Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2019;

or

 

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 001-38161

 

 

Calyxt, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

Delaware

 

27-1967997

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

2800 Mount Ridge Road

 

 

Roseville, MN

 

55113-1127

(Address of principal executive offices)

 

(Zip Code)

(651) 683-2807

(Registrant’s telephone number, including area code)

N/A

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

Securities registered or to be 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 (0.0001 par value)

  

CLXT

  

The NASDAQ Global 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 No

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 No

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

  

  

Accelerated filer

  

Non-accelerated filer

  

  

Smaller reporting company

  

 

  

 

  

Emerging growth company

  

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of November 6th, 2019, there were 32,951,329 shares of common stock, $0.0001 par value per share, outstanding.

 

 


Table of Contents

 

 

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

3

 

 

 

Item 1. Financial Statements

 

3

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

16

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

23

 

 

 

Item 4. Controls and Procedures

 

23

 

 

 

PART II. OTHER INFORMATION

 

24

 

 

 

Item 1. Legal Proceedings

 

24

 

 

 

Item 1A. Risk Factors

 

24

 

 

 

Item 6. Exhibits

 

25

 

 

 

SIGNATURE

 

26

 

 

 

 


Table of Contents

Terms

When we use the terms “we,” “us,” the “Company,” or “our” in this report, unless the context otherwise requires, we are referring to Calyxt, Inc. When we use the term “Cellectis,” we are referring to Cellectis S.A., our majority stockholder.

We own the names and trademarks for Calyxt® and Calyno®; we also own or license other trademarks, trade names and service marks of Calyxt appearing in this Quarterly Report on Form 10-Q. The name and trademark “Cellectis®” and “TALEN®”, and other trademarks, trade names and service marks of Cellectis appearing in this Quarterly Report are the property of Cellectis. This Quarterly Report also contains additional trade names, trademarks and service marks belonging to other companies. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report contains “forward-looking statements” made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are based on our current assumptions and expectations, are subject to risks and uncertainties. Forward-looking statements in this report may include statements about our future financial performance, product pipeline and development, commercialization efforts and growth strategies. These statements are only predictions based on our current expectations and projections about future events. Our actual results could be materially different that those expressed, implied or anticipated by the forward-looking statements.

There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Those factors are discussed under the caption entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the Securities and Exchange Commission (SEC) on March 12, 2019 (our Annual Report).

Any forward-looking statement made by us in this Quarterly Report is based only on information currently available to us and speaks only as of the date of this report. We do not assume any obligation to publicly provide revisions or updates to any forward-looking statements after the date of this Quarterly Report, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.

Market Data

Unless otherwise indicated, information contained in this Quarterly Report concerning our industry and the markets in which we operate is based on information from various sources, including independent industry publications. In presenting this information, we have also made assumptions based on such data and other similar sources, and on our knowledge of, and our experience to date in, the potential markets for our product. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section entitled “Risk Factors” in our Annual Report. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

Website Disclosure

We use our website (www.calyxt.com), our corporate Twitter account (@Calyxt_Inc) and our corporate LinkedIn account (https://www.linkedin.com/company/calyxt-inc) as routine channels of distribution of company information, including press releases, analyst presentations, and supplemental financial information, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor our website and our corporate Twitter and LinkedIn accounts in addition to following press releases, filings with the SEC and public conference calls and webcasts. Additionally, we provide notifications of announcements as part of our website. Additionally, we provide notifications of announcements as part of our website.

None of the information provided on our website, in our press releases or public conference calls and webcasts or through social media is incorporated into, or deemed to be a part of, this Quarterly Report or in any other report or document we file with the SEC, and any references to our website or our corporate Twitter and LinkedIn accounts are intended to be inactive textual references only.

- 2 -


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CALYXT, INC.

