crops.
The International Service for the Acquisition of Agri-Biotech Applications (ISAAA), an industry research group, reported that 457470 million acres worldwide were planted with GM crops in 2016,during 2019, the most recent year wherefor which data is available.The planting of GM crops is centered in the Americas with North America atand South America each representing approximately 4544 percent of the acres and Latin America at approximately 43 percent. total worldwide acres.China and India follow with approximately 8 percent and the balance of the total worldwide GM crop acreage in 2016during 2019. The remaining GM acreage was planted in European Unionthe EU and the rest of world.The primary GM crops in the U.S. are corn, soybean, cotton and sugar beet.In Canada, the oilseed crop canola is the primary GM crop.Cotton is the primary GM crop grown in India and China.
In contrast to the Americas, the European UnionEU has been relatively slowresistant to adoptthe adoption of GM crops and has relied heavily on plant breeding programs for capturing crop yield improvements over the last 20 years.In 2016,2019, Spain was the largest producer of GM crops in Europe, based on cultivation of GM corn representing approximately 20 percent of the country’s crop that year.Certain GM crops have been approved for cultivation in some European countries, while other countries have imposed outright bans on cultivation of GM crops.
According to the market sector research and analytics firm, ResearchMarkets and Markets, the total global seed businessmarket was estimated at $53$63 billion in 20142021 and is projected to grow to more than $100$86 billion by 2022. 2026.According to anthe ISAAA, report,in 2019 the global GM seed business representedadoption of biotech crops was recorded for 72 countries with 29 planting and an additional 43 importing for food, feed, and processing. That year, a $15.8 billion markettotal of 190.4 million hectares of biotech crops were grown in 2016.29 countries. The top five biotech crop growing countries worldwide are the United States, Brazil, Argentina, Canada, and India. The traits being commercialized today by the agricultural industry mainly address crop protection, which involves preventing crop damage by weeds, insects and other pests that lower expected crop yield.As technology has advanced, “trait stacking,” or the practice of adding multiple traits to an elite plant line, has become commonplace as a strategy to protect yield.As the industry has developed, the practice of inter-licensing traits between research and development driven seed companies has led to a proliferation of branded seed products on the market today.
The GM seed business in North America is dominated by large multinational companies and their subsidiaries including BASF Corporation, Bayer DowDuPont, Monsanto,Crop Science, Corteva Agriscience, Syngenta, and AgReliant. AgReliant Genetics, LLC.These companies have significant resources, extensive experience and track records of successfully developing, testing and commercializing high performing seed lines as well as new traits for GM crops.They offer farmers conventional and biotechnology seeds as well as crop protection chemicals, biologicals, fertilizers and other products and technologies aimed at supporting the on-farm efficiency of managing crops in the field as well as managing the overall cost of crop production through to successful harvest. Many
Privately owned, U.S. retail seed companies play a key role in the industry by developing, marketing and selling high performing seed to U.S. farmers.These companies include Beck’s Hybrids and Stine Seed. These companiesSeed, which have capabilities in both biotechnology and plant breeding.They source traits from the multinational companies and input these traits into elite plant germplasm to produce seeds optimized for a variety of soil, climate and field conditions.Both companies offer a broad arrange of GM corn and soybean products to their customers.
Recent advances in biotechnology, including gene editing, have led to the formation of companies focusing on yield trait discovery, biologicals for pest control, agbiome strategies and precision agriculture.There are startups, privately held and publicly traded companies involved in this space.Such companies include AgBiome LLC, Arcadia Biosciences, Inc., Benson Hill Biosystems, Calytx,Inc., BioCeres S.A., Calyxt, Inc., Cibus Ltd., Evogene Ltd., Inari Agriculture, Inc., Indigo Agriculture, Inc., Kaiima Bio-Agritech Ltd., and Marrone Bio Innovation,Pairwise Plants LLC, many of which have greater resources and experience than we have.
Intellectual Property
Our continued success depends in large part on our proprietary technology.As of December 31, 2017,2022, we owned or held exclusive rights to 19 patent families, including 15 issued patents and 41 pending patent applications, worldwide related to advanced technologies for increasing yield in crops. crops, in the United States and throughout the world. As part of our agreement with Rothamsted, we have an exclusive option to license two patent families, RR213 and RR305, including six issued patents and four pending applications, including both the original patent filing for the production of EPA, DHA+EPA oil in Camelina and for an improvement patent filed after the agreement was signed.Our portfolio of patent applications includes plant science technologies we have in-licensed globally and exclusively from Thethe University of Massachusetts and North Carolina State University related to the yield trait gene C3003 and other advanced technologies based on advanced metabolic engineering methods to improve carbon capture and selectively control carbon partitioning in plants.
Our portfolio of patent applications also includes advanced technologies for oilseed crops that we in-licensed globally and exclusively from the University of Missouri in 2018 and 2019 related to the yield trait genes C3007, C3010 and C3012.
We continue to seek, develop and evaluate new technologies and related intellectual property that might enhance our Company's business strategy, industry position or deployment options.
EmployeesHuman Capital Resources
As of December 31, 2017,2022, we had 2030 full-time employees. Of those employees, 1624 were in research and development. Among our staff, 815 hold Ph.D.’s and 1211 hold masters’ or bachelors’ degrees in their respective disciplines. Our technical staff has expertise in the following areas: plant genetics, plant biology, microbial genetics, bioinformatics, metabolic engineering and systems biology.Our headquarters areis located in Massachusetts, and we maintainour wholly-owned subsidiary, Yield10 Oilseeds Inc. ("YOI"), maintains a research and development facility, including greenhouse facilities, in Saskatoon, Canada.None of our employees are subject to a collective bargaining agreement. Weagreement and we consider our relationship with our employees to be good.
Talent Acquisition and Retention
We recognize that our employees largely contribute to our success.To this end, we support business growth by seeking to attract and retain best-in-class talent.We use internal and external resources to recruit highly skilled candidates for open positions.We believe that we are able to attract and retain superior talent as measured by our minimal turnover rate and high employee service tenure.
Total Rewards
Our total rewards philosophy has been to create investment in our workforce by offering a competitive compensation and benefits package for the two geographies in which we have offices.We provide employees with compensation packages that include base salary, annual incentive bonuses, and long-term equity incentive awards.We also offer comprehensive employee benefits, such as life, disability, and health insurance as well as flexible spending accounts, paid time off, and a 401(k) plan.It is our expressed intent to be an employer of choice in our industry by providing a market-competitive compensation and benefits package.
Health, Safety, and Wellness
The health, safety, and wellness of our employees is a priority in which we have always invested and will continue to do so.We provide our employees with access to a variety of innovative, flexible, and convenient health and wellness programs.Program benefits are intended to provide protection and security, so employees can have peace of mind concerning events that may require time away from work or that may impact their financial well-being.
These investments and the prioritization of employee health, safety, and wellness took on particular significance in 2020 through 2022 in light of COVID-19.To protect and support our team members, we implemented health and safety measures that included maximizing personal workspaces, altering work schedules, and providing personal protective equipment.To aid in containing the spread of COVID-19, we also implemented remote-work options and limited employee travel.We continue to monitor this rapidly evolving situation and will continue to seek programs to educate and assist employees whenever possible.
Diversity, Equity, and Inclusion
We believe a diverse workforce is critical to our success.Our mission is to value differences in races, ethnicities, religions, nationalities, genders, ages, and sexual orientations, as well as education, skill sets and experience.We are focused on inclusive hiring practices, fair and equitable treatment, organizational flexibility, and training and resources.
Corporate History and Investor Information
WeIn 1992, our Company was incorporated in Massachusetts under the name Metabolix, Inc.In September 1998, we reincorporated in Delaware and in January 2017, we changed our name to Yield10 Bioscience, Inc. in January 2017 to reflect our change in mission around innovations in agricultural biotechnology focused on developing disruptive technologies for step-change improvements in crop yield. In 1992, our Company was incorporated in Massachusetts under the name Metabolix, Inc. In September 1998, we reincorporated in Delaware. Financial and other information about our Company is available on our website at www.yield10bio.com.
The information on our website is not incorporated by reference into this annual report on Form 10-K and should not be considered to be part of this annual report on Form 10-K. We make available on our website, free of charge, copies of our annual reportAnnual Report on Form 10-K, quarterly reportsQuarterly Reports on Form 10-Q, current reportsCurrent Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the Securities and Exchange Commission (the “SEC”"SEC").
Investors should note that we announce material information to our investors using our website, SEC filings, press releases, public conference calls and webcasts. We use these channels, as well as social media, to communicate with our shareholders and the public about our Company, our products and other matters. It is possible that the information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our Company to review the information we post on the social media channels listed at the top of our website.
In addition, the public may readSEC maintains an internet site that contains reports, proxy and copy any materialsinformation statements, and other information regarding issuers that we file electronically with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, ourSEC.Our filings with the SEC may be accessed through the SEC's website at http://www.sec.gov.
ITEM 1A. RISK FACTORS
Risk Factor Summary
Our business is subject to numerous risks. We encourage you to carefully review the full risk factors contained in this Annual Report on Form 10-K. Some of the principal risk factors are summarized below:
•We have a history of net losses and our future profitability is uncertain.
•We will need to secure additional funding to finance our operations and may not be able to do so when necessary, and/or the terms of any financings may not be advantageous to us.
•Our seed products and crop science technologies are at an early stage of development. We may never commercialize a technology or product that will generate meaningful, or any, revenues.
•There can be no assurance that we will be able to comply with the continued listing standards of The Nasdaq Capital Market.
•Currently, our primary source of our revenue is government grants; continued availability of grant funding is uncertain and contingent on compliance with the requirements of the grant.
•Our financial condition and results of operations could be adversely affected by public health epidemics, including the continued evolution of the coronavirus outbreak.
•Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.
•Our business operations could be adversely affected by the impact of the war in Ukraine.
•The crop science product development cycle is lengthy and uncertain, and our progress will depend on our ability to attract third-party investment in research under license agreements and on our ability to establish collaborative partnerships to develop and commercialize our innovations.
•Any potential collaborative partnerships that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our innovations.
•Our crop science program may not be successful in developing commercial products or if our future collaborators are successful in developing commercial products that incorporate our traits, such products may not achieve commercial success.
•Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the markets in which we may compete in the future achieve growth, our business could fail to achieve the same growth rates as others in the industry.
•If ongoing or future field trials conducted by us or our future collaborators are unsuccessful, we may be unable to complete the regulatory process for, or commercialize, our products in development on a timely basis.
•Adverse weather conditions, natural disasters, crop disease, pests and other natural conditions can impose significant costs and losses on our business.
•Competition in the market for traits and seeds is intense and requires continuous technological development, and, if we are unable to compete effectively, our financial results will suffer.
•Our business is subject to various government regulations in the United States and Canada; the regulatory requirements for our future products in development are evolving and are subject to change, and if there are adverse changes to the current regulatory framework, our or our future collaborators’ ability to market our traits could be delayed, prevented or limited.
•If we or our future collaborators are unable to comply with and timely complete the regulatory process in the United States and Canada for our future products in development, our or our future collaborators’ ability to market our traits could be delayed, prevented or limited.
•The regulatory environment for genetically engineered crops in jurisdictions outside the United States and Canada varies greatly, and some jurisdictions have more restrictive regulations that could delay, prevent or limit our or our future collaborators’ ability to market our traits.
•Consumer resistance to genetically engineered crops may negatively affect the ability to commercialize future crops containing our traits, as well as our public image, and may reduce any future sales of seeds containing our yield traits.
•Government policies and regulations, particularly those affecting the agricultural sector and related industries, could adversely affect our operations and our ability to generate future revenues and to achieve profitability.
•The products of third parties, or the environment itself, may be negatively affected by the unintended appearance of our trait genes, novel seed compositions and novel seed products.
•Loss of or damage to our elite novel trait events and plant lines would significantly slow our product development efforts.
•Our insurance coverage may be inadequate to cover all the liabilities we may incur.
•We rely on third parties to conduct, monitor, support, and oversee field trials and, in some cases, to maintain regulatory files for those products in development, and any performance issues by third parties, or our inability to engage third parties on acceptable terms, may impact our ability to complete the regulatory process for or commercialize such products.
•If we lose key personnel or are unable to attract and retain necessary talent, we may be unable to develop or commercialize our products under development.
•Our business and operations would suffer in the event of system failures.
•Patent protection for our technologies is both important and uncertain.
•Third parties may claim that we infringe their intellectual property, and we could suffer significant litigation or licensing expense as a result.
•Portions of our crop science technology are owned by or subject to retained rights of third parties.
•We may not be successful in obtaining necessary rights to additional technologies for the development of our products through acquisitions and in-licenses.
•Our license agreements include milestone and royalty payments that we are required to make to third parties.
•The intellectual property landscape around genome editing technology, such as CRISPR, is highly dynamic and uncertain, and any resolution of this uncertainty could have a material adverse effect on our business.
•We rely in part on trade secrets to protect our technology, and our failure to obtain or maintain trade secret protection could harm our business.
•Raising additional funds may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies.
•Trading volume in our stock can fluctuate and an active trading market for our common stock may not be available on a consistent basis to provide stockholders with adequate liquidity. Our stock price may be volatile, and our stockholders could lose a significant part of their investment.
•Provisions in our certificate of incorporation and by-laws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.
•Concentration of ownership among our officers, directors and principal stockholders may prevent other stockholders from influencing significant corporate decisions and depress our stock price.
We caution you that the following important factors, among others, could cause our actual results to differ materially from those expressed in forward-looking statements made by us or on our behalf in filings with the SEC, press releases, communications with investors and oral statements.statements. Any or all of our forward-looking statements contained in this Annual Report on Form 10-K and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in the discussion below will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may differ materially from those anticipated in forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosure we make in our reports filed with the SEC.
All dollar amounts, except per share amounts, are stated in thousands.
Risks Relating to our Financial Position
We have a history of net losses and our future profitability is uncertain.
We have recorded losses in every year since our inception, with the exception of 2012. As of December 31, 20172022, our accumulated deficit was $342,753.$399,697. Since 1992, we have been engaged primarily in research and development and early-stage commercial activities. Because our crop science technology is at an early stage of development, we cannot be certain that the Yield10 Bioscienceour business will generate sufficient revenue to become profitable.We expect to continue to have significant losses and negative cash flow for at least the next several years, as we incur additional costs and expenses for the continued development of our technology, including the ongoing expenses of research, development, commercialization and administration.The amount of money we spend will impact our need for capital resources as well as our ability to become profitable and this will depend, in part, on the number of new technologies that we attempt to develop.We may not achieve any or all of these goals and, thus, we cannot provide assurances that we will ever be profitable or achieve significant, or any, product revenues.
We will need to secure additional funding to finance our operations and may not be able to do so when necessary, and/or the terms of any financings may not be advantageous to us.
As of December 31, 2017,2022, we heldhad unrestricted cash, and cash equivalents and short-term investments of $14,487.$4,347. We believeestimate that theseour cash resources and the cash generated from existing grants will be sufficient to fund operations and meet our projected operating requirements until mid-2019.obligations into the second 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 current cash forecast, we expect that our present capital resources will not be sufficient to fund our planned operations for 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 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.
We continue to face significant challenges and uncertainties and, as a result, our available capital resources may be consumed more rapidly than currently expected due to any or all of the following:
•lower than expected revenues from grants licenses, and service feeslicenses related to our Yield10 Bioscience technologies;
•changes we may make to the business that affect ongoing operating expenses;
•further changes we may make to our business strategy;
•changes in our research and development spending plans; and
•other items affecting our forecasted level of expenditures and use of cash resources.
In 2016, we completed a strategic restructuring under which Yield10 Bioscience has become our core business, with a focus on developing disruptive technologies for step-change improvements in crop yield to enhance global food security.
We will require additional capital resources to support the implementation of this strategy and we may pursue one or more of a variety of financing options, including public or private equity financing, secured or unsecured debt financing, equity or debt bridge financing, as well as licensing or other collaborative arrangements. our business strategy.There can be no assurance that our financing efforts will be successful. If we are not able to secure such additional capital resources or otherwise fund our operations, we may be forced to explore strategic alternatives and/or wind down our operations and pursue options for liquidating our remaining assets, including intellectual property and equipment.
We completed two offerings of equity securities in 2017, for combined net proceeds of approximately $15,063. If we issue equity or debt securities to raise additional funds in the future, we may incur fees associated with such issuances, our existing stockholders may experience dilution from the issuance of new equity securities, we may incur ongoing interest expense and be required to grant a security interest in our assets in connection with any debt issuance, and 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, as amended, 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.
We have recently changed our corporate strategy to focus on theOur seed products and crop science industry, and our technologies in this area are at a veryan early stage of development.We may never commercialize a technology or product that will generate meaningful, or any, revenues.
In July 2016, our Board of Directors approved a plan to implement a strategic restructuring under which Yield10 Bioscience has become our core business. As part of the restructuring, we discontinued our biopolymer operations, eliminated positions in our biopolymer operations and corporate organization, and sold certain of our biopolymer business assets. We currently anticipate that our annual net cash used in operations, including anticipated payments for final restructuring costs of $489 as of December 31, 2017, will be approximately $8,500 - $9,000.
The remaining cash restructuring costs associated with our strategic repositioning have various payment due dates through May 2018 . The reduction in cash used in operations resulting from the restructuring may be less than expected. If we are not successful in reducing our cash used in operations, we may require more financing than anticipated or we may be forced to wind down our remaining operations.
Thecrop science products and technologies we are currently developing as a result of our strategic repositioning are at a veryan early stage of development, and the process of developing them is lengthy and uncertain.If we fail to introduce and commercialize a seed product that meets customers’ expectations, our growth prospects may be materially and adversely affected.In addition, our current management has limited experience in developing technologies for the crop science industry and has never commercialized a product or technology in this industry.We may never reach a point at which our efforts result in products that allow us to achieve revenue from their license or sale.
There can be no assurance that we will be able to comply with the continued listing standards of The Nasdaq Capital Market.
We cannot assure you that we will be able to comply with the standards that we are required to meet in order to maintain a listing of our common stock on The Nasdaq Capital Market. Market ("Nasdaq").Nasdaq provides various continued listing requirements that a company must meetrules require us to maintain certain closing bid price, stockholders’ equity and other financial metric criteria in order for itsour common stock to continue trading on TheNasdaq.For example, Nasdaq Capital Market. Among these requirements is the requirement that our stock trades atListing Rule 5550(a)(4) requires companies to maintain a minimum closingof 500,000 publicly held shares.Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share. On June 30, 2016, we receivedshare, and Listing Rule 5810(c)(3)(A) provides that a deficiency letter from The Nasdaq Stock Market which provided us a grace period of 180 calendar days, or until December 27, 2016,failure to regain compliance withmeet the minimum bid price requirement; we subsequently received an additional 180 days (until June 26, 2017)requirement exists if the deficiency continues for a period of 30 consecutive business days. To meet the criteria for continued listing under the equity standard, Nasdaq Listing Rule 5550(b)(1) requires companies to regain compliance with the requirement. On May 24, 2017,demonstrate stockholders' equity of at least $2.5 million.
Currently, our stockholders approved an amendment to our amended and restated certificateprimary source of incorporation, as amended, authorizing a reverse stock split of our common stock. A 1-for-10 ratio for the reverse stock split was subsequently approved by our Board of Directors, and the reverse stock split took effect on May 30, 2017. As a result of the reverse stock split, every ten shares of our common stock were automatically combined and converted into one issued and outstanding share of our common stock, with no change in the par value per share. As of June 12, 2017, we had regained compliance with the minimum bid price requirement.
If we fail to continue to meet all applicable Nasdaq Capital Market requirements in the future and Nasdaq determines to delist our common stock, the delisting could substantially decrease trading in our common stock and adversely affect the market liquidity of our common stock; adversely affect our ability to obtain financing on acceptable terms, if at all, for the continuation of our operations; and harm our business. Additionally, the market price of our common stock may decline further and stockholders may lose some or all of their investment.
Currently, our revenue is generated from government research grants; continued availability of government grant funding is uncertain and contingent on our compliance with the requirements of the grant.
Historically, a portion of our revenue has been generated from payments to us from government entities in the form of government grants, whereby we are reimbursed for certain expenses incurred in connection with our research and development activities, subject to our compliance with the specific requirements of the applicable grant, including rigorous documentation requirements.To the extent that we do not comply with these requirements, ourthe expenses incurredthat we incur may not be reimbursed. Any of ourOur existing grantsgrant or new grants that we may obtain in the future may be terminated or modified.We are a participant in a grant from the Department of Energy with Michigan State University, as amended, which has been our primary source of grant revenue over the past five years.The final year of the grant ends on September 14, 2023, and we may be unable to obtain a new grant to replace the loss of this source of grant revenue.
Our ability to obtain grants or incentives from government entities in the future is subject to the availability of funds under applicable government programs and approval of our applications to participate in such programs.The application process for these grants and other incentives is highly competitive.We may not be successful in obtaining any additional grants, loans or other incentives.Recent political focus on reducing spending at the U.S. federal and state levels may continue to reduce the scope and amount of funds dedicated to crop science products, if such funds will continue to be available at all.To the extent that we are unsuccessful in being awarded any additional government grants in the future, we would lose a potential source of revenue.
Our government grants may subject us to government audits, which could expose us to penalties.penalties if we have failed to comply with the terms of the grants.
We may be subject to audits by government agencies as part of routine audits of our activities funded by our government grants.As part of an audit, these agencies may review our performance, cost structures and compliance with applicable laws, regulations and standards and the terms and conditions of the grant.If any of our costs are found to be allocated improperly, the costs may not be reimbursed, and any costs already reimbursed for such contract may have to be refunded.Accordingly, an audit could result in a material adjustment to our results of operations and financial condition.Moreover, if an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions.
Our financial condition, research and development efforts, and results of operations could be further adversely affected by the continued evolution of the coronavirus outbreak.
Any outbreak of contagious diseases, such as COVID-19, or other adverse public health developments, could have a material and adverse effect on our business operations. The continued evolution of COVID-19 and its variants, as well as periodic spikes in infection rates and local outbreaks, in spite of safety measures or vaccinations, could cause disruptions to our operations or those of third parties with whom we engage. The COVID-19 pandemic has led to global supply chain challenges, which could adversely impact our ability to conduct business in the manner and timelines presently planned. As new variants of the virus appear, especially variants that are more easily spread, cause more serious outcomes, or are resistant to existing vaccines, new health orders and safety protocols could further impact our operations. We will continue to monitor developments of the pandemic and continuously assess its potential further impact on our operations to prevent any
disruptions to the conduct of our business. In the event of a prolonged continuation of the pandemic, it is not clear what the potential impact may be on our business, financial position and financial performance.
Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.
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 ended December 31 2022, the U.S. Bureau of Labor Statistics reported that the Consumer Price Index for All Urban Consumers increased 6.5 percent.The existence of inflation in the economy has resulted in, and may continue to result in, higher interest rates and capital costs, supply shortages, increased cost of labor, weakening exchange rates and other similar effects. Recently inflation has increased throughout the U.S. economy. Inflation can adversely affect us by increasing the costs of our research and developments, administration and other costs of doing business.Inflation could also adversely affect the ability of growers to enter into and fulfill their obligations under Camelina grain production agreements with the Company. An economic downturn, including as a result of COVID-19, could result in a variety of risks to our business, including weakened demand for our products and our inability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our manufacturers and suppliers, possibly resulting in supply disruption. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.
The ongoing war between Russia and Ukraine may adversely affect our business, financial condition or results of operations.
The short and long-term implications of the ongoing war between Russia and Ukraine are difficult to predict at this time. To date, we have not experienced any material interruptions in our infrastructure, supplies, technology systems, or networks needed to support our operations. However, Ukraine, and the Black Sea region in general, are a major exporter of wheat and corn to the world, and the disruption of supply could cause volatility in prices and margins of these commodities and related products.Ukraine is also the largest supplier of sun seed and sun oil in the world, which cannot be completely replaced from other geographic regions.The conflict in Ukraine has created disruptions in global supply chains and is expected to create dislocations of key agricultural commodities.While Yield10 has no direct business operations or assets within either Ukraine or Russia, the Company's plans and operating results could be adversely affected by a number of factors, including the crop growing decisions made by farmers in the U.S., Canada, and South America as a consequence of supply shortages and rising commodity prices.These rising prices may negatively impact our ability to contract suitable acreage for future crop trials or could delay our plans to commercialize Yield10's first Camelina plant varieties.
The risk of cybersecurity incidents has increased in connection with the ongoing war.For example, the war has been accompanied by cyberattacks against the Ukrainian government and other countries in the region.The proliferation of malware from the war into systems unrelated to the war, or cyberattacks against U.S. companies in retaliation for U.S. sanctions against Russia or U.S. support of Ukraine, could also adversely affect our operations.In accordance with industry standards, we insure ourselves against many types of risks, including cybersecurity risks.While this insurance may mitigate certain of the risks associated with the ongoing Ukraine-Russia war, our level of insurance may not cover all losses we could incur.The potential effects of these conditions could have a material adverse effect on our business, results of operations and financial condition.
We will continue to monitor this fluid situation and develop contingencies as necessary to address any disruptions to our business operations as they develop.
Risks Relating to our Yield10 Bioscience Crop Science Program
OurThe crop science product development cycle is lengthy and uncertain, and our progress will depend heavilysignificantly on futureour ability to attract third-party investment in research under license agreements and on our ability to establish collaborative partners.partnerships to develop and commercialize our innovations.
The technology and processes used in our crop science program and the application of our technology to enhance photosynthetic efficiencydevelop Camelina as a platform crop for large scale production of cropslow-carbon sustainable seed products to address applications in petroleum replacement, food and nutrition markets, are at an early stage of development.Research and development in the
seed, agricultural biotechnology, and larger agriculture industries is expensive and prolonged and entails considerable uncertainty.Completion of our development work with respect to our products will require a significant investment of both time and money, if it can be completed at all.We expect that collaborations with established agricultural industry companies willmay be required to successfully develop and commercialize our innovations. For example, in 2017 we entered into a research license with Monsanto Company, pursuant to which we granted Monsanto a non-exclusive research license to evaluate our novel C3003 and C3004 yield traits in soybean. The industry is highly concentrated and dominated by a small number of large players, which could impact efforts to form such collaborations. We may not be successful in establishing or maintaining suitable additional suitable partnerships,relationships with established agricultural industry companies for research licenses in the future, and may notthere can be able to negotiate additionalno assurance that any such relationships will result in future collaboration agreements havingto develop and commercialize our innovations, with terms that are satisfactory to us or at all.In addition, industry collaborators have significant resources and development capabilities and may develop products and technologies that compete with or negatively impact the development and commercialization of our technologies.
Any potential collaborative partnerships that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our innovations.
We expect that collaborations with established agricultural industry companies may be required for us to successfully develop and commercialize our innovations.The agriculture industry is highly concentrated and dominated by a small number of large companies, which could impact efforts to form the collaborations that we will need in order to complete the development of our products.To the extent that we pursue such arrangements, we will face significant competition in seeking appropriate partners.Moreover, such arrangements are complex and time-consuming to negotiate, document, implement and maintain.We may not be successful in establishing or implementing such arrangements.The terms of any partnerships, joint ventures or other collaborative arrangements that we may establish may not be favorable to us.
The success of any future collaborative partnerships is uncertain and will depend heavily on the efforts and activities of our potential partners.Such arrangements are subject to numerous risks, including the risks that:
•our partners may have significant discretion in determining the efforts and resources that they will apply to the arrangement;
•our partners may not pursue the development and commercialization of our product candidates based on trial results, changes in their strategic focus, competing priorities, availability of funding, or other external factors;
•our partners may delay or abandon field trials, fail to conduct field trials that produce sufficient conclusory data, provide insufficient funding for field trials, or repeat or conduct new field trials;
•partners who have marketing, manufacturing and distribution rights with respect to a product may not commit sufficient resources to, or otherwise may not perform satisfactorily in carrying out, these activities;
•to the extent that such arrangements provide for exclusive rights, we may be precluded from collaborating with others;
•our partners may not properly maintain or defend our intellectual property rights, or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;
•disputes may arise between us and a partner that causes the delay or termination of the research, development or commercialization of our current or future products, or that results in costly litigation or arbitration that diverts management attention and resources;
•such arrangements may be terminated, and, if terminated, may result in a need for additional capital for our independent pursuit of matters previously covered by such arrangement;
•our partners may own or co-own intellectual property that results from our arrangement; and
•a partner’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.
Our crop science program may not be successful in developing commercial products.
We and our potential future collaborators may spend many years and dedicate significant financial and other resources developing traits or other seed products that will never be commercialized.Seeds containing the traits that we develop may never become commercialized for any of the following reasons:
•our traits may not be successfully validated in the target crops;
•our traits may not achieve our targeted yield improvements;
•we may not be able to secure sufficient funding to progress our traits through development and commercial validation;
•our traits may not have the desired effecteffects sought by future collaborators for the relevant crops;
•development and validation of traits, particularly during field trials, may be adversely affected by environmental or other circumstances beyond our control;
•we or our future collaborators may be unable to obtain the requisite regulatory approvals for the seeds containing our traits;traits, to the extent regulatory approvals are required;
•competitors may launch competing or more effective seed traits or seeds;
•a market may not exist for seeds containing our traits or such seeds may not be commercially successful;
•future collaborators may be unable to fully develop and commercialize products containing our seed traits or may decide, for whatever reason, not to commercialize such products; and
•we may be unable to patent our traits in the necessary jurisdictions.jurisdictions; and
•our efforts to develop niche crop products based on our Camelina platform, including specialty oils and PHB biomaterials, are in the early stages and may not be successful.
