UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2016;2019
or
| 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)
Delaware (State or other jurisdiction of incorporation or organization) | 04-3158289 (I.R.S. Employer Identification No.) | |
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:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock | YTEN | The |
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��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 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:
Large accelerated filer o | Accelerated filer o | |||||
Non-accelerated filer | Smaller reporting company | |||||
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 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 NASDAQNasdaq Capital Market on June 30, 201628, 2019 was $7,869,303.$8,012,418.
The number of shares outstanding of the registrant's common stock as of March 17, 201718, 2020 was 28,402,471.1,923,184.
DOCUMENTS INCORPORATED BY REFERENCE
YIELD10 BIOSCIENCE, INC.
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 20162019
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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 Yield10 technologies.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
ITEM 1. BUSINESS
Overview
Yield10 Bioscience, Inc. is an agricultural bioscience company focusing onthat uses its "Trait Factory" and the developmentCamelina oilseed “Fast Field Testing” system to develop high value seed traits for the agriculture and food industries. Yield10 is headquartered in Woburn, Massachusetts and has an Oilseed Center of new technologiesExcellence in Saskatoon, Saskatchewan, Canada. Our goal is to efficiently develop superior gene traits for the major crops including corn, soybean, canola, and other crops to enable step-change increases in crop yield of at least 10-20 percent. Our “Trait Factory” encompasses discovery of gene targets using our GRAIN (“Gene Ranking Artificial Intelligence Network”) big data mining platform, deployment of trait gene targets in the oilseed Camelina and generation of field performance data. The “Trait Factory” enables two complementary commercial opportunities with different paths to enhance globalmarket. The first is trait licensing to the major seed companies for corn, soybean, canola and other crops. Data from our trait field testing in Camelina has enabled Yield10 to establish research license agreements with leading seed companies including Bayer Crop Science division of Bayer AG ("Bayer"), Forage Genetics International, LLC a division of Land O'Lakes, Inc. ("Forage Genetics") and JR Simplot Company ("Simplot"). These companies are progressing the development of Yield10 traits in soybean, forage sorghum, and potato, respectively. The second commercial opportunity is to improve the performance and value of Camelina as a platform to develop a commercial crop product business producing nutritional oils and PHA biomaterials. Using this approach, Yield10 can leverage the resources of the major seed companies to efficiently develop superior gene traits for the major crops and focus internal resources on trait gene discovery and the commercial development of Camelina products.
Our focus in the near term is to develop a revenue generating business using Camelina to produce nutritional oils. Yield10 has discovered a series of performance gene traits for Camelina focused on seed yield and oil content, the two primary drivers of value. Our plan is to focus on our traits deployed using genome editing which can be qualified as non-regulated under U.S. Department of Agriculture ("USDA") Animal and Plant Health Inspection Service ("APHIS") rules. In parallel, the Company plans to establish a program to develop herbicide tolerant Camelina lines. We believe this will enable Yield10 to develop a crop oil product business with a clear path to revenue and growth. This foundation will form a strong base to produce PHA biomaterials in the longer term for use in water treatment and plastics replacement applications. Yield10
believes crop based PHA biomaterials represent a compelling new market opportunity for agriculture addressing a non-traditional market with high upside potential.
Yield10 brings a unique history and skill set, captured in our GRAIN data mining gene discovery platform, for developing advanced crop traits and increasing the concentration of specific biochemicals of commercial interest in crops. Our plan is to also use GRAIN to develop a source of revenue from funded research and development collaborations for traits, products and crops not being directly pursued internally. We are currently engaged in a range of discussions with third parties with respect to different crops, traits and products in the feed, food security.and pharmaceutical sectors.
Over the last four years, we have been evaluating certain of our traits in greenhouse studies and field tests conducted in the United States and Canada. We consider 10-20 percent increasescurrently have three non-exclusive research license agreements in cropplace: with the Crop Science division of Bayer, for the evaluation of our C3003 and C3004 traits in soybean; with Forage Genetics for the evaluation of five yield traits in forage sorghum; and with Simplot for evaluation of three of our traits in potato. We have progressed our evaluation of C3003 and C3004 in field tests with Camelina and canola and plan to be step-change increases. continue our field testing in the 2020 growing season. In Camelina we have demonstrated the potential of a series of traits, including C3003 and C3004 to significantly increase seed yield and genome edited traits including C3007-C3010 to increase seed oil content and filed a new patent application on a potentially breakthrough technology for producing PHA biomaterials.
According to a United Nations report, foodcrop production must be increased by over 70 percent in 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 land as a result of infrastructure growth and increased pressure on scarce water resources. Consumption of meat, seafood, and dairy products is also expected to increase based on dietary changes associated with increasing wealth and living standards. This will result in increased demand for feed grains and forage crops. Seafood production is increasingly based on aquaculture where fish diets have been increasingly moving to crop-based feed ingredients due to the limited availability and cost of processed ocean harvested fish as feed. Fish oil is the main source of omega-3 fatty acids which are essential in the human diet. Omega-3 oils have been shown to help prevent heart disease and stroke, may help control lupus, eczema, and rheumatoid arthritis, and may play protective roles in cancer and other conditions. Oils high in omega-3 fatty acids are in increasing demand as the supply of fish oil from ocean harvest is under increasing pressure. Aquaculture and other feed markets represent a growing opportunity for Camelina oil, which is high in the omega-3 fatty acid alpha linolenic acid (“ALA”).
Harvestable food production per acre and per growing season must be increased to meet this demand. At the same time, with 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. With crop intensification (less land available and more production needed), we expect that improved crop genetics based on new gene traits will be a key driver of increased productivity, potentially resulting in the best performing yield traits commanding disproportionate value and disrupting the seed sector. We expect farmers and growers to be the major beneficiaries of these drivers, which represent potential opportunities for increased revenue and crop diversification. Today the global food market has an estimated value of $5 trillion.
Yield10 brings unique capabilities and experience in advanced metabolic engineering and systems biology to optimize photosynthesis and carbon efficiency in crops to increase grain or biomass yield. These capabilities were developed based on sustained investment over many years when the company was named Metabolix. As Metabolix, we solved complex biological problems in the industrial/synthetic biology space to produce bioplastics. By 2012, we had begun work to increase photosynthesis in crops as part of those activities, which led to the creation in 2015 of the current Yield10 business focused on crop yield. In mid-2016 we sold our fermentation-based bioplastics assets to focus on our agricultural innovations and the company was rebranded as Yield10 Bioscience in January 2017.
Exciting new genetic engineering technologies like clustered regularly interspaced short palindromic repeats ("CRISPR") technology and other approaches to genome editing hold promise to accelerate the deployment of novel traits into commercial crops. This CRISPR method of making insertions or deletions of DNA into plants without the use of foreign DNA has been described as “precision breeding.” We signed a research license, with rights to convert to a commercial license, to CRISPR/Cas-9 technology in 2018 to support our genome editing program. We have achieved non-regulated status pursuant to 7 CFR part 340 for two genome edited traits designed to boost oil content in Camelina through the USDA-APHIS “Am I Regulated?” petitioning process and have petitions pending for new edited lines. Genome editing technology as well as the streamlined regulatory process supported by USDA-APHIS for certain types of plant traits may enable agricultural innovators such as Yield10 to deploy and field test new traits more quickly, potentially resulting in a shorter path
to market and reduced costs as compared to the more highly regulated path required for traditional biotechnology-derived traits.
| SUMMARY OF OUR CROP YIELD TRAITS IN DEVELOPMENT | |
| R&D Area | Crops Under Evaluation |
Seed Yield Traits-Likely Regulated1 | |
| C3003 | Camelina, canola, soybean, corn, potato |
| C3011 | Corn, Camelina and canola |
Seed Yield Traits-Likely Not-Regulated2 | |
| C3004 | Camelina, soybean, canola and corn |
Oil Enhancing Traits-Likely Not-Regulated2 | |
| C3007 | Camelina and canola |
| C3008a | Camelina (not-regulated4) |
| Oil trait combinations - C3008a, C3008b and C3009 | Camelina (not-regulated4) |
| Additional oil traits and combinations | Research in progress (target crops to be determined) |
| C3014 and C3015 PHA biomaterials | Camelina in progress |
Yield Improvement Trait Discovery Platform (Traits Potentially Non-Regulated)3 | |
| C4001 | Camelina, forage, sorghum and corn |
| C4002 | Sorghum and corn |
| C4003 | Sorghum and corn |
| C4029 | Sorghum |
| (1) | C3003 and C3011 consist of microbial genes and are likely to be subject to regulation by USDA-APHIS. |
| (2) | These traits are accessible using genome editing or other methods that do not result in the insertion of non-plant DNA. These approaches may be deemed not to be regulated by USDA-APHIS pursuant to 7CFR part 340 based on recent filings by us and other groups. |
| (3) | Traits in this area were developed in our GRAIN platform and all are potentially deployable through approaches which may be not-regulated by USDA-APHIS pursuant to 7 CFR part 340. |
| (4) | USDA-APHIS does not consider these lines submitted by Yield10 to be regulated pursuant to 7 CFR part 340. Commercial plant or plant lines or plant products derived from these lines may be regulated by the U.S. Food and Drug Administration ("FDA") or U.S. Environmental Protection Agency ("EPA"). |
One of the critical unmet needs in the agricultural sector is to increase the fundamental yield potential of crops to address global food security. Yield10’s Trait Factory encompasses discovery of gene targets using two proprietary advanced biotechnologyour GRAIN big data mining platform, genetic engineering of Camelina to modify those trait gene discovery platformstargets and the generation of field data with the engineered crops. Performance and molecular data from the engineered crops are then fed back into the GRAIN system to improveenable refinement of specific gene targets and the identification of new trait gene targets. Data from the Camelina field studies is then leveraged to form relationships with leading seed companies to progress our trait genes in major crops. Modified Camelina lines with improved performance enter the development pipeline and progress on the regulated or non-regulated path to market depending on how the plants are genetically engineered. GRAIN is a powerful new tool developed primarily to focus on Yield10 trait targets. However, we believe we may also be able to generate a revenue stream by providing access to our GRAIN platform to third parties who are interested in other trait targets and/or crops Yield10 is not pursuing.
As we continue to develop the GRAIN platform, key elements of this system have proven effective and have enabled Yield10 to produce several promising crop yield traits in our development pipeline. Yield10 has achieved and published in peer reviewed journals scientific data from growth chamber and greenhouse studies showing that significant improvements to crop yield are possible. We have achieved these results by improving fundamental crop yield through enhanced photosynthetic carbon capture and increased carbon utilization efficiency to increase seed yield. These platformsSome examples of these traits and their impact on crop yield are shown below. In order to highlight the power of our advanced metabolic engineering/systems biology approach of improving fundamental carbon conversion processes in seed we developed the C3006 trait. C3006 required a complex combination of microbial genes to enhance carbon fixation from non-photosynthetic pathways in seed. This trait is based on a complex combination of 10 microbial genes which, when deployed into Camelina, more than doubled seed yield in greenhouse studies. Although the genetic complexity of C3006 creates a regulatory hurdle we believe this proof point demonstrates the value of our GRAIN platform and the potential to double Camelina seed yield. We plan to continue the development of the C3003 and C3004 traits as well as our C4000 series of yield traits in Camelina and support our licensees on their development work in corn, canola and potato.
| Examples of our traits and their impact on crop yield in growth chamber and greenhouse studies | |
| C3003/C3004 traits: | 23% - 65% increase in seed yield in oilseed crops (Camelina) |
| C3006 advanced synthetic biology trait: | 128% increase in oilseed yield (Camelina) |
| C4001, C4003 traits: | Work ongoing; 70% increase in photosynthesis, 150% increase in biomass (switchgrass) |
Yield10 has a pipeline of more than 10 novel yield traits in research and development and we expect to generate several proof points for our traits in various crops over the next two years.
We are building a portfolio of intellectual property around our crop yield technology and traits. As of December 31, 2019, we owned or held exclusive rights to 22 patents or pending patent applications worldwide related to advanced technologies for increasing yield in crops. Our portfolio of patent applications includes plant science technologies we have in-licensed globally and exclusively from the University of Massachusetts related to the yield trait gene C3003. The first U.S. patent on this trait was issued in 2019. Our portfolio of patent applications also includes advanced technologies for increasing oil content in oilseed crops in-licensed globally and exclusively from the University of Missouri in 2018 and 2019 related to the yield trait genes C3007, C3010 and C3012. Yield10 filed a patent application in 2019 for our triple edit oil content traits C3008a, C3008b and C3009. We also recently filed a new patent application on a breakthrough technology for producing PHA biomaterials in oilseeds which offers the potential for very low-cost production of a new crop product with applications in water treatment and plastics replacement.
Trait Development Process and Stages
Yield10 has effectively condensed the early phases of trait gene discovery with early development to accelerate the identification of trait leads. Novel trait gene targets, identified using our GRAIN discovery platform or in-licensed from academic institutions where proof-of-principle has been demonstrated, are deployed and evaluated in our Camelina Fast Field Testing platform. Depending on the characteristics of the trait gene, Camelina lines can be engineered using CRISPR genome editing (a non-regulated path) or traditional gene transformation technologies (a regulated path). For genome edited traits, once we have developed Camelina lines with the target trait we can file a petition with USDA-APHIS to confirm that the new Camelina lines meet the non-regulated criteria prior to field testing. For traditional traits defined as regulated at this stage of development, we can apply for regulatory approval and permits in order to carry out field testing. Following first field testing, non-regulated traits deployed in Camelina demonstrating improved yield performance in the field would then progress into the commercial development phase. This phase can be expected to last two to three years to complete activities associated with launching a new variety of Camelina. For regulated traits, the development process is considerably longer and is expected to be in the range of four to seven years 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 demonstratemultiple steps required in the commercial value of new genetically engineered yield trait genes, identified in our discovery platforms, in major cropsdevelopment phase including event selection, optimization and to identify additional genome editing targets for improved crop performance in several key food and feed crops, including canola, soybean, rice and corn. Yield10 Bioscience is headquartered in Woburn, Massachusetts and has an additional agricultural science facility with greenhouses in Saskatoon, Saskatchewan, Canada.
