SEC Filing | Yield10 Bioscience, Inc.

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yten-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2021

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

For the transition period from to

Commission file number 001-33133

YIELD10 BIOSCIENCE, INC.


Delaware						04-3158289
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

19 Presidential Way Woburn, MA						01801
(Address of principal executive offices)						(Zip Code)

(617) 583-1700

(Registrant’s telephone number, including area code)

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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	YTEN	The Nasdaq Capital Market

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 every Interactive Data File required to be submitted 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 such files). Yes ý No o

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


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	ý	Smaller reporting company	ý
Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

The number of shares outstanding of the registrant’s common stock as of November 8, 2021 was 4,881,851.

Yield10 Bioscience, Inc.

Form 10-Q

For the Quarter Ended September 30, 2021

Table of Contents


		Page
Part I. Financial Information

Item
1.	Condensed Consolidated Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets at September 30, 2021 and December 31, 2020	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020	4
	Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	6
	Condensed Consolidated Statements of Series B Convertible Preferred Stock and Stockholders' Equity for the three and nine months ended September 30, 2021 and 2020	7
	Notes to the Condensed Consolidated Financial Statements	9
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
3.	Quantitative and Qualitative Disclosures About Market Risk	29
4.	Controls and Procedures	30

Part II. Other Information		30

Item
1.	Legal Proceedings	30
1A.	Risk Factors	30
2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
3.	Defaults Upon Senior Securities	30
4.	Mine Safety Disclosures	30
5.	Other Information	30
6.	Exhibits	31

SIGNATURES		32

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

YIELD10 BIOSCIENCE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

(in thousands, except share and per share data)


	September 30, 2021		December 31, 2020
Assets
Current Assets:
Cash and cash equivalents	$	14,618	$	3,423
Short-term investments	3,904		6,279
Accounts receivable	24		86

Unbilled receivables	46		27
Prepaid expenses and other current assets	462		527

Total current assets	19,054		10,342

Restricted cash	264		264
Property and equipment, net	903		921
Right-of-use assets	2,447		2,712
Other assets	278		283
Total assets	$	22,946	$	14,522

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	45	$	60
Accrued expenses	1,122		1,297
Current portion of lease liabilities	499		457
Total current liabilities	1,666		1,814
Lease liabilities, net of current portion	2,783		3,163

Other long-term liabilities	9		13
Total liabilities	4,458		4,990
Commitments and contingencies (Note 10)

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 September 30, 2021 and December 31, 2020; 4,877,987 and 3,334,048 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	49		33
Additional paid-in capital	401,760		384,758
Accumulated other comprehensive loss	(170)		(159)
Accumulated deficit	(383,151)		(375,100)
Total stockholders’ equity	18,488		9,532
Total liabilities and stockholders’ equity	$	22,946	$	14,522

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

YIELD10 BIOSCIENCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

(in thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue:

Grant revenue	$	92	$	204	$	462	$	604


Total revenue	92		204		462		604

Expenses:

Research and development	1,636		1,300		4,603		3,939
General and administrative	1,547		1,098		4,583		3,664
Total expenses	3,183		2,398		9,186		7,603
Loss from operations	(3,091)		(2,194)		(8,724)		(6,999)

Other income (expense):
Change in fair value of warrants	—		—		—		(957)
Loan forgiveness income (Note 9)	—		—		—		333
Gain on investment in related party	700		—		700		—
Other income (expense), net	(1)		37		(2)		85
Total other income (expense)	699		37		698		(539)
Net loss from operations before income taxes	(2,392)		(2,157)		(8,026)		(7,538)
Income tax provision	(6)		(11)		(25)		(26)
Net loss	$	(2,398)	$	(2,168)	$	(8,051)	$	(7,564)

Basic and diluted net loss per share	$	(0.49)	$	(0.87)	$	(1.72)	$	(3.69)

Number of shares used in per share calculations:
Basic and diluted	4,873,248		2,492,274		4,681,292		2,050,726

