Company Quick10K Filing
Quick10K
Calyxt
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$6.38 33 $209
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
8-K 2019-08-06 Earnings, Exhibits
8-K 2019-06-25 Other Events, Exhibits
8-K 2019-05-17 Shareholder Vote
8-K 2019-05-07 Earnings, Exhibits
8-K 2019-03-11 Earnings, Exhibits
8-K 2019-02-26 Other Events, Exhibits
8-K 2019-02-19 Other Events, Exhibits
8-K 2019-01-17 Officers, Exhibits
8-K 2019-01-17 Officers, Exhibits
8-K 2019-01-03 Officers, Exhibits
8-K 2018-11-13 Earnings, Exhibits
8-K 2018-09-17 Officers, Exhibits
8-K 2018-09-11 Officers
8-K 2018-08-21 Officers, Exhibits
8-K 2018-08-01 Earnings, Exhibits
8-K 2018-07-03 Officers
8-K 2018-06-15 Officers
8-K 2018-05-24 Shareholder Vote
8-K 2018-05-17 Other Events, Exhibits
8-K 2018-05-15 Other Events, Exhibits
8-K 2018-03-13 Earnings, Exhibits
CF CF Industries 10,322
ICL Israel Chemicals 5,963
SMG Scotts Miracle-Gro 5,824
UAN CVR Partners 424
AVD American Vanguard 401
CGA China Green Agriculture 251
MBII Marrone 154
EVGN Evogene 41
SNES Senestech 34
RKDA Arcadia Biosciences 1
CLXT 2019-06-30
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-10.1 clxt-ex101_347.htm
EX-31.1 clxt-ex311_10.htm
EX-31.2 clxt-ex312_9.htm
EX-32 clxt-ex32_8.htm

Calyxt Earnings 2019-06-30

CLXT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 clxt-10q_20190630.htm 10-Q clxt-10q_20190630.htm

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 June 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 August 6th, 2019, there were 32,866,100 shares of common stock, $0.0001 par value per share, outstanding.

 

 


Table of Contents

 

 

 

 

 


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 name and trademark, Calyxt® and CalynoTM; 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. Investors and others can receive notifications of new press releases posted on our website by signing up for email alerts.

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)

 

 

 

June 30,

2019

(unaudited)

 

December 31,

2018

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

76,434

 

$

93,794

 

Restricted cash

 

 

381

 

 

381

 

Trade accounts receivable

 

 

810

 

 

 

Due from related parties

 

 

78

 

 

46

 

Inventory

 

 

111

 

 

 

Prepaid expenses and other current assets

 

 

1,470

 

 

1,301

 

Total current assets

 

 

79,284

 

 

95,522

 

Non-current restricted cash

 

 

1,128

 

 

1,113

 

Land, buildings, and equipment

 

 

22,480

 

 

21,850

 

Other non-current assets

 

 

684

 

 

306

 

Total assets

 

$

103,576

 

$

118,791

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

395

 

$

818

 

Accrued expenses

 

 

1,993

 

 

2,007

 

Accrued compensation and benefits

 

 

1,238

 

 

1,305

 

Due to related parties

 

 

781

 

 

1,905

 

Current portion of financing lease obligations

 

 

308

 

 

258

 

Other current liabilities

 

 

253

 

 

711

 

Total current liabilities

 

 

4,968

 

 

7,004

 

Financing lease obligations

 

 

18,259

 

 

18,227

 

Other non-current liabilities

 

 

159

 

 

163

 

Total liabilities

 

$

23,386

 

$

25,394

 

Stockholders’ equity:

 

 

 

 

 

 

 

Common stock, $0.0001 par value; 275,000,000 shares authorized; 32,918,599 shares issued and 32,859,700 shares outstanding as of June 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

 

 

180,237

 

 

176,069

 

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

 

 

(789

)

 

(230

)

Accumulated deficit

 

 

(99,223

)

 

(82,445

)

Accumulated other comprehensive loss

 

 

(38

)

 

