Welcome to the First Quarter 2020 Financial Results and Business Update Conference Call for Yield10 Bioscience. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the conference call over to your host, Yield10 Vice President of Planning and Corporate Communications, Ms. Lynne Brum. Ms. Brum, you may begin.

Thank you, Laura, and good evening, everyone. Welcome to Yield10 Bioscience First Quarter 2020 Conference Call. Joining me on the call today are President and CEO, Dr. Oliver Peoples; Vice President of Research and Chief Science Officer, Dr. Kristi Snell; and Chief Accounting Officer, Chuck Haaser. Earlier this afternoon, Yield10 issued our first quarter 2020 financial results as well as a press release confirming that permitting is complete for our 2020 field testing program. These releases, as well as slides that accompany today's presentation, are available on the Investor Relations Events section of our website at yield10bio.com. Let's now turn to Slide 2. Please note that as part of our discussion today, management will be making forward-looking statements. These statements are not guarantees of future performance and therefore, you should not place undue reliance on them. Investors are also cautioned that statements that are not strictly historical constitute forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties that could cause the actual results to differ materially from those anticipated. These risks include risks and uncertainties detailed in Yield10's filings with the SEC, including the company's most recent 10-K. The company undertakes no obligation to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this conference call. Now I'll turn the call over to Oli.

Thanks, Lynne. Good evening, everyone, and thanks for joining our call. Today, I will provide an overview of Yield10, our pipeline of traits and some recent accomplishments. Kristi will present an update on the status of our 2020 field test program and an update on recent R&D activities. I'll then provide Camelina business development updates, review the financials and summarize our key milestones for 2020 before opening the call to questions. Now let's turn to Slide 3, our business profile. As most of you know, Yield10 is an agricultural bioscience company focused on developing performance traits for licensing in major food and feed crops using our Camelina oilseed platform. We are also progressing our traits in Camelina to develop a specialty products business. We have a strong leadership team in operations in Woburn, Massachusetts, and Saskatoon, Canada. Now let's turn to Slide 4, our recent accomplishments. We've made considerable progress year-to-date, and I'll now highlight some of our accomplishments. We diversified and strengthened the Board by adding ag industry veteran, Dr. Sherri Brown, to the Board of Directors. We completed Phase I of development of several of our traits in the corn program and contracted a seed count that we can execute in Phase II in order to develop corn hybrids for field testing. The reported results for the 2019 field test in Camelina and canola obtained positive response for our "Am I Regulated?" letter from USDA-APHIS for CRISPR C3000 trait in Camelina. And we completed permitting for 2020 field testing program, executed all service provider contracts and shipped seed to all field test sites, and continued to advance our Camelina business plan. Moving forward in 2020, we look forward to generating additional proof points, forming strategic alliances and further progressing our Camelina business plan. Now let's turn to Slide 5, our COVID-19 business continuity plan. As the COVID-19 pandemic has caused an unprecedented global health and economic crisis, we are focused on the safety of our employees while maintaining business continuity by prioritizing activities necessary to conduct our 2020 field testing program. I'd like to recognize the efforts and dedication of our employees for adapting to this rapidly evolving situation to keep our business on track. One key lesson out of this crisis is having two R&D locations, Woburn, Massachusetts and Saskatoon, Canada, has been vital to managing effectively through the crisis. In Woburn, remote work began in mid-March and continues as COVID-19 infections persist in Massachusetts. The ability to work on-site, including in the lab, has been limited, and we're waiting for guidelines from the governor in order to reopen. We're planning to -- for a staggered schedule to start, perhaps later in May to early June, and the Woburn R&D team will pivot to work in Camelina. Under the Cares Act, our application is accepted to the payroll protection program and received $330,000 of funding in the second quarter. We have not laid off or furloughed any employees. In Saskatoon, our R&D labs and greenhouses have remained accessible since mid-March, albeit on a limited schedule with staggered work times. This was crucial during this extremely busy period for preparing and shipping seeds to the field test sites. Saskatchewan province recently communicated plans to fully reopen over several weeks. Our R&D and regulatory teams effectively kept the 2020 field test program on track, and we are just waiting on weather and fuel conditions for planting. At the current time, our field test contractors have everything they need for planting. The ability of our team members to travel to the field test sites for inspections is restricted, and we don't know how this will change as the season progresses. So we're getting set up to rely on video conferencing and local consultants to monitor field prep and planting. We expect the uncertainties and impacts caused by the COVID-19 pandemic are going to persist in 2020, so we will continue to focus on executing our business continuity plan, prioritizing the safety of our team. Now let's turn to Slide 6, our trait factory and business opportunities. Yield10's trait factory is made up of the GRAIN trait gene discovery platform, genetic modification of the trait gene targets in Camelina and fast field testing to generate performance data. This data enables us to form research license agreements with major seed companies for the evaluation of our traits and large acreage crops and to improve the potential commercial value of Camelina as a crop of producing specialty products. We have 3 distinct commercial opportunities from the trait factory: Collaboration agreements for access to our GRAIN platform for trait targets; licensing of our yield and performance traits for use in major row crops, corn, soybean, canola and others; and creating option value for our traits in the most important global food and feed crops; and product sales based on our Camelina platform for producing nutritional oils in the near term and PHA biomaterials in the future. Please turn to Slide 7 for traits in development. We currently have a strong pipeline of novel traits, including 6 which we have progressed to the field testing stage in Camelina, with several earlier-stage performance traits currently progressing. As you know, a number of our traits are also being progressed in soybean, forage sorghum and potato by Bayer, Forage Genetics and Simplot, respectively. Each of them is keeping us updated on their progress. Our C3003 and C3004 CGO pads could be broadly applicable to major North American crops, including canola, soy and corn, which account for 200 million acres harvested annually, with another 200 million acres of potential in South America. The C4000 series traits have been shown to result in significant increases in photosynthesis and biomass yield in the model crop, and we are now deploying these traits in Camelina and corn. We'll discuss the Camelina traits to increase seed oil and to produce PHA biomaterials, which together form the foundation of our Camelina products business plan later in the presentation. In 2020, we have made -- already made good progress on our trait developments in Camelina, supporting our partners in major crops and progressing our Camelina business plan. I'll now hand the call over to Kristi.