Based on encouraging early results from these gene discovery programs,using Camelina as our Fast Field Testing system, we refocusedcurrently have approximately 10 traits at different stages in our crop science effortsdevelopment pipeline. As we develop our business plan for commercial products made in Camelina based products such as oils and PHA biomaterials, we expect we will continually evaluate and prioritize our traits in development as we progress to yield improvementproduct concepts and commercialization. A summary of our traits and their stage of development in major food and feed crops in 2015 and rebranded the effort as Yield10 Bioscience. In 2016, we sold our biopolymers assets and restructured the 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:pipeline is presented below.
For the development of our lead yield trait genestraits in major crops such as corn, soybean, canola soybean, rice and cornothers, our approach is to provide step-change crop yield solutionslook for enhancing global food security.
Traits Being Developed by Licensees1
1 The time line shown in the C3 photosynthetic family. This difference in plant yield is a resultchart reflects the duration 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.
each partner's research license agreements.
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 and 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 sustainably increase global food production including in grains, protein, seafood, dairy and edible oils to meet this demand. This will need to be achieved in the face of increased pressure on land and water resources in addition to increasingly variable weather patterns.patterns and growing environmental challenges. Solving this problem is a major global challenge requiring new crop innovation and technologies to fundamentally enhance crop productivity.
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 regions of the globe, and current rates of crop yield increase based on traditional plant breeding approaches are expected to fall significantly behind the levels needed to meet the demand for global food production. The researchers found that the top four global crops - maizecrops-maize (corn), rice, wheat and soybean - aresoybean-are currently witnessing average yield improvements of only between 0.9 to 1.6 percent per year, far slower than the required rates to double their production by 2050 solely 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)using our Trait Factory to “build better plants,”optimize photosynthesis and carbon efficiency in which technology is deployedcrops to make the process of photosynthesis within plants more efficient at capturing atmospheric carbon and depositing that carbon in seedincrease grain 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.yield. We have been working onin the area of increasing photosynthetic carbon capture and crop yield technologies since 2012. As a result,2012 and we have identified a number of excitingseveral potentially promising genes for increasing yield or improving crop performance.
Health and Wellness, Food Safety and Sustainability
At the same time, with 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 agricultural biotechnology, 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 "healthier" where the value driver is the ability to make marketing claims directly to the consumer.
Camelina oil naturally contains over 30% by weight of the omega-3 fatty acid and has recently been shown in clinical studies to be more effective than fish oil for controlling LDL cholesterol indicating potential use in reducing heart disease. This oil is also finding applications in aquaculture feed due to current constraints on the availability of omega-3 fish oil from ocean harvested fish. Yield10 believes that Camelina also has considerable potential as a cover crop to reduce soil erosion and nutrient run-off from land used for row crop production. In the longer term the production of PHA biomaterials in Camelina would represent an entirely new market opportunity for farmers. This opportunity could provide economic returns for farmers to justify large acreage adoption of Camelina as a cover crop and enable the low-cost production of this product for new markets including water treatment and sustainable biodegradable plastics replacement applications.
Business Strategy
Our goal is to build a successful agricultural biotechnology company centered on demonstrating and capturing the value of our traits and technologies based on the following three potential revenue streams:
•Licensing of our yield and performance traits for use in major foodrow crops;
•Product sales revenue from products produced in the oilseed Camelina; and feed crops. We
•R&D revenue for access to our GRAIN trait gene discovery platform.
Using our Trait Factory, we have identified and are evaluating novel yield trait genes that we have discovered using our two technology platforms. We believe we have extensive and unique metabolic engineering capabilities 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, cropCrop 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, canwould be expected to generate significant value to the seed and crop industry.farm sectors. For example, Yield10 is targeting an approximately 2010-20 percent increase in canola and soybean yields, which, if successfully deployed across North American acreage, wouldcould result in annual incremental crop value of up to $10 billion. By ultimately increasing the output of major food and feed crops and potentially reducing strains on scarce natural resources, we believe that Yield10’s technologies will also contribute to addressing global food security.
Our C3003 yield trait is an algal gene, and we believe that it will be regulated by USDA-APHIS as a biotech trait. In 2017, we signed a non-exclusive research license with the Crop Science division of Bayer AG ("Bayer") (formerly Monsanto Company), to test C3003 and the first version of C3004 in soybean. In 2019, the license was expanded to cover a new discovery and intellectual property related to a new version of C3004. Similarly, in 2018 we signed a non-exclusive research license with Forage Genetics, to test a series of traits in forage sorghum. In 2019 we signed a non-exclusive research license with Simplot for the evaluation of our traits in potato. We have been progressing our traits internally in canola and in corn on a fee for service basis but plan to look for partners for our traits in both crops this year. Yield10 significantly expands
the development pipeline by enabling the licensees to progress our traits in major crops. 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.
We believe we can leverage our seed yield and oil content traits to add value to Camelina in North America in the near term. We will focus our initial development activities on the production of nutritional oils for human and aquaculture feed markets using traits that can be qualified as non-regulated by USDA-APHIS to build our commercial capabilities.
The production of PHA biomaterials in Camelina could open new markets and provide economic returns for farmers to justify large acreage adoption and enable the low-cost production of this natural biodegradable product for water treatment and plastics replacement applications. We believe crop-based production will enable an advantageous cost structure thereby eliminating one of the remaining significant barriers to entry for broad adoption of these biomaterials. By reprogramming Camelina to produce PHA in the seed, the harvested seed can then be processed to produce three products: oil, protein meal for animal feed, and PHA biomaterial. The typical costs for producing edible oils are a useful benchmark for the potential long-term cost structure for crop based PHAs. In this scenario, crop based PHAs would have a cost advantage over petroleum-based plastics.
In water treatment, the PHA biomaterial acts as a growth substrate and energy source for denitrifying bacteria which convert nitrate, a primary cause of water pollution and algal growth, to nitrogen gas which returns to the air. This application is breakthrough sciencetechnically straight-forward, requiring only the production and technology innovation.shipment of PHA biomaterials in pellet form. Yield10 is in the early stages of developing a revenue generating business model for this opportunity.
PHA biomaterials are also useful for functionally replacing petroleum-based plastics in a wide range of packaging applications. For example, the plastics industry produces more than 350 million tons of material per year globally. This sector is facing intensive scrutiny due to increasing plastic waste pollution in the environment. As natural biomaterials, PHAs fully degrade over time in the environment yet have good processing and physical properties and can be processed like plastics to produce articles with excellent shelf life in use. When we made the transition to the Yield10 business we divested our fermentation based PHA bioplastics assets and related applications technology. However, Yield10 retained the rights to PHA production in engineered crops. Yield10 plans to buildeventually look for partners to produce resin-grade PHA biomaterial for supply to the plastics sector but will focus the initial launch on its core strengths bringingwater treatment applications.
We are at an early stage of developing a detailed plan for the Camelina business but believe it may have considerable potential for Yield10. Completing this business plan is a key goal for 2020.
Our History
We have a significant track record and expertise in the metabolic engineering of microbes and have made significant progress translating this capability to plants.
As part of the legacy biopolymers and biobased chemicals business of our predecessor company, Metabolix had supported a crop science research program to produce PHA biomaterials in crops as a potential low-cost production system. 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 in the seeds of oilseed crops or in the leaves of biomass crops such as switchgrass. The PHB biomaterial is useful as a natural water treatment product and as a replacement for petroleum-based plastics.
As we made progress on producing PHB in plants, we learned that basic carbon supply from photosynthesis was a bottleneck. To address this carbon shortfall, in 2012 we began developing new technologymetabolic engineering and bioinformatics approaches to exploit an innovation gap inenhancing basic crop photosynthetic carbon capture. Discoveries from these two approaches became the agricultural biotechnology space 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 optimizefoundation of our step-change yield
GRAIN crop trait innovations into the major food and feed crops, and demonstrate their economic value to farmers and seed companies.discovery platform. We intend to create high-value assets in the form of proprietaryalso began building intellectual property on novel yield trait gene technologies discovered in these programs and realized that our experience in re-engineering the flow of carbon in microorganisms could be applied to building better plants with higher yield potential. Improving the yield potential of major crops is an essential step to increase seed and/or biomass yield and, therefore, food production.
Our Approach
Our GRAIN platform provides us with a unique approach for discovering novel yield trait genes.
We have integrated advanced metabolic flux modeling capabilities with transcriptome network analysis to form the foundation of our GRAIN big data mining gene discovery platform. This discovery platform is the core of our Trait Factory. In the case of crops, the levers to increase seed yield are the metabolic infrastructure through which carbon flows from photosynthesis to seed production and the gene regulators or transcription factors which control the various pathways. Over the last 20 years, the agricultural sector has generated vast numbers of data points. During this same period, there have been very few new crop traits produced. GRAIN efficiently mines big data sets and prioritizes actionable gene targets to improve crop productivity. We have employed this approach to discover a range of potential yield trait genes.
We developed the Camelina Fast Field Test model system to characterize, evaluate and de-risk these assets by progressing them alongnovel yield trait genes.
One of the path to commercial development with increasingly larger scalechallenges 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 tests and multi-site field trialsresults in major crops. We are currently deployingTranslating success with non-plant genes in major crops has been successful and the current biotechnology 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 on our yield trait genes into canola, soybeanCamelina oilseed platform. Camelina is an industrial oilseed well-suited to field trials, and corn, by designingwe believe it is a promising new crop for farmers. It is also very fast to modify, develop genetically stable seed and progressing genetically engineered events suitablescale up seed 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 innovationsfield planting. Ideally, we hope to be the largeable to progress from trait identification to field planting in about 12 months. Results from our field studies in Camelina can then be used to generate partner interest in progressing our traits in corn, soybean, canola and mid-size agricultural companies that would eitherother crops through research license or acquire rights to Yield10’s yield trait genes and incorporate them into their proprietary commercial crop lines for subsequent commercialization.agreements.
We are focused on identifying and developing technologies that will enable us to produce step-change improvements to crop yield.yield and value.
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 percent in 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. 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 GMbiotech traits. Current GMbiotech traits deployed in crops by the seed industry are based primarily on using microbial-sourced genes to impart yield protection through herbicide, pest, disease and even drought resistance, whereas Yield10 is focused on increasing fundamental crop yield through enhanced carbon capture and utilization. The demand for edible vegetable oils and healthier edible oils is also increasing.
Yield10 is fundamentally focused on “building better plants” based on using genetic engineering technologiesthe Trait Factory to deploy new yield trait genes that improve the efficiency ofoptimize photosynthesis and thecarbon efficiency of converting fixed carbonin crops to seed and/increase grain or introducing targeted genetic changesbiomass yield targeting step-change increases in the plant genome that allow the plant to make more seed or biomass.
We have assembled a significant track recordpipeline of crop yield traits for development that are applicable to major commercial crops and expertise in the metabolic engineering of microbes and have made significant progress translating this capability to plants.
Our unique approach consiststo crop yield 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 two core technology platforms. The first is based onyield genes with potential use for producing step-change improvements in crop yield. Through our 30 yearsresearch and early development efforts we have identified and begun characterizing our C3000 and C4000 series of experience optimizingtraits. To initially characterize 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 seedpotential yield in the industrial oilseed Camelina. We currently have four novel trait genes, impacting seed yield, which we refer to as: C3003 through C3006, and we are progressingtest our lead yield trait gene C3003 incandidates using our key crop targets canola, soybean and corn. Recently, we reported seedCamelina platform. As a yield increases of up to 23 percent in early field tests conducted in 2016 with Camelina.
We believe our business model will allow us to capture value for our yield trait discoveries and provide a path to commercialization for important new yield traits for major crops.
We have signed non-exclusive research licenses for our novel yield traits with agriculture industry leaders.
In 2017 we granted a non-exclusive global research license to Bayer to evaluate our novel yield traits C3003 and C3004 in soybean. The license was expanded in 2019 to include a new discovery and intellectual property for C3004. Bayer is a leader in the Smart Carbon Griddevelopment and commercialization of biotech-derived soybean seed. In 2018, we granted a research license with a similar structure to Forage Genetics, a leader in forage crops used for Cropsanimal feed, to evaluate five traits in forage sorghum. In 2019 we granted a research license with a similar structure to Simplot, a leader in potato.
These licenses are intended to provide market leaders in their respective crops with an attractive opportunity to test our traits and develop data at their own expense. At any time during the T3 Platform hasterm, 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 these traits. This structure allows us the flexibility to expand the testing of our traits with investment by other companies and to potentially enter negotiations for development and commercial licenses when the value of our traits is better understood. In 2019, we continued to explore additional opportunities to expand the testing of our traits through similar arrangements with other companies and as part of our evolving strategy we now plan to look for partners in canola and corn.
We have identified promising potential targets fortraits which can be modified using genome editing. We believe that these approachessuch targets 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/Cas9,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 to have the potential to significantly reduce development costs and regulatory timelines for crop trait development and market introduction. Announcements from DupontIn 2018, we signed a non-exclusive research license for CRISPR/Cas-9 technology with the Broad Institute of MIT and the United States DepartmentHarvard and Pioneer, part of Agriculture - Animal and Plant Health Inspection Service ("USDA-APHIS") regarding a clarification onCorteva Agriscience.
USDA-APHIS has streamlined the regulatory path for a geneticallygenome edited corn line indicatedplant lines 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 diddo 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 editedThese plant lines may not be subject to certain GMOUSDA-APHIS crop regulations in the U.S., an outcome supported by recent developments See the “Regulatory Requirements” section below. This significantly decreased the timeline and cost of developing and bringing some new traits to commercialization in the USDA APHIS reviewU.S. The GRAIN platform is particularly well suited to the challenge of the current regulatory processidentifying new gene targets for crops made using genetic engineering.genome editing that can generate economic value. This has opened 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.
We plan to use any revenues we generate from license agreements aroundbelieve Camelina has high potential as a commercial crop for producing nutritional oils and PHA biomaterials in North America.
