Filing summary
Issuer and period: The request identifies Cibus, Inc., but the supplied filing is for Calyxt, Inc. (NASDAQ: CLXT), a 10-Q for the quarter ended March 31, 2019. Confirm the filing is the intended one before relying on this summary. Amounts below are in U.S. dollars.
Business context
Calyxt is an early-stage food-ingredient company using gene-editing technology to develop crops with targeted traits. In late February 2019, it began commercializing its first products, High Oleic Soybean Oil and Meal; it also has other soybean products and High Fiber Wheat in development. Cellectis owned approximately 69.5% of the company at quarter-end.
Financial performance and position
- Revenue: $157,000, versus $11,000 in Q1 2018, primarily reflecting initial sales of the new soybean products.
- Expenses and losses: Cost of revenue was $34,000; R&D expense was $2.044 million and SG&A was $5.241 million. Operating loss was $7.523 million and net loss was $7.375 million, compared with a $4.370 million net loss in Q1 2018. Loss per share was $0.23 versus $0.16.
- Margins: The filing cautions that current product margins are not representative of future margins: pre-commercialization grain and seed costs had generally been expensed as R&D, while related processing and transportation costs are now recorded in cost of revenue.
- Cash flow: Operating activities used $9.335 million, compared with $6.565 million in Q1 2018. Investing activities used $346,000, mainly for lab equipment and headquarters furniture and fixtures. Financing activities provided $125,000, primarily from option exercises.
- Liquidity: Cash and cash equivalents were $84.231 million; restricted cash was $1.501 million. Combined cash, cash equivalents and restricted cash totaled $85.732 million at March 31, 2019, down from $95.288 million at year-end 2018.
- Debt and balance sheet: Financing lease obligations had a carrying value of approximately $18.4 million, including current and non-current portions. Total liabilities were $22.968 million and stockholders’ equity was $87.703 million. The company reported an accumulated deficit of $89.820 million.
Changes versus Q1 2018 and year-end 2018
- Revenue rose with initial commercial sales, but net loss increased by $3.005 million year over year. R&D expense increased 95.0% and SG&A increased 95.9%; management fees and royalties declined 38.1%.
- Management attributed higher R&D costs largely to increased headcount and stock-based compensation. Higher SG&A reflected stock-based compensation, executive and board additions, and public-company professional-services costs.
- Operating cash use increased by $2.770 million year over year, reflecting increased staffing and professional costs, commercial infrastructure investment, R&D, and grain purchases ahead of commercialization.
- Effective January 1, 2019, grain and seed production agreements were designated as normal purchases rather than accounting derivatives; related contracts are no longer carried at fair value.
Outlook, risks and contingencies
- Management expected available cash, cash equivalents and restricted cash to fund operations through at least early 2021, based on its anticipated cash burn. This is a forward-looking estimate, not a guarantee.
- The company expected continuing and increasing losses and did not expect significant product revenue until it could further commercialize its soybean products and other candidates. It anticipated needing additional funding; future financing may be unavailable or dilutive, and a shortfall could force delays, reductions or discontinuation of development or commercialization.
- As of March 31, 2019, Calyxt had committed to grain purchases totaling $19.7 million, priced using commodity-market factors and estimated yields. The commitments were not recorded as liabilities because delivery had not occurred. The company did not hedge its commodity-price exposure.
- Key risks include early-stage commercialization and demand uncertainty, agricultural and weather variability, regulatory changes, competition, access to capital, intellectual-property protection, reliance on third parties, and its relationship with majority stockholder Cellectis. Cellectis also provides services and licenses key technology; management fees were $361,000 in the quarter.
- The company reported no material pending legal proceedings, no material change in risk factors, no off-balance-sheet arrangements, and effective disclosure controls as of quarter-end.
Most important facts for investors to verify
- Whether Calyxt’s 10-Q is the intended source, given the request names Cibus, Inc.
- Commercial sales volumes, customer demand, and whether future product economics improve once the transition from pre-commercialization accounting is complete.
- Cash-burn assumptions underlying the stated runway through early 2021, and the timing and terms of any additional financing.
- Exposure and payment obligations under the $19.7 million grain commitments, including commodity-price and yield assumptions.
- Related-party arrangements with Cellectis, including control, management services, technology licenses and royalties.