Yield10 Bioscience, Inc.

Q1 2023 Earnings Conference Call


spk05: Last week, we signed a letter of intent with Marathon Petroleum for an investment and off-take agreement for Camberlina production in a specific growing region. Discussions to finalize terms for definitive off-take and investment agreements are in place, or in progress, sorry. In exchange for a period of exclusivity for that region, Marathon paid yield 10, 1 million in the form of a contractual note. In first quarter, We announced the signing of an MOU with Mitsubishi to establish a partnership for supply, off-take and marketing of Camelina oil as a feedstock oil for biofuels, for sustainable aviation fuel, or SAF, and we continue to progress those off-date discussions. We also announced the signing of an MOU with American Airlines to collaborate to develop the value chain for Camelina, or SAF, and we are delighted with the efforts they are making to assist us. We look forward to continuing to work with Marathon, Mitsubishi, and American in the months ahead. Early in the year, we also signed an agreement with a privately owned integrated crusher biorefinery customer for offtake of camelina grain. This business is located in the key commercial launch growing region and provides a complete seed to biofuel value chain, allowing us to scale camelina. As 2023 progresses, we plan to continue discussions with additional partner prospects, with the goal of creating the option to establish a network of alliances to supply camelina feedstock oil to this market. In our role as a grain originator, we are continuing to scale up seed to enable contract growing in thousands of acres in the near term, with the ramp-up of acres accelerating with the introduction of herbicide-tolerant camelina varieties. Our herbicide-colored technology will provide multiple benefits to growers, and we believe this will lead to hundreds of thousands and then the first million acres of annual production. Our goal is to supply the best-in-class camelina varieties in the industry, providing ease of crop integration into current crop rotations and highest on-farm returns. Let's start at slide four, the camelina biofuel feedstock oil focus. Investments to convert refineries from petroleum to biofuels in the U.S. alone has created demand for an additional 6 billion gallons of feedstock oil in the near term. We believe this demand for renewable diesel as well as SAF could lead to the potential for at least 45 million acres of camelina production in North America. Over our last few investor calls, we have mentioned growing tailwinds, increasing vegetable oil production, or decarbonizing biofuels. Let's now turn to slide five. to recap two recent policy advancements that underscore the potential for Camelina for this market. First, the European Parliament last week reached an agreement named the Refuel EU Aviation Proposal. This agreement embodies a set of new rules to require aviation fuel suppliers to supply a minimum share of SAF at EU airports, starting at 2% of overall fuel. It's around 1 million gallons per day starting in 2024, and rising to 6% in 2030 and 70% in 2050. While this initiative steams towards EU members, it demonstrates global momentum behind decarbonizing transportation fuels and another potential source of demand for feedstock oils. And last week, the Canadian regulatory body, CFIA, published its long-awaited guidance on genome-edited crops. CFIA indicated that it will treat most gene-edited crops as non-regulated as long as the plant does not contain any foreign DNA. The new rule does note that for any new traits for herbicide tolerance, even if produced using gene editing, will need to be submitted for CFIA review, a stance that was anticipated by the ag community. Overall, another very positive announcement for crop innovators like YieldTan. Please start to slide six, oilseed cover crop development approaches. There are multiple new oilseed crops in commercial development for the biofuel market, including pennycress, cameronata, and camelina. The common technology has been accessed to public germplasm, lime selection, and breeding. We are committed to that approach. but have also invested significantly in developing proprietary advanced trait technologies to create a path to high-performance elite Tamalina germplasm. In addition to herbicide tolerance, our unique capabilities to identify and test new performance traits to stack traits, leveraging the improved regulatory environment in the U.S. and Canada, provide a path to further performance differentiation for our varieties. In the early days of ag biotech, a single gene trait was a large differentiator, and essential to remain in the commodity row crop seed business, as evidenced by the subsequent sector consolidation. The big five, Monsanto, DuPont, Bayer, Syngenta, and now Ag, then dominated the sector until the more recent consolidation, which created the top two, Cortiva and Bayer, with Syngenta in third, and BSF becoming the leader in canola. Today, elite germplasm with multiple gene stacks in corn and soybean provide high barriers to entry and are the key differentiators for the seed companies. So we believe we are uniquely positioned based on our advanced trait technologies to deliver continuous improvements, drive core revenue, and secure production acres over time. Now let's turn to slide seven, camelina-based biofuel feedstocks. Grower adoption of camelina as a seamless integral part of the crop rotation is key to making camelina a meaningful source of feedstock oil. Increasing harvest value of the grain to drive grower revenue is also critical. So we are placing strong emphasis on technology innovation to provide growers with continuous improvement in the crop. Finally, growers want to see that the value chain is in place to ensure the camelina grain has a clear path to market. Simply put, we plan to make it straightforward and profitable for our growers to produce camelina grain for yield time. Let's now turn to slide nine, establishing the Camelina value chain. There are three components of the biofuel value chain for Camelina. The first is high quality Camelina seed and contract farming. This is where yield 10 has the capabilities to build unique differentiation in our Camelina seed genetics. The second component is logistics and seed crushing. And the third is refining to produce renewable diesel or SAF. New customers such as American Airlines can also play a role as they commit to the use of sustainable fuels. Our vision for the business is to contract with growers for large-scale production and build a network of alliances for contracted offtake of the grain for biofuels with the meal going into animal feed. Our LOI with Marathon, as well as our MOUs with Mitsubishi and American, demonstrate the potential for establishing downstream alliances committed to accelerating the ramp-up of Camelene acres to supply the biofuel market and provide support to innovators like Yield 10. I will now pass the call over to Christy.
spk07: Thanks, Ollie, and good afternoon, everyone. Please turn to slide nine. We are executing on our early commercial activities in close cooperation with our growers with a focus on three camelina varieties. These include the genome-edited spring E3902 camelina variety, as well as two winter camelina varieties, WDH2 and WDH3, which were produced by our team using a plant breeding procedure. We are also using these three core camelina varieties as a chassis for deploying herbicide tolerance traits for weed control into spring and winter camelina. Please turn to slide 10. Our winter variety field testing program includes well over 20 sites denoted with the blue pins on the map of the U.S. and Canada. In our March call, we indicated that we obtained confirmation of the performance of our herbicide-tolerant spring camelina to application of an over-the-top broadleaf herbicide in U.S. contra-season trials performed at locations indicated by the yellow pins on the slide. Our winter program also includes agronomy trials with winter camelina. One such study involved planting winter camelina side-by-side with winter wheat, which is the benchmark crop for winter planting. The cold hardiness of our winter camelina was found to be better or equivalent to winter wheat in this trial. As the season progresses, we'll plan to post photos of our winter camelina fields on our website. Please turn to slide 11. We are conducting our spring 2023 field testing program at 13 sites in the US and Canada. The trials include additional field testing and seed scale-up of our lead spring herbicide-tolerant camelina line. In addition, we have generated candidate-stacked herbicide-tolerant camelina events for first field testing. We will evaluate the data from these camelina lines to enable the selection of lead and backup camelina lines for subsequent seed scale-up and field testing. We also remain encouraged by the performance of our yield traits and have included C3004 and C3007 in our 2023 field test. We are not only interested in what these novel traits can do to increase seed yield or oil content alone, but we also plan to evaluate these traits in stacked combinations. Let's turn to slide 12. There has been a profound change in the regulatory environment for crop innovations driven by the impact of gene editing and an appreciation for the safe deployment of new traits in crops for over 30 years. The deployment of herbicide tolerance in camelina will involve the completion of a series of performance, regulatory, and seed scale-up milestones to enable the commercial launch of these new varieties in the U.S. On this slide, we have identified the major development milestones and tracked these for spring herbicide-tolerance E3902 camelina as well as for our winter herbicide-tolerant lines based on WDH2 and WDH3. For our spring variety, we have checked the box for generating the herbicide-tolerance events and have selected our lead and backup camelina lines for seed scale-up. filed our RSR package for broadleaf herbicide tolerance to USDA ACES under the SECURE rule, a step we took last year in parallel with starting early development of herbicide-tolerant camelina. We have followed these activities with an application to EPA to request a label amendment for a broadleaf herbicide to allow its use on camelina. This application was submitted to EPA by a third-party manufacturer of the herbicide chemistry. We believe these applications at USDA and EPA will be reviewed during 2023 to early 2024. Finally, we will perform comparative analyses of seed from herbicide-tolerant camelina with those from conventional camelina to demonstrate compositional equivalency. This is necessary to sell the high-protein camelina meal remaining