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

YIELD10 BIOSCIENCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

UNAUDITED

(in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net loss:	$	(2,398)	$	(2,168)	$	(8,051)	$	(7,564)
Other comprehensive loss
Change in unrealized gain (loss) on investments	—		(6)		1		1
Change in foreign currency translation adjustment	(17)		5		(12)		(43)

Total other comprehensive loss	(17)		(1)		(11)		(42)
Comprehensive loss	$	(2,415)	$	(2,169)	$	(8,062)	$	(7,606)

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

YIELD10 BIOSCIENCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

(in thousands)


	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities
Net loss	$	(8,051)	$	(7,564)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	165		137
Change in fair value of warrants	—		957
Loan forgiveness income (Note 9)	—		(333)
Loss on disposal of fixed assets	—		206
Charge for 401(k) company common stock match	100		95
Stock-based compensation	1,175		506
Non-cash lease expense	265		345
Deferred income tax provision	24		33
Changes in operating assets and liabilities:
Accounts receivable	62		(76)

Unbilled receivables	(19)		(36)
Prepaid expenses and other assets	60		92
Accounts payable	(15)		(228)
Accrued expenses	(192)		(324)
Lease liabilities	(338)		(495)
Other liabilities	(4)		15
Net cash used for operating activities	(6,768)		(6,670)

Cash flows from investing activities
Purchase of property and equipment	(147)		(42)
Proceeds from sale of property and equipment	—		10


Purchase of investments	(3,874)		(6,290)
Proceeds from the maturity of short-term investments	6,250		3,197
Net cash provided by (used by) investing activities	2,229		(3,125)

Cash flows from financing activities
Proceeds from warrants exercised (Note 12)	3,856		1,658
Proceeds from PPP loan (Note 9)	—		333


Proceeds from public offering, net of issuance costs	11,993		5,367

Taxes paid on employees' behalf related to vesting of stock awards	(103)		(17)
Net cash provided by financing activities	15,746		7,341

Effect of exchange rate changes on cash, cash equivalents and restricted cash	(12)		(46)

Net increase (decrease) in cash, cash equivalents and restricted cash	11,195		(2,500)
Cash, cash equivalents and restricted cash at beginning of period	3,687		5,749
Cash, cash equivalents and restricted cash at end of period	$	14,882	$	3,249




Supplemental disclosure of non-cash information:


Offering costs remaining in accrued expenses	$	—	$	63

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

YIELD10 BIOSCIENCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SERIES B CONVERTIBLE STOCK AND STOCKHOLDERS' EQUITY

UNAUDITED

(In thousands, except share amounts)


	Three Months Ended September 30, 2021
	Series B Convertible Preferred Stock			Series A Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)				Total Stockholders' Equity
	Shares	Par Value		Shares	Par Value		Shares	Par Value						Accumulated Deficit
Balance, June 30, 2021	—	$	—	—	$	—	4,868,466	$	49	$	401,319	$	(153)	$	(380,753)	$	20,462
Non-cash stock-based compensation expense	—	—		—	—		—	—		436		—		—		436
Issuance of common stock for 401(k) match	—	—		—	—		2,857	—		24		—		—		24

Issuance of common stock for restricted stock units	—	—		—	—		6,664	—		—		—		—		—
Taxes paid on employees' behalf related to vesting of stock awards	—	—		—	—		—	—		(19)		—		—		(19)

Effect of foreign currency translation and unrealized loss on investments	—	—		—	—		—	—		—		(17)		—		(17)
Net loss	—	—		—	—		—	—		—		—		(2,398)		(2,398)
Balance, September 30, 2021	—	$	—	—	$	—	4,877,987	$	49	$	401,760	$	(170)	$	(383,151)	$	18,488


