UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

ý      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2020

OR

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

For the transition period from                to                
Commission file number 001-33133
YIELD10 BIOSCIENCE, INC.
Delaware
 
04-3158289
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
19 Presidential Way
Woburn, MA
 
01801
(Address of principal executive offices)
 
(Zip Code)
(617) 583-1700
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report.)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
YTEN
The Nasdaq Capital Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý  No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
ý
Smaller reporting company
ý
Emerging growth company
o
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No ý

The number of shares outstanding of the registrant’s common stock as of August 7, 2020 was 1,976,487.
 

1



Yield10 Bioscience, Inc.
Form 10-Q
For the Quarter Ended June 30, 2020

Table of Contents

 
 
Page
 
 
 
Item
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item
 
 
 
 
 

2



PART I.  FINANCIAL INFORMATION
ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
YIELD10 BIOSCIENCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
(in thousands, except share and per share data)

 
June 30,
2020

December 31,
2019
Assets
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
3,290

 
$
5,417

Short-term investments
5,211

 
5,700

Accounts receivable
13

 
72

Unbilled receivables
59

 
20

Prepaid expenses and other current assets
417

 
475

Total current assets
8,990

 
11,684

Restricted cash
254

 
332

Property and equipment, net
978

 
1,243

Right-of-use assets
2,879

 
3,141

Other assets
265

 
318

Total assets
$
13,366

 
$
16,718

 
 
 
 
Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)
 
 
 
Current Liabilities:
 
 
 
Accounts payable
$
150

 
$
279

Accrued expenses
882

 
1,326

Lease liabilities
430

 
602

Total current liabilities
1,462

 
2,207

Lease liabilities, net of current portion
3,400

 
3,619

Warrant liability

 
14,977

Other long-term liabilities
17

 

Total liabilities
4,879

 
20,803

Commitments and contingencies (Note 10)

 

Series B Convertible Preferred Stock ($0.01 par value per share); 0 and 5,750 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

 

Stockholders’ Equity (Deficit):
 
 
 
Series A Convertible Preferred Stock ($0.01 par value per share); 0 shares and 796 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

 

Common stock ($0.01 par value per share); 60,000,000 shares authorized at June 30, 2020 and December 31, 2019; 1,972,798 and 933,423 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
20

 
9

Additional paid-in capital
378,924

 
360,926

Accumulated other comprehensive loss
(167
)
 
(126
)
Accumulated deficit
(370,290
)
 
(364,894
)
Total stockholders’ equity (deficit)
8,487

 
(4,085
)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)
$
13,366

 
$
16,718


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

3



YIELD10 BIOSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(in thousands, except share and per share data)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2020
 
2019
 
2020
 
2019
Revenue:
 
 
 
 
 
 
 
Grant revenue
$
221

 
$
318

 
$
400

 
$
442

Total revenue
221

 
318

 
400

 
442

 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
Research and development
1,179

 
1,191

 
2,639

 
2,414

General and administrative
1,179

 
1,025

 
2,566

 
2,211

Total expenses
2,358

 
2,216

 
5,205

 
4,625

Loss from operations
(2,137
)
 
(1,898
)
 
(4,805
)
 
(4,183
)
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Change in fair value of warrants

 

 
(957
)
 

Loan forgiveness income (Note 9)
333

 

 
333

 

Other income (expense), net
15

 
27

 
48

 
52

Total other income (expense)
348

 
27

 
(576
)
 
52

Net loss before income tax expense
(1,789
)
 
(1,871
)
 
(5,381
)
 
(4,131
)
Income tax expense
(7
)
 

 
(15
)
 

Net loss
$
(1,796
)
 
$
(1,871
)
 
$
(5,396
)
 
$
(4,131
)
 
 
 
 
 
 
 
 
Basic and diluted net loss per share
$
(0.92
)
 
$
(5.99
)
 
$
(2.95
)
 
$
(14.36
)
 
 
 
 
 
 
 
 
Number of shares used in per share calculations:
 
 
 
 
 
 
 
Basic and diluted
1,957,927

 
312,342

 
1,827,526

 
287,592


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

4



YIELD10 BIOSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
UNAUDITED
(in thousands)

 
Three Months Ended
June 30,
Six Months Ended
   June 30,
 
2020
 
2019
2020
 
2019
Net loss:
$
(1,796
)
 
$
(1,871
)
$
(5,396
)
 
$
(4,131
)
Other comprehensive loss
 
 
 
 
 
 
Change in unrealized gain (loss) on investments
(15
)
 

7

 

Change in foreign currency translation adjustment
7

 
(3
)
(48
)
 
(8
)
Total other comprehensive loss
(8
)
 
(3
)
(41
)
 
(8
)
Comprehensive loss
$
(1,804
)
 
$
(1,874
)
$
(5,437
)
 
$
(4,139
)

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

5



YIELD10 BIOSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(in thousands)


Six Months Ended
   June 30,
 
2020
 
2019
Cash flows from operating activities
 
 
 
Net loss
$
(5,396
)
 
$
(4,131
)
Adjustments to reconcile net loss to cash used in operating activities:
 
 
 
Depreciation
91

 
100

Change in fair value of warrants
957

 

Loss on disposal of fixed assets
206

 

Charge for 401(k) company common stock match
66

 
49

Stock-based compensation
297

 
275

Non-cash lease expense
262

 
299

Deferred tax provision
27

 

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
59

 
(54
)
Unbilled receivables
(39
)
 
(37
)
Prepaid expenses and other assets
84

 
(10
)
Accounts payable
(129
)
 
(62
)
Accrued expenses
(390
)
 
(102
)
Lease liabilities
(391
)
 
(404
)
Other liabilities
17

 

Net cash used for operating activities
(4,279
)
 
(4,077
)


 

Cash flows from investing activities
 
 
 
Purchase of property and equipment
(42
)
 
(13
)
Proceeds from sale of property and equipment
10

 

Purchase of short-term investments
(503
)
 
(998
)
Proceeds from the sale and maturity of short-term investments
999

 
2,746

Net cash provided by investing activities
464

 
1,735



 

Cash flows from financing activities
 
 
 
Proceeds from warrants exercised (Note 12)
1,658

 

Proceeds from registered direct offering, net of issuance costs

 
2,583

Taxes paid on employees' behalf related to vesting of stock awards

 
(4
)
Net cash provided by financing activities
1,658

 
2,579



 

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(48
)
 
(8
)


 

Net (decrease) increase in cash, cash equivalents and restricted cash
(2,205
)
 
229

Cash, cash equivalents and restricted cash at beginning of period
5,749

 
3,355

Cash, cash equivalents and restricted cash at end of period
$
3,544

 
$
3,584


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

6



YIELD10 BIOSCIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SERIES B CONVERTIBLE STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY
UNAUDITED
(In thousands, except share amounts)
 
Three Months Ended June 30, 2020
 
Series B Convertible Preferred Stock
Series A Convertible Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
Shares
 
Par Value
Shares
 
Par Value
 
Shares
 
Par Value
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Accumulated Deficit
 
Total Stockholders' Equity
Balance, March 31, 2020

 
$

296

 
$

 
1,923,184

 
$
19

 
$
377,963

 
$
(159
)
 
$
(368,494
)
 
$
9,329

Non-cash stock-based compensation expense

 


 

 

 

 
194

 

 

 
194

Issuance of common stock for 401(k) match

 


 

 
10,114

 

 
38

 

 

 
38

Issuance of common stock for warrant exercise (Note 12)

 


 

 
2,500

 

 
730

 
 
 
 
 
730

Issuance of common stock upon conversion of Series A Convertible Preferred Stock

 

(296
)
 

 
37,000

 
1

 
(1
)
 

 

 

Effect of foreign currency translation and unrealized loss on investments

 


 

 

 

 

 
(8
)
 

 
(8
)
Net loss

 


 

 

 

 

 

 
(1,796
)
 
(1,796
)
Balance, June 30, 2020

 
$


 
$

 
1,972,798

 
$
20

 
$
378,924

 
$
(167
)
 
$
(370,290
)
 
$
8,487


 
Three Months Ended June 30, 2019
 
Series B Convertible Preferred Stock
Series A Convertible Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
Shares
 