Based on our genome editing targets to support our ongoing research and development efforts to enable step-changes10-year investment in crop yield.
We believe that thisour Camelina development capabilities, together with our yield and oil content trait improvements, will provideenable an attractive Camelina products business focused on nutritional oils in the opportunity for go-no-go decisions in some cases and in other cases allow us to update our approach based on the results of our Fast Field Testing in Camelina. For example withnear-term. In the longer development timelines needed to get canola 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 results of our Fast Field Testing in Camelina. We have started deploying this process with our first trait C3003, in which we conducted Fast Field Testing in 2016, and plan to conduct additional studies in both Camelina and canola in 2017.
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 NRC Plant Biotechnology Institute ("PBI")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 and breeding 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.
We have a network of commercial and science advisors to provide us with insight and opportunities to advance our industry alliances, crop research and development, and key intellectual property.
Yield10 named Sherri Brown, Ph.D., a former Monsanto Company executive, as a member of the Board of Directors on January 2020. Prior to joining the Board, Dr. Brown has served as a special commercial and technical advisor to the Company since 2018. Dr. Brown, who is currently a Managing Director at The Yield Lab, served from 1999-2017 in leadership positions at Monsanto, most involving the development and commercialization of new traits for corn and oilseed crops including soybean and canola.
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 (a division of the U.S. Department of Energy ("DOE") 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 Biology and remains a collaborator on C3003. In 2018, Yield10 announced signing a global license agreement with the University of Missouri for advanced technology to boost oil content in oilseed crops, including C3007 and C3010, which are based on the discovery of a key regulatory mechanism controlling oil production in oilseed crops which can be used to increase oil content. Jay J. Thelen, Ph.D., Professor of Biochemistry at the University of Missouri, who discovered this mechanism, joined our Scientific Advisory Board in 2018.
We plan to seek U.S. and Canadian government grants to support our research and development goals.
Yield10 has 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 test these novel traits in Camelina. This work is valuable because traits developed in Camelina have the potential to be developed and deployed in other oilseed crops. For example, in 2017, we were selected as a sub-awardee on a new DOE grant led by Michigan State University to conduct research aimed at boosting oilseed yield in Camelina. We plan to continue to pursue government grants to defray research costs associated with our research and development activities.
We have establishedare operating with a lean organizational footprint which is capable of evaluating our initial novel yield traits in greenhouse and field tests while maintaining efficient use of cash resources.
As of December 31, 2016,30, 2019, we had 2025 full-time employees, with the majority directly involved with our research and development activities. We believe that our organizational capabilities are aligned with our research priorities and are complemented by our use of third partythird-party infrastructure and certain service providers. With this approach we can leverage third partythird-party infrastructure and capability without having to spend the time and capital needed to recreate them in-house. This will allowis allowing 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.
“GRAIN” Technology PlatformsPlatform
In the last decadetwo decades there has been a dramatic expansion of new genetic engineering and systems biology tools: genomics data;data, metabolic engineering;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 generationAs a result, the seed sector has tested thousands of single genes and generated billion if not trillions of data points yet step change improvements in the near-term while we independently work to demonstrate the economic value of our transformative genetic engineering basedcrop 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.have remained elusive. Yield10 is focusedbringing new approaches and innovation based on increasing theover 30 years of experience in advanced synthetic biology and metabolic systems modelling to improve 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
At 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.
Plant growth is based on a series of chemical reactions and these can be modeled to determine the fact that simply fillingbest ways to optimize the gas tankyield of the targeted product. We have integrated advanced metabolic flux modeling capabilities with transcriptome network analysis to form the foundation of the GRAIN gene discovery platform. GRAIN is a powerful new data mining tool which the company has protected as a trade secret. Yield10 has used GRAIN to identify a pipeline of traits it is developing in Camelina to determine performance and then through a car does not make it go faster. If successfulseries of license arrangements with major seed companies in increasing photosynthesis, we expectother crops. We also believe our integrated GRAIN platform can be used to reach metabolic bottlenecks downstream,successfully identify new targets for improving crop yield and are working to leverage the platform in the near-term to secure research and development funding from industry partners.
Traits in Development
Based on our early innovations, the development of the fully integrated GRAIN trait gene discovery platform and the execution of our in-licensing strategy, Yield10 has established a strong pipeline of traits in development. By using our Camelina platform as a Fast Field Testing platform, to generate initial trait performance data, our traits are furthest along in Camelina. This has formed the foundation of our strategy to develop a Camelina based specialty products business. Data from Camelina field studies have also helped us to establish research license agreements with three seed companies (Bayer, Forage Genetics, Simplot) to enable them to progress our traits in major crops. Yield10 is progressing proprietary traits in corn through a service agreement. In 2019 Yield10 continued to progress the development of our C3000 series of seed yield and oil content traits as well as some of which will likely prevent someour C4000 series traits in the oilseed Camelina. We progressed several of these traits into major crops including corn, soybean, forage sorghum and potato through third party relationships and in canola using internal resources. In 2019, Yield10 announced the additional fixed carbonfiling of a new patent application on a technology breakthrough for producing high levels of a PHA biomaterial, a product with very large market potential in oilseeds.
Novel Yield Trait Gene C3003
C3003 is an algal gene, in-licensed 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 themeUniversity of enhanced carbon capture from photosynthesis and targeted carbon deposition to seed.
Canola is an important North American oilseed crop harvested for its oil. We are targeting step-changes of 10-20% in the evaluation and development of novel traits to increase seed yield in canola. In our field tests of canola in 2018, we
achieved seed yield improvements in some events at the low end of this range (11%), and based on these results, we continued to progress C3003 into the preliminary commercial development phase in canola in 2019. Key activities in 2019 included field testing of the C3003 Canola lines from the 2018 trial and the development of additional commercial quality C3003 canola events. The 2019 growing season was particularly challenging with wide swings in weather patterns and as a result we were unable to generate statistically significant performance data. However, based on earlier results and our increasing understanding of the underlying biological mechanism, we remain committed to progressing the development of C3003. In 2019, we produced 15 additional high quality C3003 canola lines and plan to continue the field testing and development programs with this trait in Camelina and canola in 2020.
Under a research license, Bayer is working with C3003 in its soybean program as a strategy to improve seed yield. We anticipate that Bayer will generate field test data with C3003 pursuant to the research license. The Bayer license was expanded in 2019 to include a new discovery relating to C3004 that will enable them to begin deploying and rice,testing this trait in their soybean program. Yield10 is working to identify additional partners for our traits in soybean.
Novel Yield Trait Gene C3004
While the role of C3004 is currently not well understood and we expectcontinue to disclose additional resultsinvestigate the role of the gene in plant metabolism, we believe that it may affect carbon partitioning (the flow of carbon from a numbergreen photosynthetic tissue to seed development) in plants. Our ongoing research will continue to investigate the activity of these activities throughout 2017.
We began our investigation of C3004 by preparing genetic constructs to increase the expression of the C3004 gene in Camelina. Stable C3004 Camelina lines were developed and we performed yield studies in a greenhouse and a controlled environment growth chamber. In these studies, increased expression of C3004 in Camelina resulted in a significant increase in plant growth and vigor, increased branching and seed yield, and in some cases increased individual seed weight. In 2019 we continued the development of additional C3004 Camelina lines, conducted greenhouse studies and our first field tests.
Our 2019 greenhouse studies included additional C3004 Camelina lines with different Camelina genetic backgrounds. We again observed increased vigor, branching and increases in seed yield consistent with our 2018 observations. In our 2019 field tests, photosynthetic measurements were taken during the growing season on C3004 Camelina lines at similar developmental stages. Five lines tested showed statistically significant increases in several important photosynthetic parameters for plants, including CO2 fixation, electron transport rate, and the conversion of light energy to chemical energy (effective quantum yield). While field conditions throughout Western Canada were harsh, including severe drought, there were indications that the C3004 plants produced more seed than wildtype Camelina; however, substantial variability among the test plots under these severe conditions confounded the collection of statistically significant seed yield data from the study. In 2020, Yield10 plans to field test C3004 Camelina lines at an expanded number of sites to collect agronomic and seed yield data; we also plan to field test C3004 in canola for the first time is also planned. We currently have research license agreements in place with seed companies to evaluate the Camelina C3004 gene in soybean, corn and potato.
The version of the C3004 trait we have tested so far in our Camelina studies was genetically engineered using a traditional GMO approach; however, we believe that it may be possible to develop versions of C3004 Camelina that are non-regulated under current USDA-APHIS rules and expect this will form a key part of our Camelina commercial development effort.
Oil Enhancing Traits: C3007, C3008, C3009, C3010 and C3012
Edible oils or vegetable oils are derived from fruits and vegetables, such as palm, soybean, rapeseed (canola) and sunflower. These oils are used in frying, baking, other types of cooking and in food preparation and flavoring such as salad dressings and bread dips. Edible oils are of increasing importance among health-conscious consumers as key functional ingredients which may reduce the risk of cardiovascular disorders along with potentially lowering the possibility of certain kinds of breast cancer. Based on these drivers the global edible oil market is anticipated to witness a substantial growth in demand for unrefined, unprocessed, healthy, and organic oil.
This is leading to the development and commercialization of modified soybean and canola oils with higher levels of healthier unsaturated fatty acids. Health benefits of omega-3 fatty acids from fish oil are creating additional interest in plant-based omega-3 vegetable oils as a nutritional constituent in the food industry on account of their exceptional anti-inflammatory and other health attributes. Camelina and flax naturally produce omega-3 oils and are seeing increased commercial interest and we believe that Yield10 is well positioned to become the leader in Camelina oil production.
Yield10 is progressing a series of traits targeted at increasing the oil content in Camelina where the best C3003 lineoil is the main value driver. Based on the results we obtain with Camelina we may be able to license these traits to seed companies for use in other oilseed crops including canola and soybean. Yield10 is building significant capabilities and intellectual property around key oil biosynthesis pathways in plants based on technologies for increasing oil content in seeds. In cases where the edible oil is the primary economic value driver for the crop, increasing oil content is a valuable trait. Improving the oil content and yield of Camelina seed would make this an attractive crop for producing omega-3 nutritional oils. Based on our study of metabolic pathways in oilseed crops, we believe there is an opportunity to apply genome editing to significantly increase oil content in oilseed crops including canola, soybean, sunflower and Camelina. We began the technical work in Camelina in 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’s Biotechnology Regulatory Services (BRS) that two types of our genome-edited Camelina plant lines developed using CRISPR/Cas-9 genome editing technology for increased oil content were not considered to be regulated under 7 CFR part 340, clearing the way for field testing in the U.S. The first type is based on the inactivation of an enzyme expected to decrease turnover of oil in mature seeds and reduce free fatty acids in oil, a trait we have designated as C3008a. The other type is based on the inactivation of three enzymes to both enhance the production of oil and decrease turnover of oil in mature seeds and is designated as our triple edit, or C3008a, C3008b and C3009 trait containing line. We completed our first field trial with these edited Camelina lines in the U.S. during the 2019 growing season. Some of the Camelina lines with edits to the three genes produced an increase in oil content in individual seeds as well as an increase in seed oil content as a 23 percent increase as measured by averagepercentage of seed weight per hectare. This result was statistically significant (p<0.05) as compared to control plants. In addition, the highest yieldingThe best performing line expressing the C3003 gene maturedproduced an average of six days earlier than the control plants. Expression of C3003 did not change the11.8 percent increase in oil per individual seed, an 8.7 percent increase in individual seed weight, and a 4.7 percent increase in seed oil content as a percentage of overall seed weight. No significant change in oil contentcomposition was observed. Yield10 is planning additional field tests with the best Camelina line in the 2020 growing season and is scaling up pure seed as measured byproduction in anticipation of potential commercial use.
In 2018, we signed an exclusive global license agreement with the weightUniversity of Missouri for advanced oilseed technology including the C3007 and C3010 gene traits, promising targets focused on the central role of Acetyl-CoA Carboxylase ("ACCase") a key metabolic control point for oil production. In 2019, we signed an additional exclusive global license with University of Missouri for another ACCase related gene target we named C3012. We have produced genome edited versions of C3007 in relationCamelina and canola. We have also filed a petition with USDA-APHIS to confirm that the weight of the seed.
PHA Traits: C3014 and C3015
While we continue the discovery of novel yield traits for licensing to seed companies and focus on deploying our non-regulated traits to improve the performance and value of Camelina to produce highernutritional oils in the near-term, we believe there may be significant market opportunity for producing PHA biomaterials in Camelina in the future. PHA biomaterials (PHAs) are natural microbial high molecular weight polymeric storage polymers. These polymers are natural polyesters and can be recovered from the microbes which produce them and processed using standard plastics processing equipment into a range of product forms. PHAs have applications in a wide range of markets including animal nutrition, wastewater treatment and the replacement of petroleum plastics. Commercialization of PHAs based on fermentation technologies continues to receive considerable media and investment interest even although this approach has proven challenging due to the high capital and operating costs. Feedstock and energy costs dominate, the net result being PHA products with limited market adoption. We believe direct production of PHAs in crops can lead to low production costs and open large market opportunities. Seeds are natural, stable storage sites for large amounts of oil and proteins deposited by plants to nourish seedlings following seed yieldsgermination 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 site in a plant for producing PHA biomaterials. In 2019, Yield10 filed a U.S. Patent application for new technology potentially enabling low-cost production of PHA biomaterials in the seeds of Camelina. The new Yield10 patent application describes a discovery around maintaining the viability and vigor of Camelina seed programed 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 have demonstrated the production of up to 10% PHB in seeds of Camelina with good seedling viability in growth chambers. We believe crop-based production will enable an advantaged cost structure thereby eliminating a barrier to entry for broad adoption of these materials. The key concept was to introduce PHB as a new component of the seed composition and by weight per hectare,processing the individualPHB producing seed, sizeto produce oil, polymer, and protein rich seed meal. The combination of all three products improves the overall value proposition and we believe that in time this will result in PHA biomaterial costs in line with canola and soybean oils. Yield10 plans to develop and commercialize Camelina seed based PHA biomaterials for water
treatment applications and look for commercial partnering opportunities for plastics replacements markets. We currently have two new PHA biomaterial traits, C3014 and C3015, in our development pipeline and plan to carry out the first field tests in 2020 with these lines was decreasedtraits, pending regulatory approval. In the planned tests, we will also bulk up C3014 and C3015 Camelina seed for planting in the 2021 growing season so we can begin to scale production and produce crop based PHA samples for testing and demonstration purposes.