Thanks, Oli, and hello, everyone. Our grain platform is productive, and as a result, we currently have a pipeline of approximately 15 novel traits, and most of these are applicable to multiple crops. Today, I will provide an update on our recent R&D activity, especially as it relates to the promising traits we will be evaluating in our 2020 field testing program. Let's now turn to Slide 8. We announced today that we have completed the permitting process for our field trials in both the U.S. and Canada. This involved close cooperation between our team, the U.S. and Canadian regulatory agencies and our field test operators. This was completed despite some of the uncertainties and hurdles we faced over the last month due to COVID-19, and we anticipate planting will take place in the second quarter when conditions are suitable to do so. The objective of the 2020 field test is to generate multi-site field data to further characterize our traits and to identify commercial-quality Camelina line and data to drive partnership discussions and our product business plan. We are conducting field tests in Camelina with several traits at both sites in both the U.S. and Canada. C3004 is a very promising seed yield trait and a photo showing the increased figure of a C3004 greenhouse-grown plant is shown on the slide. In field test last year, under very challenging conditions, we were able to collect data showing C3004 plants display a significant increase in photosynthetic efficiency. In the field this year, we plan to obtain seed yield and oil content data for C3004. Based on receiving a positive response to our "Am I Regulated?" letter, we'll also test our CRISPR genome edited C3007 oil content-boosting trait. Our PHA biomaterial trait, C3014 and C3015, will be tested in the field for the first time to evaluate the co-production of PHA and oil in the seeds. We will also conduct seed bulk-up of our edited oil content trait in Camelina line E3902 for larger-scale trials in 2021. This trait produced increases in oil content in our 2019 field test and may be our first commercial Camelina variety. We are also conducting field tests of canola in Canada. These field tests will include testing the C3004 trait in canola for the first time to see if observed increases in Camelina plant figures in yield with this trait translate to canola. C3004 is currently being evaluated by Bayer in soybean and Simpla in potato. We will also bulk up seeds for 14 new commercial-quality C3003 canola lines as an extension of our prior work, where testing of early linescape increases in seed yield of up to 10%. C3003 is also being evaluated by Bayer in soybean and Simplot in potato. Our goal is to generate data on C3003 and C3004 in canola to drive partnership discussions around this important food oil crop. Our 2020 field test program is our largest and most extensive yet. The data in seed harvest from this program will help us advance our work in Camelina and may provide licensing opportunities in canola and other major crops. Let's now turn to Slide 9, which outlines our 2020 R&D priorities for trait development. In 2020, we are focused on executing our field test program and continuing to support Bayer, Forage Genetics and Simplot as they evaluate our traits in soybean, forage sorghum and potato. Additional field test data may enable Yield10 to expand the number of seed companies and crops, including canola and corn, in which our traits are being evaluated. We are building a technology and business plan to develop advanced commercial Camelina varieties with yield and oil performance traits, complemented by traits for herbicide tolerance and disease resistance. Yield10 has made important technology strides since we first started just 3 years ago. Our team is focused on generating technology proof points for our lead traits and further developing our Camelina technology for specialty products. I would like to thank our R&D team for their tremendous effort and look forward to their continued productivity this year. Oli, back to you.