Par Value
Shares
 
Par Value
 
Shares
 
Par Value
 
Additional Paid-In Capital
 
Accumulated other Comprehensive Loss
 
Accumulated Deficit
 
Total Stockholders' Equity
Balance, March 31, 2019

 
$


 
$

 
311,690

 
$
3

 
$
360,505

 
$
(115
)
 
$
(354,198
)
 
$
6,195

Non-cash stock-based compensation expense

 


 

 

 

 
113

 

 

 
113

Issuance of common stock for 401(k) match

 


 

 
546

 

 
24

 

 

 
24

Issuance of common stock for restricted unit release, net of 2,449 shares withheld for employee taxes

 


 

 
116

 

 
(4
)
 

 

 
(4
)
Effect of foreign currency translation and unrealized loss on investments

 


 

 

 

 

 
(3
)
 

 
(3
)
Net loss

 


 

 

 

 

 

 
(1,871
)
 
(1,871
)
Balance, June 30, 2019

 
$


 
$

 
312,352

 
$
3

 
$
360,638

 
$
(118
)
 
$
(356,069
)
 
$
4,454


7



 
Six Months Ended June 30, 2020
 
Series B Convertible Preferred Stock
Series A Convertible Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
Shares
 
Par Value
Shares
 
Par Value
 
Shares
 
Par Value
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Accumulated Deficit
 
Total Stockholders' (Deficit) Equity
Balance, December 31, 2019
5,750

 
$

796

 
$

 
933,423

 
$
9

 
$
360,926

 
$
(126
)
 
$
(364,894
)
 
$
(4,085
)
Non-cash stock-based compensation expense

 


 

 

 

 
354

 

 

 
354

Issuance of common stock for 401(k) match

 


 

 
13,829

 

 
63

 

 

 
63

Issuance of common stock for warrant exercise

 


 

 
207,296

 
2

 
1,656

 

 

 
1,658

Issuance of common stock upon conversion of Series A Convertible Preferred Stock

 

(796
)
 

 
99,500

 
2

 
(2
)
 

 

 

Issuance of common stock upon conversion of Series B Convertible Preferred Stock
(5,750
)
 


 

 
718,750

 
7

 
(7
)
 

 

 

Reclassification of warrant liability to equity

 


 

 

 

 
15,934

 

 

 
15,934

Effect of foreign currency translation and unrealized loss on investments

 


 

 

 

 

 
(41
)
 

 
(41
)
Net loss

 


 

 

 

 

 

 
(5,396
)
 
(5,396
)
Balance, June 30, 2020

 
$


 
$

 
1,972,798

 
$
20

 
$
378,924

 
$
(167
)
 
$
(370,290
)
 
$
8,487


 
Six Months Ended June 30, 2019
 
Series B Convertible Preferred Stock
Series A Convertible Preferred Stock
 
Common Stock
 
 
 
 
 
 
 
 
 
Shares
 
Par Value
Shares
 
Par Value
 
Shares
 
Par Value
 
Additional Paid-In Capital
 
Accumulated other Comprehensive Loss
 
Accumulated Deficit
 
Total Stockholders' Equity
Balance, December 31, 2018

 
$


 
$

 
250,631

 
$
3

 
$
357,743

 
$
(110
)
 
$
(351,938
)
 
$
5,698

Non-cash stock-based compensation expense

 


 

 

 

 
275

 

 

 
275

Issuance of common stock for 401(k) match

 


 

 
1,064

 

 
41

 

 

 
41

Issuance of stock for restricted stock unit vesting, net of 2,449 shares withheld for employee taxes

 


 

 
116

 

 
(4
)
 

 

 
(4
)
Issuance of common stock for registered direct offering , net of $349 offering costs

 


 

 
60,541

 

 
2,583

 

 

 
2,583

Effect of foreign currency translation and unrealized loss on investments

 


 

 

 

 

 
(8
)
 

 
(8
)
Net loss

 


 

 

 

 

 

 
(4,131
)
 
(4,131
)
Balance, June 30, 2019

 
$


 
$

 
312,352

 
$
3

 
$
360,638

 
$
(118
)
 
$
(356,069
)
 
$
4,454

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

8



YIELD10 BIOSCIENCE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED

(All dollar amounts, except share and per share amounts, are stated in thousands)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Yield10 Bioscience, Inc. is an agricultural bioscience company that uses its "Trait Factory" and the Camelina oilseed “Fast Field Testing” system to develop high value seed traits for the agriculture and food industries. The Company's 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. The “Trait Factory” encompasses discovery of gene targets using the 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 market. The first is trait licensing to the major seed companies for corn, soybean, canola and other crops. Data from the Company's trait field testing in Camelina has enabled Yield10 to establish research license agreements with leading seed companies including Bayer, Forage Genetics and Simplot. These companies are progressing the development of Yield10 traits in soybean, forage sorghum, and potato, respectively. The second 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.
The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars, are unaudited, and have been prepared by Yield10 in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements have been condensed or omitted. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The condensed consolidated financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary for fair statements of the financial position and results of operations for the interim periods ended June 30, 2020 and June 30, 2019.
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for any future period or the entire fiscal year. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019, which are contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 25, 2020.
The accompanying condensed consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. Except for a single year, the Company has recorded losses since its initial founding, including the three and six months ended June 30, 2020.
As of June 30, 2020, the Company held unrestricted cash, cash equivalents and short-term investments of $8,501. The Company follows the guidance of Accounting Standards Codification ("ASC") Topic 205-40, Presentation of Financial Statements-Going Concern, in order to determine whether there is substantial doubt about its ability to continue as a going concern for one year after the date its financial statements are issued. Based on its current cash forecast, management expects that the Company's present capital resources will be sufficient to fund its planned operations and meet its obligations into the second quarter of 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. The Company's ability to continue operations after its current cash resources are exhausted depends on its ability to obtain additional financing through, among other sources, public or private equity financing, secured or unsecured debt financing, equity or debt bridge financing, warrant holders' ability and willingness to exercise the Company's outstanding warrants, additional government grants or collaborative arrangements with third parties, as to which no assurance can be given. Management does not know whether additional financing will be available on terms favorable or acceptable to the Company when needed, if at all. If adequate additional funds are not available when required, management may be forced to curtail the Company's research efforts, explore strategic alternatives and/or wind down its operations and pursue options for liquidating its remaining assets, including intellectual property. Based on its cash forecast, management has determined that the Company's present capital resources will not be sufficient to fund its planned operations for the twelve months from the date that these interim financial statements are filed, which raises substantial doubt about the Company's ability to continue as a going concern.

9



If the Company issues equity or debt securities to raise additional funds, (i) the Company may incur fees associated with such issuance, (ii) its existing stockholders may experience dilution from the issuance of new equity securities, (iii) the
Company may incur ongoing interest expense and be required to grant a security interest in Company assets in connection with any debt issuance, and (iv) the new equity or debt securities may have rights, preferences and privileges senior to those of the Company’s existing stockholders. In addition, utilization of the Company’s net operating loss and research and development credit carryforwards may be subject to significant annual limitations under Section 382 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code") due to ownership changes resulting from equity financing transactions. If the Company raises additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to its potential products or proprietary technologies or grant licenses on terms that are not favorable to the Company.
2. ACCOUNTING POLICIES
Principles of Consolidation
The Company's unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions were eliminated, including transactions with its Canadian subsidiary, Metabolix Oilseeds, Inc.
Reverse Stock Split
On January 15, 2020, the Company effected a 1-for-40 reverse stock split of its common stock. Unless otherwise indicated, all share amounts, per share data, share prices, and conversion rates set forth in these notes and the accompanying financial statements have, where applicable, been adjusted retroactively to reflect this reverse stock split.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments purchased with an original maturity date of ninety days or less at the date of purchase to be cash equivalents.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Company's Unaudited Condensed Consolidated Balance Sheets included herein:
 
June 30,
2020
 
December 31,
2019
Cash and cash equivalents
$
3,290

 
$
5,417

Restricted cash
254

 
332

Total cash, cash equivalents and restricted cash
$
3,544

 
$
5,749

Amounts included in restricted cash represent those required to be set aside by contractual agreement. Restricted cash of $254 at June 30, 2020 and $332 at December 31, 2019 consists primarily of funds held in connection with the Company's lease agreement for its Woburn, Massachusetts facility.
Investments
The Company considers all investments purchased with an original maturity date of more than ninety days at the date of purchase and a maturity date of one year or less at the balance sheet date to be short-term investments. All other investments are classified as long-term.
Other-than-temporary impairments of equity investments are recognized in the Company's statements of operations if the Company has experienced a credit loss and has the intent to sell the investment or if it is more likely than not that the Company will be required to sell the investment before recovery of the amortized cost basis. Realized gains and losses, dividends, interest income and declines in value judged to be other-than-temporary credit losses are included in other income (expense). Any premium or discount arising at purchase is amortized and/or accreted to interest income.