If any of these things were to occur, it could have a material adverse effect on our business and our results of operations.Research and development in the crop science industry is expensive and prolonged and entails considerable uncertainty.Because of the stringent product performance and safety criteria applied in development of crop science products, products currently under development may neithernot survive the development process noror may ultimately not receive the requisite regulatory approvals that may be needed to market such products.Even when such approvals are obtained, there can be no assurance that a new product will be commercially successful.In addition, research undertaken by competitors may lead to the launch of competing or improved products, which may affect sales of any products that we are able to develop.
Even if we or our future collaborators are successful in developing commercial products that incorporate our traits, such products may not achieve commercial success.
Our strategy depends upon our or our future collaborators’ ability to incorporate our traits into a wide range of crops in significant markets and geographies.Even if we or our future collaborators such as Monsanto, are able to develop commercial products that incorporate our traits, any such products may not achieve commercial success for one or more of the following reasons, among others:
•products may fail to be effective in particular crops, geographies, or circumstances, limiting their commercialization potential;
•our competitors, or competitors of our collaborators, may launch competing or more effective traits or products;
•significant fluctuations in market prices for agricultural inputs and crops could have an adverse effect on the value of our traits;
•farmers are generally cautious in their adoption of new products and technologies, with conservative initial purchases and proof of product required prior to widespread deployment, and accordingly, it may take several growing seasons for farmers to adopt our or our collaborators’ products on a large scale; and
•we may not be able to produce high-quality seeds in sufficient amounts to meet demand.demand; and
•we may not be able to secure the financial or other resources needed to achieve commercial success.
Our financial condition and results of operations could be materially and adversely affected if any of the above were to occur.
ConsumerOur estimates of market opportunity and government resistanceforecasts of market growth may prove to genetically modified organisms may negatively affect be inaccurate, and even ifthe ability to commercialize crops containing our traits, as well as our public image.
Food and feed made from genetically modified seeds are not accepted by many consumers andmarkets in certain countries production of certain genetically modified crops is effectively prohibited, including throughout the European Union, due to concerns over such products’ effects on food safety and the environment. The high public profile of the biotechnology industry in food and feed production, and a lack of consumer acceptance of products to which we have devoted substantial resources,may compete in the future achieve growth, our business could have a negative impact onfail to achieve the commercial success of products that incorporate our traits and could materially and adversely affect our ability to obtain collaborations and to finance our crop science program. Further, we could incur substantial liability and/or legal expenses if there are claims that genetically-engineered crops damage the environment or contaminate other farm crops. This could distract our management and cause us to spend resources defending against such claims.
Actions by consumer groups and others may disrupt research and development or production of genetically modified seeds. In addition, some government authorities have enacted, andsame growth rates as others in the future might enact, regulations regarding genetically modified organisms, which may delayindustry.
Market opportunity estimates and limit or even prohibit the developmentmarket growth forecasts are subject to significant uncertainty and sale of such products.
Weare based on assumptions and estimates that may not prove to be ableaccurate.Our estimates and forecasts relating to obtain or maintain the necessary regulatory approvalssize and expected growth of the global seed industry and the biotechnology seeds market, and the market size for ourany products which could restrict our ability to sell those products in some markets.
Seeds containing the traits that we may develop must receive regulatory approval before they canin our Camelina products business, such as PHA biomaterials, and the estimated ranges of incremental value increase that a novel, newly developed crop trait may produce, may prove to be marketed, butinaccurate.Even if the markets in which we may not be able to obtain such approvals. Regulatory standards and procedurescompete in the crop science industry are continuously changing,future achieve these opportunity estimates and respondingmarket growth forecasts, our business could fail to these changes and meeting existing and new requirements will be costly and burdensome. Evengrow at similar rates, if we are able to obtain approvals for the seeds containing the traits that we develop, changing regulatory standards may affect our ability to maintain compliance with such regulatory standards.at all.
If ongoing or future field trials conducted by us or our future collaborators are unsuccessful, we may be unable to complete the regulatory process for, or commercialize, our products in development on a timely basis.
The successful completion of multi-year, multi-site field trials is critical to the success of product development and marketing efforts for products containing our traits.If our ongoing or future field trials, or those of our future collaborators, are unsuccessful or produce inconsistent results or unanticipated adverse effects on crops, or if we or our collaborators are unable to collect reliable data, regulatory review of products in development containing our traits could be delayed or commercialization of products in development containing our traits may not be possible.In addition, more than one growing season may be required to collect sufficient data to develop or market a product containing our traits, and it may be necessary to collect data from different geographies to prove performance for customer adoption.Even in cases where field trials are successful, we cannot be certain that additional field trials conducted on a greater number of acres, or in
different crops or geographies, will be successful.Generally, we or our collaboratorsresearch licensees conduct these field trials, or we pay third parties, such as farmers, consultants, contractors, and universities, to conduct field trials on our behalf.Poor trial execution or data collection, failure to follow required agronomic practices, regulatory requirements, or mishandling of products in development by our collaborators or these third parties could impair the success of these field trials.
Adverse weather conditions, natural disasters, crop disease, pests and other natural conditions can impose significant costs and losses on our business.
Many factors that may adversely affect the success of our field trials, seed inventory and seed production are beyond our control, including weather and climatic variations, such as drought or floods, severe heat or frost, hail, tornadoes and hurricanes, uncommon or unanticipated pests and diseases, or acts of protest or vandalism.For example, if there waswere a prolonged or permanent disruption to the electricity, climate control, or water supply operating systems in our greenhouses or laboratories, the crops in which we or our collaborators are testing our traits and the samples we or our collaborators store in freezers, both of which are essential to our research and development activities including field tests, could be severely damaged or destroyed, adversely affecting these activities and thereby our business and results of operations.Unfavorable weather conditions including drought or excessive rain, or fluctuations in temperature, which we have experienced from time to time in our field trials, can also reduce both acreageacreages planted and incidence, or timing of, certain crop diseases or pest infestations, each of which may halt or delay our field trials.Any field test failure we may experience may not be covered by insurance and, therefore, could result in increased cost for the field trials and development of our traits, which may negatively impact our business, results of operations, and ability to secure financing.Such factors outside of our control can create substantial volatility relating to our business and results of operations.
In addition, seed crops are vulnerable to crop disease and to pests, which may vary in severity and effect, depending on the stage of production at the time of infection or infestation, the type of treatment applied and climatic conditions. Unfavorable growing conditions can reduce both crop size and quality and may reduce our available inventory.
Competition in the market for traits and seeds is intense and requires continuous technological development, and, if we are unable to compete effectively, our financial results will suffer.
We face significant competition in the markets in which we operate.The markets for traits and agricultural biotechnology products are intensely competitive and rapidly changing.In most segments of the seed and agricultural biotechnology market, the number of products available to consumers is steadily increasing as new products are introduced. At the same time, the expiration of patents covering existing products reducesreduce the barriers to entry for competitors.We may be unable to compete successfully against our current and future competitors, which may result in price reductions, reduced margins and the inability to achieve market acceptance for any products that we or our future collaborators commercialize containing our traits.In addition, most of our competitors have substantially greater financial, marketing, sales, distribution, research and development, and technical resources than we have, and some of our potential future collaborators have more experience in research and development, regulatory matters, manufacturing, and marketing.We anticipate increased competition in the future as new companies enter the market and new technologies become available.Our technologies may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of our competitors, which will prevent or limit our ability to generate revenues from the commercialization of our traits being developed.
Our business is subject to various government regulations in the United States and if we or our collaborators are unable to timely completeCanada, the regulatory processrequirements for our future products in development are evolving and are subject to change, and if there are adverse changes to the current regulatory framework, our or our future collaborators’ ability to market our traits could be delayed, prevented or limited.
Our business is generally subjectIn the United States and Canada, where our seed traits and biotechnology-derived plant lines are developed and field tested, changes in regulatory requirements applicable to two types of regulations: regulations that apply to how weour seed traits or future products in development containing our traits could result in a substantial increase in the time and our collaborators operate,costs associated with developing and regulations that apply tocommercializing future products containing our traits. traits, and could materially affect our ability to meet our desired development timelines or to develop and commercialize a future product containing our traits at all.
In the United States, our seed traits and any future products that are successfully developed containing our seed traits are or will be subject to USDA and FDA regulatory requirements.The USDA and FDA requirements will vary depending on the particular seed trait and the intended use of any product that will be commercialized.Our business strategy is focused on crop yield traits and we have no current plans for the development of pesticide or herbicide traits, which would be subject to regulation by the EPA.
Within USDA, the APHIS is responsible for protecting agricultural plants under the Plant Protection Act.USDA-APHIS regulates organisms and products that are known or are suspected to be plant pests or to pose a plant pest risk, including those that have been altered or produced through various genetic engineering techniques.The USDA-APHIS has proposed regulations that could impact our business.For example, in recent years, we and others have submitted various petitions to USDA-APHIS to determine whether particular biotechnology-derived plants developed through the use of different genome editing techniques may be considered to be not regulated under the framework administered by the agency.
The USDA also announced in March 2018 that it would not require an assessment on products that used modern forms of mutagenesis if it was clear these outcomes could occur in nature.The USDA stated at that time that it did not “have any plans to regulate plants that could otherwise have been developed through traditional breeding techniques as long as they are developed without the use of a plant pest as the donor or vector and they are not themselves plant pests.”This USDA policy statement applies to genetic deletions of any size, which would include genome editing through CRISPR-Cas9 and other emerging technologies, although it remains to be seen how this policy announcement will be implemented by USDA-APHIS and what practical effect that may have on seed trait developers like us and our competitors.
There can be no guarantee that the USDA-APHIS governing regulations and policies will not change again in the future.We cannot predict whether advocacy groups will challenge existing regulations and USDA determinations, whether
the USDA will alter its interpretations of existing regulations, modify existing regulations or promulgate new regulations, or whether additional laws will come into effect.If these or other developments resulted in adverse changes to the current regulatory framework, our seed traits or future products in development containing our traits could be subjected to more burdensome regulatory standards, thereby substantially increasing the time and costs associated with developing and commercializing any future products.Moreover, we cannot assure you that USDA-APHIS will analyze any of our future yield traits or products in development containing our traits in a manner consistent with its analysis of our genome edited yield traits to date. Complying with the USDA’s plant pest regulations for traits that are classified as “regulated articles,” including the permitting requirements for field testing and environmental release, is a costly, time-consuming process and could substantially delay or prevent the commercialization of any future products containing traits that we expected to be deemed non-regulated by USDA-APHIS under 7 CFR part 340.
In addition to USDA-APHIS regulation of plant breeding and planting, a biotechnology-derived plant also will be regulated by the FDA if it is intended to be used as human food or animal feed.The FDA regulates the safety of food for humans and animals, and foods derived from novel plant varieties must meet the same food safety requirements as foods derived from traditionally bred plants (also called conventional foods).Since 1992, the FDA has had in place a voluntary consultation process for developers of bioengineered food (“Biotechnology Consultations”).
We have not participated in any Biotechnology Consultations or engaged in any informal discussions with the FDA about our novel yield traits, whether those traits have been developed using genome editing or traditional genome modification using the insertion of recombinant DNA.Any delay in the regulatory consultation process, or a determination by the FDA that future product candidates containing our traits raise different safety issues than the relevant conventional crop and therefore must be approved by the agency as a new food additive through an intensive premarket safety review process, could increase the costs associated with or delay or prevent the commercialization of the future product candidate. Such delays may lead to reduced acceptance by farmers, food manufacturers or the public and an increase in competitor products that may directly compete with ours.Further, if the FDA enacts new regulations or policies with respect to genome edited plants in particular, such policies could result in additional compliance costs or delay or prevent the commercialization of any potential commercial products containing our seed traits, which could adversely affect our ability to generate revenues and to achieve profitability.
In Canada, genetically engineered crops and the food products into which they are incorporated are regulated by multiple government agencies under a federal framework for the regulation of biotechnology products that is similar to the U.S. system.Any commercialization of our yield crops in Canada is expected to be done by a third-party collaborator or other partner and complying with Health Canada’s pre-market notification requirement and safety assessment for novel foods would be the obligation of that third-party collaborator.
Complying with the Canadian regulations is a costly, time-consuming process and could substantially delay or prevent the commercialization of our products.In addition, we cannot assure that CFIA and Health Canada regulations or the agencies’ implementation of those regulations will not change, or that the legislative framework in Canada for biotechnology-derived crops, whether for genome edited plants or plants modified using the insertion of recombinant DNA, will not be amended or otherwise changed in a manner that could result in additional compliance costs or delay, or prevent the commercialization of any potential commercial products containing our seed traits, which could adversely affect our ability to generate revenues and to achieve profitability.
Failure to comply with applicable regulatory requirements may, among other things, result in fines, suspensions of regulatory approvals, product recalls, product seizures, operating restrictions and criminal prosecution.
If we or our future collaborators are unable to comply with and timely complete the regulatory process in the United States and Canada for our future products in development, our or our future collaborators’ ability to market our traits could be delayed, prevented or limited.
We apply for and maintain the regulatory permits in the United States and Canada necessary for our operations, particularly those covering our field trials, whichtrials.We anticipate that we or our future collaborators will apply for and maintain regulatory approvals, if any, necessary for the commercialization of any future products containing our seed traits.Even if we and our collaborators make timely and appropriate applications for regulatory permits for our field trials, government delays in issuing such permits can significantly affect the development timelines for our traits, particularly if the planting period for a crop growing season expires before the necessary permits are obtained. In most
In addition to regulation by the U.S. government, products containing our traits may be subject to regulation in each country in which such products are tested or sold. International regulations may vary from country to country and from those of the United States. The difference in regulations under U.S. law and the laws of foreign countries may be significant and, in order to comply with the laws of foreign countries, we may have to implement global changes to our products or business practices. Such changes may result in additional expense to us and either reduce or delay product development or sales. Additionally, we or our collaborators may be required to obtain certifications or approvals by foreign governments to test and sell the products in foreign countries.
The regulatory process is expensive and time-consuming, and the time required to complete the process is difficult to predict and depends upon numerous factors, including the substantial discretion of the regulatory authorities.We have not completed all phases of the regulatory process for any of our traits in development.Our traits could require a significantly longer time to complete the regulatory process than expected, or may never gain approval, even if we and our collaborators expend substantial time and resources seeking such approval.The time required for regulatory approval, or any delay or denial of such approval, could negatively impact our ability to generate revenues and to achieve profitability and finance our ongoing operations.In addition, changes in regulatory review policies during the development period of any of our traits, changes in, or the enactment of, additional regulations or statutes, or changes in regulatory review practices for a submitted product application may cause a delay in obtaining approval or result in the rejection of an application for regulatory approval.Regulatory approval, if obtained, may be made subject to limitations on the intended uses for which we or our collaborators may market a product. future product containing our traits.These limitations could adversely affect our potential revenues. Failure
The regulatory environment for genetically engineered crops in jurisdictions outside the United States and Canada varies greatly, and some jurisdictions have more restrictive regulations that could delay, prevent or limit our or our future collaborators’ ability to comply with applicablemarket our traits.
Other jurisdictions and governmental authorities, including in South America and Asia, are increasingly taking an interest in regulating agricultural products of biotechnology.Regulatory approaches vary by jurisdiction as a result of the existing public health frameworks and phytosanitary laws, as well as other less tangible factors such as cultural and religious norms that may have an impact on individual country risk assessments and decision-making.Each jurisdiction may have its own regulatory requirementsframework, which may among other things, result in fines, suspensions of regulatory approvals, product recalls, product seizures, operatinginclude restrictions and criminal prosecution.regulations on planting and growing genetically engineered plants, import of grain and other plant products, and in the consumption and labeling of feed and foods derived from such novel plants, and which may apply to future products containing our traits.We cannot predict future changes in the global regulatory landscape regarding genetically engineered plants or commercial products incorporating such novel plant varieties. The regulatory environment for such plants is greatly uncertain outside of the U.S. and Canada, and some jurisdictions have more restrictive regulations that could delay, prevent or limit our or our future collaborators’ ability to market our traits.
Our work withFor example, regulation of all genetically engineered plants in the Smart Carbon Grid for Crops and the T3 Platform has identified promising potential targets for gene editing, and we believe that these approaches may be subject to less regulatory complexityEuropean Union ("EU") is far more stringent than in the U.S. duringand Canada.U.S. and Canadian regulators have determined that genome edited plants pose fewer risks than traditional biotechnology-derived plants subjected to modification through the insertion of recombinant DNA.In contrast, a recent EU legal ruling indicated that the existing EU regulations for genetically engineered plants modified by the insertion of recombinant DNA, which were already more stringent than corresponding U.S. and Canadian regulations, should be strictly applied to genome edited plants as well.As a result, there is a sharp distinction between how EU and U.S. and Canadian regulatory agencies oversee novel seed traits, and in particular those that are generated using the more modern techniques of genome editing.
Although we are not currently targeting EU markets for the development or commercialization of future products containing our traits, emerging oversight regimes for genetically engineered products in other jurisdictions may follow the EU approach and alongimpose similarly strict requirements for the pathrelease of such products into the environment and their incorporation into human food or other consumer products.Such jurisdictions may also elect to commercialization. Gene editing techniques,regulate genetically engineered plants without distinguishing between traditional biotechnology-derived plants modified with recombinant DNA and genome edited plants.There is no guarantee that countries for which we may have or may develop future marketing plans would not take a stricter legal and regulatory approach to controlling genetically engineered plants similar to that of the EU, which could increase regulatory costs and delay, prevent or limit our or our future collaborators’ ability to market our traits in such jurisdictions.
Consumer resistance to genetically engineered crops may negatively affect the ability to commercialize future crops containing our traits, as well as our public image, and may reduce any future sales of seeds containing our yield traits.
Food and feed made from genetically engineered seeds and plants are not accepted by some consumers, and in certain countries production of certain genetically engineered crops is effectively prohibited, including CRISPR,throughout the EU, due to concerns over such products’ effects on food safety and the environment.Advocacy groups have engaged in publicity campaigns and filed lawsuits in various countries against companies and regulatory authorities, seeking to halt regulatory approval activities or influence public opinion against genetically engineered and/or genome edited products.Actions by
consumer groups and others also may disrupt research and development or production of genetically engineered plants, seeds or food products that incorporate such novel plant varieties.The high public profile of the biotechnology industry in food and feed production, and a lack of consumer acceptance of the types of products to which involve making small targeted changeswe have devoted substantial development resources, could have a negative impact on the commercial success of any of products incorporating our traits that may successfully complete the development process, as to which no assurance can be given, and could materially and adversely affect our ability to obtain future collaborations and to finance our crop science program.Further, we could incur substantial liability and/or legal expenses if there are claims that genetically engineered crops damage the DNA of a target organism, have been of interestenvironment or contaminate other farm crops.This could distract our management and cause us to spend resources defending against such claims.
Government policies and regulations, particularly those affecting the agricultural biotech industry because this approach is believedsector and related industries, could adversely affect our operations and our ability to have the potentialgenerate future revenues and to significantly reduce development costsachieve profitability.
Agricultural production and regulatory timelines for crop trait development and market introduction. Statements by USDA-APHIS regarding the regulatory path for genetically edited plants and mushrooms suggest that they will not betrade flows are subject to regulations typically used for genetically modifiedgovernment policies and regulations.Governmental policies and approvals of technologies affecting the agricultural industry, such as taxes, tariffs, duties, subsidies, incentives and import and export restrictions on agricultural commodities and commodity products can influence the planting of certain crops, (i.e., they will not be considered “regulated articles”) if the modified organisms do not contain any remaining genetic elements fromlocation and size of crop production, and the procedure used for gene editing. While we believe that these industry examples suggest that crops that are gene edited may not be subject to certain GMO regulationsvolume and types of imports and exports.Future government policies in the U.S., we cannot assure you that this regulatory path will be found to apply toUnited States, Canada or in other countries could discourage farmers from using any of our seed yieldproducts that may successfully complete the development process, as to which no assurance can be given.Similarly, these policies could discourage food processors from purchasing harvested crops containing our traits or thatcould encourage the regulatory agencies will not change this approachuse of our competitors’ products, which would put us at a commercial disadvantage and could negatively impact our ability to the regulation of genome editing or introduce new regulatory procedures applicablegenerate any revenues and to such technologies.achieve profitability.
The products of third parties, or the environment itself, may be negatively affected by the unintended appearance of our yield trait genes.genes, novel seed compositions and novel seed products.
The potential for unintended but unavoidable trace amounts, sometimes called “adventitious presence,” of yield trait genes, novel seed compositions and novel seed products in conventional seed, or in the grain or products produced from conventional or organic crops, could affect acceptance by the general public or by the agricultural industry of these traits.Trace amounts of yield trait genes may unintentionally be found outside our containment area in the products of third parties, which may result in negative publicity and claims of liability brought by such third parties against us.Furthermore, in the event of an unintended dissemination of our genetically engineered materials to the environment, we could be subject to claims by multiple parties, including environmental advocacy groups, as well as governmental actions such as mandated crop destruction, product recalls or additional stewardship practices and environmental cleanup or monitoring.The occurrence of any of these events could have a material adverse effect on our business and results of operations.
Loss of or damage to our elite novel trait events and plant lines would significantly slow our product development efforts.
We have a collection of elite novel trait events and plant lines in which we are developing traits for incorporation into elite germplasm and potential seed products.Our elite novel trait events and plant lines are a key strategic asset since they form the basis for the introgression of our traits into plant breeding programs.If we suffer loss or damage to our elite novel trait events and plant lines, our research and development activities could be negatively impacted.
Our insurance coverage may be inadequate to cover all the liabilities we may incur.
We face the risk of exposure to liability claims if any products that are successfully developed containing our seed traits, as to which no assurance can be given, are defective and if any product that we develop or any product that uses our technologies or incorporates any of our traits causes injury.Although we carry insurance at levels customary for companies in our industry, such coverage may become unavailable or be inadequate to cover all liabilities we may incur.There can be no assurance that we will be able to continue to maintain such insurance, or obtain comparable insurance at a reasonable cost, if at all.If we are unable to obtain sufficient insurance coverage at an acceptable cost or otherwise, or if the amount of any claim against us exceeds the coverage under our policies, we may face significant expenses.
We rely on third parties to conduct, monitor, support, and oversee field trials and, in some cases, to maintain regulatory files for those products in development, and any performance issues by third parties, or our inability to engage third parties on acceptable terms, may impact our or our collaborators’ ability to complete the regulatory process for or commercialize such products.
We rely on third parties to conduct, monitor, support, and oversee field trials.As a result, we have less control over the timing and cost of these trials than if we conducted these trials with our own personnel.If we are unable to maintain or enter into agreements with these third parties on acceptable terms, or if any such engagement is terminated prematurely, we may be unable to conduct and complete our trials in the manner we anticipate.In addition, there is no guarantee that these third parties will devote adequate time and resources to our studies or perform as required by our contract or in accordance with regulatory requirements, including maintenance of field trial information regarding our products in development.If any of these third parties fail to meet expected deadlines, fail to transfer to us any regulatory information in a timely manner, fail to adhere to protocols, or fail to act in accordance with regulatory requirements or our agreements with them, or if they otherwise perform in a substandard manner or in a way that compromises the quality or accuracy of their activities or the data they obtain, then field trials of our traits in development may be extended or delayed with additional costs incurred, or our data may be rejected by the applicable regulatory agencies.Ultimately, we are responsible for ensuring that each of our field trials is conducted in accordance with the applicable protocol and with legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our responsibilities.We could be subject to penalties, fines and liabilities if our third-party contractors fail to perform as required.
If our relationship with any of these third parties is terminated, we may be unable to enter into arrangements with alternative parties on commercially reasonable terms, or at all.Switching or adding service providers can involve substantial cost and require extensive management time and focus.Delays may occur, which can materially impact our ability to meet our desired development timelines.If we are required to seek alternative service arrangements, the resulting delays and potential inability to find a suitable replacement could materially and adversely impact our business.
In addition, there has been an increasing trend towards consolidation in the agricultural biotechnology industry. Consolidation among our competitors and third parties upon whom we rely could lead to a changingchanges in the competitive landscape, capabilities, and strategic priorities among potential service providers, which could have an adverse effect on our business and operations.
If we lose key personnel or are unable to attract and retain necessary talent, we may be unable to develop or commercialize our products under development.
We are highly dependent on our key technical and scientific personnel, who possess unique knowledge and skills related to our research and technology.If we were to lose the services of these individuals, we may be unable to readily find suitable replacements with comparable knowledge and the experience necessary to advance the research and development of our products.Because of the unique talents and experience of many of our scientific and technical staff, competition for our personnel is intense.The loss of key personnel or our inability to hire and retain personnel who have the required expertise and skills could have a material adverse effect on our research and development efforts, our business, and our ability to secure additional required financing.
Our business and operations would suffer in the event of system failures.
We utilize information technology systems and networks to process, transmit and store electronic information in connection with our business activities.As use of digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication.These threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data.There can be no assurance that we will be successful in preventing cyber-attacks or successful in mitigating their efforts.
Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage from such cyber-attacks, including computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.Such an event could cause interruption of our operations.For example, the loss of data from completed field tests for our yield traits could result in delays in our regulatory approval efforts and significantly increase our costs.To the extent that any disruption or security breach were to
result in a loss of or damage to our data, or inappropriate disclosure of confidential or proprietary information, we could suffer reputational harm or face litigation, or adverse regulatory action and the development of our product candidates could be delayed.
Risks Relating to Intellectual Property
Patent protection for our technologies is both important and uncertain.
Our commercial success may depend in part on our obtaining and maintaining patent protection for our technologies in the United States and other jurisdictions, as well as successfully enforcing and defending this intellectual property against third-party challenges.If we are not able to obtain or defend patent protection for our technologies, then we will not be able to exclude competitors from developing or marketing such technologies, and this could negatively impact our ability to generate sufficient revenues or profits from product sales and/or licensing to justify the cost of development of our technologies and to achieve or maintain profitability.Our currently issued patents relateinclude five patents on our C3003 gene in-licensed from the University of Massachusetts, three patents on C4001 and other novel yield traits, and one patent relating to our historical business andbusiness.Our currently issued patents have expiration dates ranging from 20202033 through 2030.2038. New outstandingpending patent applications owned by or licensed to us relating to crop yield improvements have earliest effective filing dates ranging from 2013 through 2017.2023 and include a new patent application on a breakthrough technology for producing PHA biomaterials in crops. This patent application would have an expiration date in 2040 if granted, however, we may not be able to obtain sufficiently broad claims to cover the new invention.
Our patent position involves complex legal and factual questions.Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents.Patents may not be issued for any pending or future pending patent applications owned by or licensed to us, and claims allowed under any issued patent or future issued patent owned or licensed by us may not be valid or sufficiently broad to protect our technologies.Moreover, we may be unable to protect certain of our intellectual property in the United States or in foreign countries.Foreign jurisdictions may not afford the same protections as U.S. law, and we cannot ensure that foreign patent applications will have the same scope as the U.S. patents.There will be many countries in which we will choose not to file or maintain patents because of the costs involved.Competitors may also design around our patents or develop competing technologies.
Additionally, any issued patents owned by or licensed to us now or in the future may be challenged, invalidated, or circumvented.We could incur substantial costs to bring suits or other proceedings in which we may assert or defend our patent rights or challenge the patent rights of third parties.An unfavorable outcome of any such litigation could have a material adverse effect on our business and results of operations.
Third parties may claim that we infringe their intellectual property, and we could suffer significant litigation or licensing expense as a result.
Various U.S. and foreign issued patents and pending patent applications owned by third parties exist in areas relevant to our products and processes.We could incur substantial costs to challenge third partythird-party patents.If third parties assert claims against us or our customers alleging infringement of their patents or other intellectual property rights, we could incur substantial costs and diversion of management resources in defending these claims, and the defense of these claims could have a material adverse effect on our business.In addition, if we are unsuccessful in defending against these claims, these third parties may be awarded substantial damages, as well as injunctive or other equitable relief against us, which could effectively block our ability to make, use, sell, distribute, or market our technologies and services based on our
technologies in the United States or abroad.Alternatively, we may seek licenses to such third partythird-party intellectual property. However, we may be unable to obtain these licenses on acceptable terms, if at all.Our failure to obtain the necessary licenses or other rights could prevent the sale, manufacture, or distribution of some of our products based on our technologies and, therefore, could have a material adverse effect on our business.
Portions of our crop science technology are owned by or subject to retained rights of third parties.