	Three Months Ended September 30, 2020
	Series B Convertible Preferred Stock			Series A Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)				Total Stockholders' Equity
	Shares	Par Value		Shares	Par Value		Shares	Par Value						Accumulated Deficit
Balance, June 30, 2020	—	$	—	—	$	—	1,972,798	$	20	$	378,924	$	(167)	$	(370,290)	$	8,487
Non-cash stock-based compensation expense	—	—		—	—		—	—		243		—		—		243
Issuance of common stock for 401(k) match	—	—		—	—		3,689	—		23		—		—		23
Issuance of common stock for restricted stock units	—	—		—	—		6,006	—		—		—		—		—
Taxes paid on employees' behalf related to vesting of stock awards	—	—		—	—		—	—		(17)		—		—		(17)
Issuance of common stock for concurrent private and public offerings, net of offering costs of $425	—	—		—	—		1,348,285	13		5,292		—		—		5,305

Effect of foreign currency translation and unrealized loss on investments	—	—		—	—		—	—		—		(1)		—		(1)
Net loss	—	—		—	—		—	—		—		—		(2,168)		(2,168)
Balance, September 30, 2020	—	$	—	—	$	—	3,330,778	$	33	$	384,465	$	(168)	$	(372,458)	$	11,872

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


	Nine Months Ended September 30, 2021
	Series B Convertible Preferred Stock			Series A Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Par Value		Shares	Par Value		Shares	Par Value
Balance, December 31, 2020	—	$	—	—	$	—	3,334,048	$	33	$	384,758	$	(159)	$	(375,100)	$	9,532
Non-cash stock-based compensation expense	—	—		—	—		—	—		1,185		—		—		1,185
Issuance of common stock for 401(k) match	—	—		—	—		9,747	—		86		—		—		86
Issuance of common stock for warrant exercise	—	—		—	—		481,973	5		3,851		—		—		3,856
Issuance of common stock for restricted stock units	—	—		—	—		12,219	—		—		—		—		—
Taxes paid on employees' behalf related to vesting of stock awards	—	—		—	—		—	—		(102)		—		—		(102)
Issuance of common stock in connection with stock offering, net of offering costs	—	—		—	—		1,040,000	11		11,982		—		—		11,993
Effect of foreign currency translation and unrealized loss on investments	—	—		—	—		—	—		—		(11)		—		(11)
Net loss	—	—		—	—		—	—		—		—		(8,051)		(8,051)
Balance, September 30, 2021	—	$	—	—	$	—	4,877,987	$	49	$	401,760	$	(170)	$	(383,151)	$	18,488


	Nine Months Ended September 30, 2020
	Series B Convertible Preferred Stock			Series A Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Par Value		Shares	Par Value		Shares	Par Value
December 31, 2019	5,750	$	—	796	$	—	933,423	$	9	$	360,926	$	(126)	$	(364,894)	$	(4,085)
Non-cash stock-based compensation expense	—	—		—	—		—	—		597		—		—		597
Issuance of common stock for 401(k) match	—	—		—	—		17,518	—		86		—		—		86
Issuance of common stock for restricted stock units	—	—		—	—		6,006	—		—		—		—		—
Taxes paid on employees' behalf related to vesting of stock awards	—	—		—	—		—	—		(17)		—		—		(17)
Issuance of common stock for warrant exercise	—	—		—	—		207,296	2		1,656		—		—		1,658
Issuance of common stock upon conversion of Series A Convertible Preferred Stock	—	—		(796)	—		99,500	2		(2)		—		—		—
Issuance of common stock upon conversion of Series B Convertible Preferred Stock	(5,750)	—		—	—		718,750	7		(7)		—		—		—
Reclassification of warrant liability to equity	—	—		—	—		—	—		15,934		—		—		15,934
Issuance of common stock for concurrent private and public offerings, net of offering costs of $425	—	—		—	—		1,348,285	13		5,292		—		—		5,305
Effect of foreign currency translation and unrealized loss on investments	—	—		—	—		—	—		—		(42)		—		(42)
Net loss	—	—		—	—		—	—		—		—		(7,564)		(7,564)
Balance, September 30, 2020	—	$	—	—	$	—	3,330,778	$	33	$	384,465	$	(168)	$	(372,458)	$	11,872