 

Total stockholders’ equity

 

 

80,190

 

 

93,397

 

Total liabilities and stockholders’ equity

 

$

103,576

 

$

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 June 30,

 

 

Six months ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

$

408

 

 

$

196

 

 

$

566

 

 

$

207

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

303

 

 

 

 

 

337

 

 

 

Research and development

 

2,738

 

 

 

3,241

 

 

 

4,957

 

 

 

4,410

 

Selling and general and administrative

 

6,408

 

 

 

4,048

 

 

 

11,475

 

 

 

6,603

 

Management fees and royalties

 

451

 

 

 

399

 

 

 

812

 

 

 

982

 

Total operating expenses

 

9,900

 

 

 

7,688

 

 

 

17,581

 

 

 

11,995

 

Loss from operations

 

(9,492

)

 

 

(7,492

)

 

 

(17,015

)

 

 

(11,788

)

Interest, net

 

92

 

 

 

(72

)

 

 

264

 

 

 

(140

)

Foreign currency transaction loss

 

(3

)

 

 

(12

)

 

 

(27

)

 

 

(18

)

Loss before income taxes

 

(9,403

)

 

 

(7,576

)

 

 

(16,778

)

 

 

(11,946

)

Income taxes

 

 

 

 

 

 

 

Net loss

$

(9,403

)

 

$

(7,576

)

 

$

(16,778

)

 

$

(11,946

)

Basic and diluted loss per share

$

(0.29

)

 

$

(0.25

)

 

$

(0.51

)

 

$

(0.41

)

Weighted average shares outstanding - basic and diluted

 

32,732,988

 

 

 

29,840,827

 

 

 

32,704,834

 

 

 

28,851,491

 

 

See accompanying notes to these financial statements.

- 4 -


Table of Contents

CALYXT, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited and in Thousands Except Shares Outstanding)

 

 

 

Shares

Outstanding

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Shares

in

Treasury

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Total

Stockholders’

Equity

 

Balances at December 31, 2018

 

 

32,648,893

 

 

$

3

 

 

$

176,069

 

 

$

(230

)

 

$

(82,445

)

 

$

 

 

$

93,397

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,778

)

 

 

 

 

 

(16,778

)

Stock based compensation

 

 

254,170

 

 

 

 

 

 

3,860

 

 

 

 

 

 

 

 

 

 

 

 

3,860

 

Issuance of common stock

 

 

 

 

 

 

 

 

308

 

 

 

 

 

 

 

 

 

 

 

 

308

 

Shares withheld for net share settlement

 

 

(43,363

)

 

 

 

 

 

 

 

 

(559

)

 

 

 

 

 

 

 

 

(559

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38

)

 

 

(38

)

Balances at June 30, 2019

 

 

32,859,700

 

 

$

3

 

 

$

180,237

 

 

$

(789

)

 

$

(99,223

)

 

$

(38

)

 

$

80,190

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at March 31, 2019

 

 

32,692,189

 

 

$

3

 

 

$

177,750

 

 

$

(230

)

 

$

(89,820

)

 

$

 

 

$

87,703

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,403

)

 

 

 

 

 

(9,403

)

Stock based compensation

 

 

210,874

 

 

 

 

 

 

2,304

 

 

 

 

 

 

 

 

 

 

 

 

2,304

 

Issuance of common stock

 

 

 

 

 

 

 

 

183

 

 

 

 

 

 

 

 

 

 

 

 

183

 

Shares withheld for net share settlement

 

 

(43,363

)

 

 

 

 

 

 

 

 

(559

)

 

 

 

 

 

 

 

 

(559

)

Other comprehensive loss

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

(38

)

 

 

(38

)

Balances at June 30, 2019

 

 

32,859,700

 

 

$

3

 

 

$

180,237

 

 

$

(789

)

 

$

(99,223

)

 

$

(38

)

 

$

80,190

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

Outstanding

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Shares

in

Treasury

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Total

Stockholders’

Equity

 