We have licensed and optioned from academic institutions certain patent rights that may be necessary or important to the development and commercialization of our crop science technology.These licenses and options may not provide exclusive rights to use such intellectual property in all fields of use in which we may wish to develop or commercialize our
technology.If we fail to timely exercise our option rights and/or we are unable to negotiate license agreements for optioned patent rights on acceptable terms, the academic institutions may offer such patent rights to third parties.If we fail to comply with our obligations under these license agreements, or if we are subject to a bankruptcy or insolvency proceeding, the licensor may have the right to terminate the license.In some circumstances, we may not have the right to control the preparation, filing and prosecution of licensed patent applications or the maintenance of the licensed patents.Therefore, we cannot be certain that these patents and applications will be prosecuted, maintained and enforced in a manner consistent with the best interests of our business.Furthermore, the research resulting in certain of our licensed and optioned patent rights was funded by the U.S. government.As a result, the government may have certain rights to such patent rights and technology.
We may not be successful in obtaining necessary rights to additional technologies for the development of our products through acquisitions and in-licenses.
We may be unable to acquire or in-license additional technologies from third parties that we decide we need in order to develop our business.A number of more established companies may also pursue strategies to license or acquire crop science technologies that we may consider attractive.These established companies may have a competitive advantage over us due to their size, cash resources and greater development and commercialization capabilities.Any failure on our part to reach an agreement for any applicable intellectual property could result in a third party acquiring the related rights and thereby harm our business.
In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us.We also may be unable to license or acquire relevant crop science technologies on terms that would allow us to make an appropriate return on our investment.
We expect that competition for acquiring and in-licensing crop science technologies that are attractive to us may increase in the future, which may mean fewer suitable opportunities for us as well as higher acquisition or licensing costs.If we are unable to successfully obtain rights to suitable crop science technologies on reasonable terms, or at all, our business and financial condition could suffer.
Our license agreements include royalty payments that we are required to make to third parties.
We are party to license agreements that require us to remit royalty payments and other payments related to our licensed intellectual property.Under our in-license agreements, we may pay upfront fees and milestone payments and be subject to future royalties.We cannot precisely predict the amount, if any, or timing of royalties we may owe in the future. Furthermore, we may enter into additional license agreements in the future, which may also include royalty, milestone and other payments.
The intellectual property landscape around genome editing technology, such as CRISPR, is highly dynamic and uncertain, and any resolution of this uncertainty could have a material adverse effect on our business.
The field of genome editing, especially in the area of CRISPR technology, is still in its infancy, and no products using this technology have reached the market. We are currently negotiating a license for work in the CRISPR field in order to demonstrate the utility of our yield trait genes in this field. infancy.Due to the intense research and development that is taking place in this field by several companies, including us and our competitors, in this field, the intellectual property landscape is in flux, and it may remain uncertain for the coming years.There has been, and may continue to be, significant intellectual property related litigation and proceedings relating to this area in the future.If we obtain a license to certainit is later determined that any patent rights using the CRISPR technology and it is later determined that such patent rightswe obtained under license are invalid or owned by other parties, this could have a material adverse effect on our business.
We rely in part on trade secrets to protect our technology, and our failure to obtain or maintain trade secret protection could harm our business.
We rely on trade secrets to protect some of our technology and proprietary information, especially where we believe patent protection is not appropriate or obtainable. obtainable as is the case for our GRAIN trait gene discovery platform.However, trade secrets are difficult to protect.Litigating a claim that a third partythird-party had illegally obtained and was using our trade secrets would be expensive and time consuming, and the outcome would be unpredictable.Moreover, if our competitors
independently develop similar knowledge, methods and know-how, it will be difficult for us to enforce our rights and our business could be harmed.
Risks Relating to Owning our Common Stock
Raising additional funds may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies.
Execution of our business plan requires additional financing.If we raise additional funds through equity offerings or offerings of equity-linked securities, including warrants or convertible debt securities, we expect that our existing stockholders will experience significant dilution, and the terms of such securities may include liquidation or other preferences that adversely affect yourthe rights as a stockholder. of current stockholders.Debt financing, if available, may subject us to restrictive covenants that could limit our flexibility in conducting future business activities, including covenants limiting or restricting our ability to incur additional debt, dispose of assets, or make capital expenditures.We may also incur ongoing interest expense and be required to grant a security interest in our assets in connection with any debt issuance.If we raise additional funds through strategic partnerships or licensing agreements with third parties, we may have to relinquish valuable rights to our technologies or grant licenses on terms that are not favorable to us.
Trading volume in our stock can fluctuate and an active trading market for our common stock may not be available on a consistent basis to provide stockholders with adequate liquidity.Our stock price may be extremely volatile, and our stockholders could lose a significant part of their investment.
The public trading price for our common stock will be affected by a number of factors, including:
•any change in the status of our Nasdaq listing;
•the need for near-term financing to continue operations;
•reported progress in our efforts to develop crop related technologies, relative to investor expectations;
•changes in earnings estimates, investors’ perceptions, recommendations by securities analysts or our failure to achieve analysts’ earnings estimates;
•quarterly variations in our or our competitors’ results of operations;
•general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors;
•future issuances and/or sales of our securities;
•announcements or the absence of announcements by us, or our competitors, regarding acquisitions, new products, regulatory developments, significant contracts, commercial relationships or capital commitments;
•commencement of, or involvement in, litigation;
•any major change in our board of directors or management;
•changes in governmental regulations or in the status of our regulatory approvals;
•announcements related to patents issued to us or our competitors and to litigation involving our intellectual property;
•a lack of, or limited, or negative industry or security analyst coverage;
•uncertainty regarding our ability to secure additional cash resources with which to operate our business;
•a decision by our significant shareholdersstockholders to increase or decrease their holdings in our common stock;
•short-selling or similar activities by third parties; and
•other factors described elsewhere in these Risk Factors.risk factors.
As a result of these factors, our stockholders may not be able to resell their shares at, or above, their purchase price.In addition, the stock prices of many technology companies have experienced wide fluctuations that have often been unrelated to the operating performance of those companies.Any negative change in the public’s perception of the prospects of industrial or agricultural biotechnology companies could depress our stock price regardless of our results of operations.These factors may have a material adverse effect on the market price and liquidity of our common stock and affect our ability to obtain required financing.
Provisions in our certificate of incorporation and by-laws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.
Provisions of our certificate of incorporation and by-laws and Delaware law may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which our stockholders might otherwise receive a premium for their shares of our common stock.These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management.
In addition, Section 203 of the Delaware General Corporation Law ("DGCL") prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, which generally refers to a person which together with its affiliates owns, or within the last three years has owned, 15 percent or more of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.
The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock.They could also deter potential acquirers of our company, thereby reducing the likelihood that our stockholders could receive a premium for their common stock in an acquisition.
Concentration of ownership among our officers, directors and principal stockholders may prevent other stockholders from influencing significant corporate decisions and depress our stock price.
Based on the number of shares outstanding as of March 5, 20187, 2023, our officers, directors and stockholders who hold at least 5%5 percent of our stock beneficially own a combined total of approximately 41.430.8 percent of our outstanding common stock. stock, including shares of common stock subject to stock options and warrants that are currently exercisable or are exercisable within 60 days after March 7, 2023.If these officers, directors, and principal stockholders or a group of our principal stockholders act together, they will be able to exert a significant degree of influence over our management and affairs and control matters requiring stockholder approval, including the election of directors and approval of mergers, business combinations or other significant transactions.The interests of one or more of these stockholders may not always coincide with our interests or the interests of other stockholders.For instance, officers, directors, and principal stockholders, acting together, could cause us to enter into transactions or agreements that we would not otherwise consider.Similarly, this concentration of ownership may have the effect of delaying or preventing a change in control of our company otherwise favored by our other stockholders.As of March 5, 2018,7, 2023, Jack W. Schuler (and his related entities) beneficially owned approximately 40.123.7 percent of our common stock.To the extent that this or any other significant stockholders oppose any proposal put forth for stockholder approval by our board of directors, they control a sufficient percentage of our outstanding shares to cause such proposal to either fail or be very difficult to achieve without their support.This, in turn, could have a negative effect on the market price of our common stock.It could also prevent our stockholders from realizing a premium over the market pricesprice for their shares of common stock.The concentration of ownership also may contribute to the low trading volume and volatility of our common stock.
The recently passed comprehensive tax reform bill could adversely affect our business and financial results.
On December 22, 2017, President Trump signed into law the "Tax Cuts and Jobs Act," or TCJA, that significantly reforms the Internal Revenue Code of 1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on the deductibility of interest and net operating loss carryforwards, allows for the expensing of capital expenditures, and puts into effect the migration from a "worldwide" system of taxation to a territorial system. Our net deferred tax assets and liabilities have been revalued at the newly enacted U.S. corporate rate as of December 31, 2017. We continue to examine the impact this tax reform legislation may have on our business and we urge our stockholders to consult with their legal and tax advisors with respect to such legislation and the potential tax consequences of investing in our common stock.
Our business and operations would suffer in the event of system failures.
We utilize information technology, or IT, systems and networks to process, transmit and store electronic information in connection with our business activities. As use of digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication. These threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that we will be successful in preventing cyber-attacks or successful in mitigating their efforts.
Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage from such cyber attacks, including computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Such an event could cause interruption of our operations. For example, the loss of data from completed field tests for our yield traits could result in delays in our regulatory approval efforts and significantly increase our costs. To the extent that any disruption or security breach were to result in a loss of or damage to our data, or inappropriate disclosure of confidential or proprietary information, we could suffer reputational harm or face litigation or adverse regulatory action and the development of our product candidates could be delayed.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We do not own any real property. We are party to a lease agreement pursuant to which we lease approximately 30,00022,213 square feet of office and research and development space located at 19 Presidential Way, Woburn, Massachusetts. TheThis lease began on June 1, 2016 and will end on November 30, 2026. Under2026, and does not include any options for the terms ofearly termination or the lease agreement, the landlord paid $889 for tenant improvements to the facility and paid an additional $444 for tenant improvements that result in increased rental payments by the Company. Current and non-current portions of the lease incentive obligations related to the landlord’s contributions toward the cost of tenant improvements are recorded within accrued expenses and long-term lease incentive obligation, respectively, in the Company's consolidated balance sheet contained herein. The lease incentive obligation will be amortized to rent expense over the lease term. As of December 31, 2017, the Company has a total remaining lease incentive obligation of $1,132. Pursuant to the lease, the Company also pays certain taxes and operating costs associated with the premises during the termextension of the lease. To secure the lease, the CompanyWe have provided the landlord with a security deposit in the form of a letter of credit in the amount of $307.$229.
The Company hasWe have a sublease agreement with a subsidiary of CJ CheilJedang Corporation ("CJ") for CJ's sublease of approximately 10,0009,874 square feet of the Company'sour Woburn facility. The subleased space was determined to be in excess of the Company'sour needs as a result of its recentour strategic shift and the related restructuring of its operations.our operations during 2016. The sublease is coterminous with the Company'sour master lease. CJ will paypays rent and operating expenses equal to approximately one-thirdits pro-rata share of the amounts payable to the landlord by the Company,us, as adjusted from time-to-time in accordance with the terms of the master lease. CJ has provided the Companyus with a security deposit of $103 in the form of an irrevocable letter of credit.
We also lease approximately 13,700 square feet of office and laboratory space at 650 Suffolk Street, Lowell, Massachusetts. Our lease for this facility expires in May 2020, with an option to renew for one five-year period. We are currently working with a commercial real estate broker to locate a subtenant for this space. Our wholly-owned subsidiary, Metabolix Oilseeds, Inc. ("MOI"),YOI, located in Saskatoon, Saskatchewan, Canada, leases approximately 4,1009,600 square feet of office, laboratory and greenhouse space. MOI'sspace located within Innovation Place at 410 Downey Road and within the research facility of National Research Council Canada located at 110 Gymnasium Place. These leases do not contain renewal or early termination options. YOI's leases for these facilities generally have terms of one year, and are extended annually through amendment. Most of these leases will expire on July 31, 2018 andvarious dates through September 30, 2018. We expect to renew these leases prior to their expiration.2023.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company may be subject to legal proceedings and claims in the ordinary course of business. We are not currently aware of any such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
INFORMATION ABOUT OUR DIRECTORS AND EXECUTIVE OFFICERS
Directors
Robert L. Van Nostrand
Chairman of the Board of Directors
Oliver P. Peoples, Ph.D.
President and Chief Executive Officer
Sherri M. Brown, Ph.D.
Independent Consultant
Richard W. Hamilton, Ph.D.
Chief Executive Officer and Director at Prosper DNA, Inc.
Willie Loh, Ph.D.
Independent Consultant
Anthony J. Sinskey, Sc.D.
Professor of Microbiology, Massachusetts Institute of Technology
Executive Officers
Oliver P. Peoples, Ph.D.
President and Chief Executive Officer
Lynne H. Brum
Vice President, Planning and Corporate Communications
Charles B. Haaser
Vice President, Finance, Chief Accounting Officer and Treasurer
Kristi D. Snell, Ph.D.
Vice President, Research and Chief Science Officer
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is traded on the Nasdaq Capital Market under the symbol "YTEN." The following table sets forth, for the periods indicated, the high and low sales prices for our common stock, as reported by Nasdaq, for our two most recent fiscal years:
|
| | | | | | | | | | | | | | | | |
| | | Common Stock Price |
| | | 2017 | | 2016 |
| | | High | | Low | | High | | Low |
| First Quarter | | $ | 5.00 |
| | $ | 2.82 |
| | $ | 22.90 |
| | $ | 8.62 |
|
| Second Quarter | | $ | 9.30 |
| | $ | 3.03 |
| | $ | 19.20 |
| | $ | 5.35 |
|
| Third Quarter | | $ | 4.94 |
| | $ | 2.18 |
| | $ | 8.80 |
| | $ | 2.60 |
|
| Fourth Quarter | | $ | 8.67 |
| | $ | 1.77 |
| | $ | 6.70 |
| | $ | 2.50 |
|
The closing price of our common stock, as reported by the Nasdaq Capital Market, was $1.67 on March 8, 2018. On May 26, 2017, the Company effected a 1-for-10 reverse stock split of its common stock. All share prices set forth above have been adjusted to reflect this reverse stock split.
Stockholders
As of March 8, 2018,2023, there were 9,865,3555,069,380 shares of our common stock outstanding held by 3527 stockholders of record.
Dividends
We have never declared or paid any cash dividends on our capital stock and do not expect to pay any cash dividends for the foreseeable future. We intend to use future earnings, if any, in the operation and expansion of our business. Any future determination relating to our dividend policy will be made at the discretion of our board of directors, based on our financial condition, results of operations, contractual restrictions, capital requirements, business properties, restrictions imposed by applicable law and other factors our board of directors may deem relevant.
Equity Compensation Plan Information
Please see Part III, Item 12, for information regarding securities authorized for issuance under our equity compensation plans.
Unregistered Sales of Securities
On October 3, 2017,January 4, 2023, we issued 7,11317,578 shares of common stock to participants in our Yield10 Bioscience, Inc. 401(k) Plan as a matching contribution. The issuance of these securities was exempt from registration pursuant to Section 3(a)(2) of the Securities Act of 1933 as amended.
Act.
Issuer Purchases of Equity Securities
During the quarter ended December 31, 2017,2022, there were no repurchases made by us or on our behalf, or by any "affiliated purchasers," of shares of our common stock.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA[RESERVED]
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in this Annual Report on Form 10-K.All dollar amounts are stated in thousands.
Overview
Yield10 Bioscience, Inc. ("Yield10 Bioscience," "Yield10"Yield10" or the "Company") was founded as Metabolix, Inc. in 1992 and changed its name in January 2017. Yield10 is an agricultural bioscience company focusingfocused on the developmentlarge-scale production of new technologies to enable step-change increaseslow carbon sustainable products from processing Camelina seed using the oilseed Camelina sativa ("Camelina") as a platform crop. These seed products include:
•Camelina oil for use as a low carbon biofuel feedstock
•Omega-3 oils for nutrition
•PHA Bioplastics for biodegradable zero waste packaging solutions
The co-product from producing these seed products is Camelina meal which has a protein content of over 40% and is currently approved for use in crop yield to enhance global food security. Yield10a range of animal feed rations.
Our commercial plan is using two proprietary advanced biotechnology trait gene discovery platforms to improve fundamental crop yield through enhanced photosynthetic carbon capture and increased carbon utilization efficiency to increase seed yield. These platforms are based on the principledeveloping and releasing a series of proprietary elite Camelina seed varieties incorporating genetic traits from our development pipeline which offer improved on-farm performance that plants which capturewe anticipate will lead to increased acreage adoption and utilize carbon more efficiently will enable more robust crops capable of increased seed yield. Yield10 is workingand grain product revenue. We also plan to develop, translatecreate additional value for our shareholders by licensing yield and demonstrate the commercial value of novel yield trait genes it has identifiedseed oil traits from our pipeline to large seed companies for commercialization in major crops and to identify additional genome editing targets for improved crop performance in several key food and feed crops, including canola,corn, soybean rice and corn.canola. Yield10 Bioscience is headquartered in Woburn, Massachusetts and has an additional agricultural science facility with greenhouses locatedOilseed Center of Excellence in Saskatoon, Saskatchewan, Canada.
Government Grants
On February 26, 2021, Yield10 Oilseeds, Inc. (“YOI”), the Company’s wholly-owned Canadian research subsidiary, received a research grant through the Industrial Research Assistance Program ("IRAP") administered by National 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 from December 31, 2017, proceeds20, 2020 to March 13, 2021. During the first quarter of $241 remain available under our U.S. government grants. This includes amounts2021, YOI submitted claims for reimbursement to our subcontractors, as well as reimbursementeligible payroll costs and recognized grant revenue for our employees’ time, benefits and other expenses related to future performance. We are currently workingthe full amount of the award.
During 2018, we entered into a sub-award with Michigan State University ("MSU") to finalizesupport a Department of Energy ("DOE") funded subcontract that was awarded to us during 2017grant entitled "A"A Systems Approach to Increasing Carbon Flux to Seed Oil." We anticipate thatOur participation under this five-year subcontractgrant has been awarded incrementally on an annual basis with the first year commencing on September 15, 2017. Funding for this sub-award for the full grant amount of $2,957 was appropriated by the U.S. Congress through the contractual year ending in September 2022. During the years ended December 31, 2022 and December 31, 2021, we recognized $450 and $575, respectively, from this sub-award.
As of December 31, 2022, proceeds of $60 remain to be recognized under our MSU sub-award as shown in the table below. During June 2022, the parties amended the sub-award to extend its termination date to September 15, 2023, to allow Yield10 will be for $2,957 and will commence during 2018.time to utilize the remaining grant funds.
The status of our government grants is as follows:
|
| | | | | | | | | | | | | | | | | |
| | Program Title | | Funding Agency | | Total Government Funds | | Total received through December 31, 2017 | | Remaining amount available as of December 31, 2017 | | Contract/Grant Expiration |
| |
| | Production of High Oil, Transgene Free Camelina Sativa Plants through Genome Editing ("Camelina") | | Department of Energy | | $ | 1,997 |
| | $ | 1,756 |
| | $ | 241 |
| | September 2018 |
| | Subcontract from NC State University (NCSU) project funded by DOE ARPA-E entitled "Jet Fuel from Camelina Sativa: A Systems Approach" | | Department of Energy | | 276 |
| | 276 |
| | — |
| | March 2017 |
| | Total | | | | $ | 2,273 |
| | $ | 2,032 |
| | $ | 241 |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Program Title | | Funding
Agency | | Total Government Funds | | Total revenue recognized through December 31, 2022 | | Remaining amount to be recognized as of December 31, 2022 | | Contract/Grant
Expiration |
|
| | | | | | | | | | |
| Subcontract from Michigan State University project funded by DOE entitled "A Systems Approach to Increasing Carbon Flux to Seed Oil" | | Department of Energy | | $ | 2,957 | | | $ | 2,897 | | | $ | 60 | | | September 15, 2023 |
| Funding from National Research Council Canada through its Industrial Research Assistance Program (NRC-IRAP) entitled "Innovation Assistance Program" | | National Research Council Canada | | 39 | | | 39 | | | — | | | March 13, 2021 |
| Total | | | | $ | 2,996 | | | $ | 2,936 | | | $ | 60 | | | |
Critical Accounting Estimates and Judgments
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.America ("GAAP"). The preparation of these consolidated financial statements often requires us to make judgments and accounting estimates that can materially affect the amounts reported in the consolidated financial statements and accompanying notes. These judgments and estimates can have a significant effect on the financial statements because they result primarily from estimates about the effects of matters that are inherently uncertain. We make these estimates and judgments based on guidance provided by current GAAP, historical experience and various other assumptions that affectwe believe to be reasonable under the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis.circumstances. Our actual results may differ from these estimates.
We believe that our significant accounting policies, which are described in Note 2 to our consolidated financial statements, involve a degree of judgment and complexity. Accordingly, we believe that the specific accounting policies and significant judgments described below are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.
Grant Revenue
Government research grants currently represent our sole source of revenue. We recognize government grants as revenue because the grants are central to the Company's ongoing crop science program. Revenue is earned as research expenses related to the grants are incurred and revenue earned on government grants, but not yet invoiced as of the balance sheet date, are recorded as unbilled receivables in the accompanying consolidated balance sheets for the years ended December 31, 2017 and December 31, 2016. Funds received from government grants in advance of work being performed are recorded as deferred revenue until earned. At December 31, 2017 and December 31, 2016, we had no deferred revenue related to government research grants.
Stock-Based Compensation
The accounting standards for stock-based compensation require that all stock-based awards to employees be recognized as an expense in the consolidated financial statements and that such expense be measured based on the fair value of the award.
Determining the appropriate fair value model and calculating the fair value of stock-based payment awards requires the use of highly subjective assumptions, including the expected life of the stock-based payment awards and stock price volatility. We use the Black-Scholes option-pricing model to value our service-based option grants and to determine the related compensation expense. Generally, we recognize the fair value of stock awards evenlyexpense to be recognized over theireach award's vesting periods provided the employee, director or non-employee receiving the award continues to meet continuing service conditions. The assumptions used in calculatingperiod. Calculating the fair value of stock-based payment awards using modeling techniques requires the use of assumptions. These assumptions represent management'sour best estimates, but the estimates involve inherent uncertainties and the application of management judgment. See Note 9We adjust our modeling assumptions when valuing new stock awards based on actual experience.
Income Taxes
Due to the consolidatedCompany's history of annual income tax losses, it has never incurred significant income tax expense. We have, however, historically recorded and disclosed in our financial statements significant deferred income tax assets for further discussionnet operating loss carry forwards and research tax credits that may be available to offset future taxable income. We routinely assess the realizability of the Company's deferred tax assets and have historically concluded that it is unlikely that deferred tax assets derived from our U.S. operations will be realized under current accounting standards and therefore we have consistently maintained a full valuation allowance against these tax assets. Our U.S. deferred tax assets are also subject to
substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to stock ownership changes that have occurred, primarily as a result of our securities offerings. The calculation of Section 382 limitations is highly judgmental and the calculations are complex. Based on an analysis completed during 2021, we have concluded that all of our historical U.S. deferred tax assets generated through November 31, 2019 are no longer available to us for future use to offset taxable income.
Through December 31, 2022, YOI performed research and development services for Yield10 under a research services agreement subject to intercompany transfer pricing regulations established in the U.S. and Canada. These regulations required that YOI earn an arms-length profit from the research services, calculated in accordance with U.S. and Canadian tax regulations. YOI has historically filed for research tax credit carryforwards in the past that have been used to offset its taxable income generated as a result of the intercompany profit. These accumulated Canadian research credits were recorded as a deferred tax asset within our consolidated balance sheet at December 31, 2021, based on our judgment that YOI would continue to earn taxable income in the future and the deferred tax asset would be realized. However, in our current estimation, the negative evidence related to the Company's decline in its cash and short-term investment balances through the end of 2022 now outweighs the positive evidence of YOI's historic earnings. We believe that it is now more likely than not that the remaining deferred tax assets will not be utilized and, as such, we have recorded a full valuation allowance against the remaining deferred tax asset in Canada.
Securities Offerings
We offer our securities for sale to public and private investors from time to time.The structure of these offerings can be relatively straight-forward or they can be highly complex, requiring significant judgment in their accounting treatment and financial reporting.Our historical offerings completed to date have included different classes of securities, including common stock, convertible preferred stock and warrants with various exercise prices and terms.Depending on the key assumptions used to determinefacts and circumstances of each offering, including; the offering and market price of our common stock, the amount of cash proceeds received, the fair valuesvalue determination of option grants pursuanteach type of security issued, the availability of authorized and unissued common shares to support conversion of preferred shares or the exercise of the warrants, the specific terms of securities purchase agreements and other factors that may come into consideration, the shares of an offering may be recorded as permanent or temporary equity within our balance sheets.The fair value of warrants issued in an offering, under certain situations, may be recorded as a liability and be subject to mark-to-market adjustments on each balance sheet date based on changes in their fair value determined using the Black-Scholes option pricingvaluation model.We carefully analyze our securities offerings to ensure that we record them in accordance with current accounting guidance.
Discontinued OperationsLease Accounting
A discontinued operation isAs a component of an entity that has either been disposed of, or thatlessee, we follow the lease accounting guidance codified in ASC 842. Under this guidance, a lease is classified as held for sale, which represents a separate major linefinance lease if any of business or geographical areafive criteria described in the guidance apply to the lease. Any lease not classified as a finance lease is classified as an operating lease with expense recognition occurring on a straight-line basis over the term of operationsthe lease. The application of this guidance requires judgment. Under ASC 842, a lease liability is recorded on the commencement date of a lease and is partcalculated as the present value of a single coordinated plan to dispose of a separate major line of business or geographical area of operations. In July 2016, the Company announced a strategic restructuring plan in which Yield10 Bioscience became its core business and which resultedremaining lease payments, using the interest rate implicit in the salelease, or if that rate is not readily determinable, using the lessee's incremental borrowing rate. A right-of-use asset equal to the lease liability is also recorded with adjustments made, as necessary, for lease prepayments, lease accruals, initial direct costs and lessor lease incentives that may be present within the terms of its biopolymer operations in September 2016. In accordancethe lease. If a lease subject to ASC 842 is amended, the right-of-use asset and lease liability are adjusted, if appropriate. These mathematical calculations to comply with the accounting guidance regarding the presentation of discontinued operations, the activity of our biopolymers component has been reclassified as a discontinued operation for the year ended December 31, 2016.ASC 842 can be complex.
Results of Operations
The consolidated financial statements for the year ending December 31, 2016, have been presented to reflect the former biopolymer operations of Yield10 Bioscience as a discontinued operation.
Comparison of the Years Ended December 31, 20172022 and 20162021
Revenue
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year ended
December 31, | | | |
| | 2022 | | 2021 | | Change | |
| | | | | | | |
| Grant revenue | | $ | 450 | | | $ | 614 | | | $ | (164) | | |
| | | | | | | |
| | | | | | | |
|
| | | | | | | | | | | | | |
| | | Year ended December 31, | | | |
| | | 2017 | | 2016 | | Change | |
| Grant revenue | | $ | 944 |
| | $ | 1,159 |
| | $ | (215 | ) | |
TotalGrant revenue from continuing operations was $944$450 and $1,159$614 for the years ended December 31, 20172022 and 2016, respectively, and was derived solely from our research grants. Grant2021, respectively. All of the grant revenue forrecorded during the year ended December 31, 20172022 was primarily from $913 earnedderived from the Company's Camelina grantDOE sub-award with DOE. MSU.
During the year ended December 31, 2016,2021, grant revenue consisted of $913 earned$575 and $39 was recognized from the CamelinaDOE sub-award and the short-term NRC grant and $246 from the Company's subcontract with North Carolina State University.that was awarded to YOI in February 2021, respectively.
We do not anticipate that grant revenue will fluctuate significantly overdecrease during the next twelve months.year ended December 31, 2023 in comparison to the year ended December 31, 2022, as a result of lower remaining grant appropriations of $60 that we expect to earn during the first quarter of 2023 from our MSU sub-award that ends in September 2023. We currently cannot assess whether additional U.S. or Canadian government research grants will be awarded to us during 2023. Our work onforecast related to grant revenue is subject to change, however, should we receive new grants or if our ability to earn revenue from our existing grant is negatively impacted by the DOECOVID-19 pandemic.
We contracted with growers in Canada and the U.S. for small-scale Camelina grantwinter grain production in the fall of 2022, for approximately 1,000 total acres, to supply oil to the renewable diesel fuel market. Harvest of this first winter commercial grain production is expected to wind down as it nears completion during 2018 asoccur 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 revenue derived from our billable workupcoming spring 2023 grower agreements and future growing seasons 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 five-yearrenewable diesel market.
DOE subcontract to be signed with Michigan State University ramps up. We expect this subcontract will become effective during 2018.