YIELD10 BIOSCIENCE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

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

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

Yield10 Bioscience, Inc. ("Yield10" or the "Company") is an agricultural bioscience company that is using its differentiated trait gene discovery platform, the "Trait Factory", to develop improved Camelina varieties to produce proprietary products, and to produce other high value genetic traits for the agriculture and food industries. Yield10 is headquartered in Woburn, Massachusetts and has an Oilseed Center of Excellence in Saskatoon, Saskatchewan, Canada. The Company's goals are to efficiently develop and commercialize a high value crop products business by developing superior varieties of Camelina for the production of feedstock oils and meal, nutritional oils, and PHA bioplastics, and to license its yield traits to major seed companies for commercialization in major row crops, including corn, soybean and canola.

The accompanying condensed consolidated financial statements are presented in U.S. dollars, are unaudited, and have been prepared by Yield10 in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements have been condensed or omitted. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The condensed consolidated financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary for fair statements of the financial position and results of operations for the interim periods ended September 30, 2021 and September 30, 2020.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for any future period or the entire fiscal year. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020, which are contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 16, 2021.

The accompanying condensed consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. With the exception of a single year, the Company has recorded losses since its initial founding, including the three and nine months ended September 30, 2021.

As of September 30, 2021, the Company held unrestricted cash, cash equivalents and investments of $18,522. The Company follows the guidance of Accounting Standards Codification ("ASC") Topic 205-40, Presentation of Financial Statements-Going Concern, 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 financial statements are issued. Based on its current cash forecast, management expects that the Company's present capital resources will be sufficient to fund its planned operations for at least that period of time. This forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of expenses could vary materially and adversely as a result of a number of factors. 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 government 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 may be forced to curtail the Company's research efforts, explore strategic alternatives and/or wind down its operations and pursue options for liquidating its remaining assets, including intellectual property.

If the Company issues equity or debt securities to raise additional funds in the future, (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 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.

The full impact of the COVID-19 pandemic continues to evolve as of the 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. Given the evolving nature of the COVID-19 pandemic and the global responses to it, the Company is not able to estimate the effects of the COVID-19 pandemic on its results of operations, financial condition, or liquidity for future periods.

2. ACCOUNTING POLICIES

Principles of Consolidation

The Company's unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions were eliminated, including transactions with its subsidiaries, Metabolix Oilseeds, Inc. ("MOI") and Yield10 Bioscience Securities Corp.

Reverse Stock Split

On January 15, 2020, the Company effected a 1-for-40 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 unaudited condensed financial statements have, where applicable, been adjusted retroactively to reflect this reverse stock split.

Cash, 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 Unaudited Condensed Consolidated Balance Sheets included herein:


	September 30, 2021		December 31, 2020
Cash and cash equivalents	$	14,618	$	3,423
Restricted cash	264		264
Total cash, cash equivalents and restricted cash	$	14,882	$	3,687

Amounts included in restricted cash represent those required to be set aside by contractual agreement. Restricted cash of $264 at September 30, 2021 and December 31, 2020 consists primarily of funds held in connection with the Company's lease agreement for its Woburn, Massachusetts facility.

Investments

The Company classifies investments purchased with an original maturity date of more than ninety days at the date of purchase and a maturity date of one year or less at the balance sheet date to be short-term investments. The Company classifies investments with a maturity date of greater than one year from the balance sheet date as long-term investments.

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 purchase is amortized and/or accreted to interest income.

Use of Estimates

The preparation of financial statements in conformity with 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 financial statements and the reported amounts of grant revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Foreign Currency Translation

The functional currency for MOI is the Canadian dollar. Foreign denominated assets and liabilities of MOI 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 all or substantially 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 Loss

Comprehensive loss is comprised of net loss and certain changes in stockholders' equity that are excluded from net loss. The Company includes unrealized gains and losses on debt securities and foreign currency translation adjustments in other comprehensive loss.

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 deferred tax assets to a level which, more likely than not, will be realized.

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.