after crushing the seed into the animal feed market. Here we plan to sample and collect compositional data from seeds harvested from our 2023 spring trials. We plan to determine compositional equivalency of seed to allow sale of meal, first using a self-determination process, and then with a voluntary submission to FDA that is reviewed by the agency. I believe our team has a good handle on the process and the timeline to launch, which will be driven by the timing of completing regulatory reviews in conjunction with building sufficient seed inventory for launch. Let's turn to slide 13. We know that growers want broadleaf and grassy weed control for camelina. As you may recall from our field trial activities, we have successfully completed two cycles of testing our camelina for herbicide tolerance. This herbicide tolerant event is in our elite proprietary E3902 background. We also successfully tested our camelina for tolerance to cletidum, a product used to control grassy weeds. On the regulatory front, we filed an RSR package to USDA for deployment of a well-studied broadleaf herbicide trait in camelina in 2022. In the first quarter of 2023, we supported the submission of a label amendment to EPA by a third-party company to allow the use of its broadleaf herbicide on camelina. The response from both agencies is pending. This spring, we plan to conduct larger-scale field work for product development purposes for our herbicide-tolerant spring camelina and to collect data for compositional analysis of seed. We have also developed winter lines that have demonstrated broadleaf herbicide tolerance in greenhouse tests. In winter 2023-2024, we plan to conduct our first field test of these lines. Let's turn to slide 14. To tap into the large acreage potential of camelina, the crop needs to have tolerance to herbicide residues that may persist in the soil from previous applications on other crops. We continue to make solid progress on this goal. In the first quarter, we reported that we have developed multiple E3902 spring camelina lines with stacked herbicide tolerance traits, and that these plants showed tolerance not only to spray application of broadleaf herbicide, but also to Group 2 herbicides. Group 2 herbicides, such as IMEs and SUs, which can persist in soil for months following application, commonly used to control weeds and cereals and other crops. The photo on the slide shows an example greenhouse test in which a stacked herbicide tolerant event was healthy when treated with group 2 herbicides where the control line died with a similar treatment. Based on our proof-of-concept results, we are conducting our first research field test of stacked herbicide tolerant E3902 spring camelina in in our spring 2023 field test program. Our team is also making progress deploying stacked herbicide tolerance traits in our winter varieties. We anticipate our first research field test of stacked herbicide tolerant winter lines will begin in winter 2023. With our product development efforts moving ahead at a good pace, we filed an RSR for stacked herbicide tolerance camelina in the first quarter of 2023 to pave the way for commercial introduction of these stacked herbicide-tolerant varieties. As I wrap up, I'd like to acknowledge the efforts of the Yield10 R&D team to positioning Yield10 on the forefront of technology deployment in camelina. In the months ahead, we look forward to field testing of our best commercial quality herbicide-tolerant camelina lines advancing omega-3 oils, and securing regulatory clearances for our elite Camelina products. I'll now hand the call over to Chuck.
spk04: Thanks, Christy, and good afternoon, everyone. Let's turn to slide 17. We ended the first quarter of 2023 with $1.8 million in cash and cash equivalents. Earlier this month, we added to our cash position based on receiving $1 million from Marathon Petroleum in connection with an LOI and we raised approximately 2.7 million net proceeds from a registered direct offering. We expect that our cash on hand will support our operations into the third quarter of 2023. Our net operating cash used for operating activities was 2.7 million for the first quarter of 2023, as compared to 3.1 million for the first quarter of last year. For 2023, we expect total net cash usage in the range of 12.5 to 13 million to fund our operations. This represents a revision from our last call based on a recent review of our plans for 2023. Also in 2023, we expect to report our first camelina product revenue from camelina grain sales to our offtake customer. Now let's review the first quarter 2023 operating results. For the first quarter of 2023, the company reported a net loss after taxes of 3.8 million as compared to a net loss after taxes of 3.3 million for the first quarter of 2022. Total research grant revenues in the first quarter of 2023 were 0.1 million, and this was consistent with the first quarter of 2022. As of March 31st, we completed our work under the five-year subaward under the Michigan State DOE grant. And in the first quarter of 2023, R&D expenses were $2.2 million as compared to $1.8 million in the first quarter of 2022, and our G&A expenses were $1.7 million in the first quarter of this year, which was consistent with the first quarter of last year. For more details on our financial results, please refer to the earnings release. Ali, back to you.