Operating Expenses
| | | | | | | | | | Year ended
December 31, | |
| | | Year ended December 31, | | | | | 2022 | | 2021 | | Change | |
| | | 2017 | | 2016 | | Change | | |
| Research and development expenses | | $ | 4,597 |
| | $ | 5,670 |
| | $ | (1,073 | ) | | Research and development expenses | | $ | 7,750 | | | $ | 6,201 | | | $ | 1,549 | | |
| General and administrative expenses | | 5,630 |
| | 5,737 |
| | (107 | ) | | General and administrative expenses | | 6,151 | | | 6,105 | | | 46 | | |
| Total costs and expense | | $ | 10,227 |
| | $ | 11,407 |
| | $ | (1,180 | ) | | |
| Total operating expenses | | Total operating expenses | | $ | 13,901 | | | $ | 12,306 | | | $ | 1,595 | | |
Research and Development Expenses
Research and development expensesexpense increased by $1,549, or 25%, from continuing operations were $4,597 and $5,670 for the years ended December 31, 2017 and 2016, respectively. The decrease of $1,073 was primarily due to a $841 reduction in research facility expenses from $1,835$6,201 during the year ended December 31, 20162021 to $994 for$7,750 during the year ended December 31, 2017.2022. The favorable variance2022 increase is the result of the Company's move during mid-2016 from its more expensive Cambridge, Massachusetts research facilityprimarily due to its new Woburn, Massachusetts location. The year-over-year decrease in research and development expenses is also the result of lowerhigher employee compensation and related benefitbenefits expense, expanded crop trial costs, higher third-party research services, costs associated with pre-commercial Camelina seed production and increased facility-related expenses. Employee compensation and related benefit expenses were $2,488 and $2,624 forbenefits increased by $497 from $3,547 during the yearsyear ended December 31, 2017 and 2016, respectively.2021 to $4,044 during the year ended December 31, 2022. The decrease of $136increase is primarily attributablethe result of a $600 increase in payroll charges generated from annual employee compensation increases and our hiring of additional staff. Stock-based employee compensation expense also increased by $82 during the year ended December 31, 2022 due to employee stock options awarded during the past year. Lower recruiting related expenses of $74 offset a reductionportion of these increased employee related expenses. Crop trial expense increased by $366 during the year ended December 31, 2022 in headcountcomparison to the year ended December 31, 2021 and primarily stems from our evaluation of Camelina plant varieties, including those demonstrating herbicide tolerance. Third-party research services increased by $154 during the year ended December 31, 2022 in comparison to the previous year and is primarily the result of DNA sequencing and other analytical work undertaken for regulatory purposes. During the year ended December 31, 2022, we also incurred $226 in charges for pre-commercial Camelina seed production, including seed multiplication, cleaning, packaging and storage costs. We did not have similar expenses during the year ended December 31, 2021. Facility-related expenses increased by $138 during the year ended December 31, 2022, primarily as a result of our strategic restructuring during 2016. We have also been able to reduceleasing additional laboratory and greenhouse space in support of our Camelina research activities in Saskatoon, Saskatchewan, Canada.
Based on current planning and forecasting, we anticipate that our research and development expenditures across many categoriesexpenses during the year ended December 31, 2023 will increase above levels incurred during the year ended December 31, 2022, 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 favorable consequenceprotein meal to be used in animal feed markets. The increased expenses will include employee compensation and benefits from recent and future personnel hiring, further expansion of our restructuringcrop trial programs, seed scale up and our ongoing effortspre-commercial Camelina production activities. Our forecast related to manage cash usage. Partially offsetting these expense reductions was a $146 increase in sponsored research expense as a result of the Company's Camelina field test and payments made to a third party for its work in support of one of the Camelina government grants.
We expect research and development expenses from continuing operationsexpense is subject to increase during 2018 as a result ofchange and may be impacted by our plansability to expand our field testing for crops across multiple site locations. We also plan to also hire a small number ofraise additional research staffworking capital to support those tests.our planned operations, the potential impact of the COVID-19 pandemic or the advent of third-party collaborations or other business opportunities that could alter our plans.
General and Administrative Expenses
General and administrative expenses from continuing operations were $5,630$6,151 and $5,737$6,105 for the fiscal years ended December 31, 20172022 and 2016,December 31, 2021, respectively. The decreaseincrease of $107$46, or 1%, was primarily due to a reduction inincreased employee compensation and related benefits expenses and a reduction in professional and consulting fees, offsetexpense that increased by our recognition$66, from $2,762 during 2017 of $622 of deferred equity offering costs related to a common stock purchase agreement with Aspire Capital Fund, LLC ("Aspire") that terminated. Employee compensation and related benefits expenses decreased by $178 from $2,661 for the year ended December 31, 20162021 to $2,483 for$2,828 during the year ended December 31, 2017.2022. The decreasenet increase was primarily attributable to the Company's restructuring completed during 2016 that eliminatedresult of a number of administrative positions,$146 increase in stock-based compensation expense partially offset by the Company's reinstatementreductions in employee payroll and bonus expenses of employee bonuses during 2017. Professional service$32 and consulting fees for accounting, patentlower recruiting-related expenses of $56.
Based on current planning and board fees decreased by a total of $376 during 2017 as a result of the Company's efforts to manage its available cash resources.
We expectforecasting, we anticipate that our general and administrative expenses from continuing operationsduring the year ended December 31, 2023 will increase to decreaselevels above expenses incurred during 2018 in comparison to 2017 since we will not incur the write off of Aspire deferred offering costs again andyear ended December 31, 2022, as we continue effortsscale up activities in support of our commercial growth, including increasing employee headcount, legal expenses, license payments and travel-related expenses in support of business development. Our forecast related to carefully managegeneral and administrative expense is subject to change and may be impacted by our useability to raise additional working capital to support our plans, the potential impact of cash resources.the COVID-19 pandemic or the advent of new third-party collaborations or other business opportunities that could alter our plans.
Other Income (Net)(Expense), net
| | | | | | | | | | | | | | | | | | | | |
| | Year ended
December 31, | | |
| | 2022 | | 2021 | | Change |
| Gain on investment in related party | | $ | — | | | $ | 700 | | | $ | (700) | |
| Other income (expense), net | | 41 | | | (3) | | | 44 | |
| Total other income (expense), net | | $ | 41 | | | $ | 697 | | | $ | (656) | |
|
| | | | | | | | | | | | | |
| | | Year ended December 31, | | | |
| | | 2017 | | 2016 | | Change | |
| Total other income (expense), net | | $ | (113 | ) | | $ | (38 | ) | | $ | (75 | ) | |
Gain on Investment in Related Party
During 1999, Yield10 entered into a technology sublicense agreement with Tepha, 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). In May 2021, the board of directors of Tepha approved and authorized the merger of Tepha with Becton Dickinson Global Holdings, Inc. ("Becton Dickinson"). On July 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 year ended December 31, 2021.
Interest Income (expense), net
Other income (expense), net, reflects net expense of $113 and $38 for the years ended December 31, 20172022 and 2016, respectively. The expense for 2017 and 2016 isDecember 31, 2021 was derived primarily the result of imputed interest charges recorded in connection with payments we are making through May 2018 related to the early termination of a third party manufacturing agreement.
Income from Discontinued Operations, beforeinvestment income tax
In July 2016, our Board of Directors approved a restructuring plan under which Yield10 Bioscience becameearned from the Company's core business with a focus on the development of new technologies to enable step-change increases in crop yield to enhance global food security. As a result of this strategic shift, during 2016 we completed the sale of certain biopolymer intellectual property, equipmentcash equivalents and inventory to an affiliate of CJ CheilJedang Corporation ("CJ"). The $10,000 purchase price paidinvestments offset by CJ was primarily for the acquisition of intellectual property, including the Company’s PHA strains, patent rights, know-howinterest expense and its rights, title and interest in certain license agreements. None of this intellectual property was previously capitalized on the Company’s balance sheet, resulting in a gain on the sale of approximately $9,868, net of equipment sold. The sale of our biopolymer assets contributed to income before income tax of $2,682 from discontinued operations for the year ended December 31, 2016.
Income Tax Benefit and Provision
For the year ended December 31, 2016, the Company recognized an income tax benefit within continuing operations of $1,097 and tax expense in discontinued operations of $1,097 related to taxable income generatedinvestment management fees incurred during the year as a result of the sale of biopolymer assets to CJ as discussed above.
Deemed Dividend on Series A Convertible Preferred Stock Issuance
During December 2017, the Company closed on a public offering of securities that included 4,667,000 Class A Units, priced at a public offering price of $2.25 per unit, with each unit consisting of one share of common stock, a Series A five-year warrant to purchase one share of common stock at an exercise price of $2.25 per share, and a Series B nine-month warrant to purchase 0.5 share of common stock at an exercise price of $2.25 per share, and 3,987 Class B Units, priced at a public offering price of $1,000 per unit, with each unit consisting of one share of preferred stock convertible to 445 shares of common stock at a conversion price of $2.25 per common share, Series A five-year warrants to purchase 445 shares of common stock at an exercise price of $2.25 per share, and Series B nine-month warrants to purchase 223 shares of common stock with an exercise price of $2.25 per share. Proceeds received from the offering were allocated to the various elements of the offering based on their relative fair values.
The Series A Convertible Preferred Stock was valued on an as-if-converted basis based on the underlying common stock. The Series A and Series B warrants were valued using the Black-Scholes model with the following weighted-average input at the time of issuance:
an expected term of 5.0 years and 0.75 years for the Series A and Series B warrants, respectively,
risk free rates of 2.2 percent and 1.7 percent for the Series A and Series B warrants, respectively, based on the published rates of U.S. treasury bills with similar terms, and
volatility of 125 percent based on the Company’s historical volatility.
After allocation of the proceeds, the effective conversion price of the Series A Convertible Preferred Stock was determined to be beneficial and, as a result, the Company recorded a non-cash deemed dividend of approximately $1,427 equal to the intrinsic value of the beneficial conversion feature. The Series A Convertible Preferred Stock is considered a participating security. In accordance with applicable accounting guidance, the Company's net loss of $9,396 from continuing operations has been increased by the amount of the deemed dividend from the beneficial conversion feature, resulting in a net loss attributable to common shareholders of $10,823, or $3.29 per common share.
As of March 5, 2018, holders of 3,879 , or 97%, of the 3,987 Series A Preferred Stock that was issued have elected to convert their shares into 1,724,000 shares of common stock.
year.
Liquidity and Capital Resources
Currently, we require cash to fund our working capital needs, to purchase capital assets, 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.efforts, which in recent years have been focused on Camelina. With the exception of 2012, when we recognized $38,885 of deferred revenue from a terminated joint venture, we have recorded annual losses since the Company's initial founding, including itsour fiscal year ended December 31, 2017.2022. As of December 31, 2017,2022, we had an accumulated deficit of $342,753.$399,697. Our total unrestricted cash, and cash equivalents and short-term investments as of December 31, 2017, were $14,4872022, totaled $4,347 as compared to $7,309$15,990 at December 31, 2016.2021. As of December 31, 2017,2022, we had no outstanding debt.
Our cash, and cash equivalents and short-term investments at December 31, 2017,2022 were held for working capital purposes. As of December 31, 2017,2022, we had restricted cash of $317. Restricted cash consists$264, which consisted of $307$229 held in connection with the lease agreement for our Woburn, Massachusetts facility and $10$35 held in connection with our corporate credit card used for small and incidental purchases.program.
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 consequently, 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,and concentration limits, and liquidity requirements. As of December 31, 2017,2022, we were in compliance with this policy.
Material Cash Requirements
Subject to obtaining additional working capital funding, we currently anticipate net cash usage of $13,000 to $14,000 to fund our operations during 2023, including our expanded research and development, administrative and Camelina commercial launch activities.
We believe thatrequire cash to fund our existing funds, when combined with cash generated from fromworking capital needs, to purchase capital assets, to pay our 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 equivalents and short-term investments.
We routinely enter into contractual commitments with third parties to support our accessoperating activities.The more significant of these commitments includes real estate operating leases for our office, laboratory and greenhouse facilities located in the U.S. and Canada.In addition, we typically enter into annual premium funding arrangements through our insurance broker that allows us to additional financing sources, if needed, will be sufficient to fund operationsspread the payment of our directors' and meet our obligations, including our final restructuring obligations, when due,officers' liability and other business insurance premiums over the terms of the policies.Our material commitments also include arrangements with third party growers located in North and South America for the foreseeable future. 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 that contain 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 ASU 2014-15, ASC Topic 205-40, Presentation of Financial Statements-Going Concern (Subtopic 205-40), in order to determine whether there is substantial doubt about the Company'sour ability to continue as a going concern for one year after the date itsour financial statements are issued. Based on our current cash forecast, we have determinedexpect that the Company'sour present capital resources arewill not be sufficient to fund our planned operations until mid-2019.
During 2016,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, and 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 completed awill be forced to curtail our research efforts, explore strategic restructuring ofalternatives and/or wind down our operations to focus on the Yield10 Bioscience business. We reduced staffing levels to 20 full-time employees and incurred restructuring costspursue options for contract terminationliquidating our remaining assets, including intellectual property and employee post-termination benefits of approximately $3,513 which are primarily reflected in discontinued operations within the Company's 2016 statement of operations. At December 31, 2017, $489 of these restructuring charges remain outstanding and are required to be paid out through May 2018. We currently anticipate that we will use approximately $8,500 - $9,000 of cash during 2018, including the final payments for restructuring costs.equipment.
If we issue equity or debt securities to raise additional funds, (i) the Company may incur fees associated with such issuance, (ii) our 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 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 the Company.
At-The-Market ("ATM") Program
On January 24, 2023, we entered into an Equity Distribution Agreement (the "Sales Agreement") with Maxim Group LLC ("Maxim"), under which we may offer and sell shares of our common stock, $0.01 par value per share, having an aggregate offering price of up to $4,200 from time to time through Maxim, acting exclusively as the Company's sales agent (the "Offering"). On January 24, 2023, we filed a prospectus supplement with the Securities and Exchange Commission in connection with the Offering under our existing Registration Statement on Form S-3 (File No 333-254830), which was declared effective on April 2, 2021. We intend to use the net proceeds of the Offering primarily for working capital and general corporate purposes. Maxim will be entitled to compensation at a fixed commission rate of 2.75% of the gross sales price per share sold. In addition, we agreed to reimburse Maxim for its costs and out-of-pocket expenses incurred in connection with its services, including the fees and out-of-pocket expenses of its legal counsel.
We are not obligated to make any sales under the Sales Agreement and no assurance can be given that we will sell any shares,, or the dates on which any such sales will take place. The Sales Agreement will continue until the earliest of (i) twelve (12) months following the date of the Sales Agreement, (ii) the sale of shares thereunder having an aggregate offering price of $4,200, and (iii) the termination by us upon ten (10) days written notice or by Maxim immediately upon written notification to the Company.
From January 24, 2023 through March 14, 2023, we issued 94,665 shares of common stock in connection with the ATM at per share prices between $3.03 and $4.08, resulting in net proceeds to the Company of approximately $290 after subtracting sales commissions.
Fiscal Year 2022 Cash Usage
Net cash used forin operating activities was $8,202$11,404 during the year ended December 31, 2017,2022, compared to net cash used by operating activities during 20162021 of $14,404.$9,253. Net cash used by operations during the year ended December 31, 2017,2022 primarily reflects the net loss of $9,396, partially offset by non-cash expenses, including$13,566, cash payments made to reduce the Company's lease liabilities of $520 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 $263, stock-based compensation expense of $1,395, depreciation expense of $206, and the Company's$1,903, our 401(k) stock matching contribution expense of $85. During 2017 the Company also paid down its$133 and non-cash lease incentive obligation and contract termination liability by a totalexpense of $616.
$393 resulting from amortization of our right-of-use asset. The following are the non-cashnet cash usage for operating items and investing items related to discontinued operations foractivities during the year ended December 31, 2016.
|
| | | |
| | Year Ended December 31, 2016 |
| Non-cash operating items: | |
| Depreciation | $ | 326 |
|
| Charge for 401(k) company common stock match | $ | 118 |
|
| Stock-based compensation | $ | 217 |
|
| Inventory impairment | $ | 199 |
|
| Non-cash restructuring expense paid through stock and equipment | $ | 196 |
|
| Gain on sale of discontinued operation and property and equipment | $ | (9,833 | ) |
2021 of $9,253 was primarily the result of the Company's net loss of $11,031, cash payments to reduce the Company's lease liabilities of $463 and our payment of 2020 bonus compensation of $460. Non-cash charges offsetting a portion of the net loss included depreciation and amortization expense of $220, stock-based compensation expense of $1,675, our 401(k) stock matching contribution expense of $112 and non-cash lease expense of $358.
Net cash of $109$8,522 was provided by investing activities during the year ended December 31, 2017,2022, compared to net cash provided byused for investing activities during 20162021 of $9,752. Net cash provided by investing activities during$4,578. During the year ended December 31, 2017, was2022, the Company purchased $2,445 in short-term investments, primarily the result of the release of $115 of restricted cash due to the discontinuationU.S. Treasury notes and federal agency bonds. Also during 2022, $11,121 of our corporate credit card program used for employee business travel. Net cash provided by investing activities duringshort-term investments matured and converted to cash. During the year ended December 31, 2016, was primarily the result of proceeds received from the sale of biopolymer assets of $10,3172021, we purchased $10,639 in similar short-term investments and a net decrease in restricted cash of $187, partially offset by purchases of propertyinvestments totaling $6,250 matured and equipment of $752converted to outfit the Woburn, Massachusetts facility.cash.
Net cash of $15,272$37 was providedused by financing activities during the year ended December 31, 2017,2022, compared to net cash usedprovided by financing activities of $296$15,746 during the year ended December 31, 2016.2021. During July 2017, we completed a registered direct offering of our securities, receiving cash proceeds from the transaction of $1,966, net of issuance costs of $317. Inyear ended December 2017, we31, 2021, the Company completed a public offering of our securities,1,040,000 shares of its common stock at a price of $12.25 per share, receiving cash proceeds of $13,318, net of$12,740 before issuance costs of $1,171 that were paid as$747. Also during 2021, a total of December 31, 2017. The Company will pay additional costs of $221 related to this offering during its first quarter of 2018. These amounts are included481,973 Series A and Series B warrants issued in the Company's accrued expenses as of December 31, 2017. (See Note 8 - Capital StockNovember 2019 securities offering were exercised by warrant holders, providing $3,856 in our Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K). During the years ended December 31, 2017 and December 31, 2016, the Company paid taxes of $12 and $296, respectively, related to our net settlement of employee vested stock awards. These taxes include payment of minimum federal, state or Canadian provincial income tax withholdings associated with employee restricted stock units (RSUs) that vested during each year. As RSUs vest, we withhold a number of shares with aggregate fair market value equal to the minimum tax withholding amount from the common stock issuable at the vest date.
Off-Balance Sheet Arrangements
As of December 31, 2017, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of the Securities and Exchange Commission's Regulation S-K.
cash proceeds.
Related Party Transactions
See Note 7 to our consolidated financial statements forDuring 1999, the Company entered into a full description of ourtechnology sublicense agreement with Tepha, which was a related party transactions.engaged in the development of medical products. Yield10 received 648,149 shares of Series A Convertible Preferred Stock
of Tepha during 2002 as consideration for outstanding license payments due to Yield10 totaling $700. In July 2021, Tepha merged with Becton Dickinson and we received cash consideration of $700 in exchange for our Tepha Shares.
Recent Accounting Standards Changes
For a discussion of recent accounting standards please read Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included in this report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and related financial statement schedules required to be filed are indexed on page F-1 and are incorporated herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Effectiveness of Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K, under the supervision of our Chief Executive Officer and our Chief Accounting Officer, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and our Chief Accounting Officer concluded that as of December 31, 20172022 our disclosure controls and procedures were effective to provide reasonable assurance that the information we are required to disclose in reports that we file or submit under the Exchange Act (1) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange CommissionSEC rules and forms, and (2) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Accounting Officer, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures include components of our internal control over financial reporting. Management's assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance because a control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met.
Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, as amended.Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017.2022. In making this assessment, management used the criteria set forth in the 2013 2017 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on its assessment of internal control over financial reporting, management has concluded that, as of December 31, 2017,2022, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during our last fiscal quarter in the period covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PursuantThe response to General Instruction G to Form 10-K, the information required for Part III, Items 10, 11, 12, 13 and 14,this item is incorporated herein by reference from the Company'sdiscussion responsive thereto under the captions “Directors and Executive Officers,” “Corporate Governance and Board Matters” and “Code of Business Conduct and Ethics” in our proxy statement for the Annual Meeting2023 annual meeting of Stockholdersstockholders.
ITEM 11. EXECUTIVE COMPENSATION
The response to be held on May 23,this item is incorporated by reference from the discussion responsive thereto under the captions “Executive Compensation,” “Director Compensation,” “Corporate Governance and Board Matters” and “Compensation Risk Assessment” in our proxy statement for the 2023 annual meeting of stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Security Ownership of Certain Beneficial Owners and Management,” “Securities Authorized for Issuance under Equity Compensation Plans” and "Proposal 2: Approval of an Amendment to the Company's 2018 whichStock Option and Incentive Plan" in our proxy statement for the 2023 annual meeting of stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The response to this item is expectedincorporated by reference from the discussion responsive thereto under the captions “Certain Relationships and Related Person Transactions,” “Corporate Governance and Board Matters” and “The Board of Directors and its Committees” in our proxy statement for the 2023 annual meeting of stockholders.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICE
The response to be filed not later than 120 days afterthis item is incorporated by reference from the fiscal year end covered by this Form 10-K.discussion responsive thereto under the caption “Independent Registered Public Accountants” in our proxy statement for the 2023 annual meeting of stockholders.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)The following documents are filed as part of this Report:
(1)Financial Statements
See Index to Financial Statements on page F-1.
(2)Supplemental Schedules
All schedules have been omitted because the required information is not present in amounts sufficient to require submission of the schedule, or because the required information is included in the consolidated financial statements or notes thereto.
(3)Exhibits
See Item 15(b) below.