Concentration of Credit Risk

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

At September 30, 2021, 100% of the Company's accounts and unbilled receivables are due from the Company's Michigan State University ("MSU") sub-award. During the three and nine months ended September 30, 2021, revenue earned from the MSU sub-award, represented 100.0% and 91.6% of recognized government grant revenue, respectively. A research grant of $39 awarded to MOI through the Canadian Industrial Research Assistance Program ("IRAP") and earned during the first quarter of 2021, represented the remaining difference of 8.4% during nine months ended September 30, 2021. During the three and nine months ended September 30, 2020, the MSU sub-award represented 100.0% and 88.9%, respectively, of government grant revenue earned for each of the respective periods. The remaining difference of 11.1% during the nine months ended September 30, 2020 was from grant revenue recognized from an earlier Canadian research grant of $67 awarded through IRAP.

Fair Value Measurements

The carrying amounts of the Company's financial instruments as of September 30, 2021 and December 31, 2020, which include cash equivalents, accounts receivable, unbilled receivables, accounts payable, and accrued expenses, approximate their fair values due to the short-term nature of these instruments. See Note 5 for further discussion on fair value measurements.

Segment Information

The accounting guidance for segment reporting establishes standards for reporting information on operating segments in financial statements. The Company is an agricultural bioscience company operating in one segment, which is the development of improved Camelina varieties to produce proprietary products, and to produce other high value genetic traits for the agriculture and food industries. 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.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Repairs and maintenance are charged to operating 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:


Asset Description						Estimated Useful Life (years)
Equipment						3
Furniture and fixtures						5
Software						3
Leasehold improvements						Shorter of useful life or term of lease

Right-of-Use Assets

The Company’s right-of-use assets consist of leased assets recognized in accordance with ASC 842, Leases, ("ASC 842") which requires lessees to recognize a lease liability and a corresponding right-of-use asset for long-term lease contracts. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The Company uses its incremental borrowing rate in calculating the present value of future lease payments when interest rates are not implicit in the lease. Leases with terms of 12 months or less at inception are expensed as costs are incurred and not capitalized under ASC 842.

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Accounting 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 a central operation of the Company's business. Revenue is earned as research expenses related to the grants are incurred. Revenue earned on government grants, but not yet invoiced as of the balance sheet date, are recorded as unbilled receivables in the accompanying unaudited condensed consolidated balance sheets at September 30, 2021 and December 31, 2020. 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, crop trials, regulatory activities, facility related expenses, depreciation, and stock-based compensation. Costs incurred in connection with government research grants are recorded as research and development 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, stock-based compensation and office related expenses incurred to support the administrative and business development operations 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 Company's unaudited condensed consolidated statement of operations.

Stock-Based Compensation

All share-based payments to employees, members of the Board of Directors and non-employees are recognized within operating expenses based on the straight-line recognition of their grant date fair value over the period during which the recipient is required to provide service in exchange for the award. See Note 7 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.

Recent Accounting Standards

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. During the three months ended September 30, 2021, the Company did not adopt any new accounting guidance.

In December 2019 the FASB issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard removes certain exceptions to the general principles in Topic 740 and simplifies certain other aspects of the accounting for income taxes. This standard became effective for us on January 1, 2021, and did not have a material impact on our consolidated financial statements and related disclosures.

The following new pronouncement is not yet effective but may impact the Company's financial statements in the future.

In June 2016, the FASB issued ASU No. 2016-13, 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 transition date as the initial 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 amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. The guidance 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 is currently evaluating the impact this guidance will have on its consolidated financial statements.

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

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of dilutive common shares outstanding during the period. Diluted shares outstanding is calculated by adding to the weighted shares outstanding any potential (unissued) shares of common stock from outstanding stock options and warrants based on the treasury stock method, as well as weighted shares outstanding of any potential (unissued) shares of common stock from restricted stock units and the conversion of convertible preferred stock. In periods when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods when a loss is reported, basic and dilutive loss per share are the same. Common stock equivalents include stock options, restricted stock awards, convertible preferred stock and warrants.