Thanks, Kristi, and the entire R&D team. Our dedication and persistence will be critical as we prepared for field tests in the last few months. I am excited about Yield10's mission and look forward to ongoing developments as the year progresses. Let's now turn to Slide 10, the Yield10 Camelina platform. We believe Camelina represents an opportunity to develop a large, high-growth, profitable business over the longer term as a winter cover crop to produce nutritional oils and novel agricultural products to improve the sustainability of food production. As a result, we are beginning to execute our business development strategy for Camelina based on its current merits for farmers and near-term potential markets. We expect that this will allow us to establish the value chain with the goal of generating near-term revenue in parallel with leveraging our trait factory to accelerate the deployment of advanced varieties of products. Harvested Camelina seed is typically called crush, produce oil and protein meal and Yield10 plans to participate directly in the sale of these end products. The oil has historically been used in food, is currently considered GRAS in the U.S. and is approved for salmon feed in Canada. Residual protein meal is also approved for use in some feed applications in both countries. Omega-3 fatty acids from fish oil have been shown to help prevent heart disease and stroke, may help control lupus, eczema and rheumatoid arthritis, and may provide protective roles in cancer and other conditions. Camelina oil is rich in the omega-3 fatty acid ALA, and recent clinical studies indicate that Camelina oil has heart health benefits in a study published in 2018 in the Journal of Molecular Nutrition and Food Research. The higher content of the omega-3 alpha-linolenic acid ALA makes it a preferred oil of use in aquaculture feed as compared to soybean oil. These attributes of Camelina provide the initial market opportunities, making this an exciting crop for addressing the global macro trends of health and wellness and sustainability. In the near term, we believe that Yield10 is well positioned to become a leading player in Camelina, focus on production outside of the corn belt to produce nutritional oils without having to compete head-to-head for acres with commodity crops. In the longer term, our vision is to produce natural PHA biomaterials as a third product from processing engineered Camelina seed. PHA biomaterials are natural microbial polyesters with applications in a wide range of markets, including animal nutrition, wastewater treatment and as bioplastics. 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. Our longer-term goal is to be able to produce PHA biomaterials from Camelina at the cost range of edible oils to enable their broad market adoption. We plan to focus our efforts on animal nutrition and water treatment applications and find partners for the plastics opportunity. We believe Camelina entered the year to produce PHA biomaterials will be an attractive cash cover crop for farmers, improving farm income and the sustainability of food and feed production by enabling the production of exciting, new agricultural products for large markets. Please turn to Slide 11, and let's cover a few financial highlights. Our net operating cash issues was $2.3 million for the first quarter. We ended the first quarter with $9.8 million in cash, cash equivalents and short-term investments. In April, we received a loan in the amount of $333,000 under the payroll protection program implemented under the Cares Act response to COVID-19. We conducted a thorough review of our business and determine the loan was necessary to retain staff on payroll and support our business. We intend to utilize the funds to support U.S. payroll in the second quarter and apply for loan forgiveness under the program. We have no other debt on our balance sheet. We expect our cash on hand, together with expected revenue from our current government grant, will support our operations into the second quarter of 2021. For 2020, we still anticipate net operating cash usage in the range of $9 million to $9.5 million based on our current plans. We are directing this investment towards executing our