(b)The following exhibits are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K:
|
| | | | |
Exhibit Number | | | | Description |
| | (13) | | Purchase Agreement between Metabolix, Inc. and CJ Research Center LLC, dated September 16, 2016. |
| | * | | Amended and Restated Certificate of Incorporation of the Registrant. |
| | (14) | | Amended and Restated By-laws of the Registrant. |
| | (1) | | Specimen Stock Certificate for shares of the Registrant's Common Stock. |
| | (16) | | Form of Investor Warrant to Purchase Common Stock |
| | (11) | | Registration Rights Agreement, dated October 7, 2015, between Metabolix, Inc. and Aspire Capital Fund, LLC |
| | (17) | | Form of Series A Convertible Preferred Stock Certificate |
| | (18) | | Form of Series A Common Warrant to purchase shares of Common Stock |
| | (18) | | Form of Series B Common Warrant to purchase shares of Common Stock |
| | †(1) | | 2006 Stock Option and Incentive Plan. |
| | †(1) | | 2006 Stock Option and Incentive Plan, Form of Incentive Stock Option Agreement. |
| | †(1) | | 2006 Stock Option and Incentive Plan, Form of Non-Qualified Stock Option Agreement. |
| | †(1) | | 2006 Stock Option and Incentive Plan, Form of Director Non-Qualified Stock Option Agreement. |
|
| | | | |
| | †(8) | | 2014 Stock Option and Incentive Plan, Revised and Restated. |
| | †(9) | | 2014 Stock Option and Incentive Plan, Form of Incentive Stock Option Award. |
| | †(9) | | 2014 Stock Option and Incentive Plan, Form of Non-Qualified Stock Option Award. |
| | †(9) | | 2014 Stock Option and Incentive Plan, Form of Restricted Stock Unit Award. |
| | †(15) | | Employment Agreement between the Company and Oliver P. Peoples dated March 28, 2017. |
| | †(15) | | Employment Agreement between the Company and Charles B. Haaser dated March 28, 2017. |
| | †(5) | | Severance Agreement between the Company and Sarah P. Cecil executed July 1, 2013. |
| | †(15) | | Employment Agreement between the Company and Lynne H. Brum dated March 28, 2017. |
| | †(6) | | Employment Agreement between the Company and Joseph Shaulson dated December 19, 2013. |
| | †(15) | | Employment Agreement between the Company and Kristi Snell dated March 28, 2017. |
| | †(15) | | Noncompetition, Confidentiality and Inventions Agreement between the Company and each of Oliver Peoples, Charles Haaser, Lynne H. Brum and Kristi Snell, dated March 28, 2017. |
| | †(7) | | Non-Qualified Stock Option Agreement between the Company and Joseph Shaulson dated December 19, 2013. |
| | †(7) | | Restricted Stock Unit Award Agreement between the Registrant and Joseph Shaulson dated March 24, 2014. |
| | †(1) | | Form of Indemnification Agreement between the Registrant and its Directors and Officers. |
| | (2) | | Lease between Fortune Wakefield, LLC and Metabolix, Inc. dated March 30, 2007. |
| | (4) | | First Amendment of Lease between Fortune Wakefield, LLC and Metabolix, Inc. dated February 29, 2012. |
| | (6) | | Second Amendment of Lease between Fortune Wakefield, LLC and Metabolix, Inc. dated October 24, 2013. |
| | (10) | | Securities Purchase Agreement dated June 15, 2015 between the Company and the Investors named therein. |
| | (10) | | Standstill Agreement dated June 19, 2015 between the Company and Jack W. Schuler, Renate Schuler and the Schuler Family Foundation. |
| | (12) | | Lease Agreement between the Company and ARE MA Region No. 20, LLC dated January 20, 2016 for the premises located at 19 Presidential Way, Woburn, MA |
| | (11) | | Common Stock Purchase Agreement, dated October 7, 2015 between Metabolix, Inc. and Aspire Capital Fund, LLC. |
| | †(15) | | Separation Agreement between the Company and Joseph Shaulson, dated as of November 3, 2016. |
| | @(15) | | Exclusive License Agreement, dated as of June 30, 2015, between the Company and the University of Massachusetts. |
| | (15) | | Sublease between CJ Research Center LLC and the Company, dated as of September 16, 2016. |
| | (16) | | Form of Securities Purchase Agreement dated July 3, 2017 between the Company and the Purchasers named therein. |
| | (3) | | Yield10 Bioscience, Inc. Code of Business Conduct and Ethics. |
| | *
| | Subsidiaries of the Registrant. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit
Number | | Exhibit Description | | Filed Herewith | | Incorporated by Reference herein from Form or Schedule | | Filing Date | | SEC File/ Reg. Number |
| 2.1 | | | | * | | Form 8-K (Exhibit 2.1) | | 9/21/2016 | | 001-33133 |
| 3.1.1 | | | | | | Form 10-Q (Exhibit 3.1) | | 8/9/2018 | | 001-33133 |
| 3.1.2 | | | | | | Form 8-K (Exhibit 3.1) | | 1/15/2020 | | 001-33133 |
| 3.1.3 | | | | | | Form 8-K (Exhibit 3.1) | | 11/20/2019 | | 001-33133 |
| 3.1.4 | | | | | | Form 8-K (Exhibit 3.2) | | 11/20/2019 | | 001-33133 |
| 3.2 | | | | | | Form 10-Q (Exhibit 3.1) | | 11/10/2021 | | 001-33133 |
| 4.1 | | | | X | | | | | | |
| 4.2 | | | | | | Form 10-Q (Exhibit 4.1) | | 11/12/2020 | | 001-33133 |
| 4.3 | | | | | | Form 8-K (Exhibit 4.1) | | 7/5/2017 | | 001-33133 |
| 4.4 | | | | | | Form S-1/A (Exhibit 4.3) | | 12/15/2017 | | 333-221283 |
| 4.5 | | | | | | Form 8-K (Exhibit 4.1) | | 11/20/2019 | | 001-33133 |
| 10.1† | | | | | | Form S-1/A (Exhibit 10.3) | | 10/20/2006 | | 333-135760 |
| 10.1.1† | | | | | | Form S-1/A (Exhibit 10.3.1) | | 10/20/2006 | | 333-135760 |
| 10.1.2† | | | | | | Form S-1/A (Exhibit 10.3.2) | | 10/20/2006 | | 333-135760 |
| 10.1.3† | | | | | | Form S-1/A (Exhibit 10.3.3) | | 10/20/2006 | | 333-135760 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 10.2† | | | | | | Form 10-Q (Exhibit 10.1) | | 8/13/2015 | | 001-33133 |
| 10.2.1† | | | | | | Form 10-K (Exhibit 10.3.1) | | 3/25/2015 | | 001-33133 |
| 10.2.2† | | | | | | Form 10-K (Exhibit 10.3.2) | | 3/25/2015 | | 001-33133 |
| 10.2.3† | | | | | | Form 10-K (Exhibit 10.3.3) | | 3/25/2015 | | 001-33133 |
| 10.3† | | | | | | Form 10-Q (Exhibit 10.1) | | 8/11/2021 | | 001-33133 |
| 10.3.1† | | | | | | Form 10-K (Exhibit 10.2.5) | | 3/28/2019 | | 001-33133 |
| 10.3.2† | | | | | | Form 10-K (Exhibit 10.2.6) | | 3/25/2020 | | 001-33133 |
| 10.4† | | | | | | Form 10-K (Exhibit 10.3) | | 3/30/2017 | | 001-33133 |
| 10.5† | | | | | | Form 10-K (Exhibit 10.4) | | 3/30/2017 | | 001-33133 |
| 10.6† | | | | | | Form 10-K (Exhibit 10.6) | | 3/30/2017 | | 001-33133 |
| 10.7† | | | | | | Form 10-K (Exhibit 10.8) | | 3/30/2017 | | 001-33133 |
| 10.8† | | | | | | Form 10-K (Exhibit 10.9) | | 3/30/2017 | | 001-33133 |
| 10.9† | | | | | | Form S/1/A (Exhibit 10.14) | | 10/20/2006 | | 333-135760 |
| 10.10 | | | | | | Form 8-K (Exhibit 10.1) | | 6/17/2015 | | 001-33133 |
| 10.11 | | | | | | Form 8-K (Exhibit 10.1) | | 1/26/2016 | | 001-33133 |
| 10.12 | | | | | | Form 10-K (Exhibit 10.20) | | 3/30/2017 | | 001-33133 |
| 10.13 | | | | | | Form 8-K (Exhibit 10.1) | | 7/5/2017 | | 001-33133 |
| 10.14@ | | | | | | Form 10-Q (Exhibit 10.2) | | 8/9/2018 | | 001-33133 |
| 10.15 | | | | | | Form 8-K (Exhibit 10.1) | | 3/15/2019 | | 001-33133 |
| 10.16 | | | | | | Form 8-K (Exhibit 10.1) | | 11/20/2019 | | 001-33133 |
| 10.17 | | | | | | Form 8-K (Exhibit 10.1) | | 8/25/2020 | | 001-33133 |
| 10.18 | | | | X | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 10.19 | | | | | | Form 8-K (Exhibit 1.1) | | 1/24/23 | | 001-33133 |
| 21.1 | | | | | | Form 10-K (Exhibit 21.1) | | 3/16/2021 | | 001-33133 |
| 23.1 | | | | X | | | | | | |
| | * | | | | X | | | | | | |
| | * | | | | X | | | | | | |
| | * | | | | X | | | | | | |
| 101.1 | | * | | The following financial information from the Yield10 Bioscience, Inc. Annual Report on Form 10-K for the year ended December 31, 20172022 formatted in XBRL; (i) Consolidated Balance Sheets, December 31, 20172022 and December 31, 2016;2021; (ii) Consolidated Statements of Operations, Years Ended December 31, 20172022 and 2016;2021; (iii) Consolidated Statements of Comprehensive Income (Loss), Years Ended December 31, 20172022 and 2016;2021; (iv) Consolidated Statements of Cash Flows, Years Ended December 31, 20172022 and 2016; and2021; (v) Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 20172022 and 2016;2021; and (vi) Notes to Consolidated Financial Statements. | | X | | | | | | |
| 101.INS | | * | | XBRL Instance Document. | | | | | | | | |
| 101.SCH | | * | | XBRL Taxonomy Extension Schema. | | | | | | | | |
| 101.CAL | | * | | XBRL Taxonomy Extension Calculation Linkbase. | | | | | | | | |
| 101.DEF | | * | | XBRL Taxonomy Extension Definition Linkbase. | | | | | | | | |
| 101.LAB | | * | | XBRL Taxonomy Extension Label Linkbase. | | | | | | | | |
| 101.PRE | | * | | XBRL Taxonomy Extension Presentation Linkbase. | | | | | | | | |
|
| | | | |
| † | Indicates a managementManagement contract or any compensatory plan contract or arrangement. |
*@ | Filed herewith |
@ | Confidential treatment has been requested for certainCertain confidential portions of this document. |
(1) | IncorporatedExhibit were omitted by reference herein tomeans of marking such portions with brackets ("[***]") because the exhibits toidentified confidential portions (i) are not material and (ii) is the Company's Registration Statement on Form S-1 (File No. 333-135760) |
(2) | Incorporated by reference herein totype of information that the exhibits to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 001-33133) |
(3) | Incorporated by reference herein to the exhibits to the Company's 2011 Annual Report on Form 10-K filed March 12, 2012 (File No. 001-33133) |
(4) | Incorporated by reference herein to the exhibits to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 (File No. 001-33133) |
(5) | Incorporated by reference herein to the exhibits to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (File No. 001-33133) |
(6) | Incorporated by reference herein to the exhibits to the Company's 2013 Annual Report on Form 10-K filed March 28, 2014 (File No. 001-33133) |
(7) | Incorporated by reference herein to the exhibits to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 (File No. 001-33133) |
(8) | Incorporated herein by reference herein to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (File No. 001-33133) |
(9) | Incorporated by reference herein to the exhibits to the Company's 2014 Annual Report on Form 10-K filed March 25, 2015 (File No. 001-33133) |
(10) | Incorporated by reference herein to the exhibits to the Company's Report on Form 8-K filed on June 17, 2015 (File No. 001-33133) |
(11) | Incorporated by reference herein to the exhibits to the Company's Report on Form 8-K filed on October 7, 2015 (File No. 001-33133) |
(12) | Incorporated by reference herein to the exhibits to the Company's Report on Form 8-K filed on January 26, 2016 (File No. 001-33133) |
(13) | Incorporated by reference herein to the exhibits to the Company's Report on Form 8-K filed on September 21, 2016 (File No. 001-33133) |
(14) | Incorporated by reference herein to the exhibits to the Company's Report on Form 8-K filed on January 6, 2017 (File No. 001-33133) |
(15) | Incorporated by reference herein to the exhibits to the Company's Annual Report on Form 10-K filed March 30, 2017 (File No. 001-33133) |
(16) | Incorporated by reference herein to the exhibits to the Company's Report on Form 8-K filed on July 5, 2017 (File No. 001-33133) |
(17) | Incorporated by reference herein to the exhibits to the Company's Registration Statement on Form S-1 (File No. 333-220040) |
(18) | Incorporated by reference herein to the exhibits to the Company's Registration Statement on Form S-1/A filed December 15, 2017 (File No. 333-221283)Company treats as private or confidential. |
ITEM 16. FORM 10-K SUMMARY
Registrants may voluntarily include a summary of information required by Form 10-K under this Item 16. We have elected not to include such summary.Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | |
| | | |
| | | |
| YIELD10 BIOSCIENCE, INC. |
March 12, 201814, 2023 | By: | | /s/ OLIVER P. PEOPLES |
| | | Dr. Oliver P. Peoples, Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)
|
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Oliver P. Peoples, Charles B. Haaser, and Lynne H. Brum, jointly and severally, his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | | | | | | | | |
| Name | | Title | | Date |
| | | | |
Name | | Title | | Date |
| | | | |
| /s/ OLIVER P. PEOPLES | | President and Chief Executive Officer and Director (Principal Executive Officer) | | March 12, 201814, 2023 |
| Oliver P. Peoples, Ph.D. | | | | |
| /s/ CHARLES B. HAASER | | Vice President, Finance, and Chief Accounting Officer (Principal Financial and Accounting Officer) | | March 12, 201814, 2023 |
| Charles B. Haaser | | | | |
/s/ PETER N. KELLOGGSHERRI M. BROWN | | Director | | March 12, 201814, 2023 |
Peter N. KelloggSherri M. Brown | | | | |
| /s/ RICHARD W. HAMILTON | | Director | | March 12, 201814, 2023 |
| Richard W. Hamilton, Ph.D. | | | | |
/s/ JOSEPH SHAULSONWILLIE LOH | | Director | | March 12, 201814, 2023 |
Joseph ShaulsonWillie Loh, Ph.D. | | | | |
| /s/ ANTHONY J. SINSKEY | | Director | | March 12, 201814, 2023 |
| Anthony J. Sinskey, Sc.D. | | | | |
| /s/ ROBERT L. VAN NOSTRAND | | Chairman | | March 12, 201814, 2023 |
| Robert L. Van Nostrand | | | | |
YIELD10 BIOSCIENCE, INC.
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the ShareholdersStockholders and the Board of Directors of Yield10 Bioscience, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Yield10 Bioscience, Inc. and its subsidiaries (the Company) as of December 31, 20172022 and 2016,2021, the related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for each of the two years in the periodthen ended, December 31, 2017, and the related notes to the consolidated financial statements and schedules (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172022 and 2016,2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matter-Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and does not have sufficient liquidity to meet forecasted costs. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters also are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis of Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ RSM US LLP
We have served as the Company's auditor since 2017.
Boston, Massachusetts
March 12, 201814, 2023
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
| | | | | | | | | | | |
| December 31,
2022 | | December 31,
2021 |
| Assets | | | |
| Current Assets: | | | |
| Cash and cash equivalents | $ | 2,356 | | | $ | 5,329 | |
| Short-term investments | 1,991 | | | 10,661 | |
| Accounts receivable | — | | | 164 | |
| Unbilled receivables | 30 | | | 34 | |
| Prepaid expenses and other current assets | 641 | | | 436 | |
| Total current assets | 5,018 | | | 16,624 | |
| Restricted cash | 264 | | | 264 | |
| Property and equipment, net | 775 | | | 890 | |
| Right-of-use assets | 1,961 | | | 2,354 | |
| Other assets | 67 | | | 283 | |
| Total assets | $ | 8,085 | | | $ | 20,415 | |
| | | |
| Liabilities and Stockholders' Equity | | | |
| Current Liabilities: | | | |
| Accounts payable | $ | 109 | | | $ | 83 | |
| Accrued expenses | 926 | | | 1,136 | |
| Lease liabilities | 575 | | | 514 | |
| Total current liabilities | 1,610 | | | 1,733 | |
| Lease liabilities, net of current portion | 2,075 | | | 2,656 | |
| Total liabilities | 3,685 | | | 4,389 | |
| Commitments and contingencies (Note 7) | | | |
| Stockholders' Equity: | | | |
| Preferred stock ($0.01 par value per share); 5,000,000 shares authorized; no shares issued or outstanding | — | | | — | |
| Common stock ($0.01 par value per share); 60,000,000 shares authorized at December 31, 2022 and 2021, and 4,944,202 and 4,881,851 shares issued and outstanding at December 31, 2022 and 2021, respectively | 49 | | | 49 | |
| Additional paid-in capital | 404,277 | | | 402,283 | |
| Accumulated other comprehensive loss | (229) | | | (175) | |
| Accumulated deficit | (399,697) | | | (386,131) | |
| Total stockholders' equity | 4,400 | | | 16,026 | |
| Total liabilities and stockholders' equity | $ | 8,085 | | | $ | 20,415 | |
|
| | | | | | | | |
| | | December 31,
2017 | | December 31,
2016 |
| Assets | | | | |
| Current Assets: | | | | |
| Cash and cash equivalents | | $ | 14,487 |
| | $ | 7,309 |
|
| Accounts receivable | | 54 |
| | 66 |
|
| Due from related parties | | — |
| | 1 |
|
| Unbilled receivables | | 65 |
| | 121 |
|
| Prepaid expenses and other current assets | | 311 |
| | 363 |
|
| Total current assets | | 14,917 |
| | 7,860 |
|
| Restricted cash | | 317 |
| | 432 |
|
| Property and equipment, net | | 1,539 |
| | 1,739 |
|
| Deferred equity financing costs | | — |
| | 622 |
|
| Other assets | | 109 |
| | 95 |
|
| Total assets | | $ | 16,882 |
| | $ | 10,748 |
|
| Liabilities and Stockholders' Equity | | | | |
| Current Liabilities: | | | | |
| Accounts payable | | $ | 76 |
| | $ | 56 |
|
| Accrued expenses | | 2,299 |
| | 2,702 |
|
| Total current liabilities | | 2,375 |
| | 2,758 |
|
| Lease incentive obligation, net of current portion | | 1,005 |
| | 1,132 |
|
| Contract termination obligation, net of current portion (Note 13) | | — |
| | 489 |
|
| Total liabilities | | 3,380 |
| | 4,379 |
|
| Commitments and contingencies (Note 6) | |
|
| |
|
|
| Stockholders' Equity: | | | | |
| Series A Convertible Preferred Stock ($0.01 par value per share); 5,000,000 authorized at December 31, 2017 and 2016, respectively; 1,826 and zero shares issued and outstanding at December 31, 2017 and 2016, respectively | | 818 |
| | — |
|
| Common stock ($0.01 par value per share); 40,000,000 shares and 250,000,000 shares authorized at December 31, 2017 and 2016, respectively; 9,089,159 and 2,834,244 shares issued and outstanding at December 31, 2017 and 2016, respectively | | 91 |
| | 28 |
|
| Additional paid-in capital | | 355,431 |
| | 339,782 |
|
| Accumulated other comprehensive loss | | (85 | ) | | (84 | ) |
| Accumulated deficit | | (342,753 | ) | | (333,357 | ) |
| Total stockholders' equity | | 13,502 |
| | 6,369 |
|
| Total liabilities and stockholders' equity | | $ | 16,882 |
| | $ | 10,748 |
|
The accompanying notes are an integral part of these consolidated financial statements.
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
| | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 |
| Revenue: | | | | |
| Grant revenue | | $ | 450 | | | $ | 614 | |
| Total revenue | | 450 | | | 614 | |
| Expenses: | | | | |
| Research and development | | 7,750 | | | 6,201 | |
| General and administrative | | 6,151 | | | 6,105 | |
| Total expenses | | 13,901 | | | 12,306 | |
| Loss from operations | | (13,451) | | | (11,692) | |
| Other income (expense): | | | | |
| Gain on investment in related party | | — | | | 700 | |
| Other income (expense), net | | 41 | | | (3) | |
| Total other income (expense) | | 41 | | | 697 | |
| Loss from operations before income taxes | | (13,410) | | | (10,995) | |
| Income tax provision | | (156) | | | (36) | |
| Net loss | | $ | (13,566) | | | $ | (11,031) | |
| | | | |
| Basic and diluted net loss per share | | $ | (2.76) | | | $ | (2.33) | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Number of shares used in per share calculations: | | | | |
| Basic and diluted | | 4,914,565 | | | 4,731,833 | |
| | | | |
|
| | | | | | | | |
| | | Years Ended December 31, |
| | | 2017 | | 2016 |
| Revenue: | | | | |
| Grant revenue | | $ | 944 |
| | $ | 1,159 |
|
| Total revenue | | 944 |
| | 1,159 |
|
| Expenses: | | | | |
| Research and development | | 4,597 |
| | 5,670 |
|
| General and administrative | | 5,630 |
| | 5,737 |
|
| Total expenses | | 10,227 |
| | 11,407 |
|
| Loss from continuing operations | | (9,283 | ) |
| (10,248 | ) |
| Other income (expense), net | | (113 | ) | | (38 | ) |
| Net loss from continuing operations before income tax benefit | | (9,396 | ) | | (10,286 | ) |
| Income tax benefit | | — |
| | 1,097 |
|
| Net loss from continuing operations | | (9,396 | ) |
| (9,189 | ) |
| Discontinued operations | | | | |
| Income from discontinued operations | | — |
| | 2,682 |
|
| Income tax provision | | — |
| | (1,097 | ) |
| Total net income from discontinued operations | | — |
| | 1,585 |
|
| Net loss | | $ | (9,396 | ) | | $ | (7,604 | ) |
| | | | | |
| Loss attributable to common shareholders and loss per common share: | | | | |
| Net loss | | $ | (9,396 | ) | | $ | (7,604 | ) |
| Deemed dividend on Series A Convertible Preferred Stock issuance | | (1,427 | ) | | — |
|
| Net loss applicable to common shareholders | | $ | (10,823 | ) | | $ | (7,604 | ) |
| | | | | |
| Basic and Diluted net loss per share: | | | | |
| Net loss from continuing operations | | $ | (3.29 | ) | | $ | (3.30 | ) |
| Net income from discontinued operations | | — |
| | 0.57 |
|
| Net loss per share | | $ | (3.29 | ) | | $ | (2.73 | ) |
| Number of shares used in per share calculations: | |
| |
|
| Basic & Diluted | | 3,288,618 |
| | 2,781,185 |
|
The accompanying notes are an integral part of these consolidated financial statements.
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | |
| | 2022 | | 2021 | | | |
| Net loss | | $ | (13,566) | | | $ | (11,031) | | | | |
| Other comprehensive loss: | | | | | | | |
| Change in unrealized gain (loss) on investments, net of income tax | | 7 | | | (8) | | | | |
| Change in foreign currency translation adjustment, net of income tax | | (61) | | | (8) | | | | |
| Total other comprehensive loss | | (54) | | | (16) | | | | |
| Comprehensive loss | | $ | (13,620) | | | $ | (11,047) | | | | |
|
| | | | | | | | |
| | | Years Ended December 31, |
| | | 2017 | | 2016 |
| Net loss | | $ | (9,396 | ) | | $ | (7,604 | ) |
| Other comprehensive income (loss): | |
| |
|
| Change in foreign currency translation adjustment | | (1 | ) | | (12 | ) |
| Total other comprehensive loss | | (1 | ) | | (12 | ) |
| Comprehensive loss | | $ | (9,397 | ) | | $ | (7,616 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | | |
| | 2022 | | 2021 | | | |
| Cash flows from operating activities | | | | | | | |
| Net loss | | $ | (13,566) | | | $ | (11,031) | | | | |
| Adjustments to reconcile net loss to cash used in operating activities: | | | | | | | |
| Depreciation and amortization | | 263 | | | 220 | | | | |
| | | | | | | |
| Expense for 401(k) company common stock match | | 133 | | | 112 | | | | |
| Stock-based compensation | | 1,903 | | | 1,675 | | | | |
| Noncash lease expense | | 393 | | | 358 | | | | |
| Deferred tax asset | | 165 | | | 35 | | | | |
| Changes in operating assets and liabilities: | | | | | | | |
| Accounts receivable | | 164 | | | (78) | | | | |
| Unbilled receivables | | 4 | | | (7) | | | | |
| Prepaid expenses and other assets | | (160) | | | 63 | | | | |
| Accounts payable | | 26 | | | 23 | | | | |
| Accrued expenses | | (209) | | | (160) | | | | |
| | | | | | | |
| Lease liabilities | | (520) | | | (463) | | | | |
| Net cash used in operating activities | | (11,404) | | | (9,253) | | | | |
| | | | | | | |
| Cash flows from investing activities | | | | | | | |
| Purchase of property and equipment | | (154) | | | (189) | | | | |
| | | | | | | |
| | | | | | | |
| Purchase of investments | | (2,445) | | | (10,639) | | | | |
| Proceeds from sale and maturity of short-term investments | | 11,121 | | | 6,250 | | | | |
| Net cash provided by (used in) investing activities | | 8,522 | | | (4,578) | | | | |
| | | | | | | |
| Cash flows from financing activities | | | | | | | |
| Proceeds from warrants exercised | | — | | | 3,856 | | | | |
| Proceeds from securities offerings, net of issuance costs | | — | | | 11,993 | | | | |
| Taxes paid on employees' behalf related to vesting of stock awards | | (37) | | | (103) | | | | |
| Net cash (used in) provided by financing activities | | (37) | | | 15,746 | | | | |
| | | | | | | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | | (54) | | | (9) | | | | |
| Net (decrease) increase in cash, cash equivalents and restricted cash | | (2,973) | | | 1,906 | | | | |
| Cash, cash equivalents and restricted cash at beginning of year | | 5,593 | | | 3,687 | | | | |
| Cash, cash equivalents and restricted cash at end of year | | $ | 2,620 | | | $ | 5,593 | | | | |
| | | | | | | |
| Supplemental Cash Flow Disclosure: | | | | | | | |
| Interest paid | | $ | 10 | | | $ | 9 | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
|
| | | | | | | | |
| | | Years Ended December 31, |
| | | 2017 | | 2016 |
| Cash flows from operating activities | | | | |
| Net loss | | $ | (9,396 | ) | | $ | (7,604 | ) |
| Adjustments to reconcile net loss to cash used in operating activities: | | | | |
| Depreciation | | 206 |
| | 515 |
|
| Expense for 401(k) company common stock match | | 85 |
| | 281 |
|
| Stock-based compensation | | 1,395 |
| | 848 |
|
| Inventory impairment | | — |
| | 199 |
|
| Gain on sale of discontinued operation and property and equipment | | — |
| | (9,833 | ) |
| Non-cash restructuring expense paid through stock and equipment | | — |
| | 196 |
|
| Changes in operating assets and liabilities: | | | | |
| Accounts receivable | | 12 |
| | 172 |
|
| Due from related parties | | 1 |
| | 145 |
|
| Unbilled receivables | | 56 |
| | 29 |
|
| Inventory | | — |
| | 180 |
|
| Prepaid expenses and other assets | | 660 |
| | 1,302 |
|
| Accounts payable | | 17 |
| | (51 | ) |
| Accrued expenses | | (622 | ) | | (845 | ) |
| Contract termination obligation and other long-term liabilities | | (616 | ) | | 339 |
|
| Deferred revenue | | — |
| | (277 | ) |
| Net cash used in operating activities | | (8,202 | ) | | (14,404 | ) |
| | | | | |
| Cash flows from investing activities | | | | |
| Purchase of property and equipment | | (6 | ) | | (752 | ) |
| Proceeds from sale of discontinued operation and property and equipment | | — |
| | 10,317 |
|
| Change in restricted cash | | 115 |
| | 187 |
|
| Net cash provided by investing activities | | 109 |
| | 9,752 |
|
| | | | | |
| Cash flows from financing activities | | | | |
| Proceeds from private placement offering, net of issuance costs | | 1,966 |
| | — |
|
| Proceeds from public stock offerings, net of issuance costs | | 13,318 |
| | — |
|
| Taxes paid on employees' behalf related to vesting of stock awards | | (12 | ) | | (296 | ) |
| Net cash provided by (used in) financing activities | | 15,272 |
| | (296 | ) |
| | | | | |
| Effect of exchange rate changes on cash and cash equivalents | | (1 | ) | | (12 | ) |
| Net increase (decrease) in cash and cash equivalents | | 7,178 |
| | (4,960 | ) |
| Cash and cash equivalents at beginning of period | | 7,309 |
| | 12,269 |
|
| Cash and cash equivalents at end of period | | $ | 14,487 |
| | $ | 7,309 |
|
| | | | | |
| Supplemental Cash Flow Disclosure: | | | | |
| Interest paid | | $ | 116 |
| | $ | 45 |
|
| | | | | |
| Supplemental Disclosure of Non-cash Information: | | | | |
| Stock offering costs remaining in accounts payable and accrued expenses | | $ | 221 |
| | $ | — |
|
| Deemed dividend related to Series A Convertible Preferred Stock beneficial conversion feature | | $ | 1,427 |
| | $ | — |
|
| Lease incentive paid by lessor | | $ | — |
| | $ | 1,332 |
|
| Transfer of equipment to settle contractual liability | | $ | — |
| | $ | 111 |
|
| Issuance of common stock to settle contractual liability | | $ | — |
| | $ | 85 |
|
The accompanying notes are an integral part of these consolidated financial statements
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | | | | | | | |
| | Shares | | Par Value | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | Accumulated Deficit | | Total Stockholders' Equity |
| Balance, December 31, 2020 | | 3,334,048 | | | $ | 33 | | | $ | 384,758 | | | $ | (159) | | | $ | (375,100) | | | $ | 9,532 | |
| Stock-based compensation expense | | — | | | — | | | 1,685 | | | — | | | — | | | 1,685 | |
| Issuance of common stock for 401(k) match | | 13,611 | | | — | | | 109 | | | — | | | — | | | 109 | |
| Issuance of common stock upon vesting of restricted stock units | | 12,219 | | | — | | | — | | | — | | | — | | | — | |
| Taxes paid on employees' behalf related to vesting of stock awards | | — | | | — | | | (102) | | | — | | | — | | | (102) | |
| Issuance of common stock for warrant exercises | | 481,973 | | | 5 | | | 3,851 | | | — | | | — | | | 3,856 | |
| Issuance of common stock in connection with stock offering, net of offering costs of $747 | | 1,040,000 | | | 11 | | | 11,982 | | | — | | | — | | | 11,993 | |
| Effect of foreign currency translation | | — | | | — | | | — | | | (16) | | | — | | | (16) | |
| Net loss | | — | | | — | | | — | | | — | | | (11,031) | | | (11,031) | |
| Balance, December 31, 2021 | | 4,881,851 | | | $ | 49 | | | $ | 402,283 | | | $ | (175) | | | $ | (386,131) | | | $ | 16,026 | |
| Stock-based compensation expense | | — | | | — | | | 1,903 | | | — | | | — | | | 1,903 | |
| Issuance of common stock for 401(k) match | | 36,706 | | | — | | | 128 | | | — | | | — | | | 128 | |
| Issuance of common stock upon vesting of restricted stock units | | 25,645 | | | — | | | — | | | — | | | — | | | — | |
| Taxes paid on employees' behalf related to vesting of stock awards | | — | | | — | | | (37) | | | — | | | — | | | (37) | |
| Effect of foreign currency translation and unrealized loss on investments | | — | | | — | | | — | | | (54) | | | — | | | (54) | |
| Net loss | | — | | | — | | | — | | | — | | | (13,566) | | | (13,566) | |
| Balance, December 31, 2022 | | 4,944,202 | | | $ | 49 | | | $ | 404,277 | | | $ | (229) | | | $ | (399,697) | | | $ | 4,400 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Series A Convertible | | | | | | | | | | | | |
| | Preferred Stock | | Common Stock | | | | | | | | |
| | Shares | | Par Value | | Shares | | Par Value | | Additional Paid-In Capital | | Accumulated other Comprehensive Income (loss) | | Accumulated Deficit | | Total Stockholders' Equity |
| Balance, December 31, 2015 | — |
| | $ | — |
| | 2,733,144 |
| | $ | 27 |
| | $ | 338,826 |
| | $ | (72 | ) | | $ | (325,753 | ) | | $ | 13,028 |
|
| Non-cash stock-based compensation expense | — |
| | — |
| | — |
| | — |
| | 848 |
| | — |
| | — |
| | 848 |
|
| Issuance of common stock for 401k match | — |
| | — |
| | 31,912 |
| | — |
| | 320 |
| | — |
| | — |
| | 320 |
|
| Issuance of stock for restricted stock unit release, net of 18,850 shares withheld for employee taxes (See Note 9) | — |
| | — |
| | 41,688 |
| | 1 |
| | (297 | ) | | — |
| | — |
| | (296 | ) |
| Issuance of stock in connection with contract termination | — |
| | — |
| | 27,500 |
| | — |
| | 85 |
| | — |
| | — |
| | 85 |
|
| Effect of foreign currency translation | — |
| | — |
| | — |
| | — |
| | — |
| | (12 | ) | | — |
| | (12 | ) |
| Net loss | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (7,604 | ) | | (7,604 | ) |
| Balance, December 31, 2016 | — |
| | $ | — |
| | 2,834,244 |
| | $ | 28 |
| | $ | 339,782 |
| | $ | (84 | ) | | $ | (333,357 | ) | | $ | 6,369 |
|
| Non-cash stock-based compensation expense | — |
| | — |
| | — |
| | — |
| | 1,395 |
| | — |
| | — |
| | 1,395 |
|
| Issuance of common stock for 401k match | — |
| | — |
| | 22,493 |
| | — |
| | 84 |
| | — |
| | — |
| | 84 |
|
| Issuance of stock for restricted stock unit release, net of 2,724 shares withheld for employee taxes (See Note 9) | — |
| | — |
| | 34,193 |
| | 1 |
| | (13 | ) | | — |
| | — |
| | (12 | ) |
| Issuance of stock in connection with registered direct offering, net of offering costs of $317 | — |
| | — |
| | 570,784 |
| | 5 |
| | 1,961 |
| | — |
| | — |
| | 1,966 |
|
| Issuance of common stock, preferred stock and warrants in connection with public offering, net of offering costs of $1,392 | 3,987 |
| | 1,786 |
| | 4,667,000 |
| | 47 |
| | 11,264 |
| | — |
| | — |
| | 13,097 |
|
| Beneficial conversion feature of Series A Convertible Preferred Stock | — |
| | (1,427 | ) | | — |
| | — |
| | 1,427 |
| | — |
| | — |
| | — |
|
| Deemed dividend to Series A Convertible Preferred Stockholders | — |
| | 1,427 |
| | — |
| | — |
| | (1,427 | ) | | — |
| | — |
| | — |
|
| Issuance of common stock upon conversion of Series A Convertible Preferred Stock | (2,161 | ) | | (968 | ) | | 960,445 |
| | 10 |
| | 958 |
| | — |
| | — |
| | — |
|
| Effect of foreign currency translation | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) |
| Net loss | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (9,396 | ) | | (9,396 | ) |
| Balance, December 31, 2017 | 1,826 |
| | $ | 818 |
| | 9,089,159 |
| | $ | 91 |
| | $ | 355,431 |
| | $ | (85 | ) | | $ | (342,753 | ) | | $ | 13,502 |
|
The accompanying notes are an integral part of these consolidated financial statements
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
1. Nature of Business and Basis of Presentation
Yield10 Bioscience, Inc. ("Yield10 Bioscience," "Yield10,"Yield10" or the "Company") was founded as Metabolix, Inc. in 1992 and changed its name in January 2017. Yield10 Bioscience is an agricultural bioscience company focusing onthat is developing the developmentoilseed Camelina sativa ("Camelina") as a platform crop for large scale production of new technologieslow carbon sustainable seed products to enable step-change increasesaddress 1) petroleum replacement markets: Camelina oil for use as a biofuel feedstock and PHA bioplastics produced in crop yield to enhance globalCamelina seed for use as a biodegradable bioplastic; and 2) food security. Yield10and nutrition markets: omega-3 (EPA, DHA+EPA) oils produced in Camelina seed for aquaculture and nutraceuticals; and for protein meal for animal feed markets. The commercial plan is using two proprietary advanced biotechnology trait gene discovery platforms to improve fundamental crop yield through enhanced photosynthetic carbon capture and increased carbon utilization efficiency to increase seed yield. These platforms are based on developing and releasing a series of proprietary elite Camelina seed varieties incorporating genetic traits from the principleCompany's development pipeline which offer improved on-farm performance that plants which capturewill lead to increased acreage and utilize carbon more efficiently will enable more robust crops capable of increased seed yield.product revenue. Yield10 is workingalso plans to translatecreate additional value for its shareholders by licensing yield and demonstrateseed oil traits from the commercial value of novel yield trait genes it has identifiedCompany's pipeline to large seed companies for commercialization in major crops and to identify additional genome editing targets for improved crop performance in several key food and feed crops, including canola,corn, soybean rice and corn.canola. Yield10 Bioscience is headquartered in Woburn, Massachusetts and has an additional agricultural science facility with greenhouses locatedOilseed Center of Excellence in Saskatoon, Saskatchewan, Canada. Yield10's wholly-owned Canadian subsidiary, Metabolix Oilseeds Inc., changed its name to Yield10 Oilseeds Inc. ("YOI") effective July 12, 2022, in order to better align the name with the Company's branding.