10



Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of grant revenue and expenses during the reporting periods. Actual results could differ from those estimates.
Foreign Currency Translation
Foreign denominated assets and liabilities of the Company's wholly owned foreign subsidiaries are translated into U.S. dollars at the prevailing exchange rates in effect on the balance sheet date. Revenues and expenses are translated at average exchange rates prevailing during the period. Any resulting translation gains or losses are recorded in accumulated other comprehensive income (loss) in the consolidated balance sheet. When the Company dissolves, sells or substantially sells all of the assets of a consolidated foreign subsidiary, the cumulative translation gain or loss of that subsidiary is released from comprehensive income (loss) and included within its consolidated statement of operations during the fiscal period when the dissolution or sale occurs.
Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of net income (loss) and certain changes in stockholders' equity that are excluded from net income (loss). The Company includes unrealized gains and losses on debt securities and foreign currency translation adjustments in other comprehensive income (loss).
Income Taxes
The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company's tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided to reduce the deferred tax asset to a level which, more likely than not, will be realized.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash, cash equivalents and investments. The Company has historically invested its cash in highly rated money market funds, corporate debt, federal agency notes and U.S. treasury notes. Investments, when purchased, are acquired in accordance with the Company’s investment policy which establishes a concentration limit per issuer.
At June 30, 2020, 100% of the Company's total accounts and unbilled receivables are due from U.S. and Canadian government grants.

Fair Value Measurements
The carrying amounts of the Company's financial instruments as of June 30, 2020 and December 31, 2019, which include cash equivalents, accounts receivable, unbilled receivables, accounts payable, and accrued expenses, approximate their fair values due to the short-term nature of these instruments. See Note 5 for further discussion on fair value measurements.
Segment Information
The accounting guidance for segment reporting establishes standards for reporting information on operating segments in financial statements. The Company is an agricultural bioscience company operating in one segment, which is the development of new technologies to enable step-change increases in crop yield to enhance global food security and production of specialty oils and niche crops.  The Company's chief operating decision-maker does not manage any part of the Company separately, and the allocation of resources and assessment of performance are based on the Company's consolidated operating results.

11



Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Repairs and maintenance are charged to operating expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets once they are placed in service as follows:
Asset Description
 
Estimated Useful Life (years)
Equipment
 
3
Furniture and fixtures
 
5
Software
 
3
Leasehold improvements
 
Shorter of useful life or term of lease
Right-of-Use Assets
The Company’s right-of-use assets consist of leased assets recognized in accordance with ASC 842, Leases, ("ASC 842") which requires lessees to recognize a lease liability and a corresponding lease asset for long-term lease contracts. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The Company uses its incremental borrowing rate in calculating the present value of future lease payments when interest rates are not implicit in the lease. Leases with terms of 12 months or less at inception are expensed as costs are incurred and not capitalized under ASC 842.
Impairment of Long-Lived Assets
Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Accounting guidance further requires that companies recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable based on its undiscounted future cash flows and measure an impairment loss as the difference between the carrying amount and fair value of the asset.
Grant Revenue
The Company's source of continuing revenue is from its government research grants, in which it serves as either the primary contractor or as a subcontractor. These grants are considered an ongoing major and central operation of the Company's business. Revenue is earned as research expenses related to the grants are incurred. Revenue earned on government grants, but not yet invoiced as of the balance sheet date, are recorded as unbilled receivables in the accompanying consolidated balance sheets at June 30, 2020 and December 31, 2019. Funds received from government grants in advance of work being performed, if any, are recorded as deferred revenue until earned.
Research and Development
All costs associated with internal research and development are expensed as incurred. Research and development expenses include, among others, direct costs for salaries, employee benefits, subcontractors, product trials, facility related expenses, depreciation, and stock-based compensation. Costs incurred in connection with government research grants are recorded as research and development expenses.
General and Administrative Expenses
The Company's general and administrative expense includes costs for salaries, employee benefits, facilities expenses, consulting and professional service fees, travel expenses, depreciation expenses and office related expenses incurred to support the administrative operations of the Company.
Intellectual Property Costs
The Company includes all costs associated with the prosecution and maintenance of patents within general and administrative expenses in the consolidated statement of operations.

12



Stock-Based Compensation
All share-based payments to employees, members of the Board of Directors and non-employees are recognized within operating expense based on the straight-line recognition of their grant date fair value over the period during which the recipient is required to provide service in exchange for the award. See Note 7 for a description of the types of stock-based awards granted, the compensation expense related to such awards and detail of equity-based awards outstanding.
Recent Accounting Standards
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies that the Company adopts as of the specified effective date. During the six months ended June 30, 2020, the Company adopted the following new accounting guidance.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This standard modifies certain disclosure requirements on fair value measurements. This standard became effective for the Company on January 1, 2020 and did not have a material impact on its disclosures.
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This standard makes targeted improvements for collaborative arrangements as follows:
Clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606, Revenue from Contracts with Customers, when the collaborative arrangement participant is a customer in the context of a unit of account. In those situations, the guidance in ASC 606 should be applied, including recognition, measurement, presentation and disclosure requirements;
Adds unit-of-account guidance to ASC 808, Collaborative Arrangements, to align with the guidance in ASC 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of ASC 606; and
Precludes a company from presenting transactions with collaborative arrangement participants that are not directly related to sales to third parties with revenue recognized under ASC 606 if the collaborative arrangement participant is not a customer.
This standard became effective on January 1, 2020. However, since the Company is not currently participating in any collaborative arrangements, the new standard does not impact its financial statements.
The following new pronouncement is not yet effective but may impact the Company's financial statements in the future.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.  It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in more timely recognition of credit losses. The guidance is effective for fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, and interim periods within those fiscal years. The Company is currently evaluating the impact this guidance will have on the Company’s condensed consolidated financial statements.
3. BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of dilutive common shares outstanding during the period. Diluted shares outstanding is calculated by adding to the weighted shares outstanding any potential (unissued) shares of common stock from outstanding stock options and warrants based on the treasury stock method, as well as weighted shares outstanding of any potential (unissued) shares of common stock from restricted stock units. In periods when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods when a loss is reported, basic and dilutive loss per share are the same. Common stock equivalents include stock options, restricted stock awards and warrants.

13



The number of shares of potentially dilutive common stock presented on a weighted average basis, related to options, restricted stock units and warrants (prior to consideration of the treasury stock method) that were excluded from the calculation of dilutive shares since the inclusion of such shares would be anti-dilutive for the three and six months ended June 30, 2020 and June 30, 2019, respectively, are shown below. Issued and outstanding warrants shown in the table below are described in greater detail in Note 12, contained herein.
 
Three Months Ended
June 30,
Six Months Ended
   June 30,
 
2020
 
2019
2020
 
2019
Options
162,822

 
50,707

115,427

 
46,883

Restricted Stock Awards
17,000

 

13,170

 
85

Series A Convertible Preferred Stock
12,166

 

25,613

 

Series B Convertible Preferred Stock

 

63,187

 

Warrants
2,843,699

 
175,995

2,843,699

 
175,995

Total
3,035,687

 
226,702

3,061,096

 
222,963

4. INVESTMENTS
Investments consist of the following at June 30, 2020 and December 31, 2019:
 
Accumulated Cost at June 30, 2020
 
Unrealized
 
Market Value at June 30, 2020
 
 
Gain
 
(Loss)
 
Short-term investments
 
 
 
 
 
 
 
     Government securities
$
5,204

 
$
7

 
$

 
$
5,211

          Total
$
5,204

 
$
7

 
$

 
$
5,211

 
Accumulated Cost at December 31, 2019
 
Unrealized
 
Market Value at December 31, 2019
 
 
Gain
 
(Loss)
 
Short-term investments
 
 
 
 
 
 
 
     Government securities
$
5,700

 
$

 
$

 
$
5,700

          Total
$
5,700

 
$

 
$

 
$
5,700

All short-term investments are classified as available for sale as of June 30, 2020 and December 31, 2019. The Company held no long-term investments at June 30, 2020, and December 31, 2019.
5. FAIR VALUE MEASUREMENTS
The Company has certain financial assets recorded at fair value which have been classified as Level 1 and Level 2 within the fair value hierarchy as described in the accounting standards for fair value measurements. In addition, during November 2019, the Company issued Series A Warrants and Series B Warrants in two concurrent securities offerings. At the time of issuance, the Company determined that all of the Series A Warrants and Series B Warrants should be classified as a warrant liability in accordance with ASC 480, Distinguishing Liabilities from Equity, and recognized at fair value due to the insufficiency of common shares available to permit their exercise. At December 31, 2019, the warrant liability met Level 3 classification criteria for classification within the fair value hierarchy. Fair value is the price that would be received from the sale of an asset or the price paid to transfer a liability in an orderly transaction between independent market participants at the measurement date. Fair values determined by Level 1 inputs utilize observable data such as quoted prices in active markets for identical instruments. Fair values determined by Level 2 inputs utilize data points other than quoted prices in active markets that are observable either directly or indirectly. Fair values determined by Level 3 inputs utilize unobservable data points in which there is little or no market data, which require the reporting entity to develop its own assumptions. The fair value hierarchy level is determined by the lowest level of significant input.
The Company’s financial assets classified as Level 2 at June 30, 2020 and December 31, 2019 were initially valued at the transaction price and subsequently valued utilizing third-party pricing services. Because the Company’s investment

14



portfolio may include securities that do not always trade daily, the pricing services use many observable market inputs to determine value including reportable trades, benchmark yields and benchmarking of like securities. The Company validates the prices provided by the third-party pricing services by reviewing their pricing methods and obtaining market values from other pricing sources. After completing the validation procedures, the Company did not adjust or override any fair value measurements provided by these pricing services as of June 30, 2020 and December 31, 2019.
The $14,977 fair value of the Series A and Series B Warrant liability at December 31, 2019 was determined using the Black-Scholes valuation model. The expected volatility and the risk free discount rate used in the Black-Scholes model were determined based on the Company's historical market price published on the Nasdaq Capital Market and from published U.S. Treasury yield curves, respectively, for a period matched to the contractual term of each warrant series.
At December 31, 2019
Series A Warrants
 
Series B Warrants
Fair market value of common stock (per share)
$6.86
 
$6.86
Expected term (years)
2.3
 
7.3
Risk free rate
1.62%
 
1.83%
Volatility
127%
 
115%
On January 15, 2020, the Company filed an amendment to its Certificate of Incorporation with the State of Delaware to effect a 1-for-40 reverse stock split. As a result of the reverse stock split, the Company's number of authorized but unissued shares of Common Stock increased significantly and the Series A Warrants and Series B Warrants issued under the offerings completed in November 2019 became eligible for exercise. Prior to reclassification as equity, the Company adjusted the warrant liability to its $15,934 fair value using the assumptions below, recording a loss on the adjustment to fair value of $957 during the six months ended June 30, 2020.
At January 15, 2020
Series A Warrants
 
Series B Warrants
Fair market value of common stock (per share)
$3.77
 
$3.77
Expected term (years)
2.3
 
7.3
Risk free rate
1.62%
 
1.83%
Volatility
127%
 
115%
The tables below present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019 and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value.
 
Fair value measurements at reporting date using
 
 
 
Quoted prices in active markets for  identical
assets
 
Significant other
observable inputs
 
Significant
unobservable  inputs
 
Balance as of
Description
(Level 1)
 
(Level 2)
 
(Level 3)
 
June 30, 2020
Assets
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
2,438

 
$

 
$

 
$
2,438

Short-term investments:
 
 
 
 
 
 
 
U.S. government and agency securities

 
5,211

 

 
5,211

Total assets
$
2,438

 
$
5,211

 
$

 
$
7,649



15



 
Fair value measurements at reporting date using
 
 
 
Quoted prices in active markets for  identical
assets
 
Significant other
observable inputs
 
Significant
unobservable  inputs
 
Balance as of
Description
(Level 1)
 
(Level 2)
 
(Level 3)
 
December 31, 2019
Assets
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
2,622

 
$

 
$

 
$
2,622

U.S. government and agency securities

 
1,750

 

 
1,750

Short-term investments:
 
 
 
 
 
 
 
U.S. government and agency securities

 
5,700

 

 
5,700

Total assets
$
2,622

 
$
7,450

 
$

 
$
10,072

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Warrant liability
$

 
$

 
$
14,977

 
$
14,977

Total liabilities
$

 
$

 
$
14,977

 
$
14,977

There were no transfers of financial assets or liabilities between category levels for the three and six months ended June 30, 2020 and the three and six months ended June 30, 2019.
The Company owns 648,149 shares of Series A Redeemable Convertible Preferred Stock of Tepha, Inc. ("Tepha"), a privately held medical device company located in Lexington, Massachusetts, that is engaged in the development of medical device products that restore, maintain, or improve tissue function. The Company received the preferred shares from Tepha during 2002 in connection with a technology sublicense agreement that was later terminated during 2016. The preferred shares owned by the Company represent less than one percent of Tepha's current outstanding common shares on a fully diluted basis and were fully written off through an impairment charge during 2005 prior to Tepha initiating commercial product sales.
6. ACCRUED EXPENSES
Accrued expenses consisted of the following at:
 
June 30,
2020
 
December 31,
2019
Employee compensation and benefits
$
517

 
$
669

Leased facilities
54

 
51

Professional services
151

 
327

Other
160

 
279

Total accrued expenses
$
882

 
$
1,326

7. STOCK-BASED COMPENSATION
Expense Information for Employee and Non-Employee Stock Awards
The Company recognized stock-based compensation expense related to stock awards, including awards to non-employees and members of the Board of Directors of $160 and $297 for the three and six months ended June 30, 2020 and $113 and $275 for the three and six months ended June 30, 2019, respectively. At June 30, 2020, there was approximately $2,356 of pre-tax stock-based compensation expense related to unvested awards not yet recognized.
The compensation expense related to unvested stock options is expected to be recognized over a remaining weighted average period of 3.62 years.

16



Stock Options
A summary of option activity for the six months ended June 30, 2020 is as follows:
 
Number of
Shares
 
Weighted Average
Exercise Price
Outstanding at December 31, 2019
62,065

 
$
178.95

Granted
261,992

 
$
5.91

Exercised

 
$

Forfeited
(721
)
 
$
48.40

Expired
(615
)
 
$
2,318.91

Outstanding at June 30, 2020
322,721

 
$
34.68

 
 
 
 
Vested and expected to vest at June 30, 2020
322,721

 
$
34.68

Options exercisable at June 30, 2020
46,233

 
$
183.33

       
Restricted Stock Units
The Company records stock compensation expense for restricted stock units ("RSUs") on a straight-line basis over their requisite service period, which approximates the vesting period, based on each RSU's award date market value. As RSUs vest, the Company withholds a number of shares from its employees with an aggregate fair market value equal to the minimum tax withholding amount (unless the employee makes other arrangements for payment of the tax withholding) from the common stock issuable at the vest date. The Company then pays the minimum required income tax for the employees. During the six months ended June 30, 2020 and June 30, 2019, the Company paid $0 and $4 for income tax withholdings associated with RSUs.
A summary of RSU activity for the six months ended June 30, 2020 is as follows:
 
Number of RSUs
Weighted Average Remaining Contractual Life (years)
Outstanding at December 31, 2019

 
Awarded
17,000

 
Common stock issued upon vesting

 
Forfeited

 
Outstanding at June 30, 2020
17,000

0.62
8. LEASES
Lease Accounting
The Company follows the lease accounting guidance codified in ASC 842. Under ASC 842, a lease is classified as a finance lease if any of five criteria described in the guidance apply to the lease. Any lease not classified as a finance lease is classified as an operating lease with expense recognition occurring on a straight-line basis over the term of the lease. The Company's existing lease arrangements meet the standards for operating lease classification.
Under ASC 842, a lease liability is recorded on the commencement date of a lease and is calculated as the present value of the remaining lease payments, using the interest rate implicit in the lease, or if that rate is not readily determinable, using the lessee's incremental borrowing rate. A right-of-use asset equal to the lease liability is also recorded with adjustments made, as necessary, for lease prepayments, lease accruals, initial direct costs and lessor lease incentives that may be present within the terms of the lease. The Company has adopted the short-term lease exception that permits lessees to omit leases with terms of twelve months or less from the accounting requirements of ASC 842.