spk05: Thanks, John. Let's now turn to slide 18, Upcoming Milestones. This is an exciting time for Yolt 10. Over the last few months, our team has made significant progress, and we've established agreements across the biofuel value chain. We're excited to work with the teams at Marathon and Mitsubishi in the months ahead on developing definitive offtake and investment agreements. We're also excited by the discussions we've had with growers, including their enthusiasm to gain access to our HD varieties as soon as they are commercially available, because they see additional benefits for their crop rotations. These factors, together with the growing interest from additional value chain partner prospects, are all good reasons to be excited about the future of our business. We've executed on the development and scale of new camelina varieties for commercial production, advanced discussions with companies committed to the biofuel space, and have committed to our commercial path forward with Omega-3 camelina. We are approaching the scaling of our camelina grain production business, using our current lead varieties tactically over the next one to two years, with a strong focus on building the relationships of cores and demonstrating the full value chain for our partners. We believe this will position us to accelerate the adoption of camelina onto hundreds of thousands of acres as our new varieties with robust weed control become available. Essentially, we plan to walk slow so we can run fast, based on building a solid foundation over the next couple of years. As 2023 progresses, we will continue to focus on executing our key milestones, including working with Marathon and Mitsubishi to finalize investment and offtake agreements, engaging with American Airlines to support the Camelina value chain for SAF, expanding our commercial activities targeting the renewable diesel and SAF markets, engaging with growers to reduce the benefits of growing Camelina and expand our grower network, building seed inventory of current and HT varieties for future grower contracts. We'll also progress the commercial launch plan for Camelina Omega-3 oils, continue business development with outreach to prospective partners across the entire value chain with the goal of executing strategic industry collaborations and will continue to expand their intellectual property portfolio. With that, I'd like to turn the call back over to Lynn for questions.
spk08: Thanks, Ollie. Maria, we're ready for questions.
spk06: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Ben Cleave with Lake Street Capital Markets. Please proceed with your question.
spk01: All right. Thanks for taking my questions. First one around the herbicide tolerance traits. First of all, congratulations. Looks like there's been an awful lot of progress there. But I'm curious about kind of the outlook here over the next couple of years. You noted that commercial launch in 2025 for spring varieties is your expectation and all of you expect that this is going to really be what allows you to scale. You know, given that herbicide tolerance traits and other crops will typically launch at a pretty, you know, material scale in year one, I'm wondering if you can kind of directionally help us understand kind of the magnitude of a initial launch of herbicide tolerance varieties in camelina relative to kind of what you're expecting in 23 and 24 from an acreage perspective.
spk05: Yeah, so, I mean, obviously, it's a little premature to provide guidance on that, but I think, generally speaking, you're quite correct. When companies have launched these types of technologies, there's two things that happen. One, they tend to be launched at a reasonable scale, and two, they then essentially take over the entire space. That's been the track record, starting with Roundup Ready. Soybean and essentially it was the same thing and I think cotton was the same thing so they clearly are Highly valued by growers and we understand that I think for us as Christie's indicated, you know, we've got to work through this RSR We've got to get that approved. We've got to get the EPA label amendment. We've got to generate the data to to Confirm for ourselves that basically the great that the meal is not is essentially unchanged all of this work is ongoing and And we'll take some time. And then we've got to scale off seed to have sufficient seed available for the growers. And so that's why I think the guidance we've provided on walking slow over 2023-24 based on non-HT varieties is the right path for us to take. Once we've got more clarity on these key questions that need to be resolved, I think at that time we'll be willing to talk more about what the scale could be when we launch this.