The accompanying 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. With the exception of 2012, when the Company recognized $38,885 of deferred revenue from a terminated joint venture,single year, the Company has recorded losses since its initial founding, including its fiscal year ending December 31, 2017. During 2016, the2022. The Company completed a strategic restructuring under which Yield10 Bioscience became its core business. In connectionended 2022 with the restructuring, the Company discontinued its pilot biopolymer production and other biopolymer operations, sold substantially all of its biopolymer assets to CJ CheilJedang Corporation ("CJ") and reduced staffing levels to approximately twenty full-time employees in order to focus on crop science activities and significantly reduce the Company's cash burn rate used in operations. During 2016, the Company recorded restructuring charges of $3,513 and as of December 31, 2017, restructuring obligations of $489 remain outstanding with payment due dates through May 2018.
As of December 31, 2017, the Company held unrestricted cash, and cash equivalents and short-term investments of $14,487. $4,347.
The Company follows the guidance of ASU 2014-15, Accounting Standards Codification ("ASC") Topic 205-40, Presentation of Financial Statements-Going Concern (Subtopic 205-40), in order to determine whether there is substantial doubt about its ability to continue as a going concern for one year after the date its consolidated financial statements are issued. The Company's ability to continue operations after its current cash resources are exhausted depends on its 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 research grants or collaborative arrangements with third parties, as to which no assurance can be given. Management does not know whether additional financing will be available on terms favorable or acceptable to the Company when needed, if at all. If adequate additional funds are not available when required, management will be forced to curtail the Company's research efforts, explore strategic alternatives and/or wind down the Company's operations and pursue options for liquidating its remaining assets, including intellectual property and equipment. Based on its current cash forecast, management has determined that the Company's present capital resources arewill not be sufficient to fund its planned operations for at least the next twelve month periodone year from the date thatwhen these consolidated financial statements are issued.available to be issued, which raises substantial doubt as to the Company's ability to continue as a going concern. This forecast of cash resource 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.
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 may 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 may be subject to significant annual limitations under Section 382 of the Internal Revenue Code of 1986, as amended, (the "Internal Revenue Code") due to ownership changes resulting from equity financing transactions. 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.
On January 30, 2020, the World Health Organization ("WHO") announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China ("COVID-19") and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 pandemic continues to evolve as of the
YIELD10 BIOSCIENCE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
date of this report. As such, the full magnitude that the pandemic will have on the Company's financial condition, liquidity and future results of operations is uncertain. While management currently expects the impact of COVID-19 to be temporary, there is uncertainty around the duration and its broader impact on the economy and therefore the effects it will have on Yield10's financial condition, liquidity, operations, suppliers, industry, and workforce in future periods.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements are presented in U.S. dollars and are prepared in accordance with accounting standards set by the Financial Accounting Standards Board ("FASB"). The FASB sets generally accepted accounting principles ("GAAP") that the Company follows to ensure its financial condition, results of operations, and cash flows are consistently reported. References to GAAP issued by the FASB in these notes to the consolidated financial statements are to the FASB Accounting Standards Codification ("ASC").
Principles of Consolidation
The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions were eliminated, including transactions with its Canadian subsidiary, Metabolixsubsidiaries, Yield10 Oilseeds Inc. During 2016, the Company completed the sale of its biopolymer intellectual property and certain equipment and inventory to an affiliate of CJ in a transaction that met the requirements for discontinued operations reporting in accordance with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
of Components of an Entity. The consolidated financial statements for the year ended December 31, 2016 have been presented to reflect the Company's biopolymer operation as a discontinued operation.
Reverse Stock Split
On May 26, 2017, the Company effected a 1-for-10 reverse stock split of its common stock. Unless otherwise indicated, all share amounts, per share data, share prices, and conversion rates set forth in these notes and the accompanying financial statements have, where applicable, been adjusted retroactively to reflect this reverse stock split.Yield10 Bioscience Securities Corp.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP")GAAP 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Cash, and Cash Equivalents and Restricted Cash
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.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Company's consolidated balance sheets included herein:
| | | | | | | | | | | |
| December 31, 2022 | | December 31, 2021 |
| Cash and cash equivalents | $ | 2,356 | | | $ | 5,329 | |
| Restricted cash | 264 | | | 264 | |
| Total cash, cash equivalents and restricted cash | $ | 2,620 | | | $ | 5,593 | |
Amounts included in restricted cash represent those required to be set aside by contractual agreement. Restricted cash of $264 at December 31, 2022 and December 31, 2021, primarily consists of funds held in connection with the Company's lease agreement for its Woburn, Massachusetts facility.
YIELD10 BIOSCIENCE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
Investments
Investments represent holdings of available-for-sale marketable debt securities acquired in accordance with the Company's investment policy. The Company considers all 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. The Company held no short or long-term investments at December 31, 2017 or December 31, 2016.2022 and 2021.
UnrealizedInvestments in marketable debt securities are recorded at fair value, with any unrealized gains and temporary losses on investments are included inreported within accumulated other comprehensive income (loss) as a separate component of stockholders' equity.equity until realized or until a determination is made that an other-than-temporary decline in market value has occurred. Other-than-temporary impairments of equity investments are recognized in the Company's statements of operations if the Company has experienced a credit loss and has the intent to sell the investment or if it is more likely than not that the Company will be required to sell the investment before recovery of the amortized cost basis. Realized gains and losses, dividends, interest income and declines in value judged to be other-than-temporary credit losses are included in other income (expense). Any premium or discount arising at purchaseThe amortized cost of debt securities is amortized and/or accretedadjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion together with interest income.
Restricted Cash
The Company had restricted cashon securities are included in the amount of $317 and $432 at December 31, 2017, and December 31, 2016, respectively. At December 31, 2017, restricted cash consists primarily of funds held in connection with the lease agreement forinterest income on the Company's Woburn, Massachusetts facility.
Deferred Equity Financing Costs
consolidated statements of operations. The Company entered into a common stock purchase agreement in 2015 with Aspire Capital Fund, LLC, (Aspire) under which Aspire committed to purchase up to an aggregatecost of $20,000marketable securities sold is determined based on the specific identification method and any realized gains or losses on the sale of the Company's common stock over a 30-month period. Offering costs incurred to establish this agreement were recorded as deferred equity financing costs. These costs were expected be charged to additional paid-in-capital as shares were issued under the agreement. Aspire purchase transactions would have utilized pricing formulas that qualified them as variable rate transactions, as defined in the securities purchase agreement entered into in connection with the Company's securities offering completed in July 2017. Because variable rate transactionsinvestments are prohibited by the securities agreement, the Aspire facility was no longer available to the Companyreflected as a sourcecomponent of capital. Therefore, the deferred equity offering costs can no longer be offset against future common stock issuances to Aspire. As such, the Company recognized the full deferral of $622 during the year ended December 31, 2017 within general and administrative expense.
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
other income (expense).
Foreign Currency Translation
Foreign denominated assets and liabilities of the Company's wholly-owned foreign subsidiariessubsidiary are translated into U.S. dollars at the prevailing exchange rates in effect on the balance sheet date. Revenues and expenses are translated at average exchange rates prevailing during the period. Any resulting translation gains or losses are recorded in accumulated other comprehensive income (loss) in the consolidated balance sheet. When the Company dissolves, sells or substantially sells all of the assets of a consolidated foreign subsidiary, the cumulative translation gain or loss of that subsidiary is released from comprehensive income (loss) and included within its consolidated statement of operations during the fiscal period when the dissolution or sale occurs.
Comprehensive Income (Loss)Loss
Comprehensive income (loss)loss is comprised of net income (loss)loss and certain changes in stockholders' equity that are excluded from net income (loss).loss. The Company includes unrealized gains and losses on marketabledebt securities and foreign currency translation adjustments in other comprehensive income (loss).loss.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash and cash equivalents, restricted cash, short-term investments and accounts receivable. 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 December 31, 2017,2022, the Company's cash equivalentsunbilled receivables of $30 were invested solely indue from Michigan State University ("MSU") for support to a money market fund.
Department of Energy funded grant under which the Company serves as a subcontractor. The Company'sCompany believes these receivables related to government grants are believed to have a low risk of default. At December 31, 2017,2021, all of the Company's accounts and unbilled receivables of $119, include $104, or 87%, that are amounts$198 were due from research grants withMSU for support of the U.S. government under which the Company serves as either the primary contractor or as a subcontractor. At December 31, 2016, the Company's accountsDOE grant.
YIELD10 BIOSCIENCE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and unbilled receivables of $187 are all from government research grants.per share amounts)
Fair Value Measurements
The carrying amounts of the Company's financial instruments as of December 31, 20172022 and 2016,December 31, 2021, which include cash equivalents, restricted cash, accounts receivable, unbilled receivables, receivables due from related parties, accounts payable, and accrued expenses, approximate their fair values due to the short-term nature of these instruments. See Note 34 for further discussion on fair value measurements.
Segment Information
The accounting guidance for segment reporting establishes standards for reporting information on operating segments in annual financial statements. The Company is an agricultural bioscience company operating in one segment, which is the development of new technologies to enable step-change increases in crop yield to enhance global food security.security and production of specialty oils and niche crops. 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 December 31, 2017 and December 31, 2016, less than 10% of the Company's combined total assets were located outside of the United States. In addition, the reported net income (loss) outside of the United States was less than 10% of the combined net income (loss) of the consolidated Company.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.depreciation and amortization. Repairs and maintenance are charged to operationsoperating expense as incurred. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets once they are placed in service as follows:
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
|
| | | | | | | |
| Asset Description | | Estimated Useful Life (years) |
| Equipment | | 3 |
Furniture and Fixturesfixtures | | 5 |
| Software | | 3 |
| Leasehold improvements | | Shorter of useful life or term of lease |
Lease Accounting
As a lessee, the Company follows the lease accounting guidance codified in ASC 842. A lease is classified as a finance lease if any of five criteria described in the guidance apply to the lease and any lease not classified as a finance lease is classified as an operating lease with expense recognition occurring on a straight-line basis over the term of the lease. Under ASC 842, the Company records a lease liability on the commencement date of a lease calculated as the present value of the lease payments, using the interest rate implicit in the lease, or if that rate is not readily determinable, using the Company's incremental borrowing rate. A right-of-use asset equal to the lease liability is also recorded with adjustments made, as necessary, for lease prepayments, lease accruals, initial direct costs and lessor lease incentives that may be present within the terms of the lease. The Company records incentive payments receivedadopted the short-term lease exception that permits lessees to omit leases with terms of twelve months or less from its landlords as a lease incentive obligation and amortizes these amounts as reductions to lease expense over the lease term.accounting requirements of ASC 842, Leases.
Impairment of Long-Lived Assets
Long-lived assets, such as property and equipment and right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. TheAccounting guidance further requires that companies recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable based on its undiscounted future cash flows and measure an impairment loss as the difference between the carrying amount and fair value of the asset.
Grant Revenue
The Company's source of continuing revenue is from its government research grants in which it serves as either the primary contractor or as a subcontractor. These grants are considered an ongoing major and central operation of the Company's business. Revenue is earned as research expenses related to the grants are incurred. Revenue earned on
YIELD10 BIOSCIENCE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
government grants, but not yet invoiced as of the balance sheet date, are recorded as unbilled receivables in the accompanying consolidated balance sheets for the years ended December 31, 20172022 and December 31, 2016.2021. Funds received from government grants in advance of work being performed, if any, are recorded as deferred revenue until earned.
Research and Development
All costs associated with internal research and development are expensed as incurred. Research and development expenses include, among others, direct costs for salaries, employee benefits, subcontractors, productcrop trials, regulatory activities, facility related expenses, depreciation, and stock-based compensation. Costs relatedincurred for seed multiplication and processing are included within research and development expense until the Company completes its transition to revenue-producing contracts andestablished commercial operations, at which time these costs are expected to be recorded within inventory. Costs incurred in connection with government research grants are recorded as research and development expenses.expense.
General and Administrative Expenses
The Company's general and administrative expense includes costs for salaries, employee benefits, facilities expenses, consulting and professional service fees, travel expenses, depreciation and amortization expenses and office related expenses incurred to support the administrative operationsand business development of the Company.
Intellectual Property Costs
The Company includes all costs associated with the prosecution and maintenance of patents within general and administrative expenses in the consolidated statement of operations.
Stock-Based Compensation
All share-basedstock-based payments to employees, members of the Board of Directors and non-employees are recognized in the statement of operations based on their fair values. For employees and members of the Company's Board of Directors, who receive nearly all of the Company's stock awards, stock compensationwithin operating expense is recognized based on the grant-datestraight-line recognition of their grant date fair value of the award, adjusted for estimated forfeitures, and is recognized on a straight-line basis over the period during which the recipient is required to provide service in exchange for the award. See Note 910 for a description of the types of stock-based awards granted, the compensation expense related to such awards and detail of equity-based awards outstanding.
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
Basic and Diluted Net Loss per Share
Basic net income (loss)loss per share is computed by dividing net income (loss)loss available to common shareholders by the weighted-average number of common shares outstanding. Diluted net loss per share is computed by dividing net incomeloss available to common shareholders 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, as well as weighted shares outstanding of any potential (unissued) shares of common stock from restricted stock units.units and the conversion of preferred stock. In periods when a net loss is reported, such as the Company's fiscal years ending December 31, 2017 and 2016, 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 dilutive loss per share.share are the same. Common stock equivalents include stock options, restricted stock awards, convertible preferred stock and warrants.
The Company follows the two-class method when computing net loss per share, when it has issued shares that meet the definition of participating securities. The two-class method determines net income 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 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. In periods of net loss, a participating security that does not have a contractual obligation to share in the loss is not allocated a portion of the net loss when determining loss per share under the two-class method. During December 2017, the Company completed an offering of its securities that included preferred shares meeting the definition of participating securities (See Note 8). However, due to the Company's net loss in 2017, no allocation of the net loss was allocated to the preferred shares as the holders of the preferred shares do not have a contractual obligation to fund losses and loss per share has been computed and presented based on the loss being fully assigned to the Company's weighted average outstanding common shares during the year. There were no amounts allocated to participating securities during the year ended December 31, 2016. as the Company had no outstanding securities that met the definition of participating securities.
The number of shares offollowing potentially dilutive common stock presented on a weighted average basis, related to options, restricted stock units, convertible preferred stock and warrants (prior to consideration of the treasury stock method) thatsecurities were excluded from the calculation of dilutive shares since the inclusion of such shares would be anti-dilutive for the years ended December 31, 2017 and 2016, respectively, are shown below:
|
| | | | | | |
| | | Year Ended December 31, |
| | | 2017 | | 2016 |
| Options | | 622,329 |
| | 89,862 |
|
| Restricted stock awards | | 16,165 |
| | 70,748 |
|
| Series A Convertible Preferred Stock | | 30,553 |
| | — |
|
| Warrants | | 943,749 |
| | 393,300 |
|
| Total | | 1,612,796 |
| | 553,910 |
|
In July 2016, the Board of Directors of the Company approved a strategic restructuring plan under which Yield10 Bioscience became its core business with a focus on developing new technologies for step-change improvements in crop yield to enhance global food security. In connection with this restructuring, the Company discontinued its biopolymer operations. The Company's consolidated statement of operations for the year ending December 31, 2016, included in this annual report has been prepared to present basic and diluted earningsnet loss per share from continuing and discontinued operations.due to their antidilutive effect:
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | | |
| | 2022 | | 2021 | | | |
| Options | | 979,748 | | | 722,765 | | | | |
| Restricted stock awards | | 27,123 | | | 9,430 | | | | |
| | | | | | | |
| | | | | | | |
| Warrants | | 1,129,298 | | | 2,361,726 | | | | |
| Total | | 2,136,169 | | | 3,093,921 | | | | |
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
Income Taxes
The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company's tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided to reduce the deferred tax assetassets to a level which, more likely than not, will be realized. See Note 10 for further discussion of income taxes. The Company had no amounts recorded for any unrecognized tax benefits as of December 31, 2017 and 2016.
The Company accounts for uncertain tax positions using a "more-likely-than-not" threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The provision for income taxes includes the effects of any resulting tax reserves or unrecognized tax benefits that are considered appropriate as well as the related net interest and penalties, if any. The Company evaluates uncertain tax positions on a quarterly basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions.
Restructuring Charges
In July 2016, the Company announced a strategic restructuring under which Yield10 Bioscience became its core business and its biopolymer operations were discontinued.See Note 13 for further discussion of income taxes. The Company records estimated restructuring chargeshad no amounts recorded for employee severanceunrecognized tax expense or benefits as of December 31, 2022 and contract termination costs as a current period expense as those costs become contractually fixed, probable and estimable. The long and short-term obligations associated with these charges is reduced or adjusted as payments are made or the Company's estimates are revised.2021.
Recent Accounting Standards Changes
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies that the Company adopts as of the specified effective date.
In March 2016,November 2021, the FASB issued Accounting Standards Update ("ASU") No. 2016-06, DerivativesASU 2021-10, Government Assistance (Topic 832) - Disclosures by Business Entities about Government Assistance. This ASU requires annual disclosures that are expected to increase the transparency of transactions with a government accounted for by applying a grant or contribution accounting model by analogy, including (1) the nature of the transactions and Hedging (Topic 815): Contingent Putthe form in which assistance has been received, (2) the accounting policy applied, and Call Options in Debt Instruments. The new standard simplifies(3) the embedded derivative analysis for debt instruments containing contingent call or put optionsbalance sheet and income statement line items that are affected by removing the requirementtransactions, and the amounts applicable to assess whether a contingent event is related to interest rates or credit risks. The new standard waseach financial statement line item. This ASU became effective for Yield10 Bioscience on January 1, 2017.annual periods beginning after December 15, 2021. The adoption of this standard did not have anmaterially impact onthe Company’s consolidated financial statements for the year ended December 31, 2022.
The following new pronouncement is not yet effective but may impact the Company's consolidated financial position or results of operations.statements in the future.
In MarchJune 2016, the FASB issued ASU No. 2016-07, Investments - Equity Method2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and Joint Ventures (Topic 323): Simplifyingtransition date as the Transitioninitial pronouncement. This standard requires entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financings and report credit losses using an expected losses model rather than the incurred losses model that was previously used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, this standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. This standard limits the amount of credit losses to be recognized for available-for-sale debt securities to the Equity Methodamount by which carrying value exceeds fair value and requires the reversal of Accounting. previously recognized credit losses if fair value increases. The new standard eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an adjustment must be made to the investment, results of operations and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The new standard wasguidance is effective for fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, and interim periods within those fiscal years. The Company on January 1, 2017. Thedoes not expect the adoption of this standard did not have an impact on our financial position or results of operations.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvementsguidance to Employee Share-Based Payment Accounting. The new standard involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The Company adopted the new standard effective January 1, 2017 and the adoption did not have a material impact on the Company'sits consolidated financial statements.
In May 2014,
3. INVESTMENTS
The Company's investments consist of the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU is the resultfollowing:
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | |
| Accumulated Cost at December 31, 2022 | | Unrealized | | Market Value at December 31, 2022 |
| | Gain | | (Loss) | |
| Short-term investments | | | | | | | |
| U.S. government and agency securities | $ | 1,992 | | | $ | — | | | $ | (1) | | | $ | 1,991 | |
| Total | $ | 1,992 | | | $ | — | | | $ | (1) | | | $ | 1,991 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Accumulated Cost at December 31, 2021 | | Unrealized | | Market Value at December 31, 2021 |
| | Gain | | (Loss) | |
| Short-term investments | | | | | | | |
| U.S. government and agency securities | $ | 10,669 | | | $ | — | | | $ | (8) | | | $ | 10,661 | |
| Total | $ | 10,669 | | | $ | — | | | $ | (8) | | | $ | 10,661 | |
All short-term investments are classified as available for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards ("IFRS") that would: remove inconsistencies and weaknesses, provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices across entities, jurisdictions, industries, and capital markets, improve disclosure requirements and resulting financial statements, and simplify the presentation of financial statements. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU was effective for annual reporting periods beginning after December 15, 2016 and early adoption was not permitted. On July 9, 2015, the FASB voted to delay the effective date of the new revenue standard by one year, but to permit entities to choose to adopt the standardsale as of the original date.December 31, 2022 and December 31, 2021. The Company will adopt the new standard effective January 1, 2018, electing to utilize the modified retrospective method of adoption. The Company evaluated the effect the new revenue standard will have on its consolidated financial statementsheld no long-term investments at December 31, 2022 and related disclosures and has determined that its grant revenue, which is its sole source of revenue, does not fall within the guidance of the new standard. The Company will review future sources of revenue agreements against the guidance provided by ASU No. 2014-09 to ensure that revenue is recorded appropriately.December 31, 2021.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The new standard clarifies certain aspects of the statement of cash flows, including the classification of debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees and beneficial interests in securitization transactions. The new standard also clarifies that an entity should determine each separately identifiable source or use within the cash receipts and cash payments on the basis of the nature of the underlying cash flows. In situations in which cash receipts and payments have aspects of more than one class of cash flows and cannot be separated by source or use, the appropriate classification should depend on the activity that is likely to be the predominant source or use of cash flows for the item. The new standard became effective for the Company on January 1, 2018 and is not expected to have a material impact on the Company's financial statements.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new standard amends certain aspects of accounting and disclosure requirements of financial instruments, including the requirement that equity investments with readily determinable fair values be measured at fair value with changes in fair value recognized in the Company's results of operations. The new standard does not apply to investments accounted for under the equity method of accounting or those that result in consolidation of the investee. Equity investments that do not have readily determinable fair values may be measured at fair value or at cost minus impairment adjusted for changes in observable prices. A financial liability that is measured at fair value in accordance with the fair value option is required to be presented separately in other comprehensive income for the portion of the total change in the fair value resulting from change in the instrument-specific credit risk. In addition, a valuation allowance should be evaluated on deferred tax assets related to available-for-sale debt securities in combination with other deferred tax assets. The new standard became effective for Yield10 Bioscience on January 1, 2018. The Company does not expect the new guidance to have a material impact on its financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. The new standard will be effective for Yield10 Bioscience on January 1, 2019. The Company is in the process of evaluating the impact of this new guidance.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new standard changes the impairment model for most financial assets and certain other instruments. Under the new standard, entities holding financial assets and net investment in leases that are not accounted for at fair value through net income are to be presented at the net amount expected to be collected. An allowance for credit losses will be a valuation account that will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. The new standard will be effective for the Company on January 1, 2020. The Company is in the process of evaluating the impact of this new guidance.
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other Than Inventory. This new standard eliminates the deferral of the tax effects of intra-entity asset transfers other than inventory. As a result, the income tax consequences from the intra-entity transfer of an asset other than inventory and associated changes to deferred taxes will be recognized when the transfer occurs. The new standard became effective for Yield10 Bioscience on January 1, 2018. The Company does not expect the new guidance to have a material impact on its financial statements.
In August 2017 the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvement to Accounting for Hedging Activities. This new standard is intended to simplify hedge accounting by better aligning how an entity's risk management activities and hedging relationships are presented in its financial statements and simplifies the application of hedge accounting guidance in certain situations. This new standard expands and refines hedge accounting for both non-financial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The new standard will become effective for the Company on January 1, 2020. The Company does not expect the new guidance to have a material impact on its financial statements.
3.4. Fair Value Measurements
The Company has certain financial assets recorded at fair value which have been classified as Level 1 and Level 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 for identical instruments. 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
The Company’s financial assets classified as Level 2 at December 31, 20172022 and 2016,December 31, 2021 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 ownadjust or override any Level 2 or Level 3 financial assets or liabilitiesfair value measurements provided by these pricing services as of December 31, 2022 and there were no transfers of financial assets or liabilities between category levels for the years then ended.December 31, 2021.
The Company'stables below present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis. The balance of Level 1 assetsbasis as of December 31, 20172022 and December 31, 2016 were $11,0252021 and $1,018, respectively, and for both yearsindicate the assets were in a money market fund classified within cash and cash equivalents.
4. Property and Equipment, Net
Property and equipment consistfair value hierarchy of the following:valuation techniques utilized to determine such fair value.
|
| | | | | | | | |
| | | Year ended
December 31, |
| | | 2017 | | 2016 |
| Equipment | | $ | 1,059 |
| | $ | 1,048 |
|
| Furniture and fixtures | | 119 |
| | 226 |
|
| Leasehold improvements | | 1,749 |
| | 1,825 |
|
| Software | | 96 |
| | 116 |
|
| Total property and equipment, at cost | | 3,023 |
| | 3,215 |
|
| Less: Accumulated depreciation | | (1,484 | ) | | (1,476 | ) |
| Property and equipment, net | | $ | 1,539 |
| | $ | 1,739 |
|
Depreciation expense for continuing operations for the years ended December 31, 2017 and 2016, was $206 and $177, respectively.
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair value measurements at December 31, 2022 | | |
| Quoted prices in active markets for identical
assets | | Significant other
observable inputs | | Significant
unobservable inputs | | Balance as of |
| Description | (Level 1) | | (Level 2) | | (Level 3) | | December 31, 2022 |
| Assets | | | | | | | |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 1,633 | | | $ | — | | | $ | — | | | $ | 1,633 | |
| | | | | | | |
| Short-term investments: | | | | | | | |
| U.S. government and agency securities | — | | | 1,991 | | | — | | | 1,991 | |
| Total assets | $ | 1,633 | | | $ | 1,991 | | | $ | — | | | $ | 3,624 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
5. Accrued Expenses
Accrued expenses consist of the following: | | | | | | | | | | | | | | | | | | | | | | | |
| Fair value measurements at December 31, 2021 | | |
| Quoted prices in active markets for identical
assets | | Significant other
observable inputs | | Significant
unobservable inputs | | Balance as of |
| Description | (Level 1) | | (Level 2) | | (Level 3) | | December 31, 2021 |
| Assets | | | | | | | |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 4,878 | | | $ | — | | | $ | — | | | $ | 4,878 | |
| Short-term investments: | | | | | | | |
| U.S. government and agency securities | — | | | 10,661 | | | — | | | 10,661 | |
| Total assets | $ | 4,878 | | | $ | 10,661 | | | $ | — | | | $ | 15,539 | |
|
| | | | | | | | |
| | | Year ended
December 31, |
| | | 2017 | | 2016 |
| Employee compensation and benefits | | $ | 646 |
| | $ | 713 |
|
| Commercial manufacturing | | 489 |
| | 939 |
|
| Professional services | | 335 |
| | 459 |
|
| Other | | 829 |
| | 591 |
|
| Total accrued expenses | | $ | 2,299 |
| | $ | 2,702 |
|
Included within accrued professional services at December 31, 2017 is $216 of professional fees related to the Company's securities offering that was completed in December. Included within accrued employee compensation and benefits at December 31, 2016 is $626 of employee post-employment severance associated with the Company's restructuring that was completed during 2016. See Note 13. There were no further severance accruals remaining at December 31, 2017.
Accrued commercial manufacturing expenses at December 31, 2017 and December 31, 2016, is comprisedtransfers of the current portion of the Company's terminated biopolymer manufacturing contract obligation See Note 13.
6. Commitments and Contingencies
Leases
The Company rents its facilities under operating leases, which expire at various dates through December 2026. Rent expense within continuing operations under operating leasesfinancial assets or liabilities between category levels for the years ended December 31, 20172022 and 2016, was $954 and $1,889, respectively.
At December 31, 2017, the Company's future minimum payments required under operating leases are as follows:2021.
|
| | | | |
| Year ended December 31, | | Minimum lease payment |
| 2018 | | $ | 917 |
|
| 2019 | | 855 |
|
| 2020 | | 734 |
|
| 2021 | | 654 |
|
| 2022 | | 676 |
|
| 2023 and thereafter | | 2,832 |
|
| Total | | $ | 6,668 |
|
Lease Commitments
In 2016 the Company entered into a lease agreement, pursuant to which the Company leases approximately 29,622 square feet of officeProperty and research and development space located at 19 Presidential Way, Woburn, Massachusetts. The lease began on June 1, 2016 and will end on November 30, 2026. The Company provided the landlord with a security deposit in the form of a letter of credit in the amount of $307. Pursuant to the lease, the Company also will pay certain taxes and operating costs associated with the premises throughout the termequipment consist of the lease. Duringfollowing:
| | | | | | | | | | | | | | |
| | Year ended December 31, |
| | 2022 | | 2021 |
| Equipment | | $ | 533 | | | $ | 581 | |
| Furniture and fixtures | | 59 | | | 43 | |
| Leasehold improvements | | 1,425 | | | 1,420 | |
| Software | | — | | | 14 | |
| Total property and equipment, at cost | | 2,017 | | | 2,058 | |
| Less: accumulated depreciation and amortization | | (1,242) | | | (1,168) | |
| Property and equipment, net | | $ | 775 | | | $ | 890 | |
Depreciation and amortization expense for the buildoutyears ended December 31, 2022 and December 31, 2021, was $263 and $220, respectively.
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
6. Accrued Expenses
Accrued expenses consist of the landlord’s contributions towardfollowing:
| | | | | | | | | | | |
| Year ended December 31, |
| 2022 | | 2021 |
| Employee compensation and benefits | $ | 39 | | | $ | 452 | |
| Leased facilities | 81 | | | 71 | |
| Professional services | 264 | | | 264 | |
| Field trials and related expenses | 273 | | | 97 | |
| Other | 269 | | | 252 | |
| Total accrued expenses | $ | 926 | | | $ | 1,136 | |
7. Commitments and Contingencies
Contractual Commitments
Exclusive Collaboration Agreement with Rothamsted Research ("Rothamsted")
On November 12, 2020, the costCompany signed an exclusive collaboration agreement with UK-based Rothamsted to support Rothamsted’s program to develop omega-3 oils in Camelina sativa. Under the agreement, Yield10 is providing Rothamsted with financial support for ongoing research including further EPA, DHA+EPA trait improvement, field testing and nutritional studies. The Company will pay Rothamsted quarterly research funding and option fees of tenant improvements$31 for two years totaling $250, of which $31 remains outstanding as of December 31, 2022. Included within the agreement, the Company had an exclusive two-year option to sign a global, exclusive or non-exclusive license agreement to the technology. In November 2022, Yield10 and Rothamsted agreed to extend the collaboration agreement, including the license option, without additional funding support, through December 31, 2023.
License Agreement with the University of Missouri ("UM")
Pursuant to a license agreement with UM dated as of May 17, 2018, Yield10 has an exclusive, worldwide license to two novel gene technologies to boost oil content in crops. Both technologies are recorded within accrued expensesbased on significant new discoveries around the function and long-term lease incentive obligation, respectively,regulation of ACCase, a key rate-limiting enzyme involved in oil production. The UM license was expanded during May 2019 to include an exclusive worldwide license to a third gene in the Company's consolidated balance sheet contained herein.
On October 10, 2016,ACCase complex, that the Company enteredhas designated C3012, that may complement the activity of C3007 to boost oil content in crops.
Pursuant to the UM license agreement, the Company is required to use diligent efforts to develop licensed products throughout the licensed field and to introduce licensed products into a subleasethe commercial market. The Company's failure to achieve any milestone provided for under the license agreement would give UM the right to terminate the license agreement or render it nonexclusive, unless the Company is able to reach agreement with a subsidiary of CJ forUM as to the sublease of approximately 9,874 square feet of its leased facility located in Woburn, Massachusetts. The subleased space was determined to be in excesspotential adjustment of the Company's needsapplicable milestone.
The Company is obligated to pay UM a license execution payment, milestone payments relating to any regulatory filings and approvals covered by the license agreement, royalties on any sales of licensed products following regulatory approval, as well as a resultpercentage of its strategic shift to Yield10 Bioscience and theany sublicense royalties, if any, related 2016 restructuring of its operations. The sublease is coterminous with the Company's master lease. CJ will pay rent and operating expenses equal to approximately one-third of the amounts payable to the landlord bylicensed products. The Company or UM may terminate the Company, as adjusted from time-to-timelicense agreement in accordance with the terms of the master lease. Total future minimum operating lease payments of $6,668 shown above are net ofagreement.
Guaranteed Minimum Payments to Growers.
As an incentive for growers located in Canada and the CJ sublease payments. In October 2016, CJ providedU.S. to enter into Camelina commercial grain production contracts with the Company withfor the 2022/2023 winter season, Yield10 offered minimum guaranteed payments per acre that
YIELD10 BIOSCIENCE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
reduce the growers' risk of financial loss. These minimum payments, which are being accrued on a security depositstraight-line basis over the expected winter growing season, are conditional upon each grower fulfilling their contractual responsibilities and are reduced by the price of $103 inYield10's Camelina planting seed and the form of an irrevocable letter of credit.
The Company also leases approximately 13,702 square feet of office and laboratory space at 650 Suffolk Street, Lowell, Massachusetts. The lease for this facility expires in May 2020, with an option to renew for one five-year period. The Company is currently working with a commercial real estate broker to locate a subtenant for this space. The Company's wholly-owned subsidiary, Metabolix Oilseeds, Inc. ("MOI"), located in Saskatoon, Saskatchewan, Canada, leases approximately 4,100 square feet of office, laboratory and greenhouse space. MOI's leases for its various leased facilities expire between July 31, 2018 and September 30, 2018.
Contractual Commitments
In connection with the wind down of its biopolymer operations,contractual price that the Company ceased pilot production of biopolymer material and reached agreements with the owner-operators of its biopolymer production facilities regarding the termination of their services. The Company recorded contract termination costs related to these manufacturing agreements of $2,641 during 2016, which is included within discontinued operations in the Company's statement of operationswill pay for the year ended December 31, 2016.actual amount of grain that is harvested. Although the Company anticipates that the payment of these guaranteed amounts will not be required under normal growing conditions, for the 2022/2023 winter season the maximum amount of these grain production guarantees is approximately $320. As of December 31, 2017,2022, the Company has recorded an accrual of approximately $489$25 for these minimum guaranteed payments, net of the obligations remain outstanding withgrowers' obligation to pay for the last payment due by May 2018. This remaining contractual liability is included in accrued expenses within the Company's consolidated balance sheetplanting seed.
Facility Leases
The Company leases facilities under non-cancelable leases expiring at December 31, 2017.various dates through November 30, 2026. See Note 11.
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.
Guarantees
As of December 31, 20172022, and 2016,December 31, 2021, the Company did not have significant liabilities recorded for guarantees.
The Company enters into indemnification provisions under various agreements with other companies in the ordinary course of business, typically with business partners, contractors, and customers. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of its activities. These indemnification provisions generally survive termination of the underlying agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is unlimited. However, to date Yield10 Bioscience has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of December 31, 20172022 and December 31, 2016.2021.
8. License Agreements
In September 2017, the Company granted a license to Bayer to evaluate the Company's novel C3003 and C3004 yield traits in soybean. Under this license, Bayer had the non-exclusive right to work with C3003 in its soybean program as a strategy to improve seed yield. In December 2022, the Company and Bayer terminated the license in accordance with its terms.
In September 2018, the Company granted a four-year, non-exclusive license, as amended, to Forage Genetics International, LLC, a subsidiary of Land O'Lakes, Inc., to evaluate five of the Company's novel traits in forage sorghum. The traits included in the research license include C3003 as well as four traits from the Company's GRAIN platform; C4001, C4002, C4003 and C4029. In September 2022, the license terminated in accordance with its terms.
In October 2019, the Company granted a non-exclusive license to J. R. Simplot ("Simplot"), to evaluate three of the Company's novel traits in potato. Under the license agreement, Simplot plans to conduct research with the yield traits C3003, C3004 and C4001 within its research and development program as a strategy to improve crop performance and sustainability. In September 2022, the Company and Simplot amended the license agreement in order to extend it for a fourth year.
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
7. License Agreements and Related Parties
The Company previously licensed certain technology to Tepha, Inc., ("Tepha") a related party, for use in medical applications. Dr. Sinskey, a member of Yield10's Board of Directors, serves on the board of Tepha, Dr. Peoples and Dr. Sinskey are stockholders of Tepha and Yield10 owns 648,149 shares of Tepha's Series A redeemable convertible preferred stock. During May 2016, the Company entered into an amendment to its license agreement with Tepha in which the Company received a lump sum payment of $2,000 in consideration for an early buyout of all future royalties under the agreement and the licensing of two additional production strains and related intellectual property that was fully delivered to Tepha during 2016. The Company recognized $2,272 of license and royalty revenue from Tepha for the year ended December 31, 2016. During 2016, the Company also received $11 from Tepha in connection with their purchase of certain laboratory equipment previously used in the Company's biopolymer operations. At December 31, 2016, the Company had outstanding receivables due from Tepha of $1. After 2016, the Company has had no further licensing or royalty arrangements with Tepha that would generate revenue or incur expenses.
During June 2016,In August 2020, the Company entered into a purchase and licensingnon-exclusive research agreement with GDM ("GDM"), a third partycompany specializing in whichplant genetics, to evaluate novel traits in soybean. Under the terms of the agreement, GDM is working with the Company's yield traits within its research and development program as a strategy to improve soybean yield performance and sustainability. The research agreement includes three novel yield traits in the first phase with the potential to expand the program to more traits in the future.
None of these research arrangements provide significant licensing revenue to the Company received a lump sum payment of $1,000 in consideration forwhile the sale of certain biopolymer inventorythird parties perform trait evaluations.
9. Capital Stock and a non-exclusive license to certain patents owned or controlled by the Company related to biopolymers. The Company recorded license fee and royalty revenue of $850 and product sales of $150 for the year ended December 31, 2016, related to this agreement.
The patents underlying these license agreements are now owned by CJ. As a consequence of this sale and the Company's discontinuation of its biopolymer operations, license fee and royalty revenue is included within income (loss) from discontinued operations within the Company's consolidated statements of operations for the year ended December 31, 2016. See Note 14.
8. Capital Stock
Warrants
Common Stock
Registered Public Offerings
On December 27, 2017,February 3, 2021, the Company held a special meeting of its stockholders in which the stockholders approved an amendment to the Company's Certificate of Corporation to decrease from 250,000,000 shares to 40,000,000 shares the aggregate number of shares of common stock that are authorized to be issued. As a result of this vote, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to decrease the number of authorized shares effective on the date of the special meeting.
During December 2017, the Company closed oncompleted a public offering of 1,040,000 shares of its securities, receiving cash proceeds of $13,318, net of issuance costs of $1,171 that were paid as of December 31, 2017. The Company will pay remaining offering costs of $221 during its first quarter of 2018. The offering included 4,667,000 Class A Units, pricedcommon stock at a public offering price of $2.25 per unit, with each unit consisting of one share of common stock, a Series A five-year expiration warrant to purchase one share of common stock at an exercise price of $2.25$12.25 per share and a Series B nine-month expiration warrant to purchase 0.5 sharefor total gross proceeds of common stock at an exercise price of $2.25 per share, and 3,987 Class B Units, priced at a public offering price of $1,000 per unit, with each unit consisting of one share of preferred stock, having a conversion price of $2.25, Series A five-year warrants to purchase 445 shares of common stock at an exercise price of $2.25 per share, and Series B nine-month warrants to purchase 223 shares of common stock with an exercise price of $2.25 per share. The Company determined that both the preferred stock and the warrants should be recorded within stockholders' equity at December 31, 2017.
Proceeds received from the offering were allocated to the various elements of the offering based on their relative fair values. The fair value of the Common Stock is its closing market price on the December 21, 2017, the closing date of the offering. The Series A Convertible Preferred Stock was valued on an as-if-converted basis based on the underlying common stock and the Series A and Series B warrants were valued using the Black-Scholes model with the following weighted-average input at the time of issuance:
an expected term of 5.0 years and 0.75 years for the Series A and Series B warrants, respectively,
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
risk free rates of 2.2 percent and 1.7 percent for the Series A and Series B warrants, respectively, based on the published rates of U.S. treasury bills with similar terms, and
volatility of 125 percent based on the Company’s historical volatility.
After allocation of the proceeds, the effective conversion price of the Series A Convertible Preferred Stock was determined to be beneficial and, as a result, the Company immediately recorded a one-time non-cash deemed dividend of $1,427 equal to the intrinsic value of the beneficial conversion feature. The Series A Convertible Preferred Stock does not have a stated redemption date, and as a consequence, accounting guidance requires immediate recognition of a beneficial conversion feature rather than amortization of the benefit over time. The Series A Convertible Preferred Stock is considered a participating security. In accordance with applicable accounting guidance, the Company's loss of $9,396 from continuing operations has been increased by the amount of the deemed dividend resulting in a net loss attributable to common shareholders of $10,823. As of December 31, 2017, preferred shareholders have converted 2,161 of the preferred shares into 960,445 shares of common stock.
On September 12, 2017, the Company issued warrants to purchase 30,000 shares of common stock to the Company's investor relations consultant, in consideration for services rendered and to be rendered by the consultant. These warrants have an exercise price of $2.90 per share and are exercisable in whole or part at any time during the period commencing on September 12, 2017 and ending on September 11, 2024. The Company reviewed the accounting guidance for warrants and determined that the warrants should be recorded as equity within additional paid-in capital.
On July 7, 2017, the Company completed a registered direct offering of its securities. Proceeds from the transaction were approximately $1,966, net of estimated$12,740 before issuance costs of $317. Investors participating in the transaction purchased a total of 570,784 shares of common stock at a price of $4.00 per share and an equal number of warrants with an exercise price of $5.04 per share, exercisable beginning on the six-month anniversary of the date of issuance. The warrants expire on the sixth anniversary of the date that they become exercisable. The Company reviewed the accounting guidance for warrants and determined that the warrants should be recorded as equity within additional paid-in capital.
On May 26, 2017, the Company effected a 1-for-10 reverse stock split of its common stock. The ratio for the reverse stock split was determined by the Company's board of directors following approval by stockholders at the Company's annual meeting held on May 24, 2017. The reverse stock split reduced the number of shares of the Company's common stock outstanding at the time of the reverse stock split from approximately 28.7 million shares to approximately 2.9 million shares. Proportional adjustments were made to the Company's outstanding stock options and restricted stock units and to the number of shares issued and issuable under the Company's equity compensation plans. The number of authorized shares of the Company's common stock at that time remained at 250,000,000 shares.
In connection with the 2016 wind down of biopolymer operations, the Company ceased pilot production of biopolymer material at its third-party biopolymer pilot production facilities. In September 2016, the Company entered into an early termination agreement with the owner-operator of one of the biopolymer production facilities. As part of the consideration for the early termination, the Company issued 27,500 unregistered shares of Yield10 Bioscience common stock (see Note 13).
In October 2015, the Company entered into a common stock purchase agreement with Aspire Capital Fund, LLC (Aspire) under which Aspire committed to purchase, at the Company's direction, up to an aggregate of $20,000 of shares of Company common stock over a 30 month period. Aspire purchase transactions would have utilized pricing formulas that qualify them as variable rate transactions, as defined in the securities purchase agreement entered into in connection with the Company's securities offering completed in July 2017. Because variable rate transactions are prohibited by the securities agreement entered into in conjunction with the Company's July 7, 2017 offering, the Aspire facility is no longer available to the Company as a source of capital. During the year ended December 31, 2017, the Company wrote off its deferred equity offering costs of $622 related to the Aspire agreement since the Company no longer intends to pursue transactions under this agreement. Expense related to this write off of deferred equity offering costs are included within general and administrative expense within the Company's condensed consolidated statements of operations for the year ended December 31, 2017, included herein.
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
$747.
Preferred Stock
The Company's certificate of incorporation, as amended and restated, authorizes it to issue up to 5,000,000 shares of $0.01 par value preferred stock.
As discussed above, during December 2017 the Company closed on a public offering of its securities that included issuance of 3,987 shares of Series A Convertible Preferred Stock. Each preferred share is convertible, at the holder's option, into 445 shares of common stock at a conversion price of $2.25 per share, subject to adjustments as a result of stock dividends and stock splits. Holders of the Series A Convertible Preferred Stock are entitled to certain purchase rights that provide them with the opportunity to participate in subsequent rights offerings on the same terms that holders of Common Stock would receive as if the preferred stock were fully converted into common shares. If the Company enters into certain Fundamental Transactions, as defined in the offering documents, including mergers, asset sales or other business combinations, preferred shareholders are entitled to participate and receive value equal to common shareholders, on a converted basis. The Series A Convertible Preferred Stock has no maturity date and holders of the Series A Convertible Preferred Stock have no voting rights, with the exception that an affirmative vote of a majority of the holders of any remaining outstanding preferred shares is required in order to change the preferences or rights of the preferred shares. The Series A Preferred Stock is not redeemable by the Company and preferred shareholders are entitled to receive dividends on the preferred shares equal to and in the same form as dividends paid on shares of Common Stock. Upon liquidation, dissolution or winding-up of the Company, holders of the Series A Convertible Preferred Stock are entitled to receive out of the assets, whether capital or surplus, the same amount that holders of common stock would receive as if the preferred stock were fully converted to common shares. The Series A Preferred Stock is convertible, at the Company's option, if during any 30 consecutive trading days the closing market price of the Company's Common Stock exceeds $6.75 per share, subject to certain adjustments for stock splits, recapitalizations and stock dividends, and the daily dollar trading volume exceeds $175.
The Company determined the Series A Convertible Preferred Stock should be classified as equity as it is not mandatorily redeemable, there are no unconditional obligations requiring the Company to settle in a variable number of common shares or settle through the transfer of assets and the monetary value of the preferred shares is fixed. As of December 31, 2017, 2,161 preferred shares had been converted to 960,445 shares of common stock, leaving a remaining balance of 1,826 shares of the Series A Convertible Preferred Stock outstanding as of that date. Through March 5, 2018, an additional 1,718 shares of the Company's Series A Convertible Preferred Stock were converted into 763,556 shares of common stock. Once converted, the shares of converted Series A Convertible Preferred Stock are restored to the status of authorized but unissued shares of preferred stock, subject to reissuance by the Board of Directors. At December 31, 2016 there were no shares of preferred stock issued or outstanding.
Warrants
The following table summarizes information with regard to outstanding warrants to purchase common stock as of December 31, 2017:2022:
| | | | | | | | | | | | | | | | | | | | |
| Issuance | | Number of Common Shares Issuable Upon Exercise of Outstanding Warrants | | Exercise Price | | Expiration Date |
| November 2019 Public Offering - Series B | | 395,528 | | | $ | 8.00 | | | May 19, 2027 |
| November 2019 Private Placement - Series B | | 718,750 | | | $ | 8.00 | | | May 19, 2027 |
| July 2017 Registered Direct Offering | | 14,270 | | | $ | 201.60 | | | January 7, 2024 |
| Consultant | | 750 | | | $ | 116.00 | | | September 11, 2024 |
| Total | | 1,129,298 | | | | | |
Effective May 19, 2022, 1,071,453 Series A warrants issued in the Company's November 2019 public and private securities offerings expired in accordance with the terms of the respective purchase agreement under which the securities had been issued. In addition, 160,975 Series A warrants issued in the Company's December 2017 securities offering also expired in accordance with the terms of their securities purchase agreement.
During the year ended December 31, 2021, a combined total of 481,973 Series A and Series B warrants issued in the Company's November 2019 securities offering were exercised by warrant holders, providing the Company with $3,856 in cash proceeds.
Reserved Shares
The following shares of common stock were reserved for future issuance upon exercise of stock options, vesting of Restricted Stock Units ("RSUs") and conversion of outstanding warrants:
|
| | | | | | | | | |
| Issuance | | Number of Shares Issuable Upon Exercise of Outstanding Warrants | | Exercise Price | | Expiration Date |
| June 2015 Private Placement | | 393,300 |
| | $ | 39.80 |
| | June 15, 2019 |
| July 2017 Registered Direct Offering | | 570,784 |
| | $ | 5.04 |
| | January 7, 2024 |
| December 2017 Public Offering - Series A | | 6,439,000 |
| | $ | 2.25 |
| | December 21, 2022 |
| December 2017 Public Offering - Series B | | 3,219,502 |
| | $ | 2.25 |
| | September 21, 2018 |
| Consultant | | 30,000 |
| | $ | 2.90 |
| | September 11, 2024 |
| Total | | 10,652,586 |
| | | | |
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
| | | | | | | | | | | | | | |
| | December 31, 2022 | | December 31, 2021 |
| Stock Options | | 979,748 | | | 722,765 | |
| RSUs | | 27,123 | | | 9,430 | |
| Warrants | | 1,129,298 | | | 2,361,726 | |
| Total number of common shares reserved for future issuance | | 2,136,169 | | | 3,093,921 | |
Reserved Shares
The following common stock shares were reserved for future issuance upon exercise of stock options, release of Restricted Stock Units ("RSUs"), conversion of outstanding Series A Convertible Preferred Stock and conversion of outstanding warrants:
|
| | | | | | |
| | | December 31, 2017 | | December 31, 2016 |
| Stock Options | | 702,033 |
| | 605,077 |
|
| RSUs | | 14,367 |
| | 21,735 |
|
| Series A Convertible Preferred Stock | | 811,555 |
| | — |
|
| Warrants | | 10,652,586 |
| | 393,300 |
|
| Total number of common shares reserved for future issuance | | 12,180,541 |
| | 1,020,112 |
|
9.10. Stock-Based Compensation
Stock Option Plans
The Company adopted a stock plan in 2006 (the "2006 Plan"), which provided for the granting of incentive stock options, nonqualifiednon-qualified stock options, stock appreciation rights, deferred stock awards, restricted stock awards, unrestricted stock awards, cash-based awards and dividend equivalent rights. In October 2014, the 2006 Plan was terminated, and the Company adopted a new plan (the "2014 Plan"). No further grants or awards were subsequently made under the 2006 Plan. A total of 146,7243,662 options were awarded from the 2006 Plan and as of December 31, 2017, 24,9842022, 159 of these options remain outstanding and eligible for future exercise.
The 2014 Plan provides for the granting of incentive stock options, nonqualifiednon-qualified stock options, stock appreciation rights, deferred stock awards, restricted stock awards, unrestricted stock awards, cash-based awards and dividend equivalent rights. In May 2018, the 2014 Plan was terminated, and the Company adopted a new 2018 Stock Option and Incentive Plan, which was amended in May 2020 (the "2018 Stock Plan"). A total of 663,10416,896 options have beenwere awarded from the 2014 Plan and as of December 31, 2017, 657,8822022, 15,990 of these options remain outstanding and eligible for future exercise. A total of 144,5413,619 restricted stock awards have beenwere awarded from the 2014 Plan and as of December 31, 2017, 14,3672022, all of these restricted stock awards are unvestedhave vested. No further stock awards may be issued from the 2014 Plan.
The 2018 Stock Plan initially reserved for issuance 32,500 shares of the Company's common stock for grants of incentive stock options, non-qualified stock options, stock grants and other stock-based awards. In accordance with the terms of the 2018 Stock Plan, beginning on the first day in January 2019, the Company's Board of Directors has annually approved the addition of shares to the 2018 Stock Plan in amounts equal to 5% of the outstanding shares of the Company's common stock on the day prior to the increase. Effective January 1, 2022 and January 1, 2021, Yield10's Board of Directors approved the addition of 247,210 and 244,092 shares, respectively. At its annual meeting of stockholders held on May 24, 2021, stockholders approved an amendment to add 300,000 more shares to the Company's 2018 Stock Plan. As of December 31, 2022, a total of 1,059,719 options and restricted stock awards have been issued from the 2018 Stock Plan, and as of that date, 990,243 options and restricted stock awards remain outstanding.
Expense Information for Employee Stock Awards
The Company recognized stock-based compensation expense, related to employee stock awards, including awards to non-employees and members of the Board of Directors, of $1,395$1,903 and $848$1,675 for the years ended December 31, 20172022 and 2016,2021, respectively. At December 31, 2017,2022, there was approximately $986$3,189 of stock-based compensation expense related to unvested awards not yet recognized which is expected to be recognized over a weighted average period of 0.812.42 years.
Stock Options
Options granted under the 2006 Plan, and the 2014 Plan (the "Plans")and 2018 Stock Plan generally vest ratably over periods of one to four years from the date of hire for new employees, orthe date of award for existing employees, or date of commencement of services with the Company for non-employees, and generally expire ten years from the date of issuance. The Company's policy is to issue new shares upon the exercise of stock options.
On October 26, 2016, the Company's Compensation Committee granted stock options for a total
On November 4, 2016, the Company's former chief executive officer ("CEO"), was granted stock options for 75,000 shares upon the execution of separation and release agreements relating to the termination of his employment with the Company. These options have an exercise price per share equal to the fair market value of the Company's common stock on
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
the date of grant, were fully vested on the date of grant, became exercisable on the effective date of the release agreement, and will remain exercisable through December 19, 2023. The Company recognized the full fair value of this award as stock compensation expense in its fiscal year ended December 31, 2016.
In December 2013, the Company's Board of Directors granted a non-qualified stock option award for the purchase of 19,167 shares of common stock to its former CEO in connection with his agreement to serve as a member of the Company's Board and to accept employment as its President and Chief Executive Officer. Upon execution of his separation agreement on November 4, 2016, the 14,375 remaining unvested stock options under this award became fully vested. The Company accounted for this vesting as an award modification and recorded the new fair value of the remaining options as expense during the Company's fiscal year ended December 31, 2016.
A summary of the activity related to the shares of common stock covered by outstanding options is as follows:
| | | | | | | | | | | Number of Shares | | Weighted Average Exercise Price | | Remaining Contractual Term
(in years) | | Aggregate Intrinsic Value | |
| | | Number of Shares | | Weighted Average Exercise Price | | Remaining Contractual Term (in years) | | Aggregate Intrinsic Value | |
| Balance at December 31, 2016 | | 605,077 |
| | $34.49 | | |
| Balance at December 31, 2020 | | Balance at December 31, 2020 | 339,108 | | | $ | 32.39 | | | 9.02 | | $ | — | | |
| Granted | | 122,998 |
| | 2.75 | | Granted | 386,017 | | | 10.08 | | | |
| Exercised | | — |
| | — | | Exercised | — | | | — | | | |
| Forfeited | | (2,534 | ) | | 5.55 | | Forfeited | (1,509) | | | 12.92 | | | |
| Expired | | (23,508 | ) | | 417.30 | | Expired | (851) | | | 1,131.62 | | | |
| Balance at December 31, 2017 | | 702,033 |
| | 16.21 | | 8.40 | | $— | |
| Vested and expected to vest at December 31, 2017 | | 702,033 |
| | 16.21 | | 8.38 | | — | |
| Exercisable at December 31, 2017 | | 436,522 |
| | 22.87 | | 8.12 | | — | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | 722,765 | | | $ | 19.22 | | | 8.79 | | $ | — | | |
| Granted | | Granted | 260,285 | | | 3.72 | | | |
| Exercised | | Exercised | — | | | — | | | |
| Forfeited | | Forfeited | (1,859) | | | 7.55 | | | |
| Expired | | Expired | (1,443) | | | 712.92 | | | |
| Balance at December 31, 2022 | | Balance at December 31, 2022 | 979,748 | | | $ | 14.10 | | | 8.15 | | $ | — | | |
| Vested and expected to vest at December 31, 2022 | | Vested and expected to vest at December 31, 2022 | 979,748 | | | $ | 14.10 | | | 8.15 | | $ | — | | |
| Exercisable at December 31, 2022 | | Exercisable at December 31, 2022 | 437,039 | | | $ | 23.03 | | | 7.69 | | $ | — | | |
The weighted average grant date fair value per share of options granted during fiscal years 20172022 and 2016,2021, was $2.10,$3.31 and $3.06,$8.99, respectively. No options were exercised during 20172022 and 2016,2021, and therefore the intrinsic value for exercised options during the two years was not applicable. The weighted average remaining contractual term for options outstanding as of December 31, 20172022 was 8.48.15 years.