The following potentially dilutive securities were excluded from the calculation of diluted net loss per share due to their antidilutive effect:


	As of September 30,
		2021	2020
Options		716,619	326,881
Restricted Stock Awards		9,430	8,500


Warrants		2,361,726	2,843,699
Total		3,087,775	3,179,080

4. INVESTMENTS

Investments consist of the following at September 30, 2021 and December 31, 2020:


	Accumulated Cost at September 30, 2021		Unrealized				Market Value at September 30, 2021
			Gain		(Loss)
Short-term investments
U.S. government and agency securities	$	3,903	$	1	$	—	$	3,904
Total	$	3,903	$	1	$	—	$	3,904


	Accumulated Cost at December 31, 2020		Unrealized				Market Value at December 31, 2020
			Gain		(Loss)
Short-term investments
U.S. government and agency securities	$	6,279	$	—	$	—	$	6,279
Total	$	6,279	$	—	$	—	$	6,279

All investments are classified as available for sale as of September 30, 2021 and December 31, 2020.

5. 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.

The Company’s financial assets classified as Level 2 at September 30, 2021 and December 31, 2020 were initially valued at the transaction price and subsequently valued utilizing third-party pricing services. Because the Company’s investment portfolio may include securities that do not always trade on a daily basis, the pricing services use many observable market inputs to determine value including reportable trades, benchmark yields and benchmarking of like securities. The Company validates the prices provided by the third-party pricing services by reviewing their pricing methods and obtaining market values from other pricing sources. After completing the validation procedures, the Company did not adjust or override any fair value measurements provided by these pricing services as of September 30, 2021 and December 31, 2020.

The tables below present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value.


	Fair value measurements at reporting date using
	Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs		Balance as of
Description	(Level 1)		(Level 2)		(Level 3)		September 30, 2021
Assets
Cash equivalents:
Money market funds	$	13,641	$	—	$	—	$	13,641

Short-term investments:
U.S. government and agency securities	—		3,904		—		3,904
Total assets	$	13,641	$	3,904	$	—	$	17,545


	Fair value measurements at reporting date using
	Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs		Balance as of
Description	(Level 1)		(Level 2)		(Level 3)		December 31, 2020
Assets
Cash equivalents:
Money market funds	$	2,873	$	—	$	—	$	2,873

Short-term investments:
U.S. government and agency securities	—		6,279		—		6,279
Total assets	$	2,873	$	6,279	$	—	$	9,152

There were no transfers of financial assets or liabilities between category levels during the three and nine months ended September 30, 2021 and the three and nine months ended September 30, 2020.

During November 2019, the Company issued Series A Warrants and Series B Warrants in two concurrent securities offerings that were considered free standing financial instruments, were legally detachable and separately exercisable from the common and preferred stock issued in the two offerings. The Company initially determined that all of the Series A Warrants and Series B Warrants should be classified as a warrant liability in accordance with ASC 480, Distinguishing Liabilities from Equity, and recognized at their inception date fair value due to the insufficiency of common shares available to permit their exercise. The warrant liability met Level 3 classification criteria for classification within the fair value hierarchy. On January 15, 2020, the Company filed an amendment to its Certificate of Incorporation with the State of Delaware to effect a 1-for-40 reverse stock split. As a result of the reverse stock split, the Company's number of authorized but unissued shares of Common Stock increased significantly and the Series A Warrants and Series B Warrants became eligible for exercise. Prior to reclassification as equity, on January 15, 2020, the Company adjusted the warrant liability to its then $15,934 fair value using the Black-Scholes valuation model, recording a loss on the adjustment to fair value of $957.

The following table shows a reconciliation of the beginning and ending balances for the Level 3 warrant liability for the nine months ending September 30, 2020.


