Organization and Summary of Significant Accounting Policies
|12 Months Ended|
Dec. 31, 2019
|Accounting Policies [Abstract]|
|Organization and Summary of Significant Accounting Policies||
1. 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. We are a technology company focused on delivering plant-based solutions that are healthy and sustainable. Prior to our initial public offering (IPO) on July 25, 2017, we were a wholly owned subsidiary of Cellectis S.A. (“Cellectis”). As of December 31, 2019, Cellectis owned 68.9% of our outstanding common stock. Certain prior year amounts have been reclassified to conform to current year presentation.
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 consolidated 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. Restricted cash, which we hold for the benefit of our counterparty on an equipment lease facility, is also invested in 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 our 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 fifteen or thirty days from the invoice date depending upon the product, and accounts past 30 days are individually analyzed for collectability. When all collection efforts have been exhausted, the account is written off.
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 commodity futures market prices plus a premium. The grower contracts are also linked to commodity futures market prices plus a premium. The grower has the option to fix their price with us throughout the term of the agreement. The grower 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 upon our purchase of the underlying grain. As of December 31, 2019, we had purchased all the underlying grain and all previously recorded gains and losses had been reflected in 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 based on the age of the inventory and our sales forecasts. We also determine the net realizable value of our inventory balances using projected selling prices for our products, market prices for the underlying agricultural markets, the age of products our anticipated costs and other factors that take into consideration our limited operating history, and compare those prices to the current weighted average costs of our inventories. If our costs are higher than the projected selling prices a valuation adjustment is recorded.
Prior to our commercialization of high oleic soybean products, all Grain Costs were expensed as R&D.
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
Land, buildings and equipment are 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 consolidated financial statements.
Revenue Recognition – Product Sales
We recognize sales revenue at the point in time that title 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.
Revenue Recognition – Out-licensing of Technology
We recognize revenue from license agreements, which may consist of nonrefundable up-front payments, milestone payments, royalties and services. In addition, we may license our technology to third parties.
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.
We expense advertising costs as incurred.
Research and Development (R&D)
We recognize R&D expenses as incurred. These expenses consist of direct costs for R&D and R&D-related allocations of 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. Prior to the commercialization of a product, Grain Costs are expensed as R&D.
We expense patent costs, including related legal costs, as incurred. Costs to maintain, in-license, and defend patents are recorded as G&A expenses in the statements of operations. Costs to write and 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. Prior to our adoption of new accounting rules on January 1, 2019, stock-based awards issued to nonemployees were 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 United States 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.
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. Prior to our adoption of new accounting rules on January 1, 2019, compensation expense for grants of stock awards to non-employees were 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-based compensation expense in that period. Stock-based compensation expense is recorded in R&D, selling and supply chain, or G&A expenses in our consolidated 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 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 G&A expenses in the consolidated statements of operations.
Recently Adopted Accounting Pronouncements
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 consolidated 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.
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 consolidated financial statements.
In the first quarter of 2019, we adopted new hedge accounting requirements that better aligned our risk management activities and financial reporting. The adoption did not have a material impact on our consolidated financial statements.
The entire disclosure for all significant accounting policies of the reporting entity.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef