UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-Q
_____________________
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended March 31,September 30, 2023;
or
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period fromto
from_________to_________
Commission file number
001-38161
_____________________
(Exact name of registrant as specified in its charter)
_____________________
Delaware | 27-1967997 | |||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices) | (Zip Code) | |||||||
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
_____________________
Securities registered pursuant to Section 12(b) of the Act.
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||||
Class A Common Stock, | The NASDAQ Stock Market LLC | |||||||||||||||
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 ☒x No ☐
oIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation(§ (§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 ☒x No ☐o
S-T
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 Rule12b-2
of the Exchange Act:| Large accelerated filer | o | Accelerated filer | ||||||||||||||
Non-accelerated filer | x | 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. ☐
oIndicate by check mark whether the registrant is a shell company (as defined in Rule☐o Yes ☒x No
12b-2
of the Exchange Act). As of April 28,November 8, 2023, there were
| ||||||||
Terms
Explanatory Note
In an effort to regain compliance with the listing rule of the Nasdaq Capital Market requiring that the bid price of Calyxt, Inc.’s common stock be $1.00 per share or higher (Bid Price Rule), Calyxt, Inc. effected a
Terms
When the terms “Cibus,” the “Company” or “its” are used in this report, unless the context otherwise requires, those terms are being used to refer to Cibus, Inc. (formerly Calyxt, Inc.) and its consolidated subsidiaries (i) excluding Cibus Global, LLC and its consolidated subsidiaries, prior to the completion of the Merger Transactions (as defined under the heading “Explanatory Note” below) and (ii) the combined entity, including Cibus Global, LLC and its consolidated subsidiaries, as of and following the consummation of the Merger Transactions. When the term “Legacy Calyxt” is used, it is being used to exclusively refer to Calyxt, Inc. prior to the Merger Transactions. When the term “Cibus Global” is used, it is being used to refer to Cibus Global, LLC, both prior to and after the completion of the Merger Transactions. When the term “Cellectis,” is used, it is being used to refer to Cellectis S.A. (socié(société anonyme)anonyme), the Company’s largest stockholdershareholder prior to the completion of the Merger Transactions.
When the term “Class A Common Stock” is used, it is being used, unless the context requires otherwise, to refer prior to the Merger Transactions to Legacy Calyxt’s common stock, par value $0.0001 per share (Legacy Common Stock) and following the former majority ownerMerger Transactions to the Class A Common Stock, $0.0001 par value per share (Class A Common Stock). Each share of its common stock.
Legacy Common Stock existing and outstanding immediately prior to the Merger Transactions remained outstanding as a share of Class A Common Stock without any conversion or exchange thereof.
The Company owns or has the names PlantSpring, BioFactory, Plant Cell Matrix, and the abbreviation PCM. The Company also ownsright to use the trademarks, Calyxt®service marks, and Calyno®trade names that it uses in conjunction with the operation of its business. Some of the more important marks and names that it owns or licenses other trademarks, trade names, and service marks appearinghas rights to use that may appear in this Quarterly Report on Form 10-Q include: “Cibus10-Q.® The names,” “RTDS®,” “Rapid Trait Development SystemTM,” “NucelisTM,” “Trait MachineTM,” “PlantSpring,” and trademarks Cellectis® and TALEN®, along with any other trademarks, trade names, and service marks of Cellectis appearing in this report are the property of Cellectis.“BioFactory.” This report may also containscontain additional trade names, trademarks, and service marks belonging to other companies. The Company does not intend its 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 these other parties.
Explanatory Note
Completion of Merger Transactions
On May 31, 2023, the Company completed the business combination transactions contemplated by the Agreement and Plan of Merger, dated as of January 13, 2023, as amended by the First Amendment thereto dated as of April 14, 2023 (as amended, the Merger Agreement, and the transactions contemplated thereby, the Merger Transactions), by and among Legacy Calyxt; Calypso Merger Subsidiary, LLC, a Delaware limited liability company and wholly-owned subsidiary of Legacy Calyxt; Cibus Global; and certain blocker entities party thereto. Among other things, as part of the Merger Transactions, the Company’s amended and restated certificate of incorporation was further amended and restated (the Amended Certificate of Incorporation). The Company is organized in an “Up-C” structure, and the Company’s only material asset consists of membership units of Cibus Global.The Amended Certificate of Incorporation designated two classes of the Company’s common stock: (i) Class A Common Stock, par value $0.0001 per share (the Class A Common Stock), which shares have full voting and economic rights, and (ii) Class B Common Stock, par value $0.0001 per share (the Class B Common Stock), which shares have full voting, but no economic rights.
The financial information presented in this Quarterly Report on Form 10-Q for the nine months ended September 30, 2023, represents four months of Cibus, inclusive of Cibus Global, and five months of Legacy Calyxt results only, except where proforma figures are presented. All financial information prior to the completion of the Merger Transactions is that of Legacy Calyxt only.
Reverse Stock Splits
Prior to the Merger Transactions, Legacy Calyxt effected a one-for-ten reverse stock split (the First Reverse Stock Split) of the Legacy Common Stock, which became effective on April 24, 2023. The First Reverse Stock Split was reflected on the Nasdaq Capital Market beginning with the opening of trading on April 25, 2023.
Immediately prior to the Merger Transactions, the Company effected a one-for-five reverse stock split (the Second Reverse Stock Split and, together with the First Reverse Stock Split, the Reverse Stock Splits) of the Legacy Common Stock, which became effective on May 31, 2023. The Second Reverse Stock Split was reflected on the Nasdaq Capital Market beginning with the opening of trading of the Class A Common Stock on June 1, 2023.
No fractional shares were issued in connection with the Reverse Stock Splits and instead, fractional shares were rounded up to the nearest whole share number. The par value and authorized shares of Legacy Common Stock and preferred stock of the Company were not adjusted as a result of the Reverse Stock Splits.
Pursuant to the Amended Certificate of Incorporation, following the consummation of the Merger Transactions, the Company is authorized to issue 310,000,000 shares, consisting of (i) 300,000,000 shares of common stock, par value $0.0001 per share, divided into (A) 210,000,000 shares of Class A Common Stock and (B) 90,000,000 shares of Class B Common Stock and (ii) 10,000,000 shares of preferred stock, par value $0.0001 per share. Unless otherwise noted, all share and per share amounts in this Quarterly Report on Form 10-Q have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Splits.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended (the Securities Act)
The Company has made these forward-looking statements in reliance on the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Although the company believes the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, level of activity, performance or achievements. In some cases, you can identify these statements by forward-looking words such as “anticipates,” “believes,” “continue,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “predicts,” “projects,” “should,” “targets,” “will,” or the negative of these terms and other similar terminology. Forward-looking statements in this report include statements about the
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improper handling of its product candidates during development; failures by third-party contractors; inaccurate demand forecasting or milestone and royalty payment projections; the effectiveness of commercialization efforts by commercial partners or licensees; disruptions to supply chains, including raw material inputs for its BioFactory; the impact of changes or increases in oversight and regulation; disputes or challenges regarding intellectual property; proliferation and continuous evolution of new technologies; management changes;strategic challenges; changes in macroeconomic and market conditions, including inflation, supply chain constraints, and rising interest rates; dislocations in the capital markets and challenges in accessing liquidity and the impact of such liquidity challenges on the Company’s ability to execute on its business plan; and other important factors discussed in Part I, Item 1A, “Risk Factors”Factors of its AnnualCibus, Inc.” filed as Exhibit 99.3 with the Company’s Current Report on Form 10-K/A for the year ended December 31, 2022,8-K, which was filed with the SEC on March 3,June 1, 2023, (its Annual Report)under the heading "Item 8.01 - Other Events - Supplemental Risk Factors" in the Company's Current Report on Form 8-K filed on October 18, 2023, and itsany additional “Risk Factors” identified in the Company’s other subsequent reports on Forms 10-Q and 8-K filed with the SEC, which should be considered an integral part of Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Any forward-looking statements made by the Company in this Quarterly Report on Form 10-Q are based only on currently available information and speak only as of the date of this report. Except as otherwise required by securities and other applicable laws, the Company does not assume any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change.
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Market Data
Unless otherwise indicated, information contained in this Quarterly Report on Form 10-Q concerning the Company’s industry and the markets in which it operates is based on information from various sources, including independent industry publications. In presenting this information, the Company has also made assumptions based on such data and other similar sources, and on its knowledge of, and its experience to date in, the potential markets for its
Website Disclosure
The Company uses its website
Additionally, the Company provides notifications of announcements as part of its website. Investors and others can receive notifications of new press releases posted on the Company’s website by signing up for email alerts.
None of the information provided on the Company’s website, in its 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 on Form 10-Q or in any other report or document it files with the SEC, and any references to its website or its corporate Twitter and LinkedIn accounts are intended to be inactive textual references only.