spk01: Okay. Very helpful. And Ali, on your prepared comments, I heard you loud and clear about your kind of assessment of, you know, germplasm and the importance in germplasm. And I'm wondering if you can elaborate at all if, you know, the potential commercial partners, you know, be it Mitsubishi American Marathon or anybody else, you know, to what extent those partners see this value as well? Is this something that is really appreciated on a commercial scale from these parties, or is this something that kind of agnerds like you and me enjoy talking about?
spk05: Yeah, it's a little bit of the latter, mainly because, keep in mind, these folks are used to running, either buying oil and running pipelines and refineries and essentially getting fuels into the transportation sector. It's a very different environment. That is actually one of the challenges. is that they really are looking at this value chain, which is inherently based on seed genetics and many, many contracts with growers as the foundation for supply. I mean, the whole value chain is dependent on this. What they do appreciate is they really appreciate our approach with the growers. I think everyone in the value chain, including the fuel companies, fully recognize that the role of the growers is key. And that the growers have to be rewarded for doing this and protected in the early years to make sure that they stick with this for the long term. Because quite frankly, without this feedstock, then the biofuel sector is going to have some real challenges.
spk01: Got it. Got it. Very helpful. And one last one for me, and I'll get back in line. The last couple of years around this time, we've talked about kind of some challenges kind of acute issues with precipitation in some of your growing areas and the need to truck in water to certain plots. Can you just kind of update us on the general conditions of your plots from a precipitation standpoint?
spk07: Well, I think it's still early days, but so far I haven't heard of any negative issues that have come up, but we're still very much in the midst of planting right now.
spk05: Okay.
spk01: Very good.
spk05: But maybe one additional piece of color on that. I was visiting Kansas field sites with one of our potential partners, a potential strategic partner, looking at some of our winter camel deer lines in those areas. And they actually had no snow cover, and yet the winter lines even though they'll be very severe, you know, minus 30 weather, the winter lines were actually looking very good. So we're very pleased with this sort of robustness of the winter trait in these crops. It's quite remarkable, actually. And so that's been something we're very pleased with.
spk01: Got it. Got it. Good to hear. Very good. Well, thanks for taking my questions. I'll get back in line.
spk08: Thanks, Ben.
spk06: Our next question comes from Anthony Venditti with Maxim Group. Please proceed with your question.
spk03: Thank you. Yes, I just wanted to talk about, Ollie, what I would categorize as statement deals with Mitsubishi American and Marathon Petroleum. I know they're MOUs, but can you talk about what the milestones are? that have to be achieved and, and what the expectation is of getting these to definitive agreements, some type of general timeline or, or milestones or expectations that they're, they're waiting for or looking for. Thanks so much.
spk05: I think, I mean, I think a couple of things. I think that, you know, obviously with Mitsubishi, you know, we're dealing with an international company and essentially, you know, managing the, you know, The fact that most of the folks were dealing with our Japanese and they're just a great team to deal with So we're just working through the details of things again. I like other companies. They are you know, they're their goal is to be in production with any of us starting the launch of a plan sometime in 2025 26 I believe in Japan and then then obviously they probably look at other investments in this area as well and And so there, it's more a matter of convincing them of the fact that we are able to do this, site visits, visits to the R&D facilities in Saskatoon. So they've done a lot of technical due diligence, obviously, to get comfortable around this. But in general, I would say the outcomes have been very positive, which is really a credit to the technology team, like electricity, and obviously the work that we're doing with the growth projects. That's all going, I would say, pretty much on the timelines that they indicated initially. And now Marathon's a little different in that Marathon has a refinery up in North Dakota. It has about 200 million gallon per year capacity. They also have a partnership with ADM and a soybean crushing facility in North Dakota, obviously to supply feedstock for biofuels. And then we believe they're the joint venture partner with Nestea. in a California refinery, which I think is somewhere around 700 million gallons of feedstock oil. And so, obviously, they're really in this. They're in this now. And they're obviously, you know, from the interactions we've had with them, they're very keen to see this scaled, to be seeing Camelina oil made available for those facilities in the shortest period of time. Now, we are working with them And, you know, we've been working with them since we announced that last week on definitive offtake agreements. And we'll continue that process over the next three to four months with the goal to get it executed as soon as possible.
spk03: Okay. So work with them the next three to four months. Okay. So it's possible that, you know, some of these could result in definitive agreements. or a marathon in particular, could result in a definitive agreement before the end of the year?
spk05: Well, our goal is to get it done in the timeline I indicated.
spk03: Yes, the three to four months we get you by the September timeframe. Yeah, okay. So that's the hope. Okay, that's great.
spk05: We're working against both companies. Right, right.
spk03: So you said there's 13 sites that have already been selected for spring camelina growing season. 13 sites. Are they, you said, in Canada and the U.S., or is it mostly Canada? Those are.
spk08: It's on page, Anthony, that's on page 11, and that's the field testing program that Christy provided an overview of. We have not put pins on the map. for the spring contract growers, that would be a different set of farms where their acres planted were between 45 and over 200. So we've not provided pins on the separate spring growers.
spk05: One of the things that's happening is clearly, when you look at this industry as a whole, Obviously, you know, there's a number of factors driving interest in the oilseed crops. One is just the sheer volume of demand for vegetable oil. The second, of course, is really getting to the lowest CI score feedstock possible. And, of course, winter, spring, and winter camelina will have potential to drive that very, very low. And the third, of course, is in some areas, or at least some regions, there's already beginning to be pushback on the use of palm and soybean oil. And so as you look at all this, you realize that, you know, Canada oilseeds, particularly oilseeds that can be planted when the land would otherwise be lying fallow, are going to play a fairly critical role in this space. And so in addition to the companies we mentioned, we have indicated inbound inquiries from other partner prospects. which we've been responding to. But right now, our goal is to work hard with the marathon guys to get something done in the timeline we indicated, and to continue the work we're doing with Mitsubishi. Those would be in six different geographies, so there's no real conflict there. And we believe that both could ultimately be done, but we can't provide firm guidelines on Mitsubishi, but we can assure you that both Marathon and Yield 10 fully understand the goal.
spk03: Okay, no, that's helpful, and I guess that was a good segue, which you just touched on, is you're very focused on these three, but you're still having additional discussions with other potential partners simultaneously or concurrently while working to close these two definitive agreements.
spk05: Yes, and I think, you know, obviously our intent with the existing partners is to close the deals. But, again, until a deal is closed, we need to make sure that we are continuing to work on the various partner prospects we have and develop, you know, the best options for yield time, which is what we're doing.
spk03: Okay, excellent. Thanks so much. I'll hop back in the queue. Appreciate it. Thanks, Anthony.
spk08: Thanks, Anthony.
spk06: Our next question comes from Samir Joshi with HC Wienright. Please proceed with your question.
spk02: Yeah, good afternoon. Thanks for taking my questions. Just a clarification on the tens of thousands of acres to be planted. Should that be expected in the 2024 spring or fall season? Just to give us a little bit of
spk05: Yes, so Samir, what we really said in terms of, you know, tens of, I think we've said hundreds of thousands of acres once, tens of hundreds of thousands of acres once we have the HD varieties, and I think Christy's indicated that that would potentially be a 2025 event. So likely spring 2025 at the earliest, yes.
spk08: I would say also, Samir, like in the time between now and then, we're going to continue to outreach to growers, engage them in our program, engage them in spring and winter contracts so that we can build and transition well over time into the HT launch.
spk05: And I think one of the key points here, Samir, is basically, you know, we're really having a great working relationship with this private company that we've mentioned who basically is contracting the green offtake from us and processing into oil and getting the oil into biofuel. And obviously, in the early years of this business, when we won't be at, you know, I would say full commercial scale, they're a really valuable partner for us in that we can scale to, you know, well, I can't say because we haven't agreed what we can say yet. But the point is we can scale from where we are today, continue to build the grower network, build the interest not only in what we're doing with spring and winter, but also particularly in the HT lines. And I will say the growers in the region were active are pretty excited about that. And again, it was for reasons I didn't quite understand until I talked to them. That is because a lot of the crops that go in these areas, they don't have good weed control. And therefore, when they grow those crops, they create increased weed pressure. And something like this camellia we're developing would be a great way to A, get a valuable crop, and B, actually to reduce weed pressure for the following crop in the rotation. So there's multiple reasons that growers do things. And we're learning a lot about this as we work with them. And what we're seeing is that we definitely made, or not so much we, Christy and the team made the right decisions on the herbicide package. And the farmers are pretty excited about it.