Balances at December 31, 2017

 

 

27,718,780

 

 

$

3

 

 

$

112,021

 

 

$

 

 

$

(54,548

)

 

$

 

 

$

57,476

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,946

)

 

 

 

 

 

(11,946

)

Stock based compensation

 

 

559,826

 

 

 

 

 

 

3,668

 

 

 

 

 

 

 

 

 

 

 

 

3,668

 

Issuance of common stock

 

 

4,057,500

 

 

 

 

 

 

57,041

 

 

 

 

 

 

 

 

 

 

 

 

57,041

 

Repurchase of stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2018

 

 

32,336,106

 

 

$

3

 

 

$

172,730

 

 

$

 

 

$

(66,494

)

 

$

 

 

$

106,239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at March 31, 2018

 

 

27,954,781

 

 

$

3

 

 

$

112,775

 

 

$

 

 

$

(58,918

)

 

$

 

 

$

53,860

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,576

)

 

 

 

 

 

(7,576

)

Stock based compensation

 

 

559,826

 

 

 

 

 

 

3,668

 

 

 

 

 

 

 

 

 

 

 

 

3,668

 

Issuance of common stock

 

 

3,821,499

 

 

 

 

 

 

56,287

 

 

 

 

 

 

 

 

 

 

 

 

56,287

 

Repurchase of stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2018

 

 

32,336,106

 

 

$

3

 

 

$

172,730

 

 

$

 

 

$

(66,494

)

 

$

 

 

$

106,239

 

 

See accompanying notes to these financial statements.

- 5 -


Table of Contents

CALYXT, INC.

STATEMENTS OF CASH FLOWS

(Unaudited and in Thousands)

 

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(16,778

)

 

$

(11,946

)

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

 

 

 

 

 

 

 

 

Depreciation

 

 

689

 

 

 

371

 

Stock-based compensation

 

 

3,860

 

 

 

2,427

 

Unrealized foreign exchange gain

 

 

 

 

 

6

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

(810

)

 

 

 

Due to/from related parties

 

 

(1,156

)

 

 

47

 

Inventory

 

 

(111

)

 

 

 

Prepaid expenses and other assets

 

 

(169

)

 

 

(799

)

Accounts payable

 

 

(423

)

 

 

25

 

Accrued expenses

 

 

(14

)

 

 

275

 

Accrued compensation and benefits

 

 

(67

)

 

 

(318

)

Other accrued liabilities

 

 

(513

)

 

 

1,084

 

Other non-current assets

 

 

(378

)

 

 

 

Net cash used by operating activities

 

 

(15,870

)

 

 

(8,828

)

Investing activities

 

 

 

 

 

 

 

 

Purchases of land, buildings and equipment

 

 

(1,319

)

 

 

(498

)

Net cash used by investing activities

 

 

(1,319

)

 

 

(498

)

Financing activities

 

 

 

 

 

 

 

 

Costs incurred related to the issuance of stock

 

 

 

 

 

(665

)

Proceeds from issuance of common stock

 

 

 

 

 

57,706

 

Repayments of financing lease obligations

 

 

(122

)

 

 

 

Proceeds from the exercise of stock options

 

 

308

 

 

 

1,241

 

Costs incurred related to shares withheld for net share settlement

 

 

(559

)

 

 

 

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

 

 

217

 

 

 

 

Net cash (used) provided by financing activities

 

 

(156

)

 

 

58,282

 

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

 

 

(17,345

)

 

 

48,956

 

Cash, cash equivalents and restricted cash - beginning of period

 

 

95,288

 

 

 

56,664

 

Cash, cash equivalents and restricted cash - end of period

 

$

77,943

 

 

$

105,620

 

 

See accompanying notes to these financial statements.

- 6 -


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) 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 transport and process the grain into finished products. Consideration we receive from our growers to purchase seed is recorded as reduction in the cost of inventory.

We evaluate inventory balances for obsolescence quarterly 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.