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in Thousands, Except Par Value and Share Amounts)
| September 30, 2023 | December 31, 2022 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 31,883 | $ | 3,427 | |||||||
| Restricted cash | — | 99 | |||||||||
| Accounts receivable | 560 | — | |||||||||
| Prepaid expenses and other current assets | 2,029 | 606 | |||||||||
| Total current assets | 34,472 | 4,132 | |||||||||
| Property, plant, and equipment, net | 17,197 | 4,516 | |||||||||
| Operating lease right-of-use assets | 22,935 | 13,615 | |||||||||
| Intangible assets, net | 134,921 | 158 | |||||||||
| Goodwill | 585,266 | — | |||||||||
| Other non-current assets | 1,444 | — | |||||||||
| Total assets | $ | 796,235 | $ | 22,421 | |||||||
| Liabilities, redeemable noncontrolling interest, and stockholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 6,281 | $ | 340 | |||||||
| Accrued expenses | 5,092 | 173 | |||||||||
| Accrued compensation | 3,704 | 107 | |||||||||
| Due to related parties | — | 175 | |||||||||
| Deferred revenue | 1,637 | 107 | |||||||||
| Current portion of notes payable | 1,165 | — | |||||||||
| Current portion of financing lease obligations | 235 | 97 | |||||||||
| Current portion of operating lease obligations | 5,436 | 367 | |||||||||
| Class A common stock warrants | 1,512 | 291 | |||||||||
| Other current liabilities | 17 | 5 | |||||||||
| Total current liabilities | 25,079 | 1,662 | |||||||||
| Notes payable, net of current portion | 629 | — | |||||||||
| Financing lease obligations, net of current portion | 102 | — | |||||||||
| Operating lease obligations, net of current portion | 18,844 | 13,447 | |||||||||
| Royalty liability - related parties | 157,113 | — | |||||||||
| Other non-current liabilities | 1,974 | 79 | |||||||||
| Total liabilities | 203,741 | 15,188 | |||||||||
| Commitments and contingencies (See Note 10) | |||||||||||
| Redeemable noncontrolling interest | 129,104 | — | |||||||||
| Stockholders’ equity: | |||||||||||
| Class A common stock, $0.0001 par value; 210,000,000 shares authorized; 17,656,831 shares issued and 16,659,996 shares outstanding as of September 30, 2023, and 275,000,000 shares authorized; 978,915 shares issued and 976,908 shares outstanding as of December 31, 2022 | 8 | 5 | |||||||||
| Class B common stock, $0.0001 par value; 90,000,000 shares authorized; 4,642,636 shares issued and outstanding as of September 30, 2023, and no shares authorized; no shares issued and outstanding as of December 31, 2022 | — | — | |||||||||
| Additional paid-in capital | 727,821 | 220,422 | |||||||||
| Class A common stock in treasury, at cost; 32,660 shares as of September 30, 2023, and 2,007 shares as of December 31, 2022 | (1,785) | (1,043) | |||||||||
| Accumulated deficit | (262,664) | (212,151) | |||||||||
| Accumulated other comprehensive income | 10 | — | |||||||||
| Total stockholders’ equity | 463,390 | 7,233 | |||||||||
| Total liabilities, redeemable noncontrolling interest, and stockholders' equity | $ | 796,235 | $ | 22,421 | |||||||
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March 31, 2023 | December 31, 2022 | |||||||
Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 2,054 | $ | 3,427 | ||||
| Restricted cash | — | 99 | ||||||
| Prepaid expenses and other current assets | 529 | 606 | ||||||
| Total current assets | 2,583 | 4,132 | ||||||
| Land, buildings, and equipment | 4,104 | 4,516 | ||||||
Operating lease right-of-use | 13,493 | 13,615 | ||||||
Other non-current assets | 105 | 158 | ||||||
Total assets | $ | 20,285 | $ | 22,421 | ||||
Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 327 | $ | 340 | ||||
| Accrued expenses | 1,052 | 173 | ||||||
| Accrued compensation | 180 | 107 | ||||||
| Due to related parties | 63 | 175 | ||||||
| Current portion of financing lease obligations | — | 97 | ||||||
| Common stock warrants | 1,110 | 291 | ||||||
| Short-term debt | 1,000 | — | ||||||
| Other current liabilities | 483 | 479 | ||||||
| Total current liabilities | 4,215 | 1,662 | ||||||
| Operating lease obligations | 13,342 | 13,447 | ||||||
Other non-current liabilities | 61 | 79 | ||||||
Total liabilities | 17,618 | 15,188 | ||||||
Stockholders’ equity: | ||||||||
| Common stock, $0.0001 par value; 275,000,000 shares authorized; 4,983,104 shares issued and 4,973,088 shares outstanding as of March 31, 2023, and 4,894,497 shares issued and 4,884,481 shares outstanding as of December 31, 2022 | 5 | 5 | ||||||
Additional paid-in capital | 221,250 | 220,422 | ||||||
| Common stock in treasury, at cost; 10,016 shares as of March 31, 2023, and December 31, 2022 | (1,043 | ) | (1,043 | ) | ||||
| Accumulated deficit | (217,545 | ) | (212,151 | ) | ||||
Total stockholders’ equity | 2,667 | 7,233 | ||||||
Total liabilities and stockholders’ equity | $ | 20,285 | $ | 22,421 | ||||
CIBUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in Thousands, Except Share and Per Share Amounts)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Revenue | $ | 475 | $ | 42 | $ | 714 | $ | 115 | |||||||||||||||
| Total revenue | 475 | 42 | 714 | 115 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 17,521 | 3,016 | 28,159 | 9,207 | |||||||||||||||||||
| Selling, general, and administrative | 8,751 | 3,229 | 22,126 | 9,965 | |||||||||||||||||||
| Total operating expenses | 26,272 | 6,245 | 50,285 | 19,172 | |||||||||||||||||||
| Loss from operations | (25,797) | (6,203) | (49,571) | (19,057) | |||||||||||||||||||
| Royalty liability interest expense - related parties | (8,136) | — | (10,753) | — | |||||||||||||||||||
| Other interest income (expense), net | 281 | (47) | 359 | (80) | |||||||||||||||||||
| Non-operating income (expenses) | (876) | 300 | (466) | 5,083 | |||||||||||||||||||
| Loss before income taxes | (34,528) | (5,950) | (60,431) | (14,054) | |||||||||||||||||||
| Income taxes | — | — | — | — | |||||||||||||||||||
| Net loss | $ | (34,528) | $ | (5,950) | $ | (60,431) | $ | (14,054) | |||||||||||||||
| Net loss attributable to redeemable noncontrolling interest | (8,099) | — | (9,918) | — | |||||||||||||||||||
| Net loss attributable to Cibus, Inc. | $ | (26,429) | $ | (5,950) | $ | (50,513) | $ | (14,054) | |||||||||||||||
| Basic and diluted net loss per share of Class A common stock | $ | (1.59) | $ | (6.36) | $ | (6.33) | $ | (15.56) | |||||||||||||||
| Weighted average shares of Class A common stock outstanding – basic and diluted | 16,641,127 | 935,702 | 7,979,132 | 903,476 | |||||||||||||||||||
See accompanying notes to these condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSCOMPREHENSIVE LOSS
(Unaudited and in Thousands Except Shares and Per Share Amounts)
Thousands)| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net loss | $ | (34,528) | $ | (5,950) | $ | (60,431) | $ | (14,054) | |||||||||||||||
| Foreign currency translation adjustments | 15 | — | 13 | — | |||||||||||||||||||
| Comprehensive loss | (34,513) | (5,950) | (60,418) | (14,054) | |||||||||||||||||||
| Comprehensive loss attributable to redeemable noncontrolling interest | (8,096) | — | (9,915) | — | |||||||||||||||||||
| Comprehensive loss attributable to Cibus, Inc. | $ | (26,417) | $ | (5,950) | $ | (50,503) | $ | (14,054) | |||||||||||||||
Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
| Revenue | $ | 42 | $ | 32 | ||||
| Cost of goods sold | — | — | ||||||
| Gross profit | 42 | 32 | ||||||
| Operating expenses: | ||||||||
| Research and development | 2,209 | 2,941 | ||||||
| Selling, general, and administrative | 2,296 | 3,180 | ||||||
| Total operating expenses | 4,505 | 6,121 | ||||||
Loss from operations | (4,463 | ) | (6,089 | ) | ||||
| Interest, net | (21 | ) | (17 | ) | ||||
Non-operating income (expenses) | (910 | ) | 487 | |||||
| Loss before income taxes | (5,394 | ) | (5,619 | ) | ||||
| Income taxes | — | — | ||||||
Net loss | $ | (5,394 | ) | $ | (5,619 | ) | ||
Basic and diluted net loss per share | $ | (1.09 | ) | $ | (1.34 | ) | ||
Weighted average shares outstanding – basic and diluted | 4,940,693 | 4,202,011 | ||||||
Anti-dilutive stock options, restricted stock units, performance stock units, and common stock warrants | 1,826,029 | 1,627,637 | ||||||
See accompanying notes to these condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS' EQUITY
(Unaudited and in Thousands, Except Shares Outstanding)
| Class A Common Stock | Class B Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2023 | Redeemable Noncontrolling Interest | Shares | Amount | Shares | Amount | Additional Paid-In Capital | Shares in Treasury | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | 136,866 | 16,606,401 | $ | 8 | 4,642,636 | $ | — | $ | 722,327 | $ | (1,785) | $ | (236,235) | $ | (2) | $ | 484,313 | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | (8,099) | — | — | — | — | — | — | (26,429) | — | (26,429) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | 5,828 | — | — | — | 5,828 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock and payment of minimum employee taxes withheld upon net share settlement of restricted stock units | — | 53,608 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares withheld for net share settlement | — | (13) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in value of redeemable noncontrolling interest | 334 | (334) | (334) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | 3 | — | — | — | — | — | — | — | 12 | 12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | 129,104 | 16,659,996 | $ | 8 | 4,642,636 | $ | — | $ | 727,821 | $ | (1,785) | $ | (262,664) | $ | 10 | $ | 463,390 | ||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2022 | Class A Shares Outstanding | Class A Common Stock | Additional Paid-In Capital | Shares in Treasury | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | 934,327 | $ | 5 | $ | 218,161 | $ | (1,043) | $ | (203,364) | $ | 13,759 | |||||||||||||||||||||||||||
| Net loss | — | — | — | — | (5,950) | (5,950) | ||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 1,035 | — | — | 1,035 | ||||||||||||||||||||||||||||||||
| Issuance of Class A common stock and payment of minimum employee taxes withheld upon net share settlement of restricted stock units | 1,871 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | 936,198 | $ | 5 | $ | 219,196 | $ | (1,043) | $ | (209,314) | $ | 8,844 | |||||||||||||||||||||||||||
Three Months Ended March 31, 2023 | Shares Outstanding | Common Stock | Additional Paid-In Capital | Shares in Treasury | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||
| Balance at December 31, 2022 | 4,884,481 | $ | 5 | $ | 220,422 | $ | (1,043 | ) | $ | (212,151 | ) | $ | 7,233 | |||||||||||
| Net loss | — | — | — | — | (5,394 | ) | (5,394 | ) | ||||||||||||||||
| Stock-based compensation | — | — | 828 | — | — | 828 | ||||||||||||||||||
| Issuance of common stock from stock-based compensation awards | 88,607 | — | — | — | — | — | ||||||||||||||||||
Balance at March 31, 2023 | 4,973,088 | $ | 5 | $ | 221,250 | $ | (1,043 | ) | $ | (217,545 | ) | $ | 2,667 | |||||||||||
Three Months Ended March 31, 2022 | Shares Outstanding | Common Stock | Additional Paid-In Capital | Shares in Treasury | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||
| Balance at December 31, 2021 | 3,877,400 | $ | 4 | $ | 211,263 | $ | (1,043 | ) | $ | (196,092 | ) | $ | 14,132 | |||||||||||
| Net loss | — | — | — | — | (5,619 | ) | (5,619 | ) | ||||||||||||||||
| Stock-based compensation | — | — | 531 | — | — | 531 | ||||||||||||||||||
| Issuance of common stock from stock-based compensation awards | 8,779 | — | — | — | — | — | ||||||||||||||||||
| Issuance of common stock from ATM facility, net of offering expenses | — | — | (7 | ) | — | — | (7 | ) | ||||||||||||||||
Issuance of common stock and pre-funded warrants in registered offering, net of $0.5 million of offering costs | 388,000 | 1 | 5,051 | — | — | 5,052 | ||||||||||||||||||
| Cumulative effect of adoption of lease accounting standard | — | — | — | — | 832 | 832 | ||||||||||||||||||
Balance at March 31, 2022 | 4,274,179 | $ | 5 | $ | 216,838 | $ | (1,043 | ) | $ | (200,879 | ) | $ | 14,921 | |||||||||||
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CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS' EQUITY, CONT.