17



Maturity Analysis of Lease Liabilities
At June 30, 2020, the Company's lease liabilities will mature as follows:
Year ended December 31,
Undiscounted Cash Flows
2020 (July to December)
$
346

2021
704

2022
726

2023
749

2024
771

Thereafter
1,540

Total undiscounted future lease payments
4,836

Discount
(1,006
)
Total lease liabilities
$
3,830

     Short-term lease liability
$
430

     Long-term lease liability
$
3,400

At June 30, 2020, the Woburn, Massachusetts facility is the only remaining lease included in the Company's right-of-use assets and corresponding lease liabilities.
Quantitative Disclosure of Lease Costs (unaudited)
 
Three Months Ended
   June 30,
 
Six Months Ended
  June 30,
 
2020
 
2019
 
2020
 
2019
Lease cost:
 
 
 
 
 
 
 
Operating lease cost
$
183

 
$
257

 
$
386

 
$
516

Short-term lease cost
123

 
108

 
306

 
254

Sublease income
(142
)
 
(134
)
 
(279
)
 
(258
)
Total lease cost, net
$
164

 
$
231

 
$
413

 
$
512

 
 
 
 
 
 
 
 
Other information as of:
 
 
 
 
June 30, 2020
 
December 31, 2019
Weighted-average remaining lease term (years)
 
 
 
 
6.4
 
6.7
Weighted-average discount rate
 
 
 
 
7.25%
 
7.24%
Real Estate Leases
During 2016, the Company entered into a lease agreement for its headquarters, pursuant to which the Company leased approximately 29,622 square feet of office and research and development space located at 19 Presidential Way, Woburn, Massachusetts. The lease began on June 1, 2016 and will end on November 30, 2026. The lease agreement does not include any options for an early termination or for an extension of the lease. Pursuant to the lease, the Company is required to pay certain taxes and operating costs associated with the premises throughout the term of the lease. During the buildout of the rented space, the landlord paid $889 for tenant improvements to the facility and an additional $444 for tenant improvements that result in increased rental payments by the Company. Upon adopting ASC 842 these improvements were recorded as a reduction in the valuation of the right-of-use asset.
In November 2019, the Company entered into a modification agreement to the Woburn lease in which Yield10 returned 7,409 square feet of underutilized space to the landlord for the remaining term of the lease. In exchange for returning the space, the landlord agreed to fund modifications and upgrades to the office space retained by the Company. The modifications were completed in February 2020, and after that point the Company has no further financial obligations for the vacated space, including lease rental charges, utilities, maintenance and real estate tax charges. The Company's security deposit was also reduced from $307 to $229. During the six months ending June 30, 2020, the Company wrote off $206 in leasehold improvements and office furniture, net of proceeds, associated with the returned space.

18



In October 2016, the Company entered into a sublease agreement with a subsidiary of CJ CheilJedang Corporation ("CJ") with respect to CJ's sublease of approximately 9,874 square feet of its leased facility located in Woburn, Massachusetts. The sublease space was determined to be in excess of the Company's needs. The CJ sublease is unaffected by the Company's recent lease modification with the landlord and it remains coterminous with the Company's master lease. CJ will pay pro rata rent and operating expenses equal to the amounts payable to the landlord by the Company, as adjusted from time to time in accordance with the terms of the master lease. Future CJ sublease payments have not been presented as an offset to total undiscounted future lease payments of $4,836 shown in the lease maturity analysis table above. CJ provided the Company with a security deposit of $103 in the form of an irrevocable letter of credit.
Through May 2020, the Company leased approximately 13,702 square feet of unused office and laboratory space in Lowell, Massachusetts. The lease terminated in accordance with the terms of the lease agreement and the facility has been returned to the landlord. No further expenses are anticipated under this lease.
The Company's wholly-owned subsidiary, Metabolix Oilseeds, Inc. ("MOI"), located in Saskatoon, Saskatchewan, Canada, leases approximately 6,900 square feet of office, laboratory and greenhouse space located within Innovation Place at 410 Downey Road and within the research facility of National Research Council Canada located at 110 Gymnasium Place. None of the leases contain renewal or early termination options. MOI's leases for these facilities expire on various dates through May 2021.
9. CARES ACT LOAN
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 and subsequently amended by the Paycheck Protection Program Flexibility Act (the "Flexibility Act") on June 5, 2020, in order to provide relief from the economic impacts of COVID-19. During April 2020, the Company received $333 in loan proceeds from the Paycheck Protection Program (the “PPP”), established pursuant to the CARES Act and administered by the U.S. Small Business Administration. The unsecured loan (the “PPP Loan”) is evidenced by a promissory note of the Company dated April 19, 2020 in the principal amount of $333, issued to a third-party lender (the "lender"). The PPP Loan was amended as a result of the changes made by the Flexibility Act.
Under the CARES Act and the PPP, the Company may apply for and be granted forgiveness for all or part of the PPP Loan. The amount of loan proceeds eligible for forgiveness is based on a formula that takes into account a number of factors, including the amount of loan proceeds used by the Company during the twenty-four-week period after the loan origination for certain purposes including payroll costs, rent payments on certain leases, and certain qualified utility payments. At least 60% of the loan amount must be used for eligible payroll costs; maintaining or rehiring employees and maintaining salaries at certain levels; and other factors.
Under the terms of the PPP Loan, as amended, interest will accrue on the outstanding principal at the rate of 1.0% per annum. The term of the PPP Loan is two years from the date the loan proceeds were received, though it may be payable sooner in connection with an event of default under the terms of the PPP Loan. To the extent the loan amount is not forgiven under the PPP, the Company is obligated to make equal monthly payments of principal and interest, beginning ten months from the date of the PPP Loan, until the maturity date.
The PPP Loan may be prepaid in part or in full, at any time, without penalty. The PPP Loan provides for certain customary events of default, including, but not limited to, failing to make a payment when due under the loan, failure to take actions required by the loan, the Company defaulting under certain agreements in favor of any third party, making false statements, the Company’s insolvency, and the commencement of creditor or forfeiture proceedings against the Company. Upon the occurrence of an event of default, the lender has customary remedies and may, among other things, require immediate payment of all amounts owed under the PPP Loan, collect all amounts owed from the Company, and file suit and obtain judgment against the Company.
During the three months ended June 30, 2020, Yield10 utilized the entire PPP Loan amount for qualifying expenses and management of the Company considers it reasonably certain that it will meet the conditions for loan forgiveness. As such, the Company has recorded the full amount of the loan, or $333, within other income (expense) in its condensed consolidated statement of operations for the three months ended June 30, 2020.

19



10. COMMITMENTS AND CONTINGENCIES
Litigation
From time to time, the Company may be subject to legal proceedings and claims in the ordinary course of business. The Company is not currently aware of any such proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on its business, financial condition or results of operations.
Guarantees
As of June 30, 2020, and December 31, 2019, the Company did not have significant liabilities recorded for guarantees.
The Company enters into indemnification provisions under various agreements with other companies in the ordinary course of business, typically with business partners and contractors. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of its activities. These indemnification provisions generally survive termination of the underlying agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is unlimited. However, to date Yield10 Bioscience has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of the indemnifications under these agreements is believed to be minimal. Accordingly, the Company has no liabilities recorded for these agreements as of June 30, 2020 and December 31, 2019.
11. GEOGRAPHIC INFORMATION
The geographic distribution of the Company’s grant revenues and long-lived assets are summarized in the tables below:
 
U.S.
 