C4000 Series Traits
We used our GRAIN platform to study global transcription factors and identify novel yield traits in the C4000 series. These traits may be powerful regulators 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, above ground biomass, and below ground biomass production in our switchgrass plants engineered to overexpress the transcription factors. We reported these results for our novel C4001 and C4003 traits in 2018 in the journal Plant Science. Switchgrass plants expressing C4001 resulted in a total increase in biomass of 75-100 percent in leaves and stems as compared to controls, likely due tocontrols. Expression of C4003 in switchgrass resulted in a change in carbon partitioning in the plant. This reduction in seed size was expected based on data from prior greenhouse trials and Yield10 is addressing this finding with our second generation C3003 trait which is expressed specifically in the seed tissue of plants.
We are planning to conduct additionalprogressing the development of certain of our C4000 series of traits in Camelina and corn. Depending on the field testsperformance of C3003 in the 2017 growing season. In these studies, we plan to evaluateC4000 series Camelina lines, transformedYield10 plans to integrate them into a commercial Camelina seed business. Recognizing our limited internal capabilities and resources in corn, the Company plans to seek partners interested in progressing these traits in corn under a license agreement like the one in place with eachBayer for soybean. Forage Genetics began work with certain of our firstC4000 series traits through a research license signed in 2018 to assess the potential of our traits to increase biomass in forage sorghum. Simplot is testing the C4001 trait in potato. We also began early development work in late 2018 to assess certain C3000 and second generation C3003 trait as well as canola lines containingC4000 series traits in corn through a third-party agricultural company.
We expect evaluation of C4000 series traits in these target crops will continue to advance in 2020. Traits in this series and the first generation C3003 trait. Preparation and logistics for this study, including seed bulk up, contracts with service providers and regulatory permitting were underway in early 2017. We plan to report preliminary data from this field test in fourth quarter 2017 once the field tests have been completed and resulting data analyzed.
Target Crop: The Oilseed Camelina sativa
As we continued to make progress on the development of our novel yield traits for major crops and/or traits. In particular we expect to progress a select few of the C4000 series traits, global regulatory genes discovered in our T3 Platform which we have shown to significantly enhance photosynthesis and carbon capture in our C4 monocot model plant switchgrass. In the meantime,through research license agreements with major seed companies we have been ableworking to progressdevelop Camelina based business opportunities for Yield10. Our vision is to use our proprietary non-regulated gene traits to improve Camelina seed oil content and yield in the C4003near term to produce nutritional oils. In the longer term, we believe optimizing the production of PHA biomaterials in Camelina will enable large acre production as a cash cover crop. Some estimates from USDA indicate a potential of up to 30 million acres in the upper corn belt of the U.S., which would make Camelina the third largest crop in the U.S. Ideally, cash cover crops should improve the sustainability of food production by reducing nutrient pollution of our waterways and provide additional sources of revenue for farmers. A new product like PHA biomaterials may have the potential to create value-added bioproducts markets in water treatment and plastics replacement. Production of PHA biomaterials in cover crops may also provide environmental benefits in that it would reduce fertilizer run-off from farming on the front end, and produce a natural biodegradable product that can be used to reduce nitrate pollution from aquaculture and septic systems on the back end.
Camelina is an attractive choice of crop for the following reasons:
There is a growing demand for crops that diversify the crop landscape, have lower environmental footprints and have the potential to produce high value secondary products, opening new opportunities for farmers.
Camelina oil is rich in an omega-3 fatty acid (ALA) which is creating demand for the oil as a substitute for fish oil in aquaculture.
Camelina is readily segregated from the major row crops and readily engineered using genetic engineering tools, making it an ideal platform for producing novel products.
Camelina, as an underdeveloped crop has high technology upside potential to improve agronomics, seed yield and seed value.
Camelina (Camelina sativa) is currently in limited cultivation in North America and Europe and was grown extensively in Europe in medieval times for food and fuel. Interest in biofuels resulted in additional investment beginning in the mid-2000s, as a result of which several beneficial Camelina attributes have been shown. Camelina is amenable to production practices used for canola, grows on marginal lands, has enhanced drought and cold tolerance, displays early
maturation and requires fewer inputs than other oilseeds. The fast growth cycle is particularly attractive in areas in the Northwest U.S. and into Canada with shorter growing seasons. It is naturally resistant to diseases that impact canola and it performs well across Canada and parts of the U.S.
Camelina oil, like flax seed oil, is rich in omega-3 fatty acids which are essential in the human diet. There are three main types of omega-3 fatty acids, two of which EPA (Eicosapentaenoic acid) and DHA (docosahexaenoic acid), come mainly from fish. The third ALA (alpha-linolenic acid), the most common omega fatty acid in the Western diet, can come from fish or plant sources including nuts, flaxseed and Camelina. Omega-3 oils have been shown to help prevent heart disease and stroke, may help control lupus, eczema, and rheumatoid arthritis, and may play protective roles in cancer and other conditions. Recent clinical studies have shown that Camelina sativa oil, but not fatty fish, or lean fish improved serum lipid profile in subjects with impaired glucose metabolism in a randomized controlled study published in the journal Molecular Nutrition and Food Research, U. Schwab, et. al. (2018). In addition, seafood production is increasingly based on aquaculture, where using ocean harvested fish as feed is not sustainable and cannot meet the growing global demand. Aquaculture feed is now increasingly based on crop-based feed ingredients such as soy protein meal and soybean oil due to the availability and lower cost, However, fish oil, the primary source of the essential omega-3 fatty acids is the most difficult and expensive feed ingredient to replace. The high content of the omega-3 ALA makes it a preferred oil for use in aquaculture feed as compared to soybean oil. This is creating a growing market for Camelina oil.
Harvested Camelina seed is typically cold crushed to produce oil and an oil containing protein meal. In the United States an application for GRAS ("Generally Regarded as Safe" under FDA guidelines) status for Camelina oil was filed with FDA in and received a favorable response letter from the FDA in 2018. The Canadian Food Inspection Agency (CFIA) has approved the use of mechanically extracted Camelina as a feed ingredient for farmed salmon and trout, a policy change likely to benefit the aquaculture industry in Canada, where there is high demand for omega-3 oils. Camelina protein meal left over following oil extraction by cold crushing has also been approved for use in animal feed applications in the U.S. and Canada. The residual oil in the meal provides additional value as animal feed.
When Yield10 was launched, we started working on Camelina as the basis for our “Fast Field Testing” system. Prior to becoming Yield10, our oilseeds team had worked with Camelina for several years to develop it as a production platform for PHA biomaterials. We currently use Camelina to develop the initial field performance data for our gene trait targets identified using our GRAIN gene discovery tool because it is possible to go from trait gene concept to engineered stable seed suitable for field work. Camelina has a small seed size and is readily segregated from commodity crops including canola, soybean and corn and for these reasons we consider it highly unlikely that engineered Camelina seed will contaminate commodity crops slated for export markets.
These commodities are exported to geographies with strict regulations regarding the use and import of farm products which have been genetically engineered. The importance of avoiding contamination of commodity crops with new GMO varieties has resulted in ricecompanies delaying commercial release until any new trait is globally deregulated. This has resulted in a large increase in both the costs and the timelines to commercialize new GMO varieties of commodity crops. The approval processes in the U.S. and Canada, although different in each country, are more straightforward to navigate. The use of new tools such as genome editing is also receiving favorable treatment in the U.S. and some traits developed using this approach can be defined as non-regulated under USDA-APHIS rules. Yield10 has developed non-regulated Camelina lines with both single and three gene edits, taken them through the USDA-APHIS process and has executed field trials with them. Camelina has also been engineered by Yield10 to produce PHA biomaterials and by third parties to produce modified oils including fish oil replacements. We expect these crops will be considered regulated under the USDA-APHIS rules but also recognize the potential upside from the ongoing process to modernize these rules, taking into consideration the track record of safety and learning from the last 25 years.
Camelina is a relatively underdeveloped crop with no barriers to entry for companies like Yield10 to develop a Camelina based seed and products business. Due to the limited market opportunities for Camelina seed mainly focused on biofuels, this crop has not been subjected to intensive breeding efforts or the use of input traits like herbicide tolerance and disease resistance. We believe the growing interest in omega-3 oils will change this and because Yield10 has been using Camelina as a trait development tool we have in hand several proof points of the upside potential using our internal resourcesproprietary yield and oil content traits. We have demonstrated the potential to more than double Camelina seed yield with our complex C3006 trait. Our single gene C3003 and C3004 yield traits have also been shown to increase Camelina seed yield and because C3004 is a Camelina gene it has the potential to be re-engineered in Camelina to develop non-regulated Camelina lines with higher seed yield. In addition to the seed yield traits, we expect to report initial rice data as soon as it is available.have progressed genome edited oil content traits which are showing promise for increased seed oil content, the primary economic value driver for Camelina seed.
Target Crops for Trait Licensing
Our initialresearch and early development work inwith our C3000 and C4000 series traits in Camelina and other crops 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 productivity of their land to meet rising demand for food and feed, andthereby creating significant economic value would be createdvalue.
In considering our strategy 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;genetically modified, or GM, due to the insertion of foreign recombinant DNA; and trait genes whichthat we may be able to deploy outside of the GM regulations,in lines that are not considered regulated by USDA-APHIS, which encompassesencompass our trait genes whichthat are based exclusively on plant genes. We see the opportunity to deploy our trait technology 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 ofon 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.
Canola or (Brassica napusnapus) is a cultivar of rapeseed which produces a higher value edible oil favored by consumers because it has a healthier 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)(Monsanto, now Bayer) and Liberty-Link (Bayer) varieties of canola are grown and were introduced to the market in the 1990s. Approximately 2224.7 million acres were planted in Canada and the U.S. in the 20162018 growing season. The Canola Council of Canada has set yield goals of 52 bushels/acre for 26 million metric tons of production to meet global market demand for canola by 2025. Yield10 is targeting a 2010-20 percent or greater increase in canola seed yield. With a 20162017 harvest of 812939 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 $1.6$1.9 billion that could be shared among the playerscompanies in the canola value chain.
Soybean or Glycine maxis 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. Approximately 88An estimated 94.4 million acres of soybean werewill be planted in the U.S. and Canada in the 20162018/2019 growing season. According to the USDA, the U.S., Brazil and Argentina growtogether represent approximately 80 percent of global soybean production. Yield10 is targeting a 20 percent or greater increase in soybean seed yield. WithAssuming a 20162018/2019 U.S. harvest of 4.364.5 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 $8.7$8.8 billion that could be shared among the playerscompanies 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 for the first time in 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 9083 million acres of corn were planted in North America in the 20162018 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” whichstacked (“stacked” refers to the practice of adding multiple traits to an elite plant line as a strategy to protect yield)line). Europe has limited production of GM corn, where Spain is a leading producer of GM corn.producer. 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 2016projected 2018/2019 U.S. harvest of 15.214.4 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 $5.32$5.1 billion that could be shared among the playerscompanies in the corn value chain.
sector has a value of rice. Whilearound $20 billion. Yield10 has not establishedno in-house R&D activities specific to potato but has executed a target for yield improvement in rice, early work is underwayresearch license agreement with Simplot to evaluateenable the potentialevaluation of three of our technologiestraits in this globally important food crop.potato.
Forage Sorghum.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.
Yield10 has no in-house R&D activities specific to forage sorghum but has executed a research license agreement with Forage Genetics to enable them to evaluate five of our traits in this crop.
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 that inbiotechnology-derived varieties. In 2016, 92 percent of the corn, 93 percent of the 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.
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”) and biotechnology-derived or genetically engineered plants that are 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, depending on the specific product.product and its potential applications or intended uses. EPA’s principal oversight role is for biotechnology-derived products that are intended for use as pesticides or herbicides, under the authorities granted to the agency under the Federal Insecticide, Fungicide, and Rodenticide Act and the Toxic Substances Control Act. Our business strategy for major grain crops is to develop yield and performance traits for licensing to the major seed companies. We have no current plans for the development of pesticide or herbicide GE traits that would be subject to the procedures and requirements of the EPA under these statutes.
Our seed traits and any future products that are successfully developed containing our seed traits, however, are or will be subject to USDA and FDA 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 for use in water treatment may potentially have EPA regulatory requirements, and the regulations relating to manufacturing and consumer protection will need to be addressed.
Within USDA, the Animal and Plant Health Inspection Service (APHIS)APHIS is responsible for protecting agricultural plants from pests, diseases and noxious weeds. Under the Plant Protection Act ("PPA"), USDA-APHIS has regulatory oversight over products of modern biotechnology that could pose such a risk.risk to domestic agriculture and native plants. Accordingly, 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.engineering techniques. These GE plants are called “regulated articles.”articles” in the relevant USDA-APHIS regulatesregulations, which are codified at 7 CFR part 340. The PPA and the implementing regulations in 7 CFR part 340 empower USDA-APHIS to regulate the import, handling, interstate movement and release into the environment of
regulated organisms that are products of biotechnology,articles, including certain GE organisms undergoing confined experimental use or field trials. Regulated articles are reviewed to ensure that, under the proposed conditions of use, they do not present a plant pest risk throughby ensuring appropriate handling, confinement and disposal. The developer may then petition
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 oversight, including but not limited to permitting requirements for a determination of non-regulated status forimport, handling, interstate movement and release into the article. environment.