| Class A Common Stock | Class B Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2023 | Redeemable Noncontrolling Interest | Shares | Amount | Shares | Amount | Additional Paid-In Capital | Shares in Treasury | Accumulated Deficit | Accumulated Other Comprehensive Income | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | — | 976,908 | $ | 5 | — | $ | — | $ | 220,422 | $ | (1,043) | $ | (212,151) | $ | — | $ | 7,233 | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | (9,918) | — | — | — | — | — | — | (50,513) | — | (50,513) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | 11,670 | — | — | — | 11,670 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock resulting from merger with Cibus Global, LLC | — | 15,508,202 | 3 | 4,642,636 | — | 634,748 | — | — | — | 634,751 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock and payment of minimum employee taxes withheld upon net share settlement of restricted stock units | — | 207,546 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares withheld for net share settlement | — | (32,660) | — | — | — | — | (742) | — | — | (742) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable noncontrolling interest resulting from merger with Cibus Global, LLC | 138,685 | — | — | — | — | (138,685) | — | — | — | (138,685) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Change in value of redeemable noncontrolling interest | 334 | (334) | (334) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | 3 | — | — | — | — | — | — | — | 10 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | 129,104 | 16,659,996 | $ | 8 | 4,642,636 | $ | — | $ | 727,821 | $ | (1,785) | $ | (262,664) | $ | 10 | $ | 463,390 | ||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | Class A Shares Outstanding | Class A Common Stock | Additional Paid-In Capital | Shares in Treasury | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | 775,480 | $ | 4 | $ | 211,263 | $ | (1,043) | $ | (196,092) | $ | 14,132 | |||||||||||||||||||||||||||
| Net loss | — | — | — | — | (14,054) | (14,054) | ||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 2,890 | — | — | 2,890 | ||||||||||||||||||||||||||||||||
| Issuance of Class A common stock and payment of minimum employee taxes withheld upon net share settlement of restricted stock units | 5,518 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Issuance of Class A common stock from ATM facility, net of offering expenses | — | — | (7) | — | — | (7) | ||||||||||||||||||||||||||||||||
| Issuance of Class A common stock and pre-funded warrants in registered offering, net of $0.5 million of offering costs | 77,600 | 1 | 5,050 | — | — | 5,051 | ||||||||||||||||||||||||||||||||
| Issuance of Class A common stock upon exercise of pre-funded warrants | 77,600 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Cumulative effect of adoption of lease accounting standard | — | — | — | — | 832 | 832 | ||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | 936,198 | $ | 5 | $ | 219,196 | $ | (1,043) | $ | (209,314) | $ | 8,844 | |||||||||||||||||||||||||||
See accompanying notes to these condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in Thousands)
| Nine Months Ended September 30, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Operating activities | ||||||||||||||
| Net loss | $ | (60,431) | $ | (14,054) | ||||||||||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||||||||
| Royalty liability interest expense - related parties | 10,753 | — | ||||||||||||
| Depreciation and amortization | 2,875 | 1,158 | ||||||||||||
| Stock-based compensation | 11,670 | 2,890 | ||||||||||||
| Change in fair value of liability classified Class A common stock warrants | 1,221 | (5,009) | ||||||||||||
| Other | 17 | — | ||||||||||||
| Changes in operating assets and liabilities, net of acquisitions: | ||||||||||||||
| Accounts receivable | 1,674 | — | ||||||||||||
| Due to/from related parties | (95) | (34) | ||||||||||||
| Prepaid expenses and other current assets | 1,111 | 297 | ||||||||||||
| Accounts payable | (61) | (188) | ||||||||||||
| Accrued expenses | 1,357 | 41 | ||||||||||||
| Accrued compensation | 738 | (166) | ||||||||||||
| Deferred revenues | 340 | (115) | ||||||||||||
| Right-of-use assets and lease liabilities, net | (28) | 154 | ||||||||||||
| Other assets and liabilities, net | (334) | (575) | ||||||||||||
| Net cash used by operating activities | (29,193) | (15,601) | ||||||||||||
| Investing activities | ||||||||||||||
| Cash acquired from merger with Cibus Global, LLC | 59,381 | — | ||||||||||||
| Purchases of property, plant, and equipment | (3,872) | (1,509) | ||||||||||||
| Net cash provided by (used) by investing activities | 55,509 | (1,509) | ||||||||||||
| Financing activities | ||||||||||||||
| Proceeds from Class A common stock issuance | — | 11,209 | ||||||||||||
| Costs incurred related to the issuance of Class A common stock | — | (962) | ||||||||||||
| Proceeds from draws on revolving line of credit from Cibus Global, LLC | 2,500 | — | ||||||||||||
| Payment of taxes related to vested restricted stock units | (742) | — | ||||||||||||
| Proceeds from issuance of notes payable | 1,287 | — | ||||||||||||
| Repayments of financing lease obligations | (242) | (353) | ||||||||||||
| Repayments of notes payable | (760) | — | ||||||||||||
| Net cash provided by financing activities | 2,043 | 9,894 | ||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (2) | — | ||||||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | 28,357 | (7,216) | ||||||||||||
| Cash, cash equivalents, and restricted cash – beginning of period | 3,526 | 14,421 | ||||||||||||
| Cash, cash equivalents, and restricted cash – end of period | $ | 31,883 | $ | 7,205 | ||||||||||
Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
Operating activities | ||||||||
| Net loss | $ | (5,394 | ) | $ | (5,619 | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
| Depreciation and amortization | 486 | 370 | ||||||
| Stock-based compensation | 828 | 531 | ||||||
Unrealized (gain) loss on mark-to-market | 819 | (435 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Due to/from related parties | (112 | ) | (108 | ) | ||||
| Prepaid expenses and other current assets | 56 | (110 | ) | |||||
| Accounts payable | (13 | ) | (145 | ) | ||||
| Accrued expenses | 879 | 37 | ||||||
| Accrued compensation | 73 | (313 | ) | |||||
| Other | 3 | (612 | ) | |||||
Net cash used by operating activities | (2,375 | ) | (6,404 | ) | ||||
Investing activities | ||||||||
| Purchases of land, buildings, and equipment | — | (545 | ) | |||||
Net cash used by investing activities | — | (545 | ) | |||||
Financing activities | ||||||||
Proceeds from the issuance of common stock and pre-funded warrants | — | 11,209 | ||||||
Costs incurred related to the issuance of common stock and pre-funded warrants | — | (704 | ) | |||||
| Proceeds from interim funding provided by Cibus Global, LLC | 1,000 | — | ||||||
| Repayments of financing lease obligations | (97 | ) | (94 | ) | ||||
Net cash provided by financing activities | 903 | 10,411 | ||||||
| Net (decrease) increase in cash, cash equivalents, and restricted cash | (1,472 | ) | 3,462 | |||||
| Cash, cash equivalents, and restricted cash – beginning of period | 3,526 | 14,421 | ||||||
Cash, cash equivalents, and restricted cash – end of period | $ | 2,054 | $ | 17,883 | ||||
See accompanying notes to these condensed consolidated financial statements.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION & SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited condensed consolidated financial statements of
For further information, refer to the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form
10-K, as amended by the Company’s Form 10-K/A
for the year ended December 31, 2022, filed with the SEC on March 2, 2023, and March3, 10-Q
should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Annual Report.Description of Business
Cibus, Inc. (formerly Calyxt, Inc.) completed the Merger Transactions (as defined below under “—Merger Transactions”) on May 31, 2023, with Cibus Global, LLC (Cibus Global), and the Company carries on its business through Cibus Global and its subsidiaries. Cibus is the sole managing member of Cibus Global and, as sole managing member, the Company operates and controls all of the business and affairs of Cibus Global. As a result, the Company consolidates the financial results of Cibus Global and its subsidiaries and reports redeemable noncontrolling interest representing the economic interest in Cibus Global held by the other members of Cibus Global.
Cibus Global, a Delaware limited liability company, was formed on May 10, 2019. Immediately prior to the effective date of this formation, Cibus Global was organized as a British Virgin Islands company (Cibus Global, Ltd.), which was formed on November 5, 2001. On May 10, 2019, Cibus Global was converted to be a Delaware limited liability company.
Cibus Global is a plant trait company using gene editing technologies to develop and license gene edited plant traits that improve farming productivity or produce renewable low carbon plant products.
Completion of Merger Transactions
On May 31, 2023, the Company completed the business combination transactions contemplated by the Agreement and Plan of Merger, dated as of January 13, 2023, as amended by the First Amendment thereto dated as of April 14, 2023 (as amended, the Merger Agreement, and the transactions contemplated thereby, the Merger Transactions), by and among Legacy Calyxt; Calypso Merger Subsidiary, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company; Cibus Global, LLC (Cibus Global); and certain blocker entities party thereto. Among other things, as part of the Merger Transactions, the Company’s amended and restated certificate of incorporation was further amended and restated (the Amended Certificate of Incorporation). The Company is organized in an “Up-C” structure, and the Company’s only material asset consists of membership units of Cibus Global.The Amended Certificate of Incorporation designated two classes of the Company’s common stock: (i) Class A Common Stock, par value $0.0001 per share (the Class A Common Stock), which shares have full voting and economic rights, and (ii) Class B Common Stock, par value $0.0001 per share (the Class B Common Stock), which shares have full voting, but no economic rights. Each share of Legacy Calyxt’s common stock, par value $0.0001 per share (Legacy Common Stock) existing and outstanding immediately prior to the Merger Transactions remained outstanding as a share of Class A Common Stock without any conversion or exchange thereof.
At the closing of the Merger Transactions, the Company contributed all of its assets and liabilities to Cibus Global, in exchange for Common Units. The Company issued an aggregate of 16,527,484 shares of Class A Common Stock (including 1,019,282 shares of restricted Class A Common Stock) and 4,642,636 shares of Class B Common Stock to Cibus Global equityholders, as consideration in the Merger Transactions, pursuant to the terms of the Merger Agreement. Upon closing, Legacy Calyxt stockholders held approximately 4.8 percent of the issued and outstanding common stock of the Company and legacy holders of membership units of Cibus Global (including profits interest units and warrants) held approximately 95.2 percent of the issued and outstanding common stock of the Company.
The primary purpose of the merger was to bring together the technology platforms and facilities of two pioneering companies to create a leading agricultural technology company for the development of productivity traits and to consolidated significant patented agricultural gene editing technology.
Reverse Stock Splits
Prior to the Merger Transactions, Legacy Calyxt effected a one-for-ten reverse stock split (the First Reverse Stock Split) of the Legacy Common Stock, which became effective on April 24, 2023. The First Reverse Stock Split was reflected on the Nasdaq Capital Market
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beginning with the opening of trading on April 25, 2023.
Immediately prior to the Merger Transactions, the Company effected a one-for-five reverse stock split (the Second Reverse Stock Split and, together with the First Reverse Stock Split, the Reverse Stock Splits) of the Legacy Common Stock, which became effective on May 31, 2023. The Second Reverse Stock Split was reflected on the Nasdaq Capital Market beginning with the opening of trading of the Class A Common Stock on June 1, 2023.
No fractional shares were issued in connection with the Reverse Stock Splits and instead, fractional shares were rounded up to the nearest whole share number. The par value and authorized shares of Legacy Common Stock and preferred stock of the Company were not adjusted as a result of the Reverse Stock Splits.
Pursuant to the Amended Certificate of Incorporation, following the consummation of the Merger Transactions, the Company is authorized to issue 310,000,000 shares, consisting of (i) 300,000,000 shares of common stock, par value $0.0001 per share, divided into (A) 210,000,000 shares of Class A Common Stock and (B) 90,000,000 shares of Class B Common Stock and (ii) 10,000,000 shares of preferred stock, par value $0.0001 per share. Unless otherwise noted, all share and per share amounts in this Quarterly Report on Form10-K/ 10-Q have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Splits.
Share information related to the Company's common stock as of September 30, 2023, is as follows:
Class A Restricted Stock
In connection with the Merger Transactions, the Company issued restricted shares of Class A Common Stock (Class A Restricted Stock), which remain subject to vesting conditions, to Cibus Global Members that held unvested profits interest units at the time of the consummation of the Merger Transactions. Shares of Class A Restricted Stock are considered to be legally issued and outstanding as of the date of grant, notwithstanding that the shares remain subject to risk of forfeiture if the vesting conditions for such shares are not met. For financial statement presentation purposes, Class A Restricted Stock is treated as issued, but will only be treated as outstanding after such awards have vested and, therefore, have ceased to be subject to a risk of forfeiture. Accordingly, unvested shares of Class A Restricted Stock are excluded from items presenting Class A Common Stock, including the calculation of net loss per share of Class A Common Stock.
Going Concern
The Company has incurred losses since its inception. The Company’s net loss was $60.4 million and cash used for operating activities was $29.2 million for the nine months ended September 30, 2023. The Company’s primary source of liquidity is its cash and cash equivalents, with additional capital resources accessible, subject to market conditions and other factors, from the capital markets, including through offerings of common stock or other securities.
As of September 30, 2023, the Company had $31.9 million of cash and cash equivalents and $25.1 million of current liabilities.
Immediately prior to the Merger Transactions, the Company effected a one-for-five reverse stock split (the Second Reverse Stock Split and, together with the First Reverse Stock Split, the Reverse Stock Splits) of the Legacy Common Stock, which became effective on May 31, 2023. The Second Reverse Stock Split was reflected on the Nasdaq Capital Market beginning with the opening of trading of the Class A Common Stock on June 1, 2023.
No fractional shares were issued in connection with the Reverse Stock Splits and instead, fractional shares were rounded up to the nearest whole share number. The par value and authorized shares of Legacy Common Stock and preferred stock of the Company were not adjusted as a result of the Reverse Stock Splits.
Pursuant to the Amended Certificate of Incorporation, following the consummation of the Merger Transactions, the Company is authorized to issue 310,000,000 shares, consisting of (i) 300,000,000 shares of common stock, par value $0.0001 per share, divided into (A) 210,000,000 shares of Class A Common Stock and (B) 90,000,000 shares of Class B Common Stock and (ii) 10,000,000 shares of preferred stock, par value $0.0001 per share. Unless otherwise noted, all share and per share amounts in this Quarterly Report on Form
Share information related to the Company's common stock as of September 30, 2023, is as follows:
| Class A Common Stock | Class B Common Stock | Total Common Stock | ||||||||||||||||||
| Authorized | 210,000,000 | 90,000,000 | 300,000,000 | |||||||||||||||||
| Issued | 17,656,831 | 4,642,636 | 22,299,467 | |||||||||||||||||
| Outstanding | 16,659,996 | 4,642,636 | 21,302,632 | |||||||||||||||||
Class A
In connection with the Merger Transactions, the Company issued restricted shares of Class A Common Stock (Class A Restricted Stock), which remain subject to vesting conditions, to Cibus Global Members that held unvested profits interest units at the time of the consummation of the Merger Transactions. Shares of Class A Restricted Stock are considered to be legally issued and outstanding as of the date of grant, notwithstanding that the shares remain subject to risk of forfeiture if the vesting conditions for such shares are not met. For financial statement presentation purposes, Class A Restricted Stock is treated as issued, but will only be treated as outstanding after such awards have vested and, therefore, have ceased to be subject to a risk of forfeiture. Accordingly, unvested shares of Class A Restricted Stock are excluded from items presenting Class A Common Stock, including the calculation of net loss per share of Class A Common Stock.
Going Concern
The Company has incurred losses since its inception. The Company’s net loss was $60.4 million and cash used for operating activities was $29.2 million for the nine months ended September 30, 2023. The Company’s primary source of liquidity is its cash and cash equivalents, with additional capital resources accessible, subject to market conditions and other factors, from the capital markets, including through offerings of common stock or other securities.
As of September 30, 2023, the Company had $31.9 million of cash and cash equivalents and $25.1 million of current liabilities.
The Company anticipates that it will continue to generate losses for the next several years. Over the longer term and until the Company can generate cash flows sufficient to support its operating capital requirements, it expects to finance a portion of future cash needs through (i) cash on hand, (ii) commercialization activities, which may result in various types of revenue streams from future product development agreements and technology licenses, including upfront and milestone payments, annual license fees, and royalties, (iii) government or other third-party funding, (iv) public or private equity or debt financings, or (v) a combination of the foregoing.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.
Management will need to raise additional capital to support its business plans to continue as a going concern within one year endedafter the date that these financial statements are issued. Although the Company has implemented a strategic realignment, which has included headcount reductions, and has initiated cost reduction initiatives designed to preserve capital resources, if the Company is unable to raise additional capital in a sufficient amount or on acceptable terms, the Company may have to implement additional, more stringent cost reduction measures to manage liquidity, and the Company may have to significantly delay, scale back, or cease operations, in part or in full. If the Company raises additional funds through the issuance of additional debt or equity securities, including as part of a strategic alternative, it could result in substantial dilution to its existing stockholders and increased fixed payment obligations, and these securities may have rights senior to those of the Company’s shares of common stock. These factors raise substantial doubt about the Company's ability to continue as a going concern for at least one year from the date of issuance of these financial statements. Any of these events could significantly impact the Company’s business, financial condition, and prospects.
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Use of Estimates
The preparation of the Company’s condensed consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management evaluates its estimates on an ongoing basis. Although estimates are based on the Company’s historical experience, knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions. Key estimates made by the Company include revenue recognition, useful lives and impairment of long-lived assets, valuation of equity-based awards and related equity-based compensation expense, valuation of intangible assets, valuation allowances on deferred tax assets, and the valuation of the Royalty Liability (defined below under "Royalty liability - Related Parties").
The preparation of the Company’s condensed consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management evaluates its estimates on an ongoing basis. Although estimates are based on the Company’s historical experience, knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions. Key estimates made by the Company include revenue recognition, useful lives and impairment of long-lived assets, valuation of equity-based awards and related equity-based compensation expense, valuation of intangible assets, valuation allowances on deferred tax assets, and the valuation of the Royalty Liability (defined below under "Royalty liability - Related Parties").
Fair Value Measurements of Financial Instruments
The Company follows Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures, for financial assets and liabilities that are recognized or disclosed at fair value in these condensed consolidated financial statements on a recurring basis. Under ASC 820, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts its business. ASC 820 clarifies fair value should be based on assumptions market participants would use when pricing the asset or liability and establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to observable unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
The carrying amounts reflected in the accompanying condensed consolidated balance sheets for cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their fair value due to their short-term nature. Based on the borrowing rates currently available to the Company for notes payable with similar terms and consideration of default and credit risk, the carrying value of the notes payable approximates fair value, which is considered a Level 2 fair value measurement.
Cash and Cash Equivalents
The Company considers all liquid investments purchased with original maturities of three months or less to be cash equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses with these financial institutions. As of September 30, 2023, the Company had cash balances deposited at major financial institutions.
Restricted Cash
The Company’s restricted cash balances are cash and cash equivalents deposited in an amount equal to the future rent payments as required under the Company’s equipment lease facility. The Company may request the return of excess restricted cash collateral annually in December. The amount of the restricted cash balance as of December 31, 2022, was returned in March of 2023.
Accounts Receivable
Accounts receivable are recorded at the amounts billed relating to contracted research and development (R&D) services provided. The Company makes judgments as to its ability to collect outstanding receivables and provides an allowance for receivables when collection is doubtful. Accounts receivable are written off when management believes that all efforts to collect the amounts outstanding have been exhausted. The allowance for credit losses is estimated by management based on evaluations of its historical bad debt, current collection experience, and estimate of remaining collectability. Bad debt expense is recorded as necessary to maintain an appropriate level of allowance for credit losses in selling, general, and administrative (SG&A) expense in the accompanying condensed consolidated statements of operations. Accounts receivable is presented net of allowance for credit losses which was $0 as of September 30, 2023, and December 31, 2022.
Property, Plant, and Equipment, net
Property, plant, and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation of buildings, lab equipment, furniture, and computer equipment and software is recorded using the straight-line method over the estimated useful lives of the respective assets, ranging from three to twenty years. Amortization of leasehold improvements are recorded using a straight-line method over the lesser of the estimated useful lives of the improvements or the remaining life of the lease. Expenditures which substantially increase the useful life of an asset, are capitalized. Expenditures for repairs and maintenance are expensed as incurred. Assets in progress include the construction of lab equipment and software to be used in the Company’s facility. The assets will be placed in service when the construction is completed and will be amortized over the useful life of the asset.
Goodwill and Acquired Intangible Assets
Goodwill is calculated as the excess of the purchase consideration paid in a business combination over the fair value of the assets acquired less liabilities assumed. Goodwill is not amortized and is tested for impairment at least annually or when events and circumstances indicate that fair value of a reporting unit may be below its carrying value. The Company has one reporting unit. The
Company first assesses qualitative factors to evaluate whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount or elects to bypass such assessment. If it is determined that it is more likely than not that the fair value of the reporting unit is less than its carrying value, or the Company elects to bypass the qualitative assessment, it performs a quantitative test by determining the fair value of the reporting unit. If the carrying value of the reporting unit exceeds the fair value, then an impairment loss is recognized for the difference.
Leases
The Company determines if an arrangement is or contains a lease at inception. For leases with a term greater than one year, lease right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company excludes short-term leases, if any, having initial terms of 12 months or less at lease commencement as an accounting policy election. In determining the net present value of lease payments, the Company uses its incremental borrowing rate, which represents an estimated rate of interest that the Company would have to pay to borrow equivalent funds on a collateralized basis, at the lease commencement date. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the condensed consolidated statements of operations. Variable lease payments primarily include common area maintenance, utilities, real estate taxes, insurance, and other operating costs that are passed on from the lessor in proportion to the space leased by the Company. The Company has elected the practical expedient to not separate between lease and non-lease components.
Asset Retirement Obligation
The Company records an asset retirement obligation (ARO) for the estimated cost of removing constructed leasehold improvement assets and restoring the leased premises back to their original condition, at the time when the contractual obligations are incurred. The ARO represents the present value of the expected cost for the related restoration activities. The ARO assets and liabilities are recorded in property, plant, and equipment, net and other non-current liabilities, respectively, in the Company’s condensed consolidated balance sheets. The Company records accretion expense, which represents the increase in the ARO, over the remaining or operational life of the associated leasehold improvements. Accretion expense is recorded as R&D expense in the condensed consolidated statements of operations using an accretion rate based on the credit adjusted risk-free interest rate. Changes resulting from revisions to the timing or amount of the original estimate of cash flows are recognized as an increase or a decrease in the asset retirement cost, or income when the asset retirement cost is depleted.
Revenue Recognition
The Company’s revenues represent amounts earned from collaboration agreements related to contract research. The Company recognizes revenues under Topic 606 Revenue from Contracts with Customers (Topic 606) when control of services is transferred to the Company’s
Collaboration Agreements Related to Contract Research
Performance obligations under collaboration arrangements include providing intellectual property licenses, performing R&D consulting services, and providing other materials. To date, the Company has concluded that the licenses of intellectual property in its collaboration arrangements have not been distinct, as intellectual property has not been licensed without related R&D support services. Under Topic 606, milestone fees are variable consideration that is initially constrained and included in the arrangement consideration only when it is probable that the milestones will be achieved. Arrangement consideration, including upfront fees, milestone fees, and fees for research services, is recognized over the period as services are provided using an input method to determine the amount to recognize each reporting period. The Company reviews the inputs each period, such as the Company’s level of effort expended, including the time the Company estimates it will take to complete the activities, or costs incurred relative to the total expected inputs to satisfy the performance obligation. Generally, input measures are labor hours expended or a time-based measure of progress towards the satisfaction of the performance obligation.
Contract Liabilities
The Company records contract liabilities when cash payments are received or due in advance of performance, primarily related to advances of upfront and milestone payments from contract research and collaboration agreements. Contract liabilities consist of deferred revenue on the accompanying condensed consolidated balance sheets. The Company expects to recognize the amounts included in deferred revenues within one year.
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The following table represents the deferred revenue activity:
| In Thousands | Deferred Revenue | |||||||
| Balance as of December 31, 2022 | $ | 107 | ||||||
| Acquired from merger with Cibus Global, LLC | 1,186 | |||||||
| Consideration earned | (714) | |||||||
| Consideration received | 1,058 | |||||||
| Balance as of September 30, 2023 | $ | 1,637 | ||||||
For the three months ended March 31,September 30, 2023, and March$0.5 million of deferred revenue was recognized as revenue in the accompanying condensed consolidated statements of operations. For the nine months ended September 30, 2023, $0.1 million of the deferred revenue balance as of December 31, 2022, allhad been recognized as revenue in the accompanying condensed consolidated statements of operations.
Selling, General, and Administrative Expenses
Selling, General, and Administrative Expenses
SG&A expense consists primarily of employee-related expenses, such as salaries for its
Beginning in the second quarter of 2023, SG&A expense includes costs related to its intellectual property portfolio and costs to write and support the research for filing patents. Historically, the Company expensed patent application costs and related legal costs for maintenance of such patents as incurred and such costs were included in R&D expense in the accompanying condensed consolidated statements of operations.
In the nine months ended September 30, 2023, the Company recognized, during the second quarter of 2023, $0.4 million of deferred financing costs related to the liability classified common warrants (Common Warrants) in SG&A expense in the accompanying condensed consolidated statements of operations.
Research and Development Expenses
R&D costs are expensed as incurred in performing R&D activities and include salaries, lab supplies, consultant fees, and allocated facility costs including rent, utilities, maintenance expenses, and depreciation and amortization.
Historically, the Company recognized its intellectual property portfolio and costs to write and support the research for filing patents as R&D expense. Beginning in the second quarter of 2023, these expenses are included in SG&A expense in the accompanying condensed consolidated statements of operations. The amounts in the prior reporting periods are not material and as such no historical amounts have been reclassified.
Royalty Liability – Related Parties
In 2014, Cibus Global entered into the warrant exchange agreement (Warrant Exchange Agreement),
Non-Operating Income (Expenses)
Non-operating income (expenses) are income or expenses that are not directly related to ongoing operations and are primarily comprised of gains and losses from the mark-to-market of Common Warrants to purchase
Net Loss Per Share of Class A Common Stock
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Weighted average shares of Class A Common Stock outstanding excludes unvested Class A Common Stock, which will be treated as issued and outstanding for financial statement presentation purposes only after such awards have vested and, therefore, have ceased to be subject to a risk of forfeiture. Accordingly, unvested shares of Class A Restricted Stock are
For all periods presented, there is no difference in
The Company’s potential dilutive securities, which include Common Warrants, unvested performance stock units, unvested restricted stock units, unvested restricted stock awards, and options to purchase Class A Common Stock, have been excluded from the computation of diluted net loss per share of Class A Common Stock as the effect would be antidilutive. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share of Class A Common Stock is the same. The following potential dilutive securities, presented on an as converted basis, were excluded from the calculation of net loss per share of Class A Common Stock due to their anti-dilutive
| As of September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Stock options outstanding | 109,551 | 116,936 | |||||||||
| Unvested restricted stock units | 198,199 | 25,210 | |||||||||
| Unvested performance stock units | — | 22,600 | |||||||||
| Unvested restricted stock awards | 945,780 | — | |||||||||
| Common Warrants | 158,483 | 158,483 | |||||||||
| Total | 1,412,013 | 323,229 | |||||||||
Warrants
The Company issued
pre-funded
warrants (Pre-Funded Warrants) to purchase follow-on
offering on February 23, 2022 (theFollow-On
Offering). ThePre-Funded
Warrants, which were each exercisable for one share of the Company’s Pre-Funded
Warrants were considered equity instruments and reported in stockholders’ equity in the Company’s condensed consolidated balance Pre-Funded
Warrants were included in the determination of the Company’s net loss per The Company also issued Common Warrants in thecommon stockClass A Common Stock for $14.10$69.04 per share as adjusted to give, after giving effect to the Reverse Stock Split.Splits. The Common Warrants have been classified as a liability because they include a put option election available to their holder that is contingently exercisable if the Company enters into a fundamental transaction (Fundamental Transaction). Pursuant to the terms of the Common Warrants, a Fundamental Transaction occurs if (i) the Company, directly or indirectly, effects any merger or consolidation of the Company with or into another person in which the Company is not the surviving entity, (ii) the Company (and all of its subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer is completed pursuant to which holders of the Company’s Class A Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50%50 percent or more of the outstanding Class A Common Stock of the Company, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization, or recapitalization of the Class A Common Stock or any compulsory share exchange pursuant to which the Class A Common Stock is effectively converted into or exchanged for other securities, cash, or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination with another person or group of persons whereby such other person or group acquires more than 50%50 percent of the voting power of the outstanding shares of Class A Common Stock (not including any shares of Class A Common Stock held by the other person or other persons making or party to, or associated or affiliated with the other persons making or party to, such stock or share purchase agreement or other business combination) (the Fundamental Change Put). If the Fundamental Change Put is exercised by the holder of a Common Warrant, holder may elect to receive either the consideration of the Fundamental Transaction or put the Common WarrantWarrants back to the Company in exchange for cash, based on terms and timing specified in the Common Warrant agreement. If the Fundamental Change Put option is exercised, the Company is required to pay cash to the holder in an amount as determined by the Black ScholesBlack-Scholes pricing model, with assumptions determined in accordance with the terms of the Common Warrants. The Company believes that the merger with Cibus, as contemplated by the Merger Agreement, doesTransactions did not qualify as a Fundamental Transaction.
Follow-On
Offering. The Common Warrants expire on August 23, 2027, and are each exercisable for one share of the Company’s The Common Warrants are reported at fair value with changes in fair value reported in earnings. The Company reports the changes in fair value of the Common Warrants in
non-operating
income (expenses) in its condensed consolidated statements of operations.Employee Retention Credit
Prior to the Merger Transactions, Cibus Global qualified for federal government assistance through the Employee Retention Credit
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(ERC) provisions of the CARES Act passed in 2020, for the second, third, and fourth fiscal quarters of 2020, as well as the first and second fiscal quarters of 2021. The purpose of the ERC was to encourage employers to keep employees on the payroll, even if they were not working during the covered period because of the coronavirus outbreak. The Company recognizes amounts to be refundable as tax credits if there is a reasonable assurance of compliance with the grant conditions and receipt of credits. As of September 30, 2023, the Company recognized $0.2 million related to the employee retention credit, and it does not expect to receive any further credits.
Foreign Currency
The accompanying condensed consolidated financial statements are presented in United States dollars (USD) as the reporting currency. For those foreign subsidiaries where the Company has determined that the functional currency is the entity’s local currency, the assets and liabilities of such subsidiaries are translated into USD using exchange rates in effect at the balance sheet date. The revenue and expenses of such subsidiaries are translated into USD using average exchange rates in effect during the reporting period. Any translation adjustments are presented as accumulated other comprehensive income (loss), within stockholders' equity in the accompanying condensed consolidated statements of redeemable noncontrolling interest and stockholders' equity. Foreign currency transaction gains and losses are included in non-operating income (expenses) within the accompanying condensed consolidated statements of operations and were immaterial for all periods presented.
Segment Reporting
Management has determined that the Company has one operating segment, R&D of plant gene editing, which is consistent with the Company's structure and how it manages the business. Furthermore, the Company's Chief Operating Decision Maker, which is the Company's Chief Executive Officer, monitors and reviews financial information at a consolidated level for assessing operating results and the allocation of resources.
Foreign Currency
The accompanying condensed consolidated financial statements are presented in United States dollars (USD) as the reporting currency. For those foreign subsidiaries where the Company has determined that the functional currency is the entity’s local currency, the assets and liabilities of such subsidiaries are translated into USD using exchange rates in effect at the balance sheet date. The revenue and expenses of such subsidiaries are translated into USD using average exchange rates in effect during the reporting period. Any translation adjustments are presented as accumulated other comprehensive income (loss), within stockholders' equity in the accompanying condensed consolidated statements of redeemable noncontrolling interest and stockholders' equity. Foreign currency transaction gains and losses are included in non-operating income (expenses) within the accompanying condensed consolidated statements of operations and were immaterial for all periods presented.
Segment Reporting
Management has determined that the Company has one operating segment, R&D of plant gene editing, which is consistent with the Company's structure and how it manages the business. Furthermore, the Company's Chief Operating Decision Maker, which is the Company's Chief Executive Officer, monitors and reviews financial information at a consolidated level for assessing operating results and the allocation of resources.
Recently Issued Accounting Pronouncements
From time-to-time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective are not expected to have a material impact on the Company’s financial position, results of operations, or cash flows upon adoption.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in ASU No. 2021-08 address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination. The amendments in ASU No. 2021-08 require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. Upon adoption, an acquirer should account for the related revenue contracts of the acquiree as if it has originated the contracts.
For public business entities, the Financial Accounting Standards Board (FASB)amendments in ASU No. 2021-08 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments in ASU No. 2021-08 should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company applied ASU No. 2021-08 to the Merger Transactions.
2. MERGER WITH CIBUS GLOBAL
As described in Note 1, on May 31, 2023, the Company completed the Merger Transactions.
As described in Note 1, on May 31, 2023, the Company completed the Merger Transactions.
Redeemable Noncontrolling Interest
All of the issued
Redeemable noncontrolling interest represents the portion of Cibus Global Common Units that are not owned directly by the Company. Redeemable noncontrolling interest is classified as temporary equity because the Common Units contained certain redemption features that were not solely within the control of the Company. As of both May 31, 2023, (the closing date of the Merger Transactions) and September 30, 2023, the Common Unit holders of the redeemable noncontrolling interest owned approximately 22 percent of Cibus Global.
Purchase Price
The purchase price for Cibus Global was determined as follows:
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- 16 -
| Number of shares of Common Stock received by Cibus Global, LLC equityholders as merger consideration (1) | 20,150,838 | |||||||
| Multiplied by the fair value per share of Cibus, Inc. Class A Common Stock (2) | $ | 31.50 | ||||||
| Purchase price | $ | 634,751,397 | ||||||
(1) This share number represents the aggregate number of shares of Common Stock issued to Cibus Global members in the Merger Transactions and comprises: 15,508,202 shares of Class A Common Stock and 4,642,636 shares of Class B Common Stock. This share number excludes 1,019,282 shares of Class A Restricted Stock, which will be treated as issued and outstanding for financial statement presentation purposes only after such awards have vested and, therefore, have ceased to be subject to a risk of forfeiture.
(2) Reflects the purchase price per share of the Company's Class A Common Stock, which was the closing price of the Class A Common Stock on May 31, 2023, the closing date of the Merger Transactions.
Purchase Price Allocation
The acquisition of Cibus Global was accounted for using the acquisition method, whereby all of the assets acquired and liabilities assumed were recognized at their fair value on the acquisition date, with any excess of the purchase price over the estimated fair value recorded as goodwill. The purchase price allocation is preliminary and subject to change, including completion of the Company's analysis on the deferred tax impact of the acquisition.
Identifiable assets acquired, liabilities assumed, and noncontrolling interest, if applicable, are recorded at their estimated fair values at the acquisition date. Significant judgment is required in determining the acquisition date fair value of the assets acquired and liabilities assumed, predominantly with respect to property, plant, and equipment and intangible assets. Evaluations included numerous inputs, including forecasted cash flows that incorporate the specific attributes of each asset. For property, plant, and equipment, the Company considered the remaining useful life of equipment, current replacement costs for similar assets, andliabilities on the balance sheet for all leases with terms longer than 12 months. The New Lease Standard establishes aright-of-use(ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as either finance or operating, with the classification affecting the pattern of expense recognition in the income statement.
Purchase Price Allocation
The acquisition of Cibus Global was accounted for using the acquisition method, whereby all of the assets acquired and liabilities assumed were recognized at their fair value on the acquisition date, with any excess of the purchase price over the estimated fair value recorded as goodwill. The purchase price allocation is preliminary and subject to change, including completion of the Company's analysis on the deferred tax impact of the acquisition.
Identifiable assets acquired, liabilities assumed, and noncontrolling interest, if applicable, are recorded at their estimated fair values at the acquisition date. Significant judgment is required in determining the acquisition date fair value of the assets acquired and liabilities assumed, predominantly with respect to property, plant, and equipment and intangible assets. Evaluations included numerous inputs, including forecasted cash flows that incorporate the specific attributes of each asset. For property, plant, and equipment, the Company considered the remaining useful life of equipment, current replacement costs for similar assets, and
comparable market transactions. The Company adoptedevaluated all available information, as well as all appropriate methodologies, when determining the New Lease Standard asfair value of January 1, 2022, using the transition method which does not require revisions to comparative periods. The Company elected to implement the transition package of practical expedients permitted within the New Lease Standard, which among other things, allows it to carry forward the historical lease classification.assets acquired, liabilities assumed, and noncontrolling interest. In addition, the Company electeddetermined the hindsight practical expedient to determineremaining useful life for property, plant, and equipment and the lease termamortization period and method of amortization for existing leaseseach finite-lived intangible asset.
- 17 -
The following table sets forth the preliminary allocation of the consideration:
Receivables have been recognized at their fair value, and the Company has not recognized, and italso made an accounting policy electiondoes not expect, any credit losses and therefore expects cash flows to not record leasesmatch the recognized receivables.
| In Thousands | May 31, 2023 | |||||||
| Cash and cash equivalents | $ | 59,381 | ||||||
| Accounts receivable | 2,216 | |||||||
| Due from related parties, net | 19 | |||||||
| Note receivable | 2,500 | |||||||
| Prepaid expenses and other current assets | 2,535 | |||||||
| Property, plant and equipment | 10,588 | |||||||
| Operating lease right-of-use-assets | 9,519 | |||||||
| Goodwill | 585,266 | |||||||
| Intangible assets | 135,429 | |||||||
| Other non-current assets | 457 | |||||||
| Accounts payable | (5,582) | |||||||
| Accrued expenses | (3,477) | |||||||
| Accrued compensation | (2,859) | |||||||
| Due to related parties | (8) | |||||||
| Deferred revenue | (1,186) | |||||||
| Current portion of notes payable | (517) | |||||||
| Current portion of operating lease obligations | (4,687) | |||||||
| Current portion of financing lease obligations | (165) | |||||||
| Other current liabilities | (17) | |||||||
| Notes payable, net of current portion | (749) | |||||||
| Operating lease obligations, net of current portion | (6,006) | |||||||
| Financing lease obligations, net of current portion | (10) | |||||||
| Royalty liability - related parties | (146,360) | |||||||
| Other non-current liabilities | (1,536) | |||||||
| Consideration transferred | $ | 634,751 | ||||||
Receivables have been recognized at their fair value, and the Company has not recognized, and it
- 18 -
Intangible Assets Acquired
Intangible assets acquired, and their related estimated average useful lives, are as follows:
The weighted average amortization period for the Company's definite lived intangible assets, including developed technology and trade names, was 20 years.
The Company incurred expenses of approximately $8.2 million in connection withan initial term of 12 months or less on its consolidated balance sheet.
Intangible assets acquired, and their related estimated average useful lives, are as follows:
| In Thousands, except useful life | May 31, 2023 | Estimated Average Useful Life (Years) | ||||||||||||
| In-process research and development | $ | 99,051 | Indefinite | |||||||||||
| Developed technology | 14,148 | 20 | ||||||||||||
| Trade name | 22,230 | 20 | ||||||||||||
| Total | $ | 135,429 | ||||||||||||
The weighted average amortization period for the Company's definite lived intangible assets, including developed technology and trade names, was 20 years.
The Company incurred expenses of approximately $8.2 million in connection with
The
These unaudited pro forma figures have been prepared as though the business combination had occurred on January 1, 2022. Pro forma adjustments have been made to reflect non-recurring stock compensation expense, legal and professional fees, severance costs, and amortization of acquired intangible assets, directly attributable to the business combination. The
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| Unaudited and in Thousands | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Pro forma revenues | $ | 475 | $ | 307 | $ | 1,154 | $ | 992 | ||||||||||||||||||
| Pro forma net loss | (34,528) | (20,365) | (88,474) | (61,603) | ||||||||||||||||||||||
| Pro forma net loss attributable to controlling interest | (24,575) | (17,301) | (70,855) | (53,178) | ||||||||||||||||||||||
| Pro forma net loss attributable to redeemable noncontrolling interest | $ | (9,953) | $ | (3,064) | $ | (17,619) | $ | (8,425) | ||||||||||||||||||
Tax Receivable Agreement
In conjunction with the Merger Transactions, the Company entered into a Tax Receivable Agreement (TRA) with the Electing Members. Pursuant to the TRA, the Company generally will be required to pay to the Electing Members, in the aggregate, 85 percent of the
As of March 31,September 30, 2023, no Up-C Units have been exchanged by Electing Members for shares of Class A Common Stock. As of September 30, 2023, the Company had $2.1 millionhas recorded a full valuation allowance against its net deferred tax assets as the realizability of cash and cash equivalents. As of March 31, 2023, current liabilities were $4.2 million.
3. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE AND CONCENTRATIONS OF CREDIT RISK
Financial Instruments Measured at Fair Value and Financial Statement Presentation
Level 1: Fair values are based on unadjusted quoted prices in active trading markets for identical assets and liabilities.
Level 2: Fair values are based on observable quoted prices other than those in Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
Level 3: Fair values are based on at least one significant unobservable input for the asset or liability.
Fair Value Measurements and Financial Statement Presentation
The fair values of the Company’s financial instruments measured at fair value and their respective levels in the fair value hierarchy as of March 31,September 30, 2023, and December 31, 2022, were as follows:
March 31, 2023 | March 31, 2023 | |||||||||||||||||||||||||||||||
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: | ||||||||||||||||||||||||||||||||
| Common stock warrants | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,110 | $ | 1,110 | ||||||||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,110 | $ | 1,110 | ||||||||||||||||
December 31, 2022 | December 31, 2022 | September 30, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Values of Assets | Fair Values of Liabilities | Fair Value of Assets | Fair Value of Assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
In Thousands | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | In Thousands | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other items reported at fair value: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock warrants | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 291 | $ | 291 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Money market funds (1) | Money market funds (1) | $ | 7,389 | $ | — | $ | — | $ | 7,389 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 291 | $ | 291 | Total | $ | 7,389 | $ | — | $ | — | $ | 7,389 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||||
(1) Included in cash and cash equivalents on the accompanying condensed consolidated balance sheets
| September 30, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value of Liabilities | Fair Value of Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||
| In Thousands | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||||||
| Common Warrants | $ | — | $ | — | $ | 1,512 | $ | 1,512 | $ | — | $ | — | $ | 291 | $ | 291 | ||||||||||||||||||||||||||||||||||
| Total | $ | — | $ | — | $ | 1,512 | $ | 1,512 | $ | — | $ | — | $ | 291 | $ | 291 | ||||||||||||||||||||||||||||||||||
The following table summarizes the Common Warrants activity for the period ended September 30, 2023:
| Level 3 Fair Value of Liabilities | ||||||||
| Balance as of December 31, 2022 | 291 | |||||||
| Mark to market adjustment | 1,221 | |||||||
| Balance as of September 30, 2023 | 1,512 | |||||||
The Company estimates the fair value of the Common Warrants as of the date of issuance and at the end of every fiscal period using a Black-Scholes option pricing model, which requires it to make
zero-coupon
yield curve for the remaining life of the Common Warrants. The Company estimates its future stock price volatility using The estimated fair values of the Common Warrants, and the assumptions used for the Black-Scholes option pricing model were as follows:
| As of September 30, 2023 | As of December 31, 2022 | ||||||||||
| Estimated fair value of Common Warrants | $ | 9.54 | $ | 1.87 | |||||||
| Assumptions: | |||||||||||
| Risk-free interest rate | 4.7 | % | 4.0 | % | |||||||
| Expected volatility | 107.1 | % | 85.0 | % | |||||||
| Expected term to liquidation (in years) | 3.9 | 4.6 | |||||||||
As of March 31, | As of December 31, | |||||||
2023 | 2022 | |||||||
| Estimated fair value of Common Warrants | $ | 1.43 | $ | 0.37 | ||||
| Assumptions: | ||||||||
| Risk-free interest rate | 3.8 | % | 4.0 | % | ||||
| Expected volatility | 90.0 | % | 85.0 | % | ||||
| Expected term to liquidation (in years) | 4.4 | 4.6 | ||||||
- 20 -
As of March 31,September 30, 2023, the Company had no other financial instruments measured at fair value.