BALANCE SHEETS

(In Thousands, Except Par Value and Share Amounts)

 

 

September 30,

2019

(unaudited)

 

 

December 31,

2018

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

66,434

 

 

$

93,794

 

Restricted cash

 

381

 

 

 

381

 

Trade accounts receivable

 

1,304

 

 

 

 

Due from related parties

 

69

 

 

 

46

 

Inventory

 

2,371

 

 

 

 

Prepaid expenses and other current assets

 

1,109

 

 

 

1,301

 

Total current assets

 

71,668

 

 

 

95,522

 

Non-current restricted cash

 

1,135

 

 

 

1,113

 

Land, buildings, and equipment

 

23,337

 

 

 

21,850

 

Other non-current assets

 

270

 

 

 

306

 

Total assets

$

96,410

 

 

$

118,791

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

945

 

 

$

818

 

Accrued expenses

 

1,958

 

 

 

2,007

 

Accrued compensation and benefits

 

1,783

 

 

 

1,305

 

Due to related parties

 

705

 

 

 

1,905

 

Current portion of financing lease obligations

 

349

 

 

 

258

 

Other current liabilities

 

51

 

 

 

711

 

Total current liabilities

 

5,791

 

 

 

7,004

 

Financing lease obligations

 

18,331

 

 

 

18,227

 

Other non-current liabilities

 

159

 

 

 

163

 

Total liabilities

 

24,281

 

 

 

25,394

 

Stockholders’ equity:

 

 

 

 

 

 

 

Common stock, $0.0001 par value; 275,000,000 shares authorized; 32,926,312 shares issued and 32,867,413 shares outstanding as of September 30, 2019, and 32,664,429 shares issued and 32,648,893 shares outstanding as of December 31, 2018

 

3

 

 

 

3

 

Additional paid-in capital

 

182,948

 

 

 

176,069

 

Common stock in treasury, at cost; 58,899 shares

 

(875

)

 

 

(230

)

Accumulated deficit

 

(109,892

)

 

 

(82,445

)

Accumulated other comprehensive loss

 

(55

)

 

 

 

Total stockholders’ equity

 

72,129

 

 

 

93,397

 

Total liabilities and stockholders’ equity

$

96,410

 

 

$

118,791

 

 

See accompanying notes to these financial statements.

- 3 -


Table of Contents

CALYXT, INC.

STATEMENTS OF OPERATIONS

(Unaudited and in Thousands Except Shares and Per Share Amounts)

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

$

2,967

 

 

$

27

 

 

$

3,533

 

 

$

234

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

3,528

 

 

 

 

 

 

3,865

 

 

 

 

Research and development

 

3,579

 

 

 

3,440

 

 

 

8,536

 

 

 

7,850

 

Selling, general and administrative

 

6,248

 

 

 

3,311

 

 

 

17,723

 

 

 

9,914

 

Management fees and royalties

 

305

 

 

 

975

 

 

 

1,117

 

 

 

1,957

 

Total operating expenses

 

13,660

 

 

 

7,726

 

 

 

31,241

 

 

 

19,721

 

Loss from operations

 

(10,693

)

 

 

(7,699

)

 

 

(27,708

)

 

 

(19,487

)

Interest, net

 

32

 

 

 

228

 

 

 

296

 

 

 

88

 

Foreign currency transaction loss

 

(8

)

 

 

(12

)

 

 

(35

)

 

 

(30

)

Loss before income taxes

 

(10,669

)

 

 

(7,483

)

 

 

(27,447

)

 

 

(19,429

)

Income taxes

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(10,669

)

 

$

(7,483

)

 

$

(27,447

)

 

$

(19,429

)

Basic and diluted loss per share

$

(0.32

)

 

$

(0.23

)

 

$

(0.84

)

 

$

(0.65

)

Weighted average shares outstanding - basic and diluted

 

32,866,467

 

 

 

32,381,010

 

 

 

32,759,194

 

 

 

30,040,926

 

 

See accompanying notes to these financial statements.