For the years ended December 31, 2017,2022, and 2016,2021, the Company determined the fair value of stock options using the Black-Scholes option pricingoption-pricing model with the following assumptions for option grants, respectively:
| | | | | Year Ended December 31, | | Year Ended December 31, |
| | | 2017 | | 2016 | | 2022 | | 2021 | |
| Expected dividend yield | | — | | — | Expected dividend yield | | — | | — | |
| Risk-free rate | | 1.79% - 2.20% | | 1.24% - 2.04% | Risk-free rate | | 1.6% - 4.3% | | 0.7% - 1.7% | |
| Expected option term (in years) | | 5.3-5.5 | | 5.4-5.7 | Expected option term (in years) | | 6.2 - 10.0 | | 6.1 - 10.0 | |
| Volatility | | 97% - 104% | | 93% - 96% | Volatility | | 116% - 126% | | 118% - 128% | |
The Company determined its volatility assumption based on actual market price fluctuations experienced during its trading history. The risk-free interest rate used for each grant is equal to the U.S. Treasury yield curve in effect at the time of grant for instruments with a term similar to the expected life of the related option. The expected term of the options is based upon evaluation of historical and expected future exercise behavior.
The stock price volatility and expected terms utilized in the calculation involve management's best estimates at that time, both of which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the life of the option. The accounting standard for stock-based compensation requires that the Company recognize compensation expense for only the portion of options that vest. The Company recognizes stock option forfeitures resulting from award terminations in the period in which the forfeiture occurs.
Restricted Stock Units ("RSUs")
The Company records stock compensation expense for RSUs on a straight-line basis over their requisite service period, which approximates the vesting period, based on each RSU's award date market value. As RSUs vests, the Company
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
Restricted Stock Units
The Company records stock compensation expense for RSUs on a straight line basis over their vesting period based on each RSU's award date market value. During the year ended December 31, 2017, the Company awarded a total of 25,337 RSUs to its non-employee directors in lieu of cash compensation for their services. These RSUs vested upon issuance resulting in immediate recognition of stock compensation expense for the fair value of the awards.
The Company initiated use of RSUs as a broad-based form of long-term compensation incentive for its officers, directors and employees during 2015. During 2015, the Company awarded 20,397 RSUs under the 2014 Plan to members of senior management pursuant to elections previously made by the senior managers to convert a portion of their 2014 performance bonuses from cash to equity. These RSUs vested one year later on April 1, 2016. During the year ended December 31, 2015, the Company also awarded a total of 90,682 additional long-term incentive RSUs to senior management and employees. These RSUs vest in 4 equal annual installments beginning one year after the date of grant, subject to service conditions. Also during 2015, the Company awarded 8,125 RSUs to its non-employee directors that vested on May 28, 2016.
Upon execution of the separation agreement with our former CEO on November 4, 2016, the Company accelerated the vesting of 15,125 previously outstanding RSUs awarded to him in 2015. The Company recorded stock compensation expense for the fair value of these RSUs during its fiscal year ended December 31, 2016, as a result of the accelerated vesting. The accelerated vesting of the RSUs and existing stock options previously discussed was provided pursuant to the terms of the separation agreement in lieu of any cash severance and a 2016 cash bonus payable under the CEO's previous employment agreement.
The Company will pay minimum required income tax withholding associated with RSUs for its employees. As the RSUs vest, the Company will withholdwithholds a number of shares from its employees with an aggregate fair market value equal to the minimum tax withholding amount (unless the employee makes other arrangements for payment of the tax withholding) from the common stock issuable at the vest date. The Company then pays the minimum required income tax for the employees. During the years ended December 31, 20172022 and December 31, 2016,2021, the Company withheld vested shares with a fair value of $12$37 and $296$102, respectively, to pay for minimum tax withholding associated with RSU vesting.
A summary of RSU activity for the year ended December 31, 20172022 is as follows:
| | | | | | | | | | | |
| Number of RSUs | | Weighted Average Remaining Contractual Life (years) |
| Outstanding at December 31, 2021 | 9,430 | | | |
| Awarded | 54,250 | | | |
| Released | (36,557) | | | |
| Forfeited | — | | | |
| Outstanding at December 31, 2022 | 27,123 | | | 0.11 |
| | | |
| Weighted average remaining recognition period (years) | 0.11 | | |
11. LEASES
|
| | | | |
| | Number of RSUs | Weighted Average Remaining Contractual Life (years) |
| Outstanding at December 31, 2016 | 21,735 |
| |
| Awarded | 25,337 |
| |
| Released | (32,542 | ) | |
| Forfeited | (163 | ) | |
| Outstanding at December 31, 2017 | 14,367 |
| 0.75 |
| | | |
| Weighted average remaining recognition period (years) | 1.25 |
| |
| Weighted average grant date fair value of RSUs granted during the year ended December 31, 2017 | $ | 4.63 |
| |
Expense Information for Non-employee Stock Awards
DuringThe Company's Woburn, Massachusetts facility is the year endedonly lease included in the Company's right-of-use assets and corresponding lease liabilities. No other active real estate or equipment leases fall within the scope of ASC 842. At December 31, 2016, the Company granted stock options to purchase 5,500 shares of common stock to non-employee members of2022, the Company's scientific advisory board. The compensation expenselease liability related to these options is to be recognized over a periodits Woburn facility will mature as follows:
| | | | | | | | |
| Year ended December 31, | Undiscounted Cash Flows | |
| 2023 | $ | 749 | | |
| 2024 | 771 | | |
| 2025 | 793 | | |
| 2026 | 747 | | |
| Total undiscounted future lease payments | 3,060 | | |
| Amount of lease payments representing interest | (410) | | |
| Total lease liabilities | $ | 2,650 | | |
| Short-term lease liabilities | $ | 575 | | |
| Long-term lease liabilities | $ | 2,075 | | |
Quantitative Disclosure of 2 years. The granted options vest 50% annually and such vesting is contingent upon future services provided by the advisors to the Company. No options were awarded for the year ended December 31, 2017 to non-employees. Options remaining unvested for non-employees are subject to remeasurement each reporting period prior to their vesting in full. Since the fair market valueLease Costs
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
| | | | | | | | | | | | | | |
| | Year Ended
December 31, |
| | 2022 | | 2021 |
| Lease cost: | | | | |
| Operating lease cost | | $ | 605 | | | $ | 605 | |
| Short-term lease cost | | 696 | | | 655 | |
| Sublease income | | (605) | | | (616) | |
| Total lease cost, net | | $ | 696 | | | $ | 644 | |
10. Income Taxes | | | | | | | | | | | | | | |
| Other information as of: | | December 31, 2022 | | December 31, 2021 |
| Weighted-average remaining lease term (years) | | 3.9 | | 4.9 |
| Weighted-average discount rate | | 7.25% | | 7.25% |
Tax CutsReal Estate Leases
During 2016, the Company entered into a lease agreement, as amended, for its headquarters, pursuant to which the Company leased 22,213 square feet of office and Jobs Actresearch and development space located at 19 Presidential Way, Woburn, Massachusetts. The lease will terminate on November 30, 2026 and does not include options for an early termination or for an extension of the lease. Pursuant to the lease, the Company is required to pay certain pro rata taxes and operating costs associated with the premises throughout the term of the lease. During the initial buildout of the rented space, the landlord paid for tenant improvements to the facility that resulted in increased rental payments by the Company. As required by ASC 842, these improvements were recorded as a reduction in the valuation of the associated right-of-use asset. The Company has provided the landlord with a security deposit of $229.
In December 2017,October 2016, the Tax Cuts and Jobs Act, or the Tax ActCompany entered into a sublease agreement with a subsidiary of CJ CheilJedang Corporation ("TCJA"CJ"), was signed into law. Among other things, the Tax Act permanently lowers the corporate federal income tax rate with respect to 21% from the existing maximum rateCJ's sublease of 35%, effective for tax years including or commencing January 1, 2018. As a result of the reduction of the corporate federal income tax rate to 21%, U.S. GAAP requires companies to revalue their deferred tax assets and deferred tax liabilities as of the date of enactment, with the resulting tax effects accounted for in the reporting period of enactment. This revaluation resulted in a provision of $10,609 to income tax expense in continuing operations and a corresponding reduction the Company's valuation allowance. There is no impact, therefore, to the Company's income statement for the year ended December 31, 2017 as a result of the reduction in federal income tax rates. The Company's preliminary estimate of the TCJA and the remeasurement9,874 square feet of its deferred tax assets and liabilities is subjectleased facility located in Woburn, Massachusetts. The sublease space was determined to the finalization of management's analysis related to certain matters, such as developing interpretations of the provisions of the TCJA, changes to certain estimates and the filing of its tax returns. U.S. Treasury regulations, administrative interpretations or court decisions interpreting TCJA may require further adjustments and changes to the Company's estimates. The final determination of the TCJA and the remeasurementbe in excess of the Company's deferred assetsneeds. The CJ sublease is coterminous with the Company's master lease and liabilitiesCJ will be completedpay pro rata rent and operating expenses proportionate to the amounts payable to the landlord by the Company, as additional information becomes available, but no later than one yearadjusted from time to time in accordance with the enactmentterms of the TCJA.master lease. Future CJ sublease payments have not been presented as an offset to total undiscounted future lease payments of $3,060 shown in the lease maturity analysis table above. CJ provided the Company with a security deposit of $103 in the form of an irrevocable letter of credit.
The Company's wholly-owned subsidiary, YOI, located in Saskatoon, Saskatchewan, Canada, leases approximately 9,600 square feet of office, laboratory and greenhouse space located within Innovation Place at 410 Downey Road and within the research facility of National Research Council Canada located at 110 Gymnasium Place. None of these leases contains renewal or early termination options. YOI's leases for these facilities expire on various dates through September 2023.
12. Income Taxes
Income Taxes and Deferred Tax Assets and Liabilities
The components of loss from continuing operations before provision for income taxes consist of the following:
|
| | | | | | | |
| | Year Ended December 31, |
| | 2017 | | 2016 |
| Domestic | $ | (9,523 | ) | | $ | (10,318 | ) |
| Foreign | 126 |
| | 48 |
|
| Loss before taxes | $ | (9,397 | ) | | $ | (10,270 | ) |
Significant components of the Company's net deferred tax assets are as follows: | | | | | | | | | | | | |
| Year Ended December 31, |
| 2022 | | 2021 | |
| Domestic | $ | (13,504) | | | $ | (11,062) | | |
| Foreign | 94 | | | 67 | | |
| Net loss from operations before income tax provision | $ | (13,410) | | | $ | (10,995) | | |
|
| | | | | | | |
| | Year Ended December 31, |
| | 2017 | | 2016 |
| Deferred Tax Assets: | | | |
| Net operating loss carryforward | $ | 20,490 |
| | $ | 25,182 |
|
| Capitalization of research and development expense | 1,606 |
| | 2,634 |
|
| Credit carryforwards | 2,493 |
| | 2,048 |
|
| Depreciation | 990 |
| | 1,505 |
|
| Stock compensation | 1,035 |
| | 2,414 |
|
| Other temporary differences | 794 |
| | 1,202 |
|
| Total deferred tax assets. | 27,408 |
| | 34,985 |
|
| Valuation allowance | (27,408 | ) | | (34,985 | ) |
| Net deferred tax assets | — |
| | — |
|
| Deferred Tax Liabilities: | | | |
| Other temporary differences | — |
| | — |
|
| Net deferred taxes | $ | — |
| | $ | — |
|
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
The reported amountcomponents of the income tax expenseprovision consisted of the following for the years differs fromended December 31, 2022 and 2021:
| | | | | | | | | | | |
| Year Ended December 31, |
| 2022 | | 2021 |
| Current Tax Provision: | | | |
| Federal | $ | — | | | $ | — | |
| State | — | | | — | |
| Foreign | — | | | — | |
| Total current | — | | | — | |
| | | |
| Deferred Tax Benefit: | | | |
| Federal | — | | | — | |
| State | — | | | — | |
| Foreign | 156 | | | 36 | |
| Total deferred | 156 | | | 36 | |
| Total tax provision | $ | 156 | | | $ | 36 | |
Significant components of the amount that would result from applying domestic federal statutory tax rates to pretax losses primarily because of changes in valuation allowance and due to a reduction inCompany's deferred tax assets are as a resultfollows:
| | | | | | | | | | | |
| Year Ended December 31, |
| 2022 | | 2021 |
| Deferred Tax Assets: | | | |
| Net operating loss carryforward | $ | 6,953 | | | $ | 5,533 | |
| Capitalization of research and development expense | 1,841 | | | — | |
| Credit carryforwards | 799 | | | 565 | |
| Stock compensation | 1,043 | | | 886 | |
| Lease liability | 733 | | | 864 | |
| Other temporary differences | — | | | 106 | |
| Total deferred tax assets | 11,369 | | | 7,954 | |
| Valuation allowance | (10,739) | | | (6,961) | |
| Net deferred tax assets | 630 | | | 993 | |
| Deferred Tax Liabilities: | | | |
| Depreciation | (94) | | | (185) | |
| Right-of-use asset | (536) | | | (643) | |
| Net deferred taxes | $ | — | | | $ | 165 | |
YIELD10 BIOSCIENCE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
Tax Rate
The items accounting for the difference between the income tax (provision) benefit computed at the federal statutory rate of 34%21% and the provision for income taxes were as follows:
| | | | Year Ended December 31, | | Year Ended December 31, | |
| | 2017 | | 2016 | | 2022 | | 2021 | |
| Federal income tax at statutory federal rate | 34.0 | % | | 34.0 | % | Federal income tax at statutory federal rate | 21.0 | % | | 21.0 | % | |
| State taxes | 4.9 | % | | 5.0 | % | State taxes | 5.9 | % | | 5.9 | % | |
| Permanent differences | (2.3 | )% | | (1.9 | )% | Permanent differences | (0.3) | % | | (0.2) | % | |
| Tax credits | 3.7 | % | | 7.4 | % | Tax credits | 2.0 | % | | 2.0 | % | |
| Federal rate change under tax reform | (112.9 | )% | | 0.0 | % | |
| State rate change on deferred balances | 0.1 | % | | (0.6 | )% | |
| Foreign rate differential | | Foreign rate differential | (0.1) | % | | (0.1) | % | |
| Impact of ownership change | 0.0 | % | | (6.1 | )% | Impact of ownership change | 0.0 | % | | (267.0) | % | |
| Non-deductible equity transactions | | Non-deductible equity transactions | 0.0 | % | | 0.0 | % | |
| Stock compensation | (12.7 | )% | | (22.9 | )% | Stock compensation | (1.6) | % | | (2.1) | % | |
| Other | 1.2 | % | | (0.5 | )% | Other | 0.0 | % | | (0.1) | % | |
| Change in valuation allowance | 84.0 | % | | (3.7 | )% | Change in valuation allowance | (28.1) | % | | 240.3 | % | |
| Total | 0.0 | % | | 10.7 | % | Total | (1.2) | % | | (0.3) | % | |
Tax Attributes
At December 31, 2017,2022, the Company had U.S. net operating loss carryforwards (NOLs)("NOLs") for federal state and internationalstate income tax purposes of approximately $72,941, $68,028$25,460 and $2,702,$25,414, respectively. All of the $25,460 of federal NOLs will carry forward indefinitely. The Company's existing federal and state net operating lossNOL carryforwards will begin to expire on various dates through 2037.2042. The Company also had available research and development and investment tax credits for federal and state income tax purposes of approximately $1,282$417 and $787,$312, respectively. These federal and state research and development credits will begin to expire on various dates through 2042. In Canada, the Company has cumulative research tax credits totaling $132 that will begin to expire on various dates through 2037.
Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets ("DTA"), which areis comprised principally of net operating loss carryforwards and research and development credits.NOL carryforwards. 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 U.S. federal and state deferred tax assets.DTAs. Accordingly, a full valuation allowance has been established against the deferred taxU.S. net DTAs. The Company has also concluded, based on its financial projections, that it is more likely than not the $132 of DTAs of its wholly-owned Canadian subsidiary, YOI, may not be recognized in the future, resulting in the Company's recording of a full valuation allowance against the assets.
Utilization of the net operating lossNOL and research and development credit ("R&D Credit") carryforwards may be subject to a substantial annual limitation under Section 382 of the U.S. Internal Revenue Code of 1986 (the "Code") due to ownership change limitations, as defined by the Code, that have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating lossNOL and research and development creditR&D Credit carryforwards that can be utilized annually to offset future U.S. taxable income and tax, respectively. The Company completed an evaluation ofevaluated its Section 382 ownership changes through DecemberMay 31, 20152021 and has determined that an ownershipthe most recent change that occurred on August 22, 2014 in connection with an equity offering. As a consequenceNovember 2019 resulted in all NOL and R&D Credit carryforwards outstanding as of this ownership change, the Company's NOLs, tax credit carryforwards and other tax deductions allocable to the tax periods preceding the ownership change became subject to limitation under Section 382.that date becoming fully limited. The Company has reduced its associated deferred tax assets accordingly. The Company has not yet completed an evaluation of ownership changes for the years 2016 and 2017. To the extent an ownership change occurs in the future, the net operating loss, creditNOL, R&D Credit carryforwards and other deferred tax assets recorded after the November 2019 ownership change may also be subject to further limitations.
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
Other
The tax years 20142019 through 20172022 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in the U.S. The statute of limitations for net operating lossesNOLs utilized in future years will remain open beginning in the year of utilization.
The Company's policy is to record estimated interest and penalties related to uncertain tax positions as income tax expense. As of December 31, 20172022 and 2016,2021, the Company had no accrued interest or penalties recorded related to uncertain tax positions.
For the year ended December 31, 2016, the Company recognized tax expense of $1,097 as a result of net income recorded for discontinued operations. This tax expense is offset in consolidation by a tax benefit of $1,097 as a result of the Company's net loss from continuing operations during that tax year.
No additional provision has been made for U.S. income taxes related to the undistributed earnings of the wholly-owned subsidiaries of Yield10 Bioscience, Inc. or for unrecognized deferred tax liabilities for temporary differences related to investments in subsidiaries as the amounts are not significant. 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, 20172022 and December 31, 20162021 approximated $482$1,081 and $346,$1,032, respectively. As a result of TCJA, the Company is reviewing its position but does not believe there will be a material impact. The Company will finalize its analysis by the fourth quarter of 2018.
11.13. Employee Benefits
The Company maintains a 401(k) savings plan in which substantially all of its regular U.S. employees are eligible to participate. Participants may contribute up to 60% of their annual compensation to the plan, subject to eligibility requirements and annual IRS limitations. The Company's plan provides for a matching contribution in common stock of up to 4.5% of a participant's total compensation dependent upon the level of participant contributions made during the plan year. Pursuant to this plan, the Company issued 22,493,36,706, and 31,91213,611 shares of common stock during the years ended December 31, 2017,2022, and 2016,December 31, 2021, respectively, and recorded $86,$133, and $281,$112, respectively, of related expense. Company contributions are fully vested upon issuance.
14. Government Research Grants
Canadian Research Grant
On February 26, 2021, YOI received a research grant through the Industrial Research Assistance Program ("IRAP") administered by National 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 December 20, 2020 - March 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.
U.S. Research Grants
During 2018, the Company entered into a sub-award with Michigan State University ("MSU") to support a Department of Energy ("DOE") funded grant entitled "A Systems Approach to Increasing Carbon Flux to Seed Oil." The Company's participation under this five-year grant has been awarded incrementally on an annual basis with the first year commencing September 15, 2017. Total funding for this sub-award in the amount of $2,957 was appropriated by the U.S. Congress through the final contractual year ending in September 2022. During the years ended December 31, 2022 and December 31, 2021, Yield10 recognized grant revenue of $450 and $575, respectively, from this sub-award.
As of December 31, 2022, final proceeds of $60 remain to be earned from the MSU sub-award. During June 2022, the parties amended the sub-award to extend its termination date to September 14, 2023, allowing Yield10 time to utilize the remaining grant funds.
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
12. U.S. Department of Energy Grants
In 2015, the Company entered into a multi-year $1,997 grant agreement entitled, Production of High Oil, Transgene Free Camelina Sativa Plants through Genome Editing, with the U.S. Department of Energy for the development of Camelina sativa feedstock. The Company is using the funds to perform research to increase oil content and/or seed yield to maximize oil yields per acre. Continued receipt of grant proceeds is contingent upon the availability of government appropriated funds and the Company's ability to make substantial progress towards meeting the objectives of the award. The Company recognizes revenue from the grant over the term of the agreement as it incurs related research and development costs and provided it meets its prorated cost-sharing obligation of approximately $500. During the years ended December 31, 2017 and 2016, the Company recognized $913 and $913, respectively, in revenue related to this grant. The grant is expected to complete in June 2018.
In 2011, the Company entered into a multi-year $6,000 grant agreement entitled, Renewable Enhanced Feedstocks for Advanced Biofuels and Bioproducts, with the U.S. Department of Energy for the development of switchgrass. The Company used the funds to perform research to enhance the yield of bio-based products, biopower, or fuels made from switchgrass to produce denser biomass and other products that can be further processed to make fuels such as butanol, chemicals such as propylene, and other materials to improve the economic competitiveness of future biorefineries. The Company recognized revenue from the grant over the term of the agreement as it incurred related research and development costs and it met its prorated cost-sharing obligation of approximately $3,900. During the year ended December 31, 2016, the Company recognized the final $1,028 in revenue related to this grant.
13. Restructuring
In July 2016, the Company announced a strategic restructuring under which Yield10 Bioscience became the core business and the biopolymer operations were discontinued. As part of its strategic restructuring, the Company substantially reduced staffing levels, and in January 2017, the Company formally changed its name to Yield10 Bioscience, Inc. See Note 14, Discontinued Operations.
In connection with the wind down of biopolymer operations, the Company ceased pilot production of biopolymer materials and reached agreements with the owner-operators of its biopolymer production facilities regarding the termination of their services. Through December 31, 2017, the Company made cumulative cash payments of $1,956, issued 27,500 shares of company common stock with a fair market value of $85 and transferred certain biopolymer-related production equipment with a net book value of $111 to settle a portion of these agreements and other restructuring activities. Remaining cash restructuring costs at December 31, 2017, of $489 are expected to be paid out at various times through May 2018.
|
| | | | | | | | | |
| Biopolymer Production Agreements | Employee Severance and Related Costs | Total |
| Aggregate Charges and Amounts Accrued | $ | 2,641 |
| $ | 872 |
| $ | 3,513 |
|
| Paid in Cash | (1,956 | ) | (872 | ) | (2,828 | ) |
| Paid through Stock and Equipment | (196 | ) | — |
| (196 | ) |
| Ending Balance Accrued at December 31, 2017 | $ | 489 |
| $ | — |
| $ | 489 |
|
With the exception of approximately $226 of the $872 in employee severance and related costs incurred for non-biopolymer employees, total restructuring costs shown in the table above were classified within discontinued operations in the Company's consolidated statement of operations for the year ended December 31, 2016. Amounts related to the biopolymer production agreements were included in research and development expenses within discontinued operations for the year ended December 31, 2016, as shown in Note 14. Remaining unpaid manufacturing contract termination costs of $489 are included in accrued expenses in the Company's consolidated balance sheet at December 31, 2017.
14. Discontinued Operation
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
In July 2016, the Company announced a strategic restructuring plan under which Yield10 Bioscience became its core business. Yield10 Bioscience discontinued its biopolymer operations and eliminated approximately 45 positions in its biopolymer operations and corporate organization.
As part of this strategic shift, the Company completed the sale of its biopolymer intellectual property and certain equipment and inventory to an affiliate of CJ during September 2016. The $10,000 purchase price paid by CJ was primarily for the acquisition of intellectual property, including the Company’s PHA strains, patent rights, know-how and its rights, title and interest in certain license agreements. None of this intellectual property was previously capitalized to the Company’s balance sheet. As such, the transaction resulted in a gain on the sale of approximately $9,868, net of the book value of the equipment sold. In addition to the CJ purchase, other parties acquired various capital equipment of the biopolymer operation for a total purchase price of approximately $428, resulting in a net loss on sale of this equipment of approximately $35.
The Company has not and will not have further involvement in the operations of the discontinued biopolymer business.
The following are the major items comprising income or loss from discontinued operations for the year ended December 31, 2016.
|
| | | |
| | Year Ended December 31, 2016 |
| Total revenue | $ | 4,945 |
|
| Costs and expenses: | |
| Cost of product revenue | 793 |
|
| Research and development | 9,854 |
|
| Selling, general and administrative | 1,449 |
|
| Net gain on sales of biopolymer assets | (9,833 | ) |
| Total costs and expenses | 2,263 |
|
| Income from discontinued operations before income tax provision | $ | 2,682 |
|
| Income tax provision | (1,097 | ) |
| Total net income (loss) from discontinued operations | $ | 1,585 |
|
The following are the non-cash operating items and investing items related to discontinued operations for the year ended December 31, 2016.
|
| | | |
| | Year Ended December 31, 2016 |
| Non-cash operating items: | |
| Depreciation | $ | 326 |
|
| Charge for 401(k) company common stock match | $ | 118 |
|
| Stock-based compensation | $ | 217 |
|
| Inventory impairment | $ | 199 |
|
| Non-cash restructuring expense paid through stock and equipment | $ | 196 |
|
| Gain on sale of discontinued operation and property and equipment | $ | (9,833 | ) |
| | |
| Investing item: | |
| Purchases of property and equipment | $ | 193 |
|
YIELD10 BIOSCIENCE, INC.
(formerly known as Metabolix, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except for share and per share amounts)
15. Geographic Information
The geographic distribution of the Company's revenues and long-lived assets from continuing operations isare summarized as follows:
|
| | | | | | | | | | | | | | | | |
| | | U.S. | | Canada | | Eliminations | | Total |
| Year Ended December 31, 2017 | | | | | | | | |
| Net revenues to unaffiliated customers | | $ | 944 |
| | $ | — |
| | $ | — |
| | $ | 944 |
|
| Inter-geographic revenues | | — |
| | 1,154 |
| | (1,154 | ) | | — |
|
| Net revenues | | $ | 944 |
| | $ | 1,154 |
| | $ | (1,154 | ) | | $ | 944 |
|
| Identifiable long-lived assets | | $ | 1,533 |
| | $ | 6 |
| | $ | — |
| | $ | 1,539 |
|
| Year Ended December 31, 2016 | | | | | | | | |
| Net revenues to unaffiliated customers | | $ | 1,159 |
| | $ | — |
| | $ | — |
| | $ | 1,159 |
|
| Inter-geographic revenues | | — |
| | 906 |
| | (906 | ) | | — |
|
| Net revenues | | $ | 1,159 |
| | $ | 906 |
| | $ | (906 | ) | | $ | 1,159 |
|
| Identifiable long-lived assets | | $ | 1,739 |
| | $ | — |
| | $ | — |
| | $ | 1,739 |
|
in the table below. Foreign revenue is based on the country in which the Company's subsidiary that earned the revenue is domiciled.
| | | | | | | | | | | | | | | | | | | | | |
| | U.S. | | Canada | | Total | |
| Year Ended December 31, 2022 | | | | | | | |
| Revenue | | $ | 450 | | | $ | — | | | $ | 450 | | |
| Identifiable long-lived assets | | $ | 671 | | | $ | 104 | | | $ | 775 | | |
| Year Ended December 31, 2021 | | | | | | | |
| Revenue | | $ | 575 | | | $ | 39 | | | $ | 614 | | |
| Identifiable long-lived assets | | $ | 821 | | | $ | 69 | | | $ | 890 | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
16. Related Party Transaction
During 2017, grant revenue earned1999, Yield10 entered into a technology sublicense agreement with Tepha, 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). In May 2021, the board of directors of Tepha approved and authorized the merger of Tepha with Becton Dickinson Global Holdings, Inc. ("Becton Dickinson") and on July 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 year ended December 31, 2021.
17. Subsequent Event
At-The-Market ("ATM") Program
On January 24, 2023, the Company entered into an Equity Distribution Agreement (the "Sales Agreement") with Maxim Group LLC ("Maxim") under which the Company may offer and sell shares of its common stock, $0.01 par value per share, having an aggregate offering price of up to $4,200 from time to time through Maxim, acting exclusively as the Company's Camelina grantsales agent (the "Offering"). On January 24, 2023, the Company filed a prospectus supplement with the DepartmentSecurities and Exchange Commission in connection with the Offering under its existing Registration Statement on Form S-3 (File No 333-254830), which was declared effective on April 2, 2021. The Company intends to use the net proceeds of Energythe Offering primarily for working capital and subawardgeneral corporate purposes. Maxim will be entitled to compensation at a fixed commission rate of 2.75% of the gross sales price per share sold. In addition, the Company agreed to reimburse Maxim for its costs and out-of-pocket expenses incurred in connection with North Carolina State University totaled $913its services, including the fees and $30,out-of-pocket expenses of its legal counsel.
The Company is not obligated to make any sales under the Sales Agreement and no assurance can be given that the Company will sell, or 97%the dates on which any such sales will take place. The Sales Agreement will continue until the earliest of (i) twelve (12) months following the date of the Sales Agreement, (ii) the sale of shares thereunder having an aggregate offering price of $4,200, and 3%, respectively,(iii) the termination by the Company upon the provision of total revenue. During 2016, revenue earned fromten (10) days written notice or by Maxim immediately upon written notification to the Company's Camelina grantCompany.
From January 24, 2023 through March 14, 2023, the Company issued 94,665 shares of common stock in connection with the ATM at per share prices between $3.03 and subaward with North Carolina State University totaled $913 and $246, or 79% and 21%$4.08, resulting in net proceeds to the Company of total revenue.approximately $290 after subtracting sales commissions.