business plan. Let's now review the first quarter operating results. The company reported a net operating loss from operations of $2.7 million for the first quarter of 2020 compared to a net operating loss of $2.3 million for the first quarter of 2019. The increase was driven primarily by expenses related to employee compensation and benefits. Total research grant revenues in the first quarter of 2020 were $179,000 versus $124,000 in the first quarter of 2019. Our ability to conduct research under the DOE grant was not affected in a significant way in first quarter, and we expect to be able to conduct the research as planned in the months ahead. In the first quarter of 2020, research and development expenses were $1.5 million, and G&A expenses were $1.4 million. This compares to $1.2 million of research and development expenses and $1.2 million of G&A expenses in the first quarter of 2019. Our total net loss of $3.6 million for the first quarter of 2020 includes a noncash charge of $1 million recorded within other income expense from the change in fair value of the company's warrant liability and a noncash operating charge to write off $0.2 million in leasehold improvements associated with a lease modification, eliminated excess space and reduced operating expenses in Woburn. At the end of May, we will complete our obligations related to our unused legacy space in Lowell, Mass. As a result, we will be capturing further savings in 2020 on our facilities cost while retaining sufficient space in our Woburn facility to grow our team as needed. Now turning to warrant exercises. In March, we indicated that there had been $1.6 million in warrant exercises in first quarter. In May, following some additional warrant exercises, we were informed by our warrant agent that there was an issue with the exercise processing around the warrants in March. They believe that the exercise price of each warrant issued in the November 2019 public securities offering had been proportionately adjusted in accordance with the reversed stock split, but the number of shares issuable upon the exercise of each warrant had not been proportionally adjusted following the reverse stock split in the records of DTCC. After some further investigation, it appears probable that certain investors who exercised warrants during the month of February were issued up to 88,762 excess shares of Yield10 common stock and up to approximately 710,000 in excess warrant exercise receipts which have been collected for these holders. As a result, we are working with DTCC and our warrant agent to start on this as soon as we can, to return any excess proceeds that were collected and to reclaim any excess number of shares of common stock that were issued in connection with these warrants. I'll know that there was a second separate warrant exercise in February that brought in 923,000, which was processed correctly. For more details on our financial results, please refer to the earnings release and our first quarter 10-Q. Let's now turn to Slide 12 to discuss our upcoming milestones. In 2020, we will continue to focus on the following milestones: executing our 2020 field testing program, including planting in Q2; to generate agronomic and yield data for C3004 in Camelina; and advance the traits in canola and corn. Advanced genome editing, boosting traits, including our at E3902 line and the C3007 Camelina lines recently cleared by USDA-APHIS. Support Bayer, Forage Generics and Simplot and the evaluation of our traits and progress the Camelina products business plan as follows: by developing advanced commercial Camelina varieties with agronomic traits, including herbicide tolerance and oil and yield traits, including the C4000 series; securing lower transacts for large scale production and product sampling; establishing agreements for cleaning, transportation and storage of seed; and progressing discussions with potential seed crushing and offtake partners. And finally, we will need to develop relationships with growers to enable acreage expansion in the 2021 growing season and success in business development, and we would like to secure some industry collaborations. With that, I'd like to turn the call back to Lynne for questions.

