Organization and Summary of Significant Accounting Policies
|12 Months Ended|
Dec. 31, 2018
|Accounting Policies [Abstract]|
|Organization and Summary of Significant Accounting Policies||
Calyxt, Inc., formerly known as Cellectis Plant Sciences, Inc. (the “Company” or “Calyxt”), was founded in 2010 and incorporated in Delaware. We are headquartered in Roseville, Minnesota and are a consumer-centric, food- and agriculture-focused company. Prior to our initial public offering (IPO) on July 25, 2017, we were a majority-owned subsidiary of Cellectis S.A. (“Cellectis”). As of December 31, 2018, Cellectis owned approximately 69.5% of our outstanding common stock.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, including those related to revenue recognition, forward purchase contracts, stock-based compensation and valuation allowances on deferred tax assets. Actual results could differ from those estimates.
Cash, Cash Equivalents, and Restricted Cash
We consider all investments purchased with an original maturity of three months or less to be cash equivalents.
Accounts receivable are unsecured and are recorded at net realizable value. We make judgments as to our ability to collect outstanding receivables based upon patterns of collectability, historical experience, and management’s evaluation of specific accounts and will provide an allowance for credit losses when collection becomes doubtful. We perform credit evaluations of our customers’ financial condition on an as-needed basis. Payment is generally due 30 days from the invoice date, and accounts past 30 days are individually analyzed for collectability. When all collection efforts have been exhausted, the account is written off against the related allowance.
Fair Value of Financial Instruments
We record financial instruments at fair value with changes in those values reported in our results of operations each period. We determine values using readily available market prices, instruments with similar terms and underlying inputs that are quoted on exchanges, or other valuation techniques if no observable inputs are available.
Land, Buildings and Equipment
Lands, buildings and equipment is stated at cost less accumulated depreciation. Assets under capital lease are stated at the lesser of their net present value of future lease payments or fair market value. Depreciation is computed based upon the estimated useful lives of the respective assets. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the assets. Repairs and maintenance costs are expensed as incurred. The cost and accumulated depreciation of property and equipment retired, or otherwise disposed of, are removed from the related accounts, and any residual values are charged to expense. Depreciation expense has been calculated using the following estimated useful lives:
We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. If the impairment tests indicate that the carrying value of the asset, or asset group is greater than the expected undiscounted cash flows to be generated by such asset or asset group, further analysis is performed to determine the fair value of the asset or asset group. To the extent the fair value of the asset or asset group is less than its carrying value, an impairment loss is recognized equal to the amount the carrying value exceeds the fair value of the asset or asset group. Assets to be disposed of are carried at the lower of their carrying value or fair value less costs to sell. Fair value is measured using a discounted cash flow model or independent appraisals, as appropriate. We have not recognized any impairment losses in these financial statements.
We recognize revenue from R&D agreements and license agreements. Revenues from R&D 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 an R&D agreement.
For agreements that contain multiple elements, each element is accounted for as a separate unit of accounting provided the following criteria are met: the delivered products or services have value to the customer on a stand-alone basis and, for an arrangement that includes a general right of return relative to the delivered products or services, delivery, or performance of the undelivered product or service is considered probable and is substantially controlled by us. We consider a deliverable to have stand-alone value if the product or service is sold separately by us or another vendor or could be resold by the customer. Our R&D agreements do not include a general right of return relative to the delivered products.
Nonrefundable up-front payments are deferred and recognized as revenue over the term of the R&D agreement. If an R&D 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 R&D partners, 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.
We expense advertising costs as incurred.
Research and Development
We recognize R&D expenses as incurred. These expenses consist of direct and research-related allocated overhead costs such as facilities and information technology costs, costs incurred in connection with collaborator-funded activities are expensed as incurred. Costs to acquire technologies that are utilized in R&D that have no alternative future use are expensed as incurred. We also expense all costs associated with the acquisition of grain, net of proceeds from seed sales, as R&D expense.
We expense patent costs, including related legal costs, as incurred. Costs to write, maintain, in-license, and defend patents are recorded as selling, general and administrative expenses in the statements of operations. Costs to support the research for filing patents are recorded as R&D expenses in the statements of operations.
We generally measure employee and nonemployee stock-based awards at grant-date fair value and record compensation expense over the vesting period of the award. Stock-based awards issued to nonemployees are remeasured until the award vests. We use the Black-Scholes option pricing model to value our stock option awards.
The expected term of stock options is estimated using the average of the vesting tranches and the contractual life of each grant for employee options as we have limited historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for our stock option grants. For options granted to nonemployees, we use the remaining contractual life. For stock price volatility, we use comparable public companies as a basis for its expected volatility to calculate the fair value of option grants. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected term of the option. We assume no dividend yield because dividends are not expected to be paid in the near future, which is consistent with our history of not paying dividends.
We generally measure compensation expense for grants of restricted stock units using the value of a share of our stock on the date of grant. Compensation expense for grants of stock awards to non-employees are initially measured using the share price on date of grant and remeasured quarterly.
If an award is forfeited prior to vesting the associated reduction in expense is reflected net in stock compensation expense in the period the forfeiture occurred. Stock-based compensation expense is recorded in R&D and selling, general and administrative (SG&A) expenses in our statements of operations.
Current income taxes are recorded based on statutory obligations for the current operating period for the jurisdictions in which we have operations.
Deferred taxes are provided on an asset and liability method, whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when we believe it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Foreign Currency Transactions
Transactions in foreign currencies are translated at the exchange rates effective on the transaction dates. Assets and liabilities denominated in foreign currencies are translated at the period-end exchange rate. Foreign currency gains and losses are recognized in SG&A expenses in the statements of operations.
Recently Adopted Accounting Pronouncements
In the second quarter of 2017 we adopted new accounting requirements for the tax treatment and presentation of share-based payments in our income and cash flow statements. The impact of adoption was a $0.8 million tax benefit, however, due to the recognition of a full valuation allowance, the net impact was zero.
In the first quarter of 2018 we adopted new accounting requirements for when to account for a change to the terms or conditions of a share-based payment award as a modification. Its adoption did not have a material impact on our financial statements.
The entire disclosure for all significant accounting policies of the reporting entity.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef