Cibus, Inc. quarterly report, Q1 FY2023

Business context and reporting period

This is Calyxt, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2023, filed May 1, 2023. Despite the request metadata, the filing is for Calyxt, not the post-merger Cibus, Inc. Calyxt described itself as an early-stage plant-based synthetic biology company using its PlantSpring platform and BioFactory production system.

Calyxt had agreed to merge with Cibus Global, LLC. If completed, the combined company was to operate as Cibus, Inc., with Cibus Global’s business as the primary business. The merger was subject to approvals and other conditions and was then expected to close in the second quarter of 2023.

Key financial metrics

Amounts below are in millions of dollars, except per-share data and where stated.

Revenue was nominal and primarily related to a customer development agreement for a soybean trait intended as an alternative to palm oil. There was no meaningful operating margin given the very small revenue base, despite reported gross profit equaling revenue.

At March 31, 2023, cash and cash equivalents were $2.054 million, versus $3.427 million at year-end 2022; restricted cash was zero, down from $0.099 million. Current assets were $2.583 million and current liabilities $4.215 million. Total assets were $20.285 million, total liabilities $17.618 million, and stockholders’ equity $2.667 million. Current liabilities included $1.0 million of short-term debt from Cibus. Operating lease obligations were $13.342 million non-current, in addition to $0.400 million classified as current; the operating lease had a 15.1-year remaining term.

Cash used in investing activities was zero, compared with $0.545 million used in Q1 2022. Financing provided $0.903 million, including $1.0 million of Cibus interim funding, partly offset by $0.097 million of lease repayments. The company reported $1.0 million of interim funding received by quarter-end and an additional $0.5 million received after quarter-end and before filing.

Material changes versus the prior comparable period

• Operating expenses fell as a result of headcount reductions and other cost controls. Employees declined from 48 to 28 in January 2023; Calyxt had 25 full-time employees at quarter-end.
• Net loss improved by $0.225 million, even though non-operating items worsened. Q1 2023 non-operating expense was $0.910 million, versus $0.487 million of income in Q1 2022, driven mainly by warrant remeasurement losses and merger-related costs, partly offset by a legal-settlement receipt.
• Operating cash use improved by $4.029 million year over year. The filing attributes this in part to prior-year severance and bonus payments and non-cash warrant valuation changes, so the improvement does not solely reflect underlying operating performance.
• No capital expenditures were made in Q1 2023, compared with $0.545 million in Q1 2022. Financing cash flow was lower than the prior year, which included proceeds from a public offering.
• On April 24, 2023, Calyxt effected a one-for-ten reverse stock split to address Nasdaq’s minimum bid-price requirement. Share and per-share data in the filing are retroactively adjusted for the split.

Outlook, management commentary, risks and unusual items

Management stated that cash, expense-reduction measures, settlement proceeds and available Cibus interim funding were expected to fund operations through the second quarter of 2023. However, management concluded that substantial doubt existed about Calyxt’s ability to continue as a going concern for 12 months or more from the filing date, because additional capital would be needed. The filing cautions that financing might not be available on acceptable terms or at all.

The interim facility was unsecured and interest-free, available in increments of $0.5 million, and capped at $3.0 million, potentially $4.0 million if Cibus extended the merger outside date. The filing describes repayment treatment as dependent on merger completion or specified termination circumstances; investors should review the merger agreement and funding terms. The facility was subject to acceleration for certain bankruptcy events.

In preparation for the proposed transaction and to conserve cash, Calyxt reduced capital spending, cut headcount, renegotiated or ended service agreements, and narrowed operations. Continuing priorities included scaling production of one Plant Cell Matrix with Evologic, licensing PlantSpring technology and plant traits, and progressing three customer projects. Management said these projects were not expected to generate material near-term revenue; non-core development activities were suspended.

If the merger did not close, Calyxt said it might pursue another strategic transaction, continue a significantly scaled-back business, or dissolve and liquidate. Management warned that liquidation could leave little or nothing for stockholders, and that further financing could be dilutive or impose additional obligations. Other notable items included a $0.75 million final payment in Q1 2023 under a settlement with a technology vendor, and $0.8 million of merger-related costs. Common warrants were recorded as a liability at fair value; their reported value increased from $0.291 million at year-end to $1.110 million at quarter-end, creating mark-to-market expense.

Most important facts for investors to verify

• Whether the merger closed, its final terms, and the resulting ownership and capitalization of the combined company.
• Cash balance, interim-funding availability and terms, and actual cash runway after Q1 2023.
• Progress on financing or strategic alternatives if the merger was delayed or terminated, including potential dilution or liquidation outcomes.
• Whether operating-cost reductions translate into sustainably lower cash burn, given nominal revenue and no expected material near-term revenue from current projects.
• Nasdaq listing compliance following the reverse split and the effect of the split and merger on share counts and per-share comparisons.
• Potential warrant-liability remeasurement volatility and the long-term costs and obligations associated with the facility lease.