Thanks, Oli. Laura, you may now poll for questions.

[Operator Instructions]. Our first question comes from the line of Ben Klieve with National Securities.

Oli, you talked at the end of your prepared comments about the kind of various puts and takes with the warrants, the kind of mistake in transaction that took place in February and then also some additional exercises that took place in May. Can you guys provide us with an update of the warrants that remain outstanding as of today? How that -- given all the various puts and takes here that we're looking at?

Yes. Chuck, do you want to take that?

Yes, Ben. Look, we're going to take a second and get that number for you. As we've explained here today, those -- there will be a settlement of those excess shares. And Chuck, do you have a number on what's outstanding?

Ben, at the end of the quarter, we had roughly 2.8 million warrants outstanding, ranging in price from the $8 from the last offering up as high as $200.

The vast majority of those warrants are actually related to the November offering at $8.

Chuck, is that broken out in the Q? Can you just tell us what the 2019 warrants are?

I have to add them all up, but it...

Just give us the two numbers. Just two tranches of 2019 warrants.

And I guess -- sorry. So kind of -- and what I'm really trying to get at here is the degree to which there was additional warrant exercises in late April and May when you're -- in early May when your share price spiked. Did you have a material exercise that brought in some excess capital? Or is the warrant picture as of March 31 really where you stand today?

I would say it's really where we are as of March 31.

Okay. Got it. Sorry for the confusion there.

No problem.

So a couple of other things. One, just kind of a minor question. Regarding the U.S. Camelina trials, there's a handful of geographies that, I guess, that could take place. Are those taking place in the Northern Plains, Pacific Northwest or somewhere else?

Yes. I mean, basically, it's essentially in the West, essentially Idaho into Montana. Basically, when you look at the challenges associated with competing with high-yield corn and beans in places like Illinois and Iowa, I mean it doesn't make any sense at this time. Our hope onto the future are that as we develop the Camelina as a winter cover crop, they'll be used in those locations essentially as a source of additional revenue and products for farmers.

Got it. And that actually leads into my next question. To what degree do you think you'd be able to -- or it would make sense to conduct field trials over the winter as a cover crop? Is that something that maybe you'd be looking at here for this upcoming winter?

Yes. We're looking at all of these things. I would say at the research level, we've been evaluating some Camelina lines for their performance over the winter. We were not quite sure where they were going to fall in our business plan. I think they're emerging as more and more important as we have gained more and more insight into the challenges around sustainability related to fertilizer use. And I think more importantly, lots of conversations with media in the farm belt and seeing quite a lot of interest in essentially new sources of revenue. Quite frankly, we're not entirely sure how that's going to change based on the COVID situation. But fundamentally, there seems to be strong grower interest in alternative crops and alternative products.

Got it. Perfect. Turning over to PHA, I guess a couple of questions. One, Kristi, you alluded to the intention to develop commercial events within PHA in your prepared remarks. And I guess I'm curious, as this strategy kind of evolves beyond the lab and you try to work with potential commercial partners, I'm wondering how the team really brings this to market to try to secure commercial relationships that may generate any kind of relatively near-term revenue, given that this is so new in your portfolio. I mean, what is the value proposition you bring and attempt to get secure near-term revenue here from PHA, given its relative infancy as opposed to the C3000, C4000 or grain platforms that are relatively more established?

Kristi, do you want me to take that?

Yes, that would be fine.

Yes. So I would say the reason that we are beginning these field trials that is because for the analysis we've done on -- based on what we've already achieved in Camelina gives us a strong degree of comfort around a recovered cost position. It opened up really large markets in water treatment and ultimately, in bioplastics use. And we've seen a massive shift of many players in the industry who use single-use plastics looking to actual solutions for the end of life. Certainly, the -- I would say, the failure or shall we say, the story around recycling given China's shutdown of imports of waste plastic from Europe and the U.S. has had a huge impact on, I would say, the industry. Late last year, we also saw coal capacity drop off. One of the major U.S. petroleum-based plastics association indicating that the values and the approach of those companies there and the way we're addressing the sustainability concerns were not consistent with the values of those two big players. So we're seeing that consistently across the board. However, I would say, we also recognize that being in plastic industry is not really where we fit. We see ourselves as essentially producing a raw material in terms of our path to market. I would say from a revenue point of view, it's primarily focused on nutritional oils initially. But moving into the PHA biomaterials, they're very broadly useful in diverse markets, and that includes essentially animal feed applications, where we would -- could literally anticipate products where you would hold crush the seed to extract the oil to go to the oils market. And the meal containing some amount of PHA would actually be fed to animals because it's been shown, over many years, that, basically, the presence of it results in feed conversion efficiency improvements, which is a tremendous sustainability play. So we see that as potentially a near-term opportunity. We also know there's tremendously growing interest in that area pretty much all over the world. The second area is really wastewater treatment. And again, as we've been mapping this out and defining where we're going, we are getting interest from large corporations interested in sustainability. And we feel there that there are going to be opportunities for partnerships that may not result in cash flow early. I think minimally, it will result in tremendous validation of the goal of that project and its potential. And we think that can assist us in terms of financing going forward, even though I still think there's opportunities there also for revenue generation.