If, the agencyhowever, USDA-APHIS determines that thea GE plant is unlikely to present a greater plant pest risk than its unmodified counterpart, the newnewly developed crop will no longer be subject to the permitting and other regulatory processes that are overseen by USDA-APHISthe agency (i.e., it will no longer be treated as a potential plant pest). Such a determination by the USDA-APHIS is called "not regulated" under the 7 CFR part 340 regulatory framework. The regulations establish detailed procedures for how a developer of a new GE plant may petition USDA-APHIS to determine if modified plant lines are not regulated under the 7 CFR part 340 framework, which is an official agency finding that the particular article is unlikely to pose a plant pest risk and therefore no longer needs to be regulated under 7 CFR part 340 and the PPA.
USDA-APHIS conducts a comprehensive science-based review of the petition to assess, among other things, plant pest risk, environmental considerations pursuant to the National Environmental Policy Act, and any potential impacts on endangered species. The duration of the petition process varies based on a number of factors, including the agency’s familiarity with similar GE products, the type and scope of the environmental review conducted, and the number and types of public comments received. If, upon the completion of the review, USDA-APHIS approves the petition and the product is no longer deemed a “regulated article,” the developer may commercialize the product, subject to any conditions set forth in the USDA-APHIS written decision issued in response to the petition for determination of non-regulated status.
Historically, changes to the U.S. regulatory paradigm for agricultural biotechnology have been infrequent, are typically preceded by notice, and are most often subject to public comment, but there can be no guarantee that the USDA-APHIS governing regulations and policies will not change.
We have submitted two petitions under 7 CFR part 340 for a determination of the regulatory status (also known as the “Am I Regulated?” letter) to USDA-APHIS’s Biotechnology Regulatory Services in order to confirm that the following two traits designed to increase oil content are not going to be regulated by the agency: (i) the single trait C3008 Camelina plant line, developed using CRISPR genome editing technology for increased oil content; and (ii) the triple-edited Camelina line that combines three gene traits, C3008a, C3008b and C3009, to increase oil production. In both cases, USDA-APHIS's Biotechnology Regulatory Services approved our petitions and confirmed that each of these novel plant lines would not be treated as a regulated article.
To our knowledge, our triple-edited Camelina line which was determined to not be regulated under 7 CFR part 340 in September 2018, is the first CRISPR-edited triple-trait plant determined by the agency to be not to be regulated. Given our business strategy to develop certain multi-trait genome edited plant lines, this achievement should facilitate our ability to put more of our novel yield traits through the petitioning process and the agency’s scientifically driven decision-making process, with the expected end result of having lines containing more of our traits treated as not to be regulated under 7 CFR part 340 (as compared to our seed traits developed using Traditional Genome Modification, which are regulated articles). We expect to continue to make appropriate use of the non-regulated genetically engineered“Am I Regulated” letter procedures to clarify the regulatory status of our new GE seed traits as they are developed.
Also, we tested the C3008 single-trait Camelina line in a 2018 field evaluation that took place in the United States following a notification in 2017 that the line would not be regulated under 7 CFR part 340.
Separate from the 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,breeding and planting issues and USDA-APHIS regulation under the authorities granted to EPA7 CFR part 340, a GE plant also will be regulated by the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). 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 and final(“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 as (i) 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.
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 evaluate 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,
As in the United States, 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 identified 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 be 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.
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. During 2018, we conducted field studies of C3003 in canola, Camelina and soybean at field sites in Canada.
Finally, as one of Canada’s major field crops, canola in particular is subject to variety registration, which is a regulatory requirement of the Seeds Act and is also administered by the CFIA. Any future sales of our seed traits or products in Canada would be done by a third-party collaborator or other partner, and that third party would be responsible for complying with registration requirements for the canola varieties, if applicable.
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, 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, while a recent EU 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. It is possible that emerging oversight regimes for GE products in other jurisdictions could follow the EU approach and impose similar strict requirements for the release of such products into the environment and their incorporation into human food or other consumer products.
Regulation of biotechnology-derived products in the EU is primarily based on Directive 2001/18/EC (the “2001 EC Directive”). The 2001 EC Directive defines “genetically modified organisms” ("GMOs") broadly as “organism[s], with the exception of human beings, in which the genetic material has been altered in a way that does not occur naturally by mating and/or natural recombination.” In July 2018, the Court of Justice of the European Union (CJEU) issued an important ruling clarifying that the 2001 EC Directive and its pre-market authorization and associated risk assessment requirements required for such “GMOs” should also apply in full to organisms developed using more modern “directed” mutagenesis techniques.
The July 2018 CJEU decision is being interpreted to cover all modern genome editing tools such as CRISPR-Cas9, TALEN and oligonucleotide-directed mutagenesis. This recent clarification by the CJEU regarding the scope of EU regulations suggests that novel seed trait developers who are seeking to bring genome edited seed traits to commercial markets in the EU will face hurdles comparable to what has historically been required in Europe for introducing and commercializing Traditional Genome Modification traits.
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. 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 GE plants similar to that of the EU.
License Agreement with the University of Massachusetts
Pursuant to a license agreement with the University of Massachusetts ("UMASS") dated as of June 30, 2015, we have an exclusive, worldwide license under certain patents and patent applications, including issued patents covering our yield trait gene C3003, relating to the manufacture of plants with enhanced photosynthesis. The agreement provides an exclusive, worldwide license to make, have made, use, offer for sale, sell, have sold and import any transgenic plant seed or plant grown there fromtherefrom or transgenic plant material developed for sale to a farmer or grower for planting 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 or in part) one or more issued or pending claims of the licensed patents or patent applications. The licensed patent rights include issued patents covering our yield trait gene C3003.
We are obligated to pay UMASS milestone payments relating to any regulatory filings and approvals covered by the agreement, royalties on any sales of licensed products following regulatory approval, as well as a percentage of any sublicense income related to the licensed products.
We may terminate the agreement at any time upon 90 days prior written notice to UMASS. Either party may terminate for material breach immediately upon written notice for a breach that is not cured within 60 days after receiving written notice of the breach. In addition, UMASS may terminate this agreement with respect to certain patent rights immediately upon written notice in the event we contest the validity or enforceability of such patent rights.
License Agreement with the University of Missouri
Pursuant to a license agreement with the University of Missouri (“UM”) dated as of May 17, 2018, we have an exclusive, worldwide license to two novel gene technologies to boost oil content in crops. Both technologies are based on significant new discoveries around the function and regulation 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 include an exclusive worldwide license to a third gene in the ACCase complex, that we have designated C3012, that may complement the activity of C3007 to boost oil content in crops.
Pursuant to the UM license agreement, we are required to use diligent efforts to develop licensed products throughout the licensed field 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 C3007, C3010 and C3012, including completion
of multi-site field demonstrations of a crop species in which C3007, C3010 and C3012 have been introduced, and filing for regulatory approval of a crop species in which C3007, C3010 and C3012 have been introduced within a specified period. Our 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 we are able to reach agreement with UM as to the potential adjustment of the applicable milestone.
We are 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 percentage of any sublicense royalties related to the licensed products.
We may terminate the license agreement at any time upon 90 days’ prior written notice to UM. Either party may terminate the license agreement upon written notice for a breach that is not cured within 30 days after receiving written notice of the breach. In addition, UM may terminate the 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.
Agricultural Industry Landscape
Following advances in biotechnology in the 1970s through early 1990s, the first genetically modified ("GM") crops were commercially introduced in the U.S. in the years 1994 and 1995. Today, the U.S. leads the world in the adoption of GM crops in terms of crop value and acreage planted. GM crops 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 444457 million acres worldwide were planted with GM crops in 2015,2016, the most recent year wherefor which data is available. The planting of GM crops is centered in the Americas with North America at approximately 45.545 percent of the acres and LatinSouth America at approximately 43 percent. China and India follow with approximately 8 percent and the balance of the total worldwide GM crop acreage in 20152016 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 2013,2016, 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 research firm, Research and Markets, the total global seed business was estimated at $53$68 billion in 20142017 and is projected to grow to more than $100 billion by 2022. According to an ISAAA report, the global GM seed business represented a $15.3$17.2 billion market in 2015.2017 and biotech crops were grown on approximately 469 million acres that year. 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 is dominated by large multinational companies and their subsidiaries including BASF Corporation, Bayer, Dow, DuPont Pioneer, Monsanto,de Nemours, Inc., Syngenta AG and AgReliant.AgReliant Genetics, LLC. These companies have significant resources, 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 to successful harvest. Many of these companies arewere recently involved in consolidation of the current sector consolidation with the Dow/ Dupont merger of DuPont de Nemours, Inc. and Dow Chemical Company, the acquisition of Syngenta AG by the China National Chemical Corporation, and the acquisition of Syngenta by ChemChina nearing completion and the acquisition ofThe Monsanto Company by Bayer ongoing.in 2018.
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 companies 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, Inc., BioCeres S.A., Calyxt, Inc., Cibus Ltd., Evogene Ltd., Inari Agriculture, Inc., Indigo Agriculture, Inc., Kaiima andBio-Agritech Ltd., Marrone Bio Innovation, Inc., and 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, 2016,2019, we owned or held exclusive rights to 1022 patents and pending patent applications worldwide related to advanced technologies for increasing yield in crops. 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.
Employees
As of December 31, 2016,2019, we had 2025 full-time employees. Of those employees, 1521 were in research and development. Among our staff, 711 hold Ph.D.’s and 1112 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 are located in Massachusetts, and we maintain a research and development facility, including greenhouse facilities, in Saskatoon, Canada. None of our employees are subject to a collective bargaining agreement. We consider our relationship with our employees to be good.
Corporate History and Investor Information
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
Our business is subject to numerous risks. 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. Any or all of our forward-looking statements 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.
Risks Relating to our Financial Position
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.
As of December 31, 2019, we held unrestricted cash, cash equivalents and short-term investments of $11.1 million. In March 2019, we closed on a registered direct offering of our common stock, raising $2.6 million, net of offering costs, and in November 2019, we closed on a public offering and a concurrent private placement of our securities, raising $10.2 million, net of offering costs. Through March 20, 2020, we received an additional $1.6 million from investor exercises of 204,796 outstanding warrants. We follow 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 the Company's ability to continue as a going concern for one year after the date its financial statements are issued. We have concluded, that the Company has sufficient cash and short-term investments to fund its operations into the second quarter of 2021.
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 and licenses related to our 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.
We will require additional capital resources to support the implementation of our business 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. 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 will 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.
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 (the "Code"), due to ownership changes resulting from equity financing transactions. If we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our potential products or proprietary technologies or grant licenses on terms that are not favorable to us.
We have recently changed our corporate strategy to focus on the crop science industry, and our technologies in this area are at a very 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 restructuring costs, will be approximately $7,500 - $8,000, compared to approximately $25,000 prior to the restructuring.
The remaining cash restructuring costs associated with our strategic repositioning are estimated at approximately $2,048, which have various payment due dates through May 2018. However, 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.
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 which("Nasdaq"). Nasdaq listing rules require us to maintain certain closing bid price, stockholders’ equity and other financial metric criteria in order for our common stock to continue trading on Nasdaq. For example, Nasdaq Listing 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. Ourshare, and Listing Rule 5810(c)(3)(A) provides that a failure to meet NASDAQ’s continued listing standards could result in the delisting of our common stock, negatively impact the price of our common stock and negatively impact our ability to raise additional capital.
On June 30, 2016,25, 2019, we received a deficiency letter from The NASDAQ Stock MarketNasdaq which provided us a grace period of 180 calendar days, or until December 27, 2016, to regain compliance with the minimum bid price requirement, which would have required a closing bid price of at least $1.00 per share for a minimum of ten consecutive business days. We did not meet the minimum bid requirement prior to the expiration of the grace period on December 27, 2016, and on December 28, 2016, we received notice that NASDAQ granted us an additional 180-day grace period (until June 26, 2017)23, 2019, to regain compliance with the minimum bid price requirement. We may achievesubsequently received an additional 180 days (until June 22, 2020) to regain compliance during this additional 180-day period ifwith the closing bid pricerequirement. On January 9, 2020, our stockholders approved an amendment to our Amended and Restated Certificate of Incorporation, as amended, authorizing a reverse stock split of our common stock. A 1-for-40 ratio for the reverse stock split was subsequently approved by our Board of Directors, and the reverse stock split took effect on January 15, 2020. As a result of the reverse stock split, every forty shares of our common stock is at least $1.00 perwere automatically combined and converted into one issued and outstanding share for a minimum of 10 consecutive business days before June 26, 2017. If we fail to regain compliance on or prior to June 26, 2017, our stock will be subject to delisting by NASDAQ. Additionally, if we fail to comply with any other continued listing standards of NASDAQ, our common stock, will also be subject to delisting. If that were to occur, our common stock would be subject to rules that impose additional sales practice requirements on broker-dealers who sell our securities. The additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from effecting transactions in our common stock. This would significantly and negatively affect the ability of investors to trade our securities and would significantly and negatively affect the value and liquidity of our common stock. These factors could contribute to lower prices and larger spreadswith no change in the par value per share. As of January 30, 2020, we had regained compliance with the minimum bid and ask prices forprice requirement.
Currently, our common stock. If we seek to implement a reverse stock split in order to remain listed on The NASDAQ Capital Market, the announcement and/or implementation of a reverse stock split could significantly negatively affect the price of our common stock.
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 our existing grants or new grants that we may obtain in the future may be terminated or modified.
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 and results of operations could be adversely affected by public health epidemics, including the recent and ongoing coronavirus outbreak.
A novel strain of coronavirus was reported to have originated in Wuhan, Hubei Province, China in December 2019, and has been rapidly spreading across the globe, including in the United States and Canada. Any outbreak of contagious disease such as the coronavirus or other adverse public health developments could have a material and adverse effect on our business operations. Such adverse effects could include quarantines, disruptions of or restrictions on our ability and/or the ability of our collaborators’ personnel to travel or conduct normal business activities, as well as closures of our facilities or the facilities of our collaborators for an indefinite period of time (including shutdowns that may be requested or mandated by governmental authorities). Any temporary closures of facilities would likely affect our development efforts and operating results, and any disruption to the operations of our collaborators would likely impact our development efforts and operating results. The extent to which the coronavirus may impact our results will depend on future developments, which are highly uncertain and cannot be predicted, and on new information that may emerge concerning the severity of the coronavirus. However, current predictions suggest that the impact of sustained business closures and quarantines resulting from the coronavirus on the global economy will be severe, and this may have a material adverse effect on our business.