Concentrations of Credit Risk
The Company invests its cash and cash equivalents and restricted cash in highly liquid securities and investment funds.interest-bearing deposit accounts. The Company diversifies the risk associated with investing in securities by allocating its investments to a diverse portfolio of short-dated, high investment-grade securities, which it classifies as short-term investmentscash and cash equivalents that are recorded at fair value in its condensed consolidated financial statements. The Company maintains the credit risk in this portfolio in accordance with its internal policies and, if necessary, makes changes to investments to minimize credit risk. The Company has not experienced any counterparty credit losses. As of March 31,September 30, 2023, and December 31, 2022, the Company did not hold any short-term investments.
4. RELATED-PARTY TRANSACTIONS
PROPERTY, PLANT, AND EQUIPMENT, NETProperty, plant, and equipment, net consists of the following:
| In Thousands, except useful life | Useful Life (Years) | As of September 30, 2023 | As of December 31, 2022 | |||||||||||||||||
| Property, plant, and equipment, net: | ||||||||||||||||||||
| Buildings | 10 - 20 | $ | 900 | $ | 900 | |||||||||||||||
| Leasehold improvements | shorter of lease term or - 15 | 3,879 | 364 | |||||||||||||||||
| Office furniture and equipment | 5 - 10 | 13,570 | 7,803 | |||||||||||||||||
| Office furniture and equipment under financing leases | 4 - 20 | 373 | 414 | |||||||||||||||||
| Computer equipment and software | 3 - 5 | 3,264 | 912 | |||||||||||||||||
| Assets in progress | N/A | 3,272 | — | |||||||||||||||||
| Total property, plant, and equipment | 25,258 | 10,393 | ||||||||||||||||||
| Less accumulated depreciation and amortization | (8,061) | (5,877) | ||||||||||||||||||
| Total | $ | 17,197 | $ | 4,516 | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| In Thousands | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Depreciation and amortization expense | $ | 1,225 | $ | 369 | $ | 2,208 | $ | 1,091 | ||||||||||||||||||
Asset Retirement Obligation
Certain lease agreements
The following table presents the changes in the ARO during the nine months ended
| In Thousands | Asset Retirement Obligations | |||||||
| Balance as of December 31, 2022 | $ | — | ||||||
| Acquired from merger with Cibus Global, LLC | 264 | |||||||
| Obligations incurred | — | |||||||
| Accretion expense | 5 | |||||||
| Balance as of September 30, 2023 | $ | 269 | ||||||
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5. GOODWILL AND INTANGIBLE ASSETS
Goodwill
In connection with the Merger Transactions with Cibus Global, the Company recognized goodwill totaling $585.3 million. The company had no goodwill prior to the Merger Transactions. Goodwill represents future economic benefits arising from acquiring Cibus Global, primarily due to its strong market position and2022.
Goodwill
In connection with the Merger Transactions with Cibus Global, the Company recognized goodwill totaling $585.3 million. The company had no goodwill prior to the Merger Transactions. Goodwill represents future economic benefits arising from acquiring Cibus Global, primarily due to its strong market position and
Intangible Assets
Intangible assets as of September 30, 2023, were as follows:
| In Thousands | Gross Carrying Amount | Accumulated Amortization | Intangible Assets, Net | |||||||||||||||||
| In-process research and development | $ | 99,051 | $ | — | $ | 99,051 | ||||||||||||||
| Developed technology | 14,148 | 236 | 13,912 | |||||||||||||||||
| Trade name | 22,230 | 370 | 21,860 | |||||||||||||||||
| Other | 150 | 52 | 98 | |||||||||||||||||
| Total | $ | 135,579 | $ | 658 | $ | 134,921 | ||||||||||||||
Total amortization expense is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| In Thousands | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Amortization expense | $ | 459 | $ | 5 | 667 | 16 | ||||||||||||||||||||
Intangible assets as of December 31, 2022, were immaterial.
As of September 30, 2023, amortization expense for each of the second consecutive calendar year in which the Company’s tangible net worth exceeds $300 million. The Company agreed to indemnify Cellectis for any obligations incurred by Cellectis under its guaranty of the obligations under the lease, effective upon Cellectis’ ownership falling to 50 percent or less of the Company’s outstanding common stock. This indemnification obligation was triggered in October 2022.next five years is estimated as follows:
| In Thousands | Amortization Expense | |||||||
| Remainder of 2023 | $ | 458 | ||||||
| 2024 | 1,833 | |||||||
| 2025 | 1,833 | |||||||
| 2026 | 1,833 | |||||||
| 2027 | 1,833 | |||||||
| 2028 | 1,833 | |||||||
The Company has
Additionally, the Company has purchased various fixed assets using notes. The notes on financed equipment are subject to annual interest rates between 7.3 percent and 17.6 percent and have a weighted average remaining term of 2.8 years. Notes used to finance equipment mature between October 2023 and
The Company has also financed certain annual insurance premiums using a note. The insurance note is subject to an annual interest rate of 7.5 percent, has a weighted average remaining term of 0.4 years, and matures in February 2024.
- 22 -
As of September 30, 2023, future minimum payments under notes payable were as follows:
| In Thousands | Annual Licenses | Financed Equipment | Insurance | Total Notes Payable | ||||||||||||||||||||||
| Remainder of 2023 | $ | 93 | $ | 137 | $ | 290 | $ | 520 | ||||||||||||||||||
| 2024 | 216 | 450 | 194 | 860 | ||||||||||||||||||||||
| 2025 | — | 351 | — | 351 | ||||||||||||||||||||||
| 2026 | — | 151 | — | 151 | ||||||||||||||||||||||
| 2027 | — | 89 | — | 89 | ||||||||||||||||||||||
| 2028 | — | 15 | — | 15 | ||||||||||||||||||||||
| 309 | 1,193 | 484 | 1,986 | |||||||||||||||||||||||
| Less: interest | (15) | (168) | (9) | (192) | ||||||||||||||||||||||
| Total | $ | 294 | $ | 1,025 | $ | 475 | $ | 1,794 | ||||||||||||||||||
| Current portion | 294 | 396 | 475 | 1,165 | ||||||||||||||||||||||
| Noncurrent portion | $ | — | $ | 629 | $ | — | $ | 629 | ||||||||||||||||||
7. STOCKHOLDERS’ EQUITY
Follow-On
Public OfferingOn February 23, 2022, the Company completed the388,00077,600 shares of its common stock,388,00077,600 shares of its common stock,Class A Common Stock, and Common Warrants to purchase up to 776,000158,483 shares of its common stock.Class A Common Stock, in each case giving effect to the Reverse Stock Splits. The aggregate offering price for each share of common stockClass A Common Stock and accompanying Common Warrant was $14.10.$70.50, as adjusted for the Reverse Stock Splits. The aggregate offering price for each$14.099.$70.4999, adjusted for the Reverse Stock Splits. In the aggregate, the Company received net proceeds of $10.0 million, after deducting approximately $0.9 million of underwriting discounts and estimated other offering expenses.
Follow-On
Offering, in which it issued Class A Common Stock, Pre-Funded
Warrants to purchase up to Pre-Funded
Warrant and accompanying Common Warrant was Pre-Funded
Eachcommon stockClass A Common Stock at an exercise price of $0.0001 per share. While outstanding, the,and subsequently settled with the counterparty.
Pre-Funded
Warrant entitled the holder to purchase one share of the Company’s Pre-Funded
Warrants were recorded as a component of stockholders’ equity within additionalpaid-in
capital. ThePre-Funded
Warrants were exercised in full on May 4, 2022,Common Stock Warrants
Each Common Warrant entitles the holder to purchase one share of common stockClass A Common Stock at an exercise price of $14.10$69.04 per share. The Common Warrants became exercisable on August 23, 2022,,and expire on August 23, 2027. The Common Warrants are recorded as a liability in the Company’s condensed consolidated balance sheet.sheets. Per the terms of the Common Warrants, a holderholders of an outstanding warrant isCommon Warrants are not entitled to exercise any portion of such warrant if, upon exercise, of such portion of the warrant, the holder’s ownership of the Company’s common stockClass A Common Stock (together with its affiliates) or the combined voting power of the Company’s securities beneficially owned by such holder (together with its affiliates) would exceed the 4.99 percent after giving effect to the exercise.
Common Warrant transactions for the threenine months ended March 31,September 30, 2023, are as follows:
| Common Warrants | Weighted Average Exercise Price Per Share | |||||||||||||
| Outstanding as of December 31, 2022 | 158,483 | $ | 69.04 | |||||||||||
| Issued | — | — | ||||||||||||
| Forfeited/canceled | — | — | ||||||||||||
| Exercised | — | — | ||||||||||||
| Outstanding as of September 30, 2023 | 158,483 | $ | 69.04 | |||||||||||
| Exercisable as of September 30, 2023 | 158,483 | $ | 69.04 | |||||||||||
Number of Common Stock Warrant Units Outstanding | Weighted-Average Exercise Price Per Share | |||||||
| Outstanding as of December 31, 2022: | 776,000 | $ | 14.10 | |||||
| Issued | — | — | ||||||
| Forfeited/canceled | — | — | ||||||
| Exercised | — | |||||||
| Outstanding as of March 31, 2023: | 776,000 | $ | 14.10 | |||||
| Exercisable as of March 31, 2023: | 776,000 | $ | 14.10 | |||||
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ATM Facility
On September 21, 2021, the Company entered into an Open Market Sale AgreementSM (the ATM
Merger with Cibus Global
At the closing of the Merger Transactions, the Company contributed all of its assets and liabilities to Cibus Global, in exchange for Common Units. The Company issued an aggregate of 16,527,484 shares of Class A Common Stock (including 1,019,282 shares of restricted Class A Common Stock) and 4,642,636 shares of Class B Common Stock to Cibus Global equityholders, as consideration in the Merger Transactions, pursuant to the terms of the Merger Agreement.