Canada
 
Eliminations
 
Total
Three Months Ended June 30, 2020:
 
 
 
 
 
 
 
Grant revenue from external customers
$
154

 
$
67

 
$

 
$
221

Inter-geographic revenues

 
373

 
(373
)
 

Revenues
$
154

 
$
440

 
$
(373
)
 
$
221

 
 
 
 
 
 
 
 
Three Months Ended June 30, 2019:
 
 
 
 
 
 
 
Grant revenue from external customers
$
318

 
$

 
$

 
$
318

Inter-geographic revenues

 
499

 
(499
)
 

Revenues
$
318

 
$
499

 
$
(499
)
 
$
318

 
 
 
 
 
 
 
 
Six Months Ended June 30, 2020:
 
 
 
 
 
 
 
Net revenues from external customers
$
333

 
$
67

 
$

 
$
400

Inter-geographic revenues

 
777

 
(777
)
 

Net revenues
$
333

 
$
844

 
$
(777
)
 
$
400

 
 
 
 
 
 
 
 
Six Months Ended June 30, 2019:
 
 
 
 
 
 
 
Net revenues from external customers
$
442

 
$

 
$

 
$
442

Inter-geographic revenues

 
836

 
(836
)
 

Net revenues
$
442

 
$
836

 
$
(836
)
 
$
442


Foreign revenue is based on the country in which the Company’s subsidiary that earned the revenue is domiciled. During the three and six months ended June 30, 2020, revenue earned from the Company's Michigan State University sub-award represented 69.7% and 83.3%, respectively, of total government grant revenue for each period.
The geographic distribution of the Company’s long-lived assets is summarized as follows:
 
U.S.
 
Canada
 
Eliminations
 
Total
June 30, 2020
$
932

 
$
46

 
$

 
$
978

December 31, 2019
$
1,186

 
$
57

 
$

 
$
1,243


20



12. CAPITAL STOCK AND WARRANTS

Common Stock
Shelf Registration
On April 1, 2020, the Company filed a shelf registration statement on Form S-3 (File No. 333-237539) with the SEC, which was declared effective on April 10, 2020 (the “Shelf Registration Statement”). The Shelf Registration Statement contained a prospectus which covers the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $25.0 million of the Company's common stock, preferred stock, warrants and subscription rights, which securities may be sold either individually or in units.
Reverse Stock Split
On January 15, 2020, the Company completed a 1-for-40 reverse stock split ("Reverse Stock Split") of its common stock by filing a certificate of amendment (the "Charter Amendment") with the State of Delaware to amend its certificate of incorporation. The ratio for the Reverse Stock Split was determined by the Company's board of directors following approval by stockholders at the Company's special meeting held on January 9, 2020. The Reverse Stock Split had the effect of increasing the Company's common shares available for issuance by reducing issued and outstanding common shares by a divisible factor of 40 while its authorized shares remained at the current 60 million shares. Proportional adjustments were made to the Company's outstanding stock options and to the number of shares issued and issuable under the Company's equity compensation plans.
November 2019 Concurrent Securities Offerings
On November 19, 2019, the Company closed on concurrent public and private securities offerings, receiving combined gross cash proceeds of $11,500, before issuance costs of $1,254.
The public portion of the offering included sales of Class A Units and Class B Units as follows:
405,750 Class A Units priced at a public offering price of $8.00 per unit, with each unit consisting of one share of common stock, par value $0.01 per share, Series A Warrants to purchase one share of common stock at an exercise price of $8.00 per share, expiring two and one-half-years from the closing date of the offering, and Series B Warrants to purchase one share of common stock at an exercise price of $8.00 per share, expiring seven and one-half-years from the closing date of the offering. The 405,750 Class A Units sold include the full exercise of the underwriter's over-allotment option of 93,750 Class A Units.
2,504 Class B Units, priced at a public offering price of $1,000 per unit, with each unit consisting of one share of Series A Convertible Preferred Stock, par value $0.01 per share, convertible at any time at the holder's option into 125 shares of common stock, par value $0.01 per share, Series A Warrants to purchase 125 shares of common stock at an exercise price of $8.00 per share, expiring two and one-half-years from the closing date of the offering, and Series B Warrants to purchase 125 shares of common stock at an exercise price of $8.00 per share, expiring seven and one-half-years from the closing date of the offering. The Series A Convertible Preferred Stock was convertible into shares of common stock at any time using a conversion ratio of $8.00 per share. As of June 30, 2020, all of the shares of the Series A Convertible Preferred Stock had converted to 313,000 shares of the Company's common stock.
Gross proceeds from the sale of Class A Units and Class B Units totaled $5,750.
In the concurrent private placement, certain existing shareholders purchased the following securities:
5,750 Units, priced at $1,000 per unit, each unit consisting of one share of the Company's Series B Convertible Preferred Stock, par value $0.01 per share, contingently convertible into 125 shares of common stock at an exercise price of $8.00, Series A Warrants to purchase 125 shares of common stock, par value $0.01 per share, at an exercise price of $8.00 per share, expiring two and one-half-years from the closing date of the offering, and Series B Warrants to purchase 125 shares of common stock at an exercise price of $8.00 per share, expiring seven and one-half-years from the closing date of the offering.
Gross proceeds from the private placement also totaled $5,750.

21



As of the November 19, 2019 closing date of the two offerings, the Company did not have sufficient authorized and available shares of common stock to permit conversion of the Series B Convertible Preferred Stock sold in the private placement or to permit the exercise of the 2,875,000 combined Series A Warrants and Series B Warrants issued under both the public and the private offerings. The Series B Convertible Preferred Shares and the Series A Warrants and Series B Warrants were not convertible or exercisable until more shares of common stock became available for issuance through the Company's filing of the Charter Amendment for the Reverse Stock Split. Upon the filing of the Charter Amendment on January 15, 2020, all of the Series B Convertible Preferred Stock sold in the private placement automatically converted into 718,750 shares of common stock and the Series A Warrants and Series B Warrants issued under both offerings became eligible for exercise.
Until their conversion to common stock, the Company recorded the Series A Convertible Preferred Stock as permanent equity within the Company's balance sheet. The contingent redemption rights of the Series B Convertible Preferred stockholders were judged to be outside of the Company's control and resulted in their classification as temporary equity within the Company's balance sheet until their automatic conversion to common shares in January 2020.
The Series A and Series B Warrants are free standing financial instruments, legally detachable and separately exercisable from the common and preferred shares issued in the concurrent offerings. At the time of their issuance, the Company determined that all of the warrants should be classified as a warrant liability and recorded at an inception date fair value of $24,518 due to the insufficiency of common shares available to permit their exercise. As the proceeds from the offerings were less than the fair value of their respective warrants, the warrants were recorded at their full fair value and the difference between the fair value and the cash proceeds of $13,018 was recorded to other income (expense) in the Company's consolidated statement of operations during the year ended December 31, 2019. No residual offering proceeds remained to be allocated to the common and preferred shares sold in the offerings.
The Company re-measured the fair value of the warrants on December 31, 2019 and again on January 15, 2020 (the date of filing the Charter Amendment to increase available shares of common stock), resulting in, respectively, the recognition of a gain of $9,541 followed by a loss of $957, due to the change in fair value at each valuation date. By filing the Charter Amendment and enacting the 1-for-40 Reverse Stock Split, the Company's outstanding common shares were reduced by a divisible factor of 40 while authorized common shares remained at the current 60 million shares. As a result of this corporate action, sufficient shares of authorized, but unissued shares of common stock became available for Series A and Series B warrant holders to exercise their warrants resulting in their reclassification from warrant liability to equity in the Company's consolidated balance sheet.
At closing, the proceeds of the combined offerings were allocated solely to the liability classified warrants, and as a consequence, the offering costs of $1,254 were immediately expensed to other income (expense) in the consolidated statement of operations for the year ended December 31, 2019 in accordance with accounting guidance.
March 2019 Registered Direct Offering
On March 18, 2019, the Company completed a registered direct offering of its common stock. Proceeds from the transaction were $2,932 before issuance costs of $349. Investors participating in the transaction purchased a total of 60,541 shares of common stock at a price of $48.40 per share.
Preferred Stock
The Company's Certificate of Incorporation authorizes it to issue up to 5,000,000 shares of $0.01 par value preferred stock.
Description of Series A Convertible Preferred Stock
The November 2019 concurrent offerings of the Company's securities included the issuance of 2,504 shares of Series A Convertible Preferred Stock. Each Series A Convertible Preferred Share was convertible into 125 shares of common stock at a conversion price of $8.00 per share. As of June 30, 2020, all 2,504 shares of the Series A Convertible Preferred Stock had converted to 313,000 shares of common stock.
Description of Series B Convertible Preferred Stock
The November 2019 concurrent offerings of the Company's securities included the issuance of 5,750 shares of Series B Convertible Preferred Stock. Each share of Series B Convertible Preferred Stock was convertible into 125 shares of common stock at a conversion price of $8.00 per share. All of the Series B Convertible Preferred Stock automatically converted to 718,750 shares of common stock on January 15, 2020, upon the Company's filing of a Charter Amendment for the reverse stock split described above.

22



When converted, the shares of Series A and B Convertible Preferred Stock were restored to the status of authorized but unissued shares of preferred stock, subject to reissuance by the Company's board of directors.
Warrants
The following table summarizes information regarding outstanding warrants to purchase common stock as of June 30, 2020:
Issuance
 
Number of Shares Issuable Upon Exercise of Outstanding Warrants
 
Exercise Price Per Share of Common Stock
 
Expiration Date
November 2019 Public Offering - Series A
 
580,727

 
$
8.00

 
May 19, 2022
November 2019 Public Offering - Series B
 
649,477

 
$
8.00

 
May 19, 2027
November 2019 Private Placement - Series A
 
718,750

 
$
8.00

 
May 19, 2022
November 2019 Private Placement - Series B
 
718,750

 
$
8.00

 
May 19, 2027
December 2017 Public Offering - Series A
 
160,975

 
$
90.00

 
December 21, 2022
July 2017 Registered Direct Offering
 
14,270

 
$
201.60

 
January 7, 2024
Consultant
 
750

 
$
116.00

 
September 11, 2024
Total
 
2,843,699

 
 
 
 
February 2020 Warrant Exercises
In connection with the Company’s public securities offering that closed on November 19, 2019, the Company issued Series A Warrants and Series B Warrants to purchase shares of the Company’s common stock. The warrants were issued, and are held, in book-entry form through The Depository Trust & Clearing Corporation (“DTCC”). During the six months ended June 30, 2020, warrants equal to a total of 207,296 shares of the Company's common stock were exercised, generating cash proceeds of $1,658. In May 2020, Yield10 was informed by DTCC and its warrant agent that the exercise price of each warrant issued in the November 2019 public securities offering had been proportionately adjusted in accordance with the Company's 1-for-40 reverse stock split completed in January 2020, but that the number of shares issuable upon the exercise of each warrant had not been proportionately adjusted following the stock split within the records of DTCC. Based on DTCC's notification, the Company believed that up to 88,762 shares of common stock may have been incorrectly issued and up to $710 in proceeds may have been incorrectly collected for certain warrants exercised during February 2020. Following a thorough review with the warrant agent, DTCC and brokers for certain warrant holders who exercised these warrants, the Company determined that the number of shares of common stock issued and the amount of cash collected from the exercises were in fact correct, but that DTCC’s records did not accurately reflect the number of warrants remaining in the affected warrant holders’ accounts following their exercises. As of June 30, 2020, the issue has been resolved by adjusting the DTCC accounts of the warrant holders. Accordingly, the Company will not be required to return cash proceeds and the warrant holders will not be required to return any of the common shares issued from the exercises.  In its Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, the Company recorded $710 within accrued expenses for the cash proceeds from the February 2020 warrant exercises that the Company previously expected to be returned to warrant holders. That accrual was relieved and reclassified to equity during the quarter ending June 30, 2020.
Reserved Shares
The following shares of common stock were reserved for future issuance upon exercise of stock options, vesting of RSUs and conversion of warrants:
 
June 30,
2020
 
December 31,
2019
Stock Options
322,721

 
62,065

RSUs
17,000

 

Series A Convertible Preferred Stock - November 2019 Public Offering

 
99,500

Warrants
2,843,699

 
175,995

Total number of common shares reserved for future issuance
3,183,420

 
337,560


23



ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

(All dollar amounts are stated in thousands)
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements relate to our future plans, objectives, expectations and intentions and may be identified by words such as “may,” “will,” “should,” “expects,” “plans,” “anticipate,” “intends,” “target,” “projects,” “contemplates,” “believe,” “estimates,” “predicts,” “potential,” and “continue,” or similar words.
Although we believe that our expectations are based on reasonable assumptions within the limits of our knowledge of our business and operations, these forward-looking statements contained in this document are neither promises nor guarantees. Our business is subject to significant risk and uncertainties and there can be no assurance that our actual results will not differ materially from our expectations. These forward looking statements include, but are not limited to, statements concerning our business plans and strategies; expected future financial results and cash requirements; statements related to the coronavirus pandemic and its potential adverse impacts; plans for obtaining additional funding; plans and expectations that depend on our ability to continue as a going concern; and plans for development and commercialization of our Yield10 technologies. Such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated including, without limitation, risks related to our limited cash resources, uncertainty about our ability to secure additional funding, risks related to the execution of our business plans and strategies, risks associated with the protection and enforcement of our intellectual property rights, as well as other risks and uncertainties set forth under the caption "Risk Factors" in Part I, Item 1A, of the Company's Annual Report on Form 10-K for the year ended December 31, 2019 and in our other filings with the SEC, including in Part II, Item 1A of this Report on Form 10-Q.
The forward-looking statements and risk factors presented in this document are made only as of the date hereof and we do not intend to update any of these risk factors or to publicly announce the results of any revisions to any of our forward-looking statements other than as required under the federal securities laws.
Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to "Yield10 Bioscience," "Yield10," "we," "our," "us," "our company" or "the company" refer to Yield10 Bioscience, Inc., a Delaware corporation, and its subsidiaries.
Overview
Yield10 Bioscience, Inc. is an agricultural bioscience company that uses its "Trait Factory" and the Camelina oilseed “Fast Field Testing” system to develop high value seed traits for the agriculture and food industries. 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 Gene Ranking Artificial Intelligence Network ("GRAIN") 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 market. 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. 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. Yield10 Bioscience is headquartered in Woburn, Massachusetts and has an Oilseed Center of Excellence in Saskatoon, Saskatchewan, Canada.
As of June 30, 2020, we held unrestricted cash, cash equivalents and short-term investments of $8,501. We follow the guidance of ASC Topic 205-40, Presentation of Financial Statements-Going Concern, in order to determine whether there is substantial doubt about our ability to continue as a going concern for one year after the date our financial statements are issued. Based on our current cash forecast, we expect that our present capital resources will be sufficient to fund our planned operations and meet our obligations into the second quarter of 2021. Our ability to continue operations after our current cash resources are exhausted depends on our ability to obtain additional financing through, among other sources, public or private equity financing, secured or unsecured debt financing, equity or debt bridge financing, additional government research grants or collaborative arrangements with third parties, as to which no assurances can be given. We do not know whether additional

24



financing will be available on terms favorable or acceptable to us when needed, if at all. If adequate additional funds are not available when required, we may be forced to curtail our research efforts, explore strategic alternatives and/or wind down our operations and pursue options for liquidating our remaining assets, including intellectual property and equipment. We have determined, based on our cash forecast, that our present capital resources will not be sufficient to fund our planned operations for the twelve months from the date that these interim financial statements are filed, which raises substantial doubt about our ability to continue as a going concern.
If we issue equity or debt securities to raise additional funds in the future, (i) we may incur fees associated with such issuances, (ii) our existing stockholders may experience dilution from the issuance of new equity securities, (iii) we may incur ongoing interest expense and be required to grant a security interest in our assets in connection with any debt issuance, and (iv) the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. In addition, utilization of our net operating loss and research and development credit carryforwards may be subject to significant annual limitations under Section 382 of the Internal Revenue Code due to ownership changes resulting from equity financing transactions. If we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our potential products or proprietary technologies or grant licenses on terms that are not favorable to us.
Government Grants
On May 20, 2020, Metabolix Oilseeds, Inc. (“MOI”), the Company’s wholly-owned Canadian research subsidiary, received a research grant through the Industrial Research Assistance Program administered by National Research Council Canada ("NRC"). The objective of the grant is to provide financial research assistance to innovative, early-stage small and medium-sized enterprises. Under the terms of the agreement, NRC agreed to contribute up to a maximum of $67 for payroll costs incurred by MOI during the period April 1, 2020 - June 24, 2020. During the three months ended June 30, 2020, MOI submitted claims for eligible payroll costs and recognized revenue for the full amount of the award.
During 2018, we entered into a sub-award 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 our funding under this sub-award has been appropriated through September 2020 for $1,698, we anticipate that each additional option year 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 June 30, 2020, proceeds of $140 remain to be recognized through the end of the third year under our MSU sub-award as shown in the table below. This includes amounts for reimbursement to our subcontractors, as well as reimbursement for our employees’ time, benefits and other expenses related to future performance.
 