Risks Relating to our Yield10 Bioscience Crop Science Program
The technology and processes used in our crop science program and the application of our technology to enhance photosynthetic efficiency of crops 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 will be required to successfully develop and commercialize our innovations. Our initial development strategy is to make it attractive for established agricultural industry companies to invest financial and technical resources to introduce our traits into their elite germplasm for event selection and evaluation under research licenses. For example, in 2017 we entered into a non-exclusive research license with Monsanto, which was subsequently acquired by Bayer AG (“Bayer”), pursuant to which we granted Monsanto a non-exclusive research license to evaluate our novel C3003 and C3004 yield traits in soybean. We expanded the agreement with Bayer in 2019 to cover a new discovery and intellectual property related to C3004. In 2018, we granted a non-exclusive research license to Forage Genetics, a subsidiary of Land O’Lakes, Inc., to evaluate five of our novel yield traits in forage sorghum. The industry is highly concentratedtraits included in the research license include C3003 as well as four traits from our GRAIN platform, C4001, C4002, C4003 and dominated byC4029. In 2019, we granted a small number of large players, which could impact effortsnon-exclusive research license to form such collaborations.J.R. Simplot Company to evaluate C3003, C3004 and C4001 in potato. We may not be successful in establishing or maintaining suitable partnerships,relationships with established agricultural industry companies for research licenses in the future, and may notthere can be able to negotiateno 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 will 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 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 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 neither survive the development process nor ultimately receive theany 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 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.
Market opportunity estimates and limit or even prohibit the developmentmarket growth forecasts are subject to significant uncertainty and sale of such products.
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.
Many factors that may adversely affect the success of our field trials 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.
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 reduces 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 us,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 Canada, the regulatory requirements for our future products in development are evolving and are subject to change, and if there are adverse changesto the current regulatory framework, our or our future collaborators’ ability to market our traits could be delayed, prevented or limited.
In 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 our seed traits or future products in development containing our traits
could result in a substantial increase in the time and costs associated with developing and commercializing future products containing our 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. These genetically engineered plants are called “regulated articles” in the relevant USDA-APHIS regulations, which control the import, handling, interstate movement and release into the environment of regulated articles, including certain genetically engineered organisms undergoing confined experimental use or field trials. Seed traits developed using the insertion of recombinant DNA, such as our C3003 yield trait that leverages the biological functions of an algal gene, are regulated articles and are therefore subject to extensive USDA-APHIS oversight, including but not limited to permitting requirements for import, handling, interstate movement and release into the environment.
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. In general, genome editing approaches to novel plant trait development have been considered not regulated by USDA-APHIS. In particular, we have submitted two petitions (also known as the “Am I Regulated?” letter) to USDA-APHIS’s Biotechnology Regulatory Services in order to confirm that the following two oil content traits are not going to be regulated by the agency under 7 CFR part 340: (i) the single trait C3008 Camelina plant line, developed using CRISPR genome editing technology for increased oil content; and (ii) the triple-edited Camelina line that combines three gene traits, C3008a, C3008b and C3009, to increase oil production. In both cases, USDA-APHIS approved our petitions and confirmed in writing that each of these novel plant lines would not be treated as a regulated article.
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. 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”).
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 genetically engineered and conventional versions. When such a determination cannot be made, the novel plant variety may become subject to FDA premarket review and approval as a food additive.
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. Subsequently, in October 2018, FDA leadership issued a document entitled the “Plant and Animal Biotechnology Innovation Action Plan” (“Action Plan”) that identified three key priorities for the agency in this area and stated that the FDA has reviewed the comments and other information it received in response to the January 2017 request for comments. The FDA also stated that it intended to develop guidance for industry explaining how the FDA’s existing regulatory policy for foods derived from new plant varieties applies to foods produced using genome editing. Although the expected draft guidance has not yet been released for public comment, on March 4, 2020 FDA, USDA, and EPA launched a new initiative to help consumers better understand foods created through genetic engineering, called “Feed Your Mind,” which aims to answer the most common questions that consumers have about such crops. The FDA also stated in the 2018 Action Plan that it intended 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. Subsequently, in February 2019, FDA completed its first consultation on a genome edited plant variety (a soybean variety modified to have increased levels of oleic acid).
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. First, the Canadian Food Inspection Agency ("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") is responsible for conducting environmental assessments of biotechnology-derived plants, referred to as “plants with novel traits” ("PNT"). Authority for the PBO includes both approving confined field trials with the PNT through permits and authorizing their “unconfined release” as a first step towards commercialization. Second, under 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 that includes any PNT or other biotechnology-derived foods. Health Canada will evaluate 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, as well as whether any restrictions are warranted under applicable law or the product’s safety profile. 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.
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 genetically engineered crops. With laboratories and greenhouses in both the U.S. and Canada, we are also subject to regulations governing the shipment of seeds and other plant material between our facilities in the U.S. and Canada, including USDA-APHIS permits for the import and export of plant materials that could pose a risk to domestic
agriculture. We also have been conducting field studies of various yield traits in Canada since 2016 under PNT permits issued by Canadian regulators.
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 you 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.
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 and in the consumption and labeling of 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.
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/Cas9,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 biotechsector and related industries, could adversely affect our operations and our ability to generate future revenues and to achieve profitability.
Agricultural production and trade flows are subject to government policies and regulations. Governmental policies and approvals of technologies affecting the agricultural industry, because this approach is believed to havesuch as taxes, tariffs, duties, subsidies, incentives and import and export restrictions on agricultural commodities and commodity products can influence the potential to significantly reduce development costsplanting of certain crops, the location and regulatory timelines forsize of crop trait developmentproduction, and market introduction. Recent statements bythe volume and types of imports and exports. Future government policies in the United States, Department of Agriculture - Animal and Plant Health Inspection Service ("USDA-APHIS") regarding the regulatory path for genetically edited plants and mushrooms indicate that they will not be subject to regulations typically used for genetically modified crops (i.e., they will not be considered “regulated articles”) if the modified organisms do not contain any remaining genetic elementsCanada or in other countries could discourage farmers from 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 regulations in the U.S., we cannot assure you that this regulatory path will be found to apply tousing 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.
The potential for unintended but unavoidable trace amounts, sometimes called “adventitious presence,” of yield trait genes in conventional seed, or in the grain or products produced from conventional or organic crops, could affect acceptance by the general public acceptanceor 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 future 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, recently 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. Our ability to attract and retain qualified employees may be affected by our efforts to manage cash usage, including reductions in total cash compensation. 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 relate to our historical business as well as two patents on our C3003 gene in-licensed from the University of Massachusetts and our C4001 U.S. patent, both of which were issued in 2019 and have expiration dates ranging from 2020 through 2030.2035, plus any patent extensions which may be granted in the U.S. for regulatory approval delays. New outstanding patent applications owned by or licensed to us relating to crop yield improvements have filing dates ranging from 2013 through 2017.2019, including the recently filed new patent application on a breakthrough technology for producing PHA biomaterials in crops. This patent 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 or march‑in 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/Cas9,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/Cas9CRISPR technology, is still in its infancy, and no products using this technology have reached the market. We are currently negotiatingIn 2018, we entered into a non-exclusive research license agreement jointly with the Broad Institute of MIT and Harvard and Pioneer, part of Corteva Agriscience™, Agriculture Division of DowDuPont Inc., for work in the CRISPR/Cas9 fielduse of CRISPR-Cas9 genome-editing technology for crops in order to demonstrate the utility of our yield trait genes in this field. The joint license covers intellectual property consisting of approximately 48 patents and patent applications on CRISPR-Cas9 technology controlled by the Broad Institute and Corteva Agriscience. Under the agreement, we have the option to renew the license on an annual basis and the right, subject to specified conditions, to
convert the research license to a commercial license in the future, although there can be no assurance that we will be able to secure such commercial license on acceptable terms. CRISPR technology is uniquely suited to agricultural applications as it enables precise changes to plant DNA without the use of foreign DNA to incorporate new traits. Plants developed using CRISPR genome-editing technology have the potential to be considered not regulated by USDA-APHIS under 7 CFR part 340 for development and commercialization in the U.S., which could result in shorter developmental timelines and lower costs associated with commercialization of new traits in the U.S. as compared to regulated crops. Due to the intense research and development that is taking place 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 certain patent rights
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 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 your rights as a stockholder. 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 is lowcan 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.
any change in the status of our NASDAQNasdaq listing;
the need for near termnear-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 stockholders 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.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%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,company, thereby reducing the likelihood that our stockholders could receive a premium for their common stock in an acquisition.
Our recently implemented reverse stock split could adversely affect the market liquidity of our common stock.
On January 9, 2020, our stockholders approved an amendment to our Amended and Restated Certificate of Incorporation, as amended, and authorized our Board of Directors, if in their judgment they deemed it necessary, to effect a reverse stock split of our common stock at a ratio in the range of 20:1 to 50:1. This reverse stock split became effective on January 15, 2020, with a ratio of 40:1. We cannot predict whether the reverse stock split will increase the market price for our common stock on a sustained basis. The history of similar stock split combinations for companies in like circumstances is varied, and we cannot predict whether:
the reverse stock split will result in a sustained per share price that will attract brokers and investors who do not trade in lower priced stocks;
the reverse stock split will result in a per share price that will increase our ability to attract and retain employees and other service providers; or
the market price per share will remain at a level in excess of the $1.00 minimum bid price as required by Nasdaq, or that we will otherwise continue to meet the requirements of Nasdaq for continued inclusion for trading on The Nasdaq Capital Market.
Concentration of ownership among our existing 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 17, 2017,18, 2020, our officers, directors and stockholders who hold at least 5% of our stock beneficially own a combined total of approximately 69.7%46.7 percent of our outstanding common stock, including shares of common stock subject to stock options and warrants that are currently exercisable or are exercisable within 60 days after March 17, 2017.18, 2020. 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 17, 2017,18, 2020, Jack W. Schuler and William P. Scully(and his related entities) beneficially owned approximately 47.7% and approximately 10.3%45.9 percent of our common stock, respectively.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 price for their shares of common stock. The concentration of ownership also may contribute to the low trading volume and volatility of our common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We do not own any real property. On January 20, 2016, we entered intoWe are party to a lease agreement pursuant to which we leasepreviously leased approximately 30,000 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 early termination or the extension of the lease. In November 2019, we entered into a modification of the Woburn lease in which we permanently returned 7,409 square feet of underutilized space to the landlord for the seven-year duration of the lease. In exchange for returning the space, the landlord agreed to fund modifications and upgrades to the remaining office space. The Company will have no further financial obligations for the vacated space and lease rental charges, including utility, maintenance and real estate tax charges, have been proportionally reduced. The security deposit was also proportionally reduced to $229,000. All other significant terms of 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, 2016, the Company has a total remaining lease incentive obligation of $1,259. Pursuant to the lease, the Company also pays certain taxes and operating costs associated with the premises during the term of the lease. To secure the lease, the Company provided the landlord with a deposit in the form of a letter of credit in the amount of $307.remained unchanged.
The CJ sublease is unaffected by our recent lease modification.
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 optionand we do not anticipate incurring significant charges in returning this space to renew for one five-year period. We are currently working with a commercial real estate broker to locate a subtenant for this space.the landlord. Our wholly-owned subsidiary, Metabolix Oilseeds, Inc. ("MOI"), located in Saskatoon, Saskatchewan, Canada, leases approximately 4,1007,000 square feet of office, laboratory and greenhouse space. MOI's leases for these facilities expire on July 31, 2017 andat various times through September 30, 2017. We expect to renew these leases prior to their expiration.2020.
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.
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 NASDAQNasdaq 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 | ||||||||||||||||
| 2016 | 2015 | |||||||||||||||
| High | Low | High | Low | |||||||||||||
| First Quarter | $ | 2.29 | $ | 0.86 | $ | 7.68 | $ | 2.22 | ||||||||
| Second Quarter | 1.92 | 0.54 | 5.10 | 2.93 | ||||||||||||
| Third Quarter | 0.88 | 0.26 | 4.07 | 1.07 | ||||||||||||
| Fourth Quarter | 0.67 | 0.25 | 3.98 | 1.25 | ||||||||||||
Stockholders
As of March 17, 2017,18, 2020, there were 28,402,4711,923,184 shares of our common stock outstanding held by 4437 stockholders of record.
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 5, 2016, the CompanyJanuary 7, 2020, we issued 121,1953,715 shares of common stock to participants in itsour Yield10 Bioscience, Inc. 401(k) Plan as a matching contribution. The issuance of these securities iswas 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, 2016,2019, 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
Not applicable
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. 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 financial statements have, where applicable, been adjusted retroactively to reflect this reverse stock split.
Overview
Yield10 Bioscience, Inc. is an agricultural bioscience company focusingheadquartered in Woburn, Massachusetts with an oilseed development Center of Excellence in Saskatoon, Saskatchewan, Canada. Yield10 uses its "Trait Factory" to develop high value seed traits for the agriculture and food industries. Specifically, Yield10 is developing superior gene traits for the major grain crops including corn, soybean, canola, wheat and rice. We believe that successful gene traits may enable step-change increases in crop yield in certain crops, which we consider to be an increase of at least 10-20 percent. While maintaining its focus on the development of step-change increasesnovel yield traits for key grain crops based on a licensing model, the Company has recently begun to execute the second part of its strategy which is to develop independent business opportunities in foodthe specialty oils and feedniche crop yieldspace using the oilseed Camelina. The target of this effort is sustainable business solutions to enhancesupport agriculture, global food security. Accordingproduction and other specialty applications. Yield10 brings a unique history and skill set captured in its GRAIN platform for developing advanced crop traits and increasing the concentration of specific biochemicals of commercial interest in crops. Our plan is to a United Nations report, food production must be increased by over 70 percent in 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. Yield10 is focused on new agricultural biotechnology approaches, using two proprietary discovery platforms, to improve fundamental crop yield through enhanced photosynthetic carbon capture and increased carbon utilization efficiency where the additional captured carbon is targeted to increase seed yield. These platforms are based on the principle that plants which capture and utilize carbon more efficiently generate benefits in the form of more robust crops with increased seed yield. Yield10 is workinguse GRAIN to develop translate and demonstrate the commercial valuea source of new genetically engineered yield trait genes and to identify genome editing targets for improved crop performance in several key food and feed crops, including canola, soybean, rice and corn. Yield10 Bioscience is headquartered in Woburn, Massachusetts and has an additional agricultural science facility with greenhouses in Saskatoon, Saskatchewan, Canada.