- 4 -


Table of Contents

CALYXT, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited and in Thousands Except Shares Outstanding)

 

Three months ended

September 30, 2019

Shares

Outstanding

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Shares

in

Treasury

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Total

Stockholders’

Equity

 

Balances at June 30, 2019

 

32,859,700

 

 

$

3

 

 

$

180,237

 

 

$

(789

)

 

$

(99,223

)

 

$

(38

)

 

$

80,190

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,669

)

 

 

 

 

 

(10,669

)

Stock based compensation

 

7,713

 

 

 

 

 

 

2,705

 

 

 

 

 

 

 

 

 

 

 

 

2,705

 

Issuance of common stock

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

6

 

Shares withheld for net share settlement

 

 

 

 

 

 

 

 

 

 

(86

)

 

 

 

 

 

 

 

 

(86

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17

)

 

 

(17

)

Balance at September 30, 2019

 

32,867,413

 

 

$

3

 

 

$

182,948

 

 

$

(875

)

 

$

(109,892

)

 

$

(55

)

 

$

72,129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended

September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2018

 

32,648,893

 

 

$

3

 

 

$

176,069

 

 

$

(230

)

 

$

(82,445

)

 

$

 

 

$

93,397

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,447

)

 

 

 

 

 

(27,447

)

Stock based compensation

 

261,883

 

 

 

 

 

 

6,565

 

 

 

 

 

 

 

 

 

 

 

 

6,565

 

Issuance of common stock

 

 

 

 

 

 

 

314

 

 

 

 

 

 

 

 

 

 

 

 

314

 

Shares withheld for net share settlement

 

(43,363

)

 

 

 

 

 

 

 

 

(645

)

 

 

 

 

 

 

 

 

(645

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(55

)

 

 

(55

)

Balance at September 30, 2019

 

32,867,413

 

 

$

3

 

 

$

182,948

 

 

$

(875

)

 

$

(109,892

)

 

$

(55

)

 

$

72,129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2018

 

32,336,106

 

 

$

3

 

 

$

172,730

 

 

$

 

 

$

(66,494

)

 

$

 

 

$

106,239

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,483

)

 

 

 

 

 

(7,483

)

Stock based compensation

 

127,301

 

 

 

 

 

 

1,476

 

 

 

 

 

 

 

 

 

 

 

 

1,476

 

Balance at September 30, 2018

 

32,463,407

 

 

$

3

 

 

$

174,206

 

 

$

 

 

$

(73,977

)

 

$

 

 

$

100,232

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended

September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2017

 

27,718,780

 

 

$

3

 

 

$

112,021

 

 

$

 

 

$

(54,548

)

 

$

 

 

$

57,476

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(19,429

)

 

 

 

 

 

(19,429

)

Stock based compensation

 

687,127

 

 

 

 

 

 

5,144

 

 

 

 

 

 

 

 

 

 

 

 

5,144

 

Issuance of common stock

 

4,057,500

 

 

 

 

 

 

57,041

 

 

 

 

 

 

 

 

 

 

 

 

57,041

 

Balance at September 30, 2018

 

32,463,407

 

 

$

3

 

 

$

174,206

 

 

$

 

 

$

(73,977

)

 

$

 

 

$

100,232

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to these financial statements.

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Table of Contents

CALYXT, INC.

STATEMENTS OF CASH FLOWS

(Unaudited and in Thousands)

 

 

Nine months ended September 30,

 

 

2019

 

 

2018

 

Operating activities

 

 

 

 

 

 

 

Net loss

$

(27,447

)

 

$

(19,429

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Depreciation

 

1,051

 

 

 

727

 

Stock-based compensation

 

6,565

 

 

 

3,016

 

Unrealized foreign exchange gain

 

 

 

 

12

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Trade accounts receivable

 

(1,304

)

 

 

 

Due to/from related parties

 

(1,223

)

 

 

576

 

Inventory

 

(2,371

)

 

 

 

Prepaid expenses and other assets

 

192

 

 

 

(341

)

Accounts payable

 

127

 

 

 

355

 

Accrued expenses

 

(49

)

 

 

880

 

Accrued compensation and benefits

 

478

 

 

 