Program Title
 
Funding
Agency
 
Total Government Funded Appropriations
 
Total revenue recognized through June 30, 2020
 
Remaining amount to be recognized as of June 30, 2020
 
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

 
$
1,558

 
$
140

 
September 2020
 
Funding from National Research Council Canada through its Industrial Research Assistance Program (NRC-IRAP) entitled "Innovation Assistance Program"
 
National Research Council Canada
 
67

 
67

 

 
June 2020
 
Total
 
 
 
$
1,765

 
$
1,625

 
$
140

 
 

25



Critical Accounting Estimates and Judgments
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP for interim financial information. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, stock-based and performance-based compensation, measurement of right-of-use assets and lease liabilities, the recognition of lease expense and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The critical accounting policies and the significant judgments and estimates used in the preparation of our condensed consolidated financial statements for the three and six months ended June 30, 2020, are consistent with those discussed in our Annual Report on Form 10-K for the year ended December 31, 2019, in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates and Judgments.”
Results of Operations
Comparison of the Three Months Ended June 30, 2020 and 2019
Revenue 
 
Three Months Ended
June 30,
 
 
 
2020
 
2019
 
Change
Grant revenue
$
221

 
$
318

 
$
(97
)
Grant revenue was $221 and $318 for the three months ended June 30, 2020 and June 30, 2019, respectively.  Grant revenue recorded during each of these periods was derived primarily from the Company's sub-award with MSU. During the three months ended June 30, 2020, we also recognized the full $67 awarded by NRC to MOI for general research support.
We anticipate that MSU grant revenue will fluctuate over the next twelve months as a result of varying annual budget appropriations awarded under the MSU sub-award. Our forecast related to grant revenue is subject to change, should we receive new grants or if our ability to earn revenue from our existing grant is negatively impacted by the COVID-19 pandemic.
Expenses
 
Three Months Ended
June 30,
 
 
 
2020
 
2019
 
Change
Research and development expenses
$
1,179

 
$
1,191

 
$
(12
)
General and administrative expenses
1,179

 
1,025

 
154

Total expenses
$
2,358

 
$
2,216

 
$
142

Research and Development Expenses
Total research and development expenses remained consistent at $1,179 and $1,191 during the three months ended June 30, 2020 and June 30, 2019, respectively. However, compensation and benefits increased by $92 from $642 during the three months ended June 30, 2019 to $733 during the three months ended June 30, 2020, primarily as a result of annual merit increases that became effective on January 1, 2020, and the Company's pro rata accrual for 2020 estimated performance bonuses expected to be paid in early 2021. We did not accrue for 2019 employee bonuses during the three months ended June 30, 2019. Facilities related expenses decreased by $82 during the three months ended June 30, 2020 compared to the three months ended June 30, 2019. In November 2019, we amended our Woburn lease and returned 7,409 square feet of underutilized space to the landlord for the remaining term of the lease.
Based on our current financial forecast, we expect research and development expenses will continue to remain consistent during the remainder of 2020. Due to the COVID-19 pandemic, we have delayed a small number of planned 2020 increases in research personnel. Our forecasts related to research and development expense are subject to change due to the

26



potential impact of the COVID-19 pandemic, or as new collaborative opportunities arise that alter our business plans.
General and Administrative Expenses
General and administrative expenses for the three months ended June 30, 2020 and June 30, 2019 increased by $154 from $1,025 to $1,179. The 15 percent increase is primarily due to an increase in compensation and benefits of $83 and an increase in professional fees of $70. Compensation and benefits increased as a result of 2020 annual merit increases and the recording of pro rata estimated 2020 bonus expenses and professional fees increased due to legal and accounting work performed in connection with the Company's securities registration filings with the SEC. We did not accrue for 2019 employee bonuses during the three months ended June 30, 2019.
We expect our general and administrative expenses for the year ended December 31, 2020, will remain at a level consistent with 2019. Note, however, that our forecasts related to general and administrative expense are subject to change due to the potential impact of the COVID-19 pandemic, or as new collaborative opportunities arise that alter our business plans.
Other Income (Expense), Net 
 
Three Months Ended
June 30,
 
 
 
2020
 
2019
 
Change
Loan forgiveness income
$
333

 
$

 
$
333

Other income (expense), net
15

 
27

 
(12
)
Total other income (expense), net
$
348

 
$
27

 
$
321

Loan Forgiveness Income
During April 2020, we received $333 in loan proceeds from the Paycheck Protection Program (the “PPP”), established pursuant to the CARES Act. Under the CARES Act and the PPP, we may apply for and be granted forgiveness for all or part of the PPP loan. Subject to certain requirements and limitations on loan forgiveness, only loan proceeds spent on payroll and other eligible costs during a twenty-four-week period will qualify for forgiveness. During the three months ended June 30, 2020, we utilized the entire PPP loan amount for qualifying expenses and consider it reasonably certain that we will meet the conditions for loan forgiveness. As such, we have recorded the full amount of the loan, or $333, within other income (expense) in our condensed consolidated statement of operations for the three months ended June 30, 2020. See Note 9.
Other Income (Expense), net
Other income (expense) for the three months ended June 30, 2020 and June 30, 2019 was derived primarily from investment income earned from the Company's cash equivalents and short-term investments.
Comparison of the Six Months Ended June 30, 2020 and 2019
Revenue 
 
Six Months Ended June 30,
 
 
 
2020
 
2019
 
Change
Grant revenue
$
400

 
$
442

 
$
(42
)
Grant revenue was $400 and $442 for the six months ended June 30, 2020 and June 30, 2019, respectively.  Grant revenue for each of these periods was derived primarily from the Company's sub-award with MSU. During the six months ended June 30, 2020, we also recognized the full $67 awarded by NRC to MOI for general research support.

27



Expenses
 
Six Months Ended June 30,
 
 
 
2020
 
2019
 
Change
Research and development expenses
$
2,639

 
$
2,414

 
$
225

General and administrative expenses
2,566

 
2,211

 
355

Total expenses
$
5,205

 
$
4,625

 
$
580

Research and Development Expenses
Research and development expenses during the six months ended June 30, 2020 and June 30, 2019 were $2,639 and $2,414, respectively. The $225, or 9 percent, increase is primarily due to a $192 increase in compensation and benefits and our recording a loss on disposal of fixed assets. Compensation and benefits increased from $1,323 during the six months ended June 30, 2019 to $1,515 during the six months ended June 30, 2020, as a result of annual merit increases that became effective on January 1, 2020, and as a result of the Company's pro rata six-month accrual for 2020 estimated performance bonuses expected to be paid in early 2021. We did not accrue for 2019 employee bonuses during the six months ended June 30, 2019. In November 2019, we entered into a modification agreement to our Woburn lease in which we returned 7,409 square feet of underutilized space to the landlord for the remaining term of the lease. As a result of this lease modification, during the six months ended June 30, 2020 we wrote off $141 in leasehold improvements and office furniture previously utilized in our research and development activities. Our facilities expenses decreased by $70 during the six months ended June 30, 2020, compared to the six months ended June 30, 2019, as a result of returning the underutilized space in our Woburn facility to the landlord.
General and Administrative Expenses
General and administrative expenses for the six months ended June 30, 2020 and June 30, 2019 increased by $355 from $2,211 to $2,566. The 16 percent increase is due to an increase in compensation and benefits of $140 as a result of 2020 annual merit increases and recording estimated bonus expenses. We did not accrue for 2019 employee bonuses during the six months ended June 30, 2019. Professional fees also increased by $210 from $372 during the six months ended June 30, 2019 to $581 during the six months ended June 30, 2020 and is primarily related to legal and accounting work performed in connection with our securities registration filings with the SEC.
Other Income (Expense), Net 
 
Six Months Ended June 30,
 
 
 
2020
 
2019
 
Change
Change in fair value of warrants
$
(957
)
 
$

 
$
(957
)
Loan forgiveness income
333

 

 
$
333

Other income (expense), net
48

 
52