Effective January 1, 2019, we designated all seed and grain production agreements (Forward Purchase Contracts) as normal purchases and as a result no longer consider these agreements to be accounting derivatives. As a result, we no longer reflect these agreements at fair value. As of that date, any mark-to-market gains or losses were frozen on our balance sheet and will be reflected in inventory upon delivery as part of the cost of the associated grain.

Prior to the commercialization of our High Oleic Soybean Products in late February 2019, we expensed all costs associated with the production of seed and acquisition of grain, net of proceeds from seed sales, as research and development (R&D) expense.

Revenue Recognition

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.

We also 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

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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 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

In the first quarter of 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 value of our financing lease obligations, including the current portion, are $15.7 million as of June 30, 2019, and $15.8 million as of December 31, 2018. The carrying amounts of our financing lease obligations, including the current portion, were $18.6 million as of June 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 June 30, 2019 and December 31, 2018, were as follows:

 

 

 

June 30, 2019

 

 

June 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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward Purchase Contracts (a)

 

$

 

 

$

1

 

 

$

 

 

$

1

 

 

$

 

 

$

203

 

 

$

 

 

$

203

 

Commodity futures and options

 

 

174

 

 

 

 

 

 

 

 

 

174

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

174

 

 

$

1

 

 

$

 

 

$

175

 

 

$

 

 

$

203

 

 

$

 

 

$

203

 

 

 

 

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

 

Commodity futures and options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

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hedging arrangements to either fix variable exposures or converting fixed prices to floating prices through the use of commodity derivative contracts. At June 30, 2019, we had entered into commodity contracts with a notional amount of $1.8 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 income (AOCI). We reclassify amounts from AOCI to cost of goods sold when we sell the underlying products to which those hedges relate. As of June 30, 2019, we expect the entire AOCI balance to be reclassified into earnings within the next 12 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

 

 

 

Six months ended,

 

 

 

 

Six months ended,

 

 

 

June 30,

 

 

December 31,

 

 

 

 

June 30,

 

 

December 31,

 

In thousands

 

2019

 

 

2018

 

 

 

 

2019

 

 

2018

 

Cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

$

(38

)

 

$

 

 

 

 

$

 

 

$

 

Total

 

$

(38

)

 

$

 

 

 

 

$

 

 

$

 

 

Foreign Exchange Risk

Foreign currency fluctuations affect our foreign currency cash flows related to payments to Cellectis and third-party purchases. Our principal foreign currency exposure is to the euro. We do not currently 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. Pursuant to our management services agreement with Cellectis, we also pay management fees for services Cellectis provides to us. We perform Cellectis’ U.S. operations payroll services. We incurred management fee expenses of $0.5 million for the three months ended June 30, 2019 and $0.4 million for the same period in 2018. We incurred management fee expenses of $0.8 million for the six months ended June 30, 2019 and $1.0 for the same period in 2018.

Cellectis also has guaranteed our headquarters lease agreement. Cellectis’ guarantee of our obligations under the sale-leaseback transaction will terminate at the end of the second consecutive calendar year in which our tangible net worth exceeds $300 million. Any amounts borrowed from Cellectis bear floating-rate interest at a rate of 12-month Euribor plus five percent per annum.

TALEN technology was invented by researchers at the University of Minnesota and Iowa State University and exclusively licensed to Cellectis. We obtained from Cellectis an exclusive license for the TALEN technology for commercial use in plants. TALEN technology is the primary gene-editing technology used by us today. We also license other key technology from Cellectis and owe them royalties on any revenue we generate from sales of product as well as a percentage of any sublicense revenues we generate. With the exception of a one-time payment made to the University of Minnesota related to our commercialization of High Oleic Soybeans, we have incurred nominal license fees under these agreements in in the three and six month periods ended June 30, 2019 and 2018.

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4. NET LOSS PER SHARE

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

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

 

 

Six months ended June 30,

 

In Thousands, Except Share Data and Per Share Amounts

2019

 

 

2018

 

Net loss

$

(16,778

)

 

$

(11,946