70

 

Other accrued liabilities

 

(743

)

 

 

518

 

Other non-current assets

 

36

 

 

 

16

 

Net cash used by operating activities

 

(24,688

)

 

 

(13,600

)

Investing activities

 

 

 

 

 

 

 

Purchases of land, buildings and equipment

 

(2,538

)

 

 

(830

)

Net cash used by investing activities

 

(2,538

)

 

 

(830

)

Financing activities

 

 

 

 

 

 

 

Costs incurred related to the issuance of stock

 

 

 

 

(222

)

Proceeds from issuance of common stock

 

 

 

 

57,706

 

Repayments of financing lease obligations

 

(195

)

 

 

 

Proceeds from the exercise of stock options

 

314

 

 

 

2,128

 

Costs incurred related to shares withheld for net share settlement

 

(645

)

 

 

 

Proceeds from the sale and leaseback of land, buildings, and equipment

 

414

 

 

 

 

Net cash (used) provided by financing activities

 

(112

)

 

 

59,612

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

(27,338

)

 

 

45,182

 

Cash, cash equivalents and restricted cash - beginning of period

 

95,288

 

 

 

56,664

 

Cash, cash equivalents and restricted cash - end of period

$

67,950

 

 

$

101,846

 

 

See accompanying notes to these financial statements.

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Table of Contents

 

CALYXT, INC.

NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION & SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP or GAAP) for interim financial information and with the rules and regulations of the Securities and Exchange Commission (SEC) applicable to interim financial statements. In our opinion, the accompanying financial statements reflect all adjustments necessary for a fair presentation of our statements of financial position, results of operations and cash flows for the periods presented but they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Except as otherwise disclosed herein, these adjustments consist of normal recurring items. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole or any other interim period.

The preparation of the financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates.

Certain prior year amounts have been reclassified to conform to the current year presentation.

For further information, refer to the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 12, 2019. The accompanying Balance Sheet as of December 31, 2018 was derived from the audited financial statements. This Quarterly Report on Form 10-Q should be read in conjunction with our financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2018.

Inventory

Inventories are recorded at the lower of cost or net realizable value and include all costs of seed production and grain we purchase as well as costs to store, transport and process the grain into finished products. Consideration we receive from growers when they purchase seed is recorded as a reduction of inventory.

We evaluate inventory balances for obsolescence on a regular basis using projected selling prices for our products, market prices for the underlying agricultural markets, the age of products and other factors that take into consideration our limited operating history.

Prior to the commercialization of our High Oleic Soybean Oil and High Oleic Soybean Meal in the three months ended March 31, 2019, we expensed all costs associated with purchasing, storing, transporting and processing grain (Grain Costs) as research and development (R&D) expense.

Forward Purchase Contracts

We enter into seed and grain production agreements (Forward Purchase Contracts) with seed producers and growers. The seed contracts often require us to pay prices for the seed produced at an exchange-traded price of grain plus a premium. The grower contracts are linked to a commodity futures market prices with the grower having the option to fix their price with us throughout the term of the agreement. These contracts allow for delivery of grain to us at harvest if so specified when the agreement is executed, otherwise delivery occurs on a date that we elect through August 31 of the following year. In all periods prior to January 1, 2019, we considered Forward Purchase Contracts to be derivatives and recorded the contracts at fair market value with changes in value reflected in earnings as R&D expense.

Effective January 1, 2019, we designated all Forward Purchase Contracts as normal purchases and as a result no longer consider these agreements to be derivatives. As of that date any mark-to-market gains or losses associated with those contracts were fixed and were reflected in inventory upon our purchase of the underlying grain. As of September 30, 2019, we had purchased all of the underlying grain and all previously recorded gains and losses had been reflected in inventory.

Revenue Recognition – Product Sales

We recognize sales revenue at the point in time that control transfers to the customer, which is based on shipping terms. Sales include shipping and handling charges if billed to the customer and are reported net of trade promotion and other costs, including estimated allowances for returns, unsalable product and prompt pay discounts. Sales, use, value-added and other excise taxes are not recognized in revenue. Trade promotions are recorded based on estimated participation and performance levels for offered programs at the time of sale. We generally do not allow a right of return. However, on a limited basis with prior approval, we may allow customers to return product.

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Table of Contents

Revenue Recognition – Out-licensing of Technology

We recognize revenue from license agreements. Revenues from license agreements may consist of nonrefundable up-front payments, milestone payments, royalties and services. In addition, we may license our technology to third parties, which may or may not be part of a license agreement.

Nonrefundable up-front payments are deferred and recognized as revenue over the term of the license agreement. If a license agreement is terminated before the original term of the agreement is fulfilled, all remaining deferred revenue is recognized at termination.

Milestone payments represent amounts received from our licensees, the receipt of which is dependent upon the achievement of certain scientific, regulatory or commercial milestones. We recognize milestone payments when the triggering event has occurred, there are no further contingencies or services to be provided with respect to that event, and the counterparty has no right to refund of the payment.

Stock-Based Compensation

We measure employee stock-based awards at grant date fair value and record compensation expense over the vesting period of the award. Prior to January 1, 2019, grants to nonemployees were previously remeasured each reporting period. Following the adoption on January 1, 2019, of the new accounting pronouncement discussed below, we no longer remeasure these awards as the fair value is determined on the grant date.

Recently Adopted Accounting Pronouncements

Effective January 1, 2019, we adopted new accounting requirements for recognition of revenue from contracts with customers. We adopted these requirements using the cumulative effect approach. The adoption did not have an impact on our financial statements.

Effective January 1, 2019, we adopted new accounting requirements for share-based payment transactions for acquiring goods and services from nonemployees. The adoption did not have an impact on our financial statements as each of the share-based payment awards granted to nonemployees had a measurement date upon grant, and thus no cumulative adjustment to retained earnings was required.

2. FINANCIAL INSTRUMENTS, FAIR VALUE, HEDGING ACTIVITIES, AND CONCENTRATIONS OF CREDIT RISK

The carrying values of cash and cash equivalents, restricted cash, due from related parties, accounts payable, due to related parties and all other current liabilities approximate fair value. The fair values of our financing lease obligations, including the current portion, are $15.8 million as of September 30, 2019, and $15.8 million as of December 31, 2018. The carrying amounts of our financing lease obligations, including the current portion, were $18.7 million as of September 30, 2019, and $18.5 million as of December 31, 2018. The fair value of our financing lease obligations was determined using discounted cash flow analysis based on market rates for similar types of borrowings. Financing lease obligations are a Level 2 liability in the fair value hierarchy.

Fair Value Measurements and Financial Statement Presentation

As described in Note 1 to these financial statements our Forward Purchase Contracts are no longer carried at fair value.

The fair values of our assets, liabilities, and derivative positions recorded at fair value and their respective levels in the fair value hierarchy as of September 30, 2019 and December 31, 2018, were as follows:

 

 

September 30, 2019

 

 

September 30, 2019

 

 

Fair Values of Assets

 

 

Fair Values of Liabilities

 

In Thousands

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Other items reported at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity futures and options

$

216

 

 

$

 

 

$

 

 

$

216

 

 

$

 

 

$

 

 

$

 

 

$

 

Total

$

216

 

 

$

 

 

$

 

 

$

216

 

 

$

 

 

$

 

 

$

 

 

$

 

 

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Table of Contents

 

December 31, 2018

 

 

December 31, 2018

 

 

Fair Values of Assets

 

 

Fair Values of Liabilities

 

In Thousands

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Other items reported at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward Purchase Contracts (a)

$

 

 

$

1

 

 

$

 

 

$

1

 

 

$

 

 

$

248

 

 

$

 

 

$

248

 

Total

$

 

 

$

1

 

 

$

 

 

$

1

 

 

$

 

 

$

248

 

 

$

 

 

$

248

 

 

(a) The fair value for Forward Purchase Contracts were previously estimated based on commodity futures market prices.

Commodity Price Risk

We enter into Forward Purchase Contracts for grain with settlement values based on commodity futures market prices. These Forward Purchase Contracts allow our counterparty to fix their sale prices to us at various times as defined in the contract. We may enter into hedging arrangements to either fix variable exposures or convert fixed prices to floating prices through the use of commodity derivative contracts. As of September 30, 2019, we held commodity contracts with a notional amount of $5.1 million.

We have designated all of our commodity derivative contracts as cash flow hedges. As a result, all gains or losses associated with recording commodity derivative contracts at fair value are recorded as a component of accumulated other comprehensive gain (loss) (AOCI). We reclassify amounts from AOCI to cost of goods sold when we sell the underlying products to which those hedges relate. As of September 30, 2019, we expect the entire AOCI balance to be reclassified into earnings within the next nine months.  

Certain amounts related to our hedging activities are as follows:

 

 

Amount of Gain (Loss)

Recognized in AOCI

 

 

 

 

Amount of Gain (Loss)

Reclassified to Earnings

 

 

September 30,

 

 

December 31,

 

 

 

 

Nine months ended September 30,

 

In thousands

2019

 

 

2018

 

 

 

 

2019

 

 

2018

 

Cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

$

(55

)

 

$

 

 

 

 

$

(22

)

 

$

 

Total

$

(55

)

 

$

 

 

 

 

$

(22

)

 

$

 

 

Foreign Exchange Risk

Foreign currency fluctuations affect our foreign currency cash flows related primarily to payments to Cellectis. Our principal foreign currency exposure is to the euro. We do not hedge these exposures, and we do not believe that the current level of foreign currency risk is significant to our operations.

Concentrations of Credit Risk

We invest our cash, cash equivalents and restricted cash in short-term investments and hold deposits at financial institutions that may exceed insured limits. We evaluate the credit-worthiness of these institutions in determining the risk associated with these deposits. We have not experienced any losses on these deposits.

3. RELATED-PARTY TRANSACTIONS

We have several agreements that govern our relationship with Cellectis, some of which require us to make payments to Cellectis. Pursuant to our management services agreement with Cellectis, we incurred management fee expenses of $305,000 for the three months ended September 30, 2019, and $1.0 million for the same period in 2018. We incurred management fee expenses of $1.1 million for the nine months ended September 30, 2019 and $2.0 million for the same period in 2018.

Cellectis has also guaranteed the lease agreement for our headquarters. Cellectis’ guarantee of our obligations under the lease will terminate at the end of the second consecutive calendar year in which our tangible net worth exceeds $300.0 million.

TALEN® is our primary gene-editing technology, and it is the foundation of our technology platform. TALEN technology was invented by researchers at the University of Minnesota and Iowa State University and exclusively licensed to Cellectis. We obtained an exclusive license for the TALEN technology for commercial use in plants from Cellectis. We also license other technology from Cellectis. We owe Cellectis royalties on any revenue we generate from sales of products less certain amounts as defined in the license agreement, as well as a percentage of any sublicense revenues. With the exception of a one-time payment made to the University of

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Minnesota related to our commercialization of High Oleic Soybeans, we have incurred nominal license fees under these agreements for the three and nine months ended September 30, 2019 and 2018.

4. NET LOSS PER SHARE

Basic and diluted loss per share was calculated using the following:

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

In Thousands, Except Share Data and Per Share Amounts

2019

 

 

2018

 

 

2019

 

 

2018

 

Net loss

$

(10,669

)

 

$

(7,483

)

 

$

(27,447

)

 

$

(19,429

)

Weighted average shares outstanding—basic and diluted

 

32,866,467

 

 

 

32,381,010

 

 

 

32,759,194

 

 

 

30,040,926

 

Basic and diluted loss per share

$

(0.32

)

 

$

(0.23

)

 

$

(0.84

)

 

$

(0.65

)

 

 

 

 

 

 

As of September 30,

 

 

 

 

 

 

 

2019

 

 

 

2018

 

Anti-dilutive stock options, restricted stock units and performance stock units

 

 

 

 

 

5,688,399

 

 

 

4,235,535

 

All outstanding stock options and restricted stock units are excluded from the calculation since they are anti-dilutive.