Government Grants
During 2018 we 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." Our participation under this projected five-year grant will be awarded on an annual basis with the first year commencing September 15, 2017. Although funding for the first three years under this sub-award has been appropriated through September 2020 for $1,698, we anticipate that each of the remaining two years will be awarded annually to Yield10 through September 14, 2022 for total sub-award funding of $2,957, provided the U.S. Congress continues to appropriate funds for the program, we are able to make progress towards meeting grant objectives and we remain in compliance with other terms and conditions of the sub-award.
As of December 31, 2016,2019, proceeds of $1,268$473 remain available under our U.S. government grants.to be earned from the MSU sub-award. This includes amounts for reimbursement to our subcontractors, as well as reimbursement for our employees’ time, benefits and other expenses related to future performance.
| Program Title | Funding Agency | Total Government Funds | Total received through December 31, 2016 | Remaining amount available as of December 31, 2016 | Contract/Grant Expiration | ||||||||||||
| Production of High Oil, Transgene Free Camelina Sativa Plants through Genome Editing | Department of Energy | $ | 1,997 | $ | 841 | $ | 1,156 | September 2017 | |||||||||
| 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 | 164 | 112 | March 2017 | ||||||||||||
| Renewable Enhanced Feedstocks For Advanced Biofuels And Bioproducts ("REFABB") | Department of Energy | 6,000 | 6,000 | — | February 2016 | ||||||||||||
| Subcontract from University of Massachusetts (Amherst) project funded by ARPA-E entitled “Development of a Dedicated High Value Biofuels Crop” | Department of Energy | 663 | 663 | — | December 2015 | ||||||||||||
| Total | $ | 8,936 | $ | 7,668 | $ | 1,268 | |||||||||||
| Program Title | Funding Agency | Total Government Funds | Total revenue recognized through December 31, 2019 | Remaining amount to be recognized as of December 31, 2019 | 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 | $ | 1,698 | $ | 1,225 | $ | 473 | September 15, 2020 | |||||||||
Critical Accounting Estimates and Judgments
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. 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
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. Revenueincurred 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, 20162019 and December 31, 2015.2018. Funds received from government grants in advance of work being performed are recorded as deferred revenue until earned.
Performance-Based Compensation Accrual
Our employee compensation program includes a potential for bonus payments based on company and individual performance against annual goals that are established early in the fiscal year by management and the Company's Board of Directors. Bonus payments are generally paid at the end of February following the most recently completed fiscal year. The Compensation Committee is responsible for reviewing annual performance against goals and approving bonus payments for the Company's executive officers. Annual cash bonuses are accrued evenly throughout the fiscal year unless management and/or the Compensation Committee determine that bonus compensation payments are unlikely to be paid at the existing rate. In that event, we make a cumulative year-to-date adjustment to our bonus accrual and adjust quarterly accruals for the remainder of the year in order to achieve a bonus compensation accrual at year-end that matches expected bonus payments. Our quarterly performance-based compensation expense and accrual balances may vary significantly during the year as performance judgments change and we revise our estimates.
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. When we issue restricted stock units containing market and performance vesting conditions, we estimate the fair value and derived service period of these awards using a Monte Carlo valuation model. Generally, we recognize the fair value of stock awards evenly over their vesting periods provided the employee, director or non-employeeindividual receiving the award continues to meetmeets continuing service conditions. The assumptions used in calculating the fair value of stock-based awards represent management's best estimates, but the estimates involve inherent uncertainties and the application of management judgment. See Note 10 to the consolidated financial statements for further discussion on the key assumptions used to determine the fair values of option grants pursuant to the Black-Scholes option pricing model.
Securities Offerings
On November 19, 2019, we closed on two securities offerings that included a public offering and 2015. In July 2016,a private placement. The public portion of the Company announced a strategic restructuring plan in which Yield10 Bioscience became its core business which resulted inofferings included sale of common stock, Series A Convertible Preferred Stock and warrants to purchase common stock. The private placement included the sale of its biopolymer operations in September 2016.
charge of $13,018 to other income (expense) on the date of issuance. At December 31, 2019, we completed a mark-to-market revaluation of the warrants and recorded a gain of $9,541 within other income (expense) for the year ended December 31, 2019.
Comparison of the Years Ended December 31, 20162019 and 20152018
Revenue
Year ended December 31, | |||||||||||||
| 2016 | 2015 | Change | |||||||||||
| Grant revenue | $ | 1,159 | $ | 1,350 | $ | (191 | ) | ||||||
Year ended December 31, | |||||||||||||
| 2019 | 2018 | Change | |||||||||||
| Grant revenue | $ | 806 | $ | 556 | $ | 250 | |||||||
Total revenue from continuing operations was $1,159$806 and $1,350$556 for the years ended December 31, 20162019 and 2015,2018, respectively, and was derived solely from our research grants. The $191 decrease in grantGrant revenue for the year ended December 31, 2016, is primarily2019 was earned from the result of the REFABB grant that ended in February 2016.Company's DOE
sub-award with Michigan State University. During the year ended December 31, 2016, we did not recognize any further2018, $419 in grant revenue was earned from the REFABBMSU sub-award and $137 was earned from the Company's completed DOE Camelina grant.
We anticipate that MSU grant revenue will decrease approximately 20 percent over the next twelve months based on annual budget appropriations awarded under the grant. Our forecast related to grant revenue is subject to change should we apply for, and receive, new grants during 2020.
Expenses
Year ended December 31, | |||||||||||||
| 2019 | 2018 | Change | |||||||||||
| Research and development expenses | $ | 4,848 | $ | 4,783 | $ | 65 | |||||||
| General and administrative expenses | 4,554 | 5,092 | (538 | ) | |||||||||
| Total expenses | $ | 9,402 | $ | 9,875 | $ | (473 | ) | ||||||
Research and Development Expenses
Research and development expenses of $4,848 and $4,783 for the years ended December 31, 2019 and 2018, respectively, remained consistent with a negligible increase of $65 between the two years. During the year ended December 31, 2015, $1,028 was recognized from this grant. No revenue was recognized from the REFABB grant during 2016. Partially offsetting this decrease were increased grant revenues of $1,126 recognized from our two Camelina grants.
Year ended December 31, | |||||||||||||
| 2016 | 2015 | Change | |||||||||||
| Research and development expenses | $ | 5,670 | $ | 6,602 | $ | (932 | ) | ||||||
| General and administrative expenses | 5,737 | 7,217 | (1,480 | ) | |||||||||
| Total costs and expense | $ | 11,407 | $ | 13,819 | $ | (2,412 | ) | ||||||
General and Administrative Expenses
General and administrative expenses from continuing operations were $5,737$4,554 and $7,217$5,092 for the fiscal years ended December 31, 20162019 and 2015,December 31, 2018, respectively. The decrease of $1,480$538, or 11%, was primarily attributabledue to decreasesreductions in employee compensation and facility related benefits expenses. Employee compensation and related benefits expenses decreased by $1,169$142 from $3,830 for the year ended December 31, 2015 to $2,661 for the year ended December 31, 2016. The decrease was primarily attributable to the Company's elimination of its 2016 bonuses and a net $810 decrease in stock compensation expense arising out of our restructuring activities and management changes completed during the second half of 2016. In addition, professional fees decreased by $154 from $1,387$1,968 during the year ended December 31, 20152018 to $1,233$1,826 during the year ended December 31, 2016,2019 and is explained by a $329 reduction in stock compensation expense, partially offset by our recording of $183 in 2019 bonus expenses. We did not record bonus expense during the year ended December 31, 2018. Facility related expenses decreased by $335 from $1,192 during the year ended December 31, 2018 to $857 during the year ended December 31, 2019. During 2018, we recorded a one-time lease impairment charge of $255 for our Lowell, Massachusetts facility. During 2019, our lease expense for the Woburn facility decreased by $127, primarily as a result of our receiving the current year benefit of lower auditing fees resulting from the Company's change in auditing firms.
lease modification previously discussed.
We expect our general and administrative expenses from continuing operationsduring 2020 will remain at a level consistent with 2019. Our forecasts related to decreasegeneral and administrative expenses are subject to significant change as events and opportunities occur during 2017 as a2020 that could result ofin modifications to our restructuring efforts completed during the second half of 2016 and our close monitoring of available cash resources.business plans.
Other Income (Net)(Expense), net
Year ended December 31, | |||||||||||||
| 2016 | 2015 | Change | |||||||||||
| Total other income (expense), net | $ | (38 | ) | $ | 29 | $ | (67 | ) | |||||
Year ended December 31, | |||||||||||||
| 2019 | 2018 | Change | |||||||||||
| Loss on issuance of securities | $ | (13,018 | ) | $ | — | $ | (13,018 | ) | |||||
| Offering costs | (1,254 | ) | — | (1,254 | ) | ||||||||
| Change in fair value of warrants | 9,541 | — | 9,541 | ||||||||||
| Interest income | 96 | 158 | (62 | ) | |||||||||
| Other income (expense), net | 21 | (24 | ) | 45 | |||||||||
| Total other income (expense), net | $ | (4,614 | ) | $ | 134 | $ | (4,748 | ) | |||||
On November 19, 2019, we closed on concurrent securities offerings that included both a public offering and private placement. The securities issued in the offerings included a total of 2,875,000 warrants that received liability classification and were determined to have a Black-Scholes fair value of $24,518 on the date of issuance. The gross proceeds of the public and private offerings were first allocated to the warrants. In accordance with applicable accounting guidance, the warrants were recorded at their full fair value and the difference between the fair value and the proceeds of $13,018 was recorded to other income (expense), net, reflects net expense. See Note 9 - Capital Stock and Warrants, in our audited financial statements for the year ended December 31, 2019.
Offering Costs
As discussed above, the proceeds of $38the combined November 2019 offerings were allocated solely to the liability classified warrants. All of the offering costs of $1,254 were therefore assigned to the warrants and netexpensed immediately to other income (expense) in according with accounting guidance related to debt issuance costs.
Change in Fair Value of $29Warrants
The fair value of the liability classified warrants issued in the November 2019 offerings are subject to mark-to-market adjustment on each balance sheet date. We remeasured the fair value of the warrant liabilities at December 31, 2019 and recognized a gain of $9,541 within other income (expense). The significant reduction in Black-Scholes valuation was primarily the result of the closing market price of the Company's stock declining from $10.82 on November 14, 2019 to $6.86 on December 31, 2019.
Interest Income
Interest income for the years ended December 31, 20162019 and 2015, respectively. The net expense for 2016 is the result of imputed interest charges recorded in connection with the Company's early termination of a manufacturing agreement with a third party, partially offset byDecember 31, 2018 was derived from investment income. Other income net, shown for 2015, is primarily the result of incomeearned from the Company's investment in money market fundscash equivalents and realized net gains from foreign currency translation.short-term investments.
Liquidity and Capital Resources
Since our inception, we have incurred significant expenses related to our research, development and commercialization efforts. With the exception of 2012, when we recognized $38,885 of deferred revenue from a terminated joint venture, the Company haswe have recorded annual losses since itsthe Company's initial founding, including itsour fiscal year ended December 31, 2016.2019. As of December 31, 2016,2019, we had an accumulated deficit of $333,357.$364,894. Our total unrestricted cash, and cash equivalents and short-term investments as of December 31, 2016, were $7,3092019, totaled $11,117 as compared to $12,269$5,769 at December 31, 2015.2018. As of December 31, 2016,2019, we had no outstanding debt.
Our cash, and cash equivalents and short-term investments at December 31, 2016,2019, were held for working capital purposes. As of December 31, 2016,2019, we had restricted cash of $432. Restricted cash consists$332, which consisted of $307 held in connection with the lease agreement for our Woburn, Massachusetts facility and $125$25 held in connection with our corporate credit card 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, concentration limits, and liquidity requirements. As of December 31, 2016,2019, we were in compliance with this policy.
We currently anticipate $9,000 - $9,500 of cash usage during 2020 to fund our operations and to make capital purchases to support our research. In November 2019, we closed on two concurrent securities offerings that included a public offering and a private placement, raising $10,246, net of issuance costs of $1,254. In March 2019, we closed on a registered direct offering of our common stock raising $2.6 million, net of offering costs. In addition, from January 1, 2020 through March 18, 2020, we have received approximately $1.6 million in proceeds from investor exercises of warrants. We estimate that our current cash resources, including funds received from the completed warrant exercises, will be sufficient to fund operations and meet our obligations, including our restructuring obligations, when due, into the fourthsecond quarter of 2017.2021. 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. We have adoptedfollow the new 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's ability to continue as a going concern for one year after the date itsour 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, 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 the Company when needed, if at all. If adequate additional funds are not available when required, or if we are unsuccessful in entering collaborative arrangements for further research, we may be forced to curtail our research efforts, explore strategic alternatives and/or wind down our operations and pursue options for liquidating our remaining assets, including intellectual property and equipment. Based on our cash forecast, we have determined that the Company's present capital resources are not sufficient to fund our planned operations for a twelve month period, and therefore, raise substantial doubt about its ability to continue as a going concern.
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.