spk02: Got it. Thanks for that. And just another clarification on commercial launch and revenue expectations later in 2023. Are these revenues from the growers, or is there another party involved from whom you will receive these revenues?
spk05: So basically, because these are grain, we are basically buying the grain from the grower, and we are selling the grain to a crusher refiner. So our revenues will come from the sale of the grain to the crusher refiner.
spk02: Oh, okay, so when you say the spring grower contracting completed on slide three, that's the purchase from the grower.
spk05: No, that means that the growers have signed contracts to produce cabalina grain for us. That grain will be harvested in the fall of this year. Got it. We will essentially, you know, over time, we will essentially acquire it from the grower and essentially sell it. to the grain crusher refiner.
spk02: Apart or any of these grains, are they going to be used as seeds for the next year's crop, or how does that work?
spk05: We did plant scale-up acres last year as well, last fall, so some of this will be used for that purpose. What we have to do, obviously, We're trying to very carefully manage, I would say, planting seed inventory and not scale the existing lines too big because, obviously, we want to be able to switch over very efficiently to the herbicide tolerant lines. And so we're trying to manage that 23, 24, shall we say, seed inventory for core contracts. And so we're not trying to produce vast quantities of this. We're trying to manage it fairly carefully. And that's why we've indicated that over these two years, we're going to walk very slowly and continue to build the grower network, build interest in the crop. But really, we see 25, or whenever the herbicide technology comes available, is really when we'll start to ramp up.
spk02: Understood. And my last question is about costs. It's sort of three questions in one. related topics. The reduction in net cash usage, is it because you are expecting some cash flows from sales? Or is it because you are rationalizing some of the costs? And then corollary to that is, are there more areas of cost rationalization that you would be targeting in the future? especially given that you are engaged in these MOUs and LOIs, and those will also need some resources. So I just wanted to understand how you're managing that.
spk05: Yeah, so as you know, Yield 10 has always been very judicious in cash management. I mean, that's been one of the real strengths of the company. We manage cash very carefully, and obviously in the current financing environment, and given the sort of magnitude, the level of partnership, interest we have, we're obviously continuing to do so. And as part of our process in this last quarter, we did rationalize some of the activities. We haven't pared back anything in terms of biofuels. We are progressing omega-3. But we decided to wait on some potential hires for the growth of the business at this time, pending essentially securing additional partnerships and then obviously financing.
spk02: And the net cash usage, does it involve any proceeds from the sales revenues, I mean?
spk05: Sales? Yeah, do we anticipate sales of revenue contributing to the net cash usage?
spk04: Yeah, it's reflected in that estimate that we'll have some cash coming in later this year from harvesting the grain and selling it.
spk08: I don't think that was the driver of the revision though, Samir. Yeah, it wasn't the driver of the revision. It was more of kind of taking a good look at the business, looking at budgets and, you know, moving forward the way Ollie said.
spk05: Yeah, and, you know, essentially, you know, we recognize that the biofuel opportunity right in front of us and with a number and high quality of the partner prospects, obviously, we're focusing our energies and our resources around that area in the time being. And obviously, as we execute on some of those, then we'll look at reactivating some of the other activities if and when it makes sense.
spk02: Understood. Yeah, no, thanks for clarifying. I just wanted to make sure that the cache was net cache and not just operating cache. Thanks for that. That's all from me. Thank you.
spk06: Thank you, Samir. We have reached the end of our question and answer session. I would now like to turn the floor back over to Lynn for closing comments. Go ahead.
spk08: Thanks, Maria. And I'll now turn the call to all the first closing remarks.
spk05: Yeah, so I'd like to personally thank all of you for joining us at the call tonight, and especially our shareholders for your continued support. I want to thank everyone at Yield 10 for contributions that are keeping us on track to reach our commercial and product development goals. Have a nice evening, everyone. Thank you.
spk06: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

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