We have not used the treasury method in determining the number of anti-dilutive stock options and restricted stock units in the table above.

5. STOCK-BASED COMPENSATION

We use broad-based stock plans to attract and retain highly qualified officers and employees and to help ensure that management’s interests are aligned with those of our shareholders. We have also granted equity-based awards to directors, nonemployees and certain employees of Cellectis.

In December 2014, we adopted the Calyxt, Inc. Equity Incentive Plan (2014 Plan), which allowed for the grant of stock options, and in June 2017, we adopted the 2017 Omnibus Plan (2017 Plan), which allowed for the grant of stock options, performance shares and other types of equity awards.

As of September 30, 2019, 2,074,654 shares were registered and available for grant under effective registration statements, while 2,585,610 shares were available for grant in the form of stock options, restricted stock, restricted stock units and performance stock units under the 2017 Plan. Stock-based awards currently outstanding also include awards granted under the 2014 Plan, under which no further awards will be granted.

Stock Options

The estimated fair values of stock options granted, and the assumptions used for the Black-Scholes option pricing model were as follows:

 

 

Nine months ended September 30,

 

 

2019

 

 

2018

 

Estimated fair values of stock options granted

$

10.70

 

 

$

9.57

 

Assumptions:

 

 

 

 

 

 

 

Risk-free interest rate

1.9% - 2.5%

 

 

2.2% - 2.8%

 

Expected volatility

77.9% - 78.9%

 

 

40.9% - 57.2%

 

Expected term (in years)

6.8 – 10.0 years

 

 

5.6 – 10.0 years

 

 

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We estimate the fair value of each option on the grant date or other measurement dates if applicable using a Black-Scholes option-pricing model, which requires us to make predictive assumptions regarding future stock price volatility, employee exercise behavior and dividend yield. The risk-free interest rate for periods during the expected term of the options is based on the U.S. Treasury zero-coupon yield curve in effect at the date of grant. We estimate our future stock price volatility using the historical volatility of comparable public companies over the expected term of the option. Our expected term represents the period of time that options granted are expected to be outstanding determined using the simplified method. We have not nor do we expect to pay dividends for the foreseeable future.

Option strike prices are set at 100 percent or more of the closing share price on the date of grant, and generally vest over six years following the grant date. Options generally expire 10 years after the date of grant.

Information on stock option activity follows:

 

Options

Exercisable

 

 

Weighted-

Average

Exercise

Price Per

Share

 

 

Options

Outstanding

 

 

Weighted-

Average

Exercise

Price Per

Share

 

Balance as of December 31, 2018

 

1,278,038

 

 

$

7.45

 

 

 

3,201,887

 

 

$

10.67

 

Granted

 

 

 

 

 

 

 

 

 

1,490,000

 

 

 

14.45

 

Exercised

 

 

 

 

 

 

 

 

 

(86,952

)

 

 

3.61

 

Forfeited or expired

 

 

 

 

 

 

 

 

 

(163,809

)

 

 

13.79

 

Other activity

 

 

 

 

 

 

 

 

 

12,495

 

 

 

13.29

 

Balance as of September 30, 2019

 

1,638,228

 

 

$

8.20

 

 

 

4,453,621

 

 

$

11.95

 

 

Stock-based compensation expense related to stock option awards was as follows:

 

 

Three months ended

 

 

Nine months ended

 

September 30,

 

 

September 30,

In Thousands

2019

 

 

2018

 

 

2019

 

 

2018

 

Stock-based compensation expense

$

1,885

 

 

$

(78)

 

 

$

4,162

 

 

$

1,126

 

The aggregate intrinsic value of options outstanding and exercisable at September 30, 2019 was $2.1