Net cash used forin operating activities was $14,700$8,654 during the year ended December 31, 2016,2019, compared to net cash used by operating activities during 20152018 of $21,863.$8,754. Net cash used by operations during the year ended December 31, 2016,2019 primarily reflects the net loss of $7,604, the add-back of the gain on the sale of$12,956 and lease payments and modifications made to reduce the Company's discontinued biopolymer assets, including certain property and equipment, totaling $9,833 that is shown within cash proceeds under investing activities, the paymentlease liabilities of 2015 performance bonuses during early 2016 of $1,665,$2,244, partially offset by non-cash expenses, including the Company's loss on issuance of securities of $13,018 representing the difference between the fair value of the liability classified warrants issued in the Company's November securities offering and the proceeds received from the offering, an offsetting non-cash gain of $9,541 as a result of remeasuring the fair value of the warrants on December 31, 2019, stock-based compensation expense of $848,$656, depreciation expense of $515, inventory impairment write-downs totaling $199, the Company's$203, 401(k) stock matching contribution expense of $281$98 and the settlementnon-cash lease expense of certain restructuring costs through transfers$1,625 resulting from amortization of manufacturing equipment and the issuance of Yield10 Bioscience common stock.
| Year Ended December 31, | |||||||
| 2016 | 2015 | ||||||
| Non-cash operating items: | |||||||
| Depreciation | $ | 326 | $ | 147 | |||
| Charge for 401(k) company common stock match | $ | 118 | $ | 167 | |||
| Stock-based compensation | $ | 217 | $ | 663 | |||
| Inventory impairment | $ | 199 | $ | 209 | |||
| Non-cash restructuring expense paid through stock and equipment | $ | 196 | $ | — | |||
| Gain on sale of discontinued operation and property and equipment | $ | (9,833 | ) | $ | (33 | ) | |
our leased right-of-use assets.
Net cash of $9,752$3,015 was provided byused in investing activities during the year ended December 31, 2016,2019, compared to net cash used byin investing activities during 20152018 of $614. Net cash provided by investing activities during$2,788. During the year ended December 31, 2016, was primarily2019, the resultCompany purchased $5,704 in short-term investments, including U.S. Treasury notes and federal agency bonds. Also during 2019, $2,750 of proceeds received from the sale of biopolymer assets of $10,317short-term investments matured and a net decrease in restrictedconverted to cash.
Net cash of $187, partially offset by purchases of property and equipment to outfit the new Woburn, Massachusetts facility of $752.
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 an 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, 2016,2019, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of the Securities and Exchange Commission'sSEC's Regulation S-K.
Related Party Transactions
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
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. Underreporting, as defined in Rules 13a-15(f) and 15d-15(f) of the supervisionExchange 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 participationmaintenance 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 includingand directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our Chief Executive Officer and Chief Accounting Officer, we conducted anassets 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, 2016, based on2019. In making this assessment, management used the criteria set forth in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Commission.Internal Control—Integrated Framework (2013).
Based on this evaluation, management concluded that the material weakness inits assessment of internal control over financial reporting, described below existedmanagement has concluded that, as of December 31, 2016.
principles.
Changes in Internal Control over Financial Reporting
ITEM 9B. OTHER INFORMATION
None.
PART III
| Nominee's or Director's Name | Year First Became Director | Position(s) with the Company | Year Current Term Will Expire | Current Director Class | ||||
| Oliver P. Peoples, Ph.D. | 1992 | Chief Executive Officer, Director | 2017 | II | ||||
| Richard W. Hamilton, Ph.D. | 2017 | Director | 2018 | III | ||||
| Peter N. Kellogg | 2007 | Director | 2019 | I | ||||
| Joseph Shaulson | 2013 | Director | 2017 | II | ||||
| Anthony J. Sinskey, Sc.D. | 1992 | Director | 2018 | III | ||||
| Robert L. Van Nostrand | 2006 | Chairman of the Board, Director | 2019 | I | ||||
| Name and Principal Position | Year | Salary | Bonus | Stock Awards(1) | Option Awards(1) | Non-Equity Incentive Plan Compensation(2) | All Other Compensation(3) | Total | |||||||||||||||||||||
| Oliver P. Peoples, Ph.D. | 2016 | $ | 237,500 | — | — | $ | 389,355 | — | $ | 11,925 | $ | 638,780 | |||||||||||||||||
| President and Chief Executive Officer | 2015 | $ | 240,000 | — | $ | 396,900 | — | $ | 144,000 | $ | 11,925 | $ | 792,825 | ||||||||||||||||
| Lynne H. Brum | 2016 | $ | 220,000 | — | — | $ | 196,850 | — | $ | 11,925 | $ | 428,775 | |||||||||||||||||
| Vice President, Planning and Communications | 2015 | $ | 220,000 | — | $ | 342,975 | — | $ | 88,000 | $ | 11,675 | $ | 662,650 | ||||||||||||||||
| Joseph Shaulson, | 2016 | $ | 320,833 | — | — | $ | 196,105 | — | $ | 67,350 | $ | 584,288 | |||||||||||||||||
| Former President and Chief Executive Officer | 2015 | $ | 350,000 | — | $ | 762,300 | — | $ | 210,000 | $ | 71,925 | $ | 1,394,225 | ||||||||||||||||
| Kristi D. Snell, Ph.D. | 2016 | $ | 214,347 | — | — | $ | 289,600 | — | $ | 11,925 | $ | 515,872 | |||||||||||||||||
| Vice President, Research and Chief Scientific Officer | |||||||||||||||||||||||||||||
| Option Awards | Stock Awards | ||||||||||||||||||||
| Name | Grant Date | Number of Securities Underlying Unexercised Options(#) Exercisable | Number of Securities Underlying Unexercised Options(#) Unexercisable(1) | Option Exercise Price($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | ||||||||||||||
| Oliver P. Peoples | |||||||||||||||||||||
| 5/17/2007 | 6,667 | — | $ | 143.94 | 5/17/2017 | — | — | ||||||||||||||
| 3/5/2008 | 6,667 | — | $ | 90.00 | 3/5/2018 | — | — | ||||||||||||||
| 5/28/2009 | 6,667 | — | $ | 41.58 | 5/28/2019 | — | — | ||||||||||||||
| 5/27/2010 | 7,500 | — | $ | 86.94 | 5/27/2020 | — | — | ||||||||||||||
| 5/19/2011 | 7,501 | — | $ | 43.50 | 5/19/2021 | — | — | ||||||||||||||
| 2/1/2012 | 15,000 | — | $ | 15.96 | 2/1/2022 | — | — | ||||||||||||||
| 9/18/2012 | 20,833 | — | $ | 9.30 | 9/18/2022 | — | — | ||||||||||||||
| 5/30/2013 | 10,209 | 1,458 | $ | 10.14 | 5/30/2023 | — | — | ||||||||||||||
| 10/26/2016 | — | 1,650,000 | $ | 0.53 | 10/26/2026 | — | — | ||||||||||||||
| 4/1/2015 | (3) | 78,750 | $ | 27,563 | |||||||||||||||||
| Lynne H. Brum | |||||||||||||||||||||
| 11/17/2011 | 5,833 | — | $ | 24.78 | 11/17/2021 | — | — | ||||||||||||||
| 5/31/2012 | 3,333 | — | $ | 12.00 | 5/31/2022 | — | — | ||||||||||||||
| 5/30/2013 | 5,833 | 834 | $ | 10.14 | 5/30/2023 | — | — | ||||||||||||||
| 10/26/2016 | — | 500,000 | $ | 0.53 | 10/26/2026 | — | — | ||||||||||||||
| 4/1/2015 | 58,749 | $ | 20,562 | ||||||||||||||||||
| Joseph Shaulson | |||||||||||||||||||||
| 12/19/2013 | 191,667 | — | $ | 7.98 | 12/19/2023 | — | — | ||||||||||||||
| 11/4/2016 | 750,000 | — | $ | 0.44 | 12/19/2023 | — | — | ||||||||||||||
| Kristi D. Snell | |||||||||||||||||||||
| 3/5/2008 | 417 | — | $ | 90.00 | 3/5/2018 | — | — | ||||||||||||||
| 5/30/2008 | 2,500 | — | $ | 67.32 | 5/30/2018 | — | — | ||||||||||||||
| 10/21/2008 | 1,400 | — | $ | 54.72 | 10/21/2018 | — | — | ||||||||||||||
| 8/21/2009 | 1,333 | — | $ | 63.24 | 8/21/2019 | — | — | ||||||||||||||
| 2/12/2010 | 1,667 | — | $ | 58.62 | 2/12/2020 | — | — | ||||||||||||||
| 2/11/2011 | 1,667 | — | $ | 54.72 | 2/11/2021 | — | — | ||||||||||||||
| 2/1/2012 | 3,334 | — | $ | 15.96 | 2/1/2022 | — | — | ||||||||||||||
| 5/31/2012 | 3,334 | — | $ | 12.00 | 5/31/2022 | — | — | ||||||||||||||
| 9/18/2012 | 10,000 | — | $ | 9.30 | 9/18/2022 | — | — | ||||||||||||||
| 2/13/2013 | 1,563 | 104 | $ | 10.08 | 2/13/2023 | — | — | ||||||||||||||
| 7/22/2013 | 3,386 | 781 | $ | 8.88 | 7/22/2023 | — | — | ||||||||||||||
| 2/24/2014 | 3,439 | 1,562 | $ | 7.74 | 2/24/2024 | — | — | ||||||||||||||
| 10/26/2016 | — | 1,000,000 | $ | 0.53 | 10/26/2026 | — | — | ||||||||||||||
| 4/1/2015 | (3) | 21,249 | $ | 7,437 | |||||||||||||||||
| 9/30/2015 | (3) | 22,500 | $ | 7,875 | |||||||||||||||||
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($) | Total ($) | |||||||||
| Peter N. Kellogg | $ | 17,500 | $ | — | $ | 17,500 | ||||||
| Celeste Beeks Mastin (2) | $ | 30,000 | $ | — | $ | 30,000 | ||||||
| Anthony J. Sinskey, Sc.D. | $ | 33,750 | $ | — | $ | 33,750 | ||||||
| Matthew Strobeck, Ph.D. (2) | $ | — | $ | — | $ | — | ||||||
| Robert L. Van Nostrand | $ | 37,500 | $ | — | $ | 37,500 | ||||||
| Beneficial Owner | Shares of Common Stock(1) | Options Exercisable Within 60 Days(2) | Warrants Exercisable Within 60 Days (2) | RSUs Vesting Within 60 days(2) | Total Shares Beneficially Owned | Percentage of Outstanding Shares(3) | ||||||||||||
| 5% Stockholders: | ||||||||||||||||||
Jack W. Schuler(4) 28161 North Keith Drive Lake Forest, IL 60045 | 11,969,795 | — | 2,996,712 | — | 14,966,507 | 47.7 | % | |||||||||||
William P. Scully(5) 771 Manatee Cove Vero Beach, FL 32963 | 2,933,333 | — | — | — | 2,933,333 | 10.3 | % | |||||||||||
| Matthew Strobeck (6) C/O Birchview Capital 688 Pine Street, Suite D Burlington, VT 05401 | 2,284,934 | 16,667 | 131,103 | — | 2,432,704 | 8.5 | % | |||||||||||
| Directors, Nominees and Named Executive Officers: | ||||||||||||||||||
| Oliver P. Peoples (7) | 242,674 | 494,274 | 13,113 | 26,250 | 776,311 | 2.7 | % | |||||||||||
| Richard W. Hamilton | — | — | — | — | — | * | ||||||||||||
| Peter N. Kellogg | 12,500 | 25,002 | — | — | 37,502 | * | ||||||||||||
| Joseph Shaulson (8) | 320,515 | 941,667 | 31,500 | — | 1,293,682 | 4.4 | % | |||||||||||
| Anthony J. Sinskey (9) | 72,390 | 21,669 | — | — | 94,059 | * | ||||||||||||
| Robert L. Van Nostrand | 34,583 | 24,169 | — | — | 58,752 | * | ||||||||||||
| Lynne H. Brum (10) | 76,884 | 140,416 | 13,113 | 19,583 | 249,996 | * | ||||||||||||
| Kristi D. Snell (11) | 44,062 | 284,976 | — | 14,583 | 343,621 | 1.2 | % | |||||||||||
| All directors and executive officers as a group (9 persons)(12) | 824,892 | 2,083,154 | 57,726 | 67,499 | 3,033,271 | 9.9 | % | |||||||||||
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||
| (a) | (b) | (c) | ||||
| Equity compensation plans approved by stockholders (1) | 6,120,383 | $3.30 | 4,234,034 | |||
| Equity compensation plans not approved by stockholders (2) | 191,667 | $7.98 | — | |||
10-K.
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 | Description | ||||||
| (15) | Purchase Agreement between Metabolix, Inc. and CJ Research Center LLC, dated September 16, 2016. | (11) | Purchase Agreement between Metabolix, Inc. and CJ Research Center LLC, dated September 16, 2016. | |||||
| (14) | Amended and Restated Certificate of Incorporation of the Registrant. | |||||||
| (16) | Amended and Restated Certificate of Incorporation, as amended, of the Registrant. | |||||||
| (20) | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant. | |||||||
| (19) | Certificate of Designation of Preferences, Rights and Limitations with respect to the Series A Preferred Stock. | |||||||
| (19) | Certificate of Designation of Preferences, Rights and Limitations with respect to the Series B Preferred Stock. | |||||||
| (1) | Amended and Restated By-laws of the Registrant. | (12) | Amended and Restated By-laws of the Registrant. | |||||
| (1) | Specimen Stock Certificate for shares of the Registrant's Common Stock. | * | Description of Securities of the Registrant. | |||||
| (1) | Specimen Stock Certificate for shares of the Registrant's Common Stock. | |||||||
| (14) | Form of Investor Warrant to Purchase Common Stock. | |||||||
| (15) | Form of Series A Common Warrant to purchase shares of Common Stock. | |||||||
| (19) | Form of Common Stock Purchase Warrant. | |||||||
| †(1) | 2006 Stock Option and Incentive Plan. | |||||||
| †(1) | 2006 Stock Option and Incentive Plan, Form of Incentive Stock Option Agreement. | |||||||