[Operator Instructions]. The next question comes from the line of Robert LeBoyer from Ladenburg.

My question has to do with some of the comments about the field testing early in the call. And I just wanted to clarify, there was the research group on-site and then the consultants. And am I correct in thinking that these 2 groups are going to be communicating by conference call instead of actually being there? Or is that something that is holding up the process?

So Kristi, do you want to take that?

Sure. Yes, there's nothing that's holding up the process. As the COVID-19 situation evolves, we don't know what travel restrictions to some of these field sites will be as far as commercial carriers or things like that. And also, we have the safety of our employees as a top priority. But we have this year, and we also have in the past, hired consultants on the ground locally that can monitor the field sites more regularly. They can go every week or even more, if need be, to really give us eyes to what's happening on the field. We would like to have our own people visit the sites as well. So we'll have to see how the COVID situation evolves. Now there is -- there are some sites that are local to our Canadian operation, and they will be able to monitor those regularly.

So one other minor point there, Robert, and that is that we've already confirmed that our field service providers are all considered to be essential businesses. And keep in mind, I mean, these folks are located in very remote areas. So certainly, the challenges we've had in Boston and Woburn and obviously, New York, are not there.

Sure. Okay. And just to clarify some of the field testing comments that were made earlier. In canola, you have the 304. And then there, you're going to bulk up commercial quantities of the C003 lines. Now are the commercial quantities, things that you're bulking up, for commercial sale or is this for additional testing? And in terms of the 14 lines, what are the differences between them?

Kristi?

Kristi, you want to take that?

Yes. Sure. Yes, so we said commercial quality line. So basically, what that means is these lines are optimized to be able to be commercialized. They've been designed specifically to be able to get through regulatory and that kind of thing. Was that the answer to the questions?

Yes. Okay. That clarifies it.

And the difference between the 14 lines, whenever you make lines, transgenic lines, there are differences between them. So you screen your best lines. These have already -- these are our best lines so far, and we'll put them in the field and do further screening to find the 1 or 2 that are really the best.

Ladies and gentlemen, we have reached the end of the question-and-answer session. I would now like to turn the call back to Ms. Lynne Brum.

Yes. Thank you, Laura. And I'd like to just turn it over to Oli for any -- his closing remarks.

So really, really appreciate you guys attending the call today. So in summary, we believe the grain platform can be used to address a wide range of traits in a broad array of food and feed crops and enable the development of advanced Camelina varieties for large scale production of specialty products. We're currently pursuing 3 distinct revenue opportunities, strategic industry collaborations and R&D revenues, licensing of our yields and performance traits for use in major growth crops and product sales based on our Camelina platform for producing edible oils and PHA biomaterials. I would like to personally thank all of you for joining us on the call tonight, and especially our shareholders for your continued support. Like everywhere else, we're dealing with the challenges around COVID-19 with an emphasis on safety and business continuity. And so I particularly want to thank our employees for continuing diligent efforts. I want to thank everyone at Yield10 for setting us on track sweeter goals in 2020, and I look forward to providing further updates this year. Have a nicely growing evening, everyone, and stay safe.

Thank you. And that concludes our call. Yes. Go ahead, Laura.

Thank you. You may now disconnect all your lines. Have a nice evening.