Filing summary
Issuer discrepancy: The supplied filing is Calyxt, Inc.’s Form 10-Q, not a filing for Cibus, Inc. It covers the quarter and nine months ended September 30, 2019; amounts below are in U.S. dollars.
Business context and reporting period
Calyxt is an early-stage plant-based food ingredients company commercializing High Oleic Soybean Oil and High Oleic Soybean Meal, while developing products in other crops. It reported one segment, food ingredients, and a North American commercial focus. Cellectis owned 69.1% of Calyxt at September 30, 2019.
Financial performance and position
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $2.967 million | $27,000 | $3.533 million | $234,000 |
| Gross profit (loss) | $(561,000) | $27,000 | $(332,000) | $234,000 |
| Operating loss | $(10.693) million | $(7.699) million | $(27.708) million | $(19.487) million |
| Net loss | $(10.669) million | $(7.483) million | $(27.447) million | $(19.429) million |
| Adjusted EBITDA (non-GAAP) | $(6.905) million | $(6.382) million | $(18.692) million | $(15.035) million |
Gross margin was approximately negative 18.9% for Q3 and negative 9.4% for the nine-month period, based on reported revenue and cost of goods sold. Loss per share was $0.32 for Q3 and $0.84 for nine months, compared with $0.23 and $0.65 in 2018, respectively.
At September 30, cash and cash equivalents were $66.4 million; total cash, cash equivalents and restricted cash were $68.0 million. Current assets were $71.7 million and current liabilities $5.8 million. Financing lease obligations had a carrying value of $18.7 million. Stockholders’ equity was $72.1 million, down from $93.4 million at December 31, 2018.
For the first nine months, operating cash use was $24.7 million, investing cash use was $2.5 million, and financing cash use was $112,000. Cash, cash equivalents and restricted cash decreased $27.3 million. Capital expenditures were $2.5 million.
Changes versus the prior comparable period
- Product revenue rose sharply from a very small 2018 base as sales of soybean oil and meal began; management described Q3 revenue as a record. It said it expanded foodservice distribution and sold all soybean meal produced during the period.
- Commercialization brought cost of goods sold of $3.5 million in Q3 and $3.9 million for nine months. Calyxt also recorded an inventory net-realizable-value adjustment reflecting higher early-stage commercialization costs.
- Net loss increased by $3.2 million in Q3 and $8.0 million for nine months. Management attributed the deterioration primarily to higher stock-based compensation and product-launch costs.
- SG&A rose 88.7% in Q3 and 78.8% for nine months, including higher personnel, stock compensation and professional fees. Management and royalty fees declined as Calyxt internalized services previously provided by Cellectis.
- Operating cash use increased by $11.1 million year over year, reflecting higher losses and working-capital investment, including receivables and inventory following commercialization.
Outlook, risks and contingencies
- Management expects significant expenses and operating losses for several years and anticipates revenue will not support operating capital requirements in the near term. It expects R&D costs to increase and SG&A investment in commercialization to continue.
- Management stated that available cash and restricted cash were expected to fund operations for at least 12 months and into mid-2021. This estimate is forward-looking and subject to risks; Calyxt may need additional financing, which could be unavailable or dilute shareholders.
- Grain purchase commitments for 2020 and 2021 were estimated at $32.7 million based on then-current assumptions. The MD&A separately says total contractual commitments increased to $63.8 million; the relationship between these figures is not clearly explained in the supplied text.
- Commodity exposure is material: Calyxt estimated that a 10% increase in commodity futures prices would reduce its financial condition by $1.2 million, while a 10% decrease would increase it by $1.0 million. It held commodity contracts with a $5.1 million notional amount.
- There were no material pending legal proceedings and no material changes to the risk factors disclosed in the 2018 Form 10-K. Management reported disclosure controls were effective as of September 30, 2019.
- The filing reports no income tax benefit, citing a full valuation allowance against deferred tax assets. Restricted cash of approximately $1.5 million was associated with financing leases.
Most important facts to verify
- Confirm the intended issuer: this supplied 10-Q is for Calyxt, Inc. (CLXT), not Cibus, Inc.
- Verify the $32.7 million grain-purchase commitment against the stated $63.8 million total contractual commitments, including what other obligations comprise the total.
- Review product-level economics, inventory valuation adjustments and whether commercialization can achieve positive gross margins.
- Assess the cash-burn assumptions underlying management’s runway estimate and potential future financing needs.
- Check a numerical inconsistency in the non-GAAP reconciliation: it lists nine-month 2019 net loss as $27.477 million, while the financial statements and MD&A report $27.447 million.