	Nine Months Ended September 30, 2020
Warrant liability, December 31, 2019	$	14,977
Recognized loss from mark-to-market adjustment prior to reclassification of warrant liability to equity	957
Reclassification from warrant liability to equity	(15,934)
Warrant liability, September 30, 2020	$	—

6. ACCRUED EXPENSES

Accrued expenses consisted of the following at:


	September 30, 2021		December 31, 2020
Employee compensation and benefits	$	504	$	620
Leased facilities	78		188
Professional services	210		235
Field trials and related expenses	191		52
Other	139		202
Total accrued expenses	$	1,122	$	1,297

7. STOCK-BASED COMPENSATION

Expense Information for Employee and Non-Employee Stock Awards

The Company recognized stock-based compensation expense related to stock awards, including awards to non-employees and members of the Board of Directors of $436 and $1,175 for the three and nine months ended September 30, 2021 and $209 and $506 for the three and nine months ended September 30, 2020, respectively. At September 30, 2021, there was approximately $4,508 of unvested awards not yet recognized as compensation expense.

The compensation expense related to unvested stock awards is expected to be recognized over a remaining weighted average period of 3.17 years.

Stock Options

A summary of option activity for the nine months ended September 30, 2021 is as follows:


	Number of Shares	Weighted Average Exercise Price
Outstanding at December 31, 2020	339,108	$	32.39
Granted	379,057	$	10.18
Exercised	—	$	—
Forfeited	(1,509)	$	12.92
Expired	(37)	$	19,253.19
Outstanding at September 30, 2021	716,619	$	19.69

Options exercisable at September 30, 2021	168,961	$	53.07

In accordance with the terms of the Company's 2018 Stock Option and Incentive Plan ("2018 Stock Plan"), effective January 1, 2021, Yield10's Board of Directors approved the addition of 166,702 shares to the 2018 Stock Plan, which represented 5% of the Company's outstanding common stock on the day prior to the increase. At its annual meeting of stockholders on May 24, 2021, stockholders approved an amendment to the 2018 Stock Plan to add 300,000 more shares to the plan. As of September 30, 2021, 73,513 shares remain available to be awarded from the 2018 Plan.

Restricted Stock Units

The Company records stock compensation expense for restricted stock units ("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 vest, the Company withholds a number of shares from its employees with an aggregate fair market value equal to the minimum tax withholding amount from the common stock issuable at the vest date. During the nine months ended September 30, 2021, 17,932 employee RSUs vested, of which 5,713 common shares with a total market value of $86 were withheld to pay employee tax withholding.

A summary of RSU activity for the nine months ended September 30, 2021 is as follows:


	Number of RSUs	Weighted Average Remaining Contractual Life (years)
Outstanding at December 31, 2020	8,500
Awarded	18,862
Common stock issued upon vesting	(17,932)
Forfeited	—
Outstanding at September 30, 2021	9,430	0.42

8. LEASES

Lease Accounting

As a lessee, the Company follows the lease accounting guidance codified in ASC 842. Under ASC 842, a lease is classified as a finance lease if any of five 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 the lease. The Company's existing lease subject to ASC 842 meets the standards for operating lease classification.

Under ASC 842, a lease liability is recorded on the commencement date of a lease and is calculated as the present value of the remaining lease payments, using the interest rate implicit in the lease, 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 the lease. The Company adopted the short-term lease exception that permits lessees to omit leases with terms of twelve months or less from the accounting requirements of ASC 842.

Maturity Analysis of Lease Liabilities

The Company's Woburn, Massachusetts facility is the only 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 September 30, 2021, the Company's lease liability related to its Woburn facility will mature as follows:



Year ended December 31,	Undiscounted Cash Flows
2021 (October to December)	$	178
2022	726
2023	749
2024	771
2025	793
Thereafter	747
Total undiscounted future lease payments	3,964
Amount of lease payments representing interest	(682)
Total lease liabilities	$	3,282
Short-term lease liability	$	499
Long-term lease liability	$	2,783

Quantitative Disclosure of Lease Costs


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Lease cost:
Operating lease cost	$	151	$	151	$	454	$	537
Short-term lease cost	171		167		497		473
Sublease income	(148)		(