Class A Common Stock
Shares of Class A Common Stock have full voting and economic rights. Unvested shares of Class A Restricted Common Stock, which were issued as equity compensation to certain of our employees and executive officers, carry all voting, dividend, distribution, and other rights as apply to shares of Class A Common Stock generally, except that (i) shares of Class A Restricted Common Stock are subject to transfer restrictions and (ii) dividends and distributions are held by the Company until vesting of the underlying shares of Class A Restricted Common Stock and remain subject to the same forfeiture provisions as such shares.
Class B Common Stock
Cibus Global Common Units
In connection with the Merger Transactions, the Company, Cibus Global, and the Electing Members entered into an Exchange Agreement (the Exchange Agreement). The Exchange Agreement sets forth the terms and conditions upon which holders of Up-C Units, comprising an equal number of shares of Class B Common Stock and Cibus Global Common Units, may exchange such Up-C Units for shares of Class A Common Stock. The Up-C Units are generally exchangeable for shares of Class A Common Stock on a one-for-one basis, subject to certain restrictions. The Electing Members’ ownership of Common Units represents the redeemable noncontrolling interest. As of September 30, 2023, there were 21,302,632 Cibus Common Units outstanding. Of the 21,302,632 Cibus Common Units outstanding, 16,659,996 are held by Cibus Inc. and 4,642,636 are held by the Electing Members.
Preferred Stock
Pursuant to the Amended Certificate of Incorporation, following the consummation of the Merger Transactions, the Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.0001 per share. As of September 30, 2023, the Company has not issued any preferred stock.
Preferred Stock
Pursuant to the Amended Certificate of Incorporation, following the consummation of the Merger Transactions, the Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.0001 per share. As of September 30, 2023, the Company has not issued any preferred stock.
8. STOCK-BASED COMPENSATION
The Company uses broad-based stock plans to attract and retain highly qualified officers and employees and to help ensure that management’s interests are aligned with those of its shareholders. The Company has also granted equity-based awards to directors, non-employees, and certain employees of Cellectis.
In December 2014, the CompanyLegacy Calyxt adopted the Calyxt, Inc. Equity Incentive Plan (2014 Plan), which allowed for the grant of stock options, and in June 2017, it adopted the Calyxt, Inc. 2017 Omnibus Plan (2017 Plan), which allowed for the grant of stock options, RSUs, PSUs, and other types of equity awards. As part of the Merger Transactions, the name of the 2017 plan was amended to reflect the name change of the Company.
In July 2021, the Company also adopted the Calyxt, Inc. Employee Inducement Incentive Plan (the Inducement Plan), from which PSUs were granted to Michael A.Carr.Carr, the Company's former Chief Executive Officer.
In July 2021, the Company also adopted the Calyxt, Inc. Employee Inducement Incentive Plan (the Inducement Plan), from which PSUs were granted to Michael A.
As of March 31,September 30, 2023, 9,259 shares were registered and available for grant under effective registration statements, while 238,9831,925,024 shares were available for grant in the form of stock options, restricted stock, RSUs, and PSUs under the 2017 Plan. Stock-based awards currently outstanding also include awards granted under the 2014 Plan and the Inducement Plan. No further awards are available for grant or will be granted under either the 2014 Plan or the InducementPlan Plan..
Stock Options
The estimated fair values of stock options granted, and the assumptions used for the Black-Scholes option pricing model were as follows:
Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
| Estimated fair values of stock options granted | $ | — | $ | 9.71 | ||||
| Assumptions: | ||||||||
| Risk-free interest rate | — | 1.9% - 2.4 | % | |||||
| Expected volatility | — | 89.7% - 91.8 | % | |||||
| Expected term (in years) | — | 5.75 - 6.89 | ||||||
| Nine Months Ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Estimated fair values of stock options granted | $ | — | $ | 42.83 | |||||||
| Assumptions: | |||||||||||
| Risk-free interest rate | —% | 1.9% - 3.5% | |||||||||
| Expected volatility | —% | 89.7% - 92.8% | |||||||||
| Expected term (in years) | — | 5.50 - 6.89 | |||||||||
The Company estimates the fair value of each stock option on the grant date, or other measurement date if applicable, using a Black-Scholes option pricing model, which requires it to make predictive assumptions regarding employee exercise behavior, future stock price volatility, and dividend yield. The Company estimates the risk-free interest rate based on the United States Treasurythe weighted-averagea weighted average historical volatility calculatedwhich takes into consideration the Company's historical volatility and historical volatility from a group of comparable publicguideline companies, over the expected term of the option. 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, or the simplified method, as the Company has limited historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. The use of the simplified method is dependent upon the type of equity award granted and the term of the award. The Company doeshas not paypaid dividends and does not expect to pay dividends in the foreseeable future.
zero-coupon
yield curve at the date of grant for the expected term of the option. The Company estimates its future stock price volatility using Option strike prices are set at 100 percent or more of the closing share price on the date of grant and generally vest over three to six years following the grant date. Options generally expire 10 years after the date of the grant.
Modification of Stock Options
On March 1, 2023, the Company’s Board of Directors (Board) approved the modification of the award terms of all outstanding stock options with a
The modification did not affect the vesting or service period of the stock options. These modifications were considered to be Type I and incremental stock compensation expense of $0.2 million was determined for all modified awards, of which $0.1 million was recognized associated with vested awards in the three months ended March 31, 2023. The remaining incremental expenses will be recognized over the remaining service period of the awards. The service period for these awards ended with the close of the Merger Transactions and the remaining expense was recognized in the three months ended June 30, 2023.90-day
post-separation exercise period from the current 90 days to five years from date of grant.Information on stock option activity is as follows:
Options Exercisable | Weighted Average Exercise Price Per Share | Options Outstanding | Weighted Average Exercise Price Per Share | ||||||||||||||||||||
| Balance as of December 31, 2022 | 67,978 | $ | 496.83 | 116,860 | $ | 367.58 | |||||||||||||||||
| Granted | — | — | — | — | |||||||||||||||||||
| Vested | 42,195 | 154.28 | — | — | |||||||||||||||||||
| Exercised | — | — | — | — | |||||||||||||||||||
| Forfeited or expired | (1,530) | 441.63 | (7,309) | 369.43 | |||||||||||||||||||
| Balance as of September 30, 2023 | 108,643 | $ | 364.57 | 109,551 | $ | 367.46 | |||||||||||||||||
Options Exercisable | Weighted- Average Exercise Price Per Share | Options Outstanding | Weighted- Average Exercise Price Per Share | |||||||||||||
| Balance as of December 31, 2022 | 339,707 | $ | 99.35 | 584,171 | $ | 73.51 | ||||||||||
| Granted | — | — | ||||||||||||||
| Exercised | — | — | ||||||||||||||
| Forfeited or expired | (21,206 | ) | 38.12 | |||||||||||||
Balance as of March 31, 2023 | 381,873 | $ | 92.18 | 562,965 | $ | 74.85 | ||||||||||
Stock-based compensation expense related to stock option awards is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| In Thousands | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Stock-based compensation expense | $ | 40 | $ | 530 | $ | 1,835 | $ | 1,420 | ||||||||||||||||||
Three Months Ended March 31, | ||||||||
In Thousands | 2023 | 2022 | ||||||
| Stock-based compensation expense | $ | 354 | $ | 180 | ||||
As of March 31,September 30, 2023, both options outstanding and options exercisable had nonominal aggregate intrinsic value and thea weighted average remaining contractual term was 5.2 years as of that date.4.0 years.
Three Months Ended March 31, | ||||||||
In Thousands | 2023 | 2022 | ||||||
| Net cash proceeds | $ | — | $ | — | ||||
| Intrinsic value of options exercised | $ | — | $ | — | ||||
As of March 31,September 30, 2023, unrecognized compensation expense related to$2.5 million. This expense will be recognized over 20 months on average.$0.1 million which has a weighted average remaining recognition period of 1.0 year.
non-vested
stock options was Restricted Stock Awards
- 25 -
The Company granted awards of Class A Restricted Stock (RSAs), in connection with the Merger Transactions, to Cibus Global members who held unvested restricted profits interest units. The Class A Restricted Stock will continue to vest following their original vesting schedules over the remaining life of the awards which is generally 2 months to four years after the date of grant. Information on Class A Restricted Stock award activity is as follows:
Restricted Stock Awards | Weighted Average Grant Date Fair Value | ||||||||||
| Unvested balance as of December 31, 2022 | — | $ | — | ||||||||
| Granted | 1,019,282 | 31.50 | |||||||||
| Vested | (71,969) | 31.50 | |||||||||
| Forfeited | (1,533) | 31.50 | |||||||||
| Unvested balance as of September 30, 2023 | 945,780 | $ | 31.50 | ||||||||
The total grant-date fair value of RSAs that vested is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| In Thousands | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Grant-date fair value | $ | 1,725 | $ | — | $ | 2,267 | $ | — | ||||||||||||||||||
Stock-based compensation expense related to RSAs is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| In Thousands | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Stock-based compensation expense | $ | 5,631 | $ | — | $ | 7,555 | $ | — | ||||||||||||||||||
As of September 30, 2023, unrecognized compensation expense related to RSAs was $24.5 million which has a weighted average remaining recognition period of 2.5 years.
Restricted Stock Units
The Company grants RSUs which generally vest over three to five years after the date of grant. Information on restricted stock unit activity is as follows:
Restricted Stock Units | Weighted Average Grant Date Fair Value | ||||||||||
| Unvested balance as of December 31, 2022 | 24,575 | $ | 99.36 | ||||||||
| Granted | 272,885 | 19.02 | |||||||||
| Vested | (96,730) | 38.27 | |||||||||
| Forfeited | (2,531) | 127.84 | |||||||||
| Unvested balance as of September 30, 2023 | 198,199 | $ | 18.19 | ||||||||
Number of Restricted Stock Units Outstanding | Weighted- Average Grant Date Fair Value | |||||||
| Unvested balance as of December 31, 2022 | 122,914 | $ | 19.90 | |||||
| Granted | 348,759 | 4.34 | ||||||
| Vested | (68,831 | ) | 15.33 | |||||
| Forfeited | (9,442 | ) | 17.24 | |||||
Unvested balance as of March 31, 2023 | 393,400 | $ | 6.97 | |||||
The total grant-date fair value of restricted stock unit awardsRSUs that vested is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| In Thousands | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Grant-date fair value | $ | 100 | $ | 530 | $ | 3,702 | $ | 1,686 | ||||||||||||||||||
Three Months Ended March 31, | ||||||||
In Thousands | 2023 | 2022 | ||||||
| Grant-date fair value | $ | 1,055 | $ | 617 | ||||
Stock-based compensation expense related to RSUs is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| In Thousands | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Stock-based compensation expense | $ | 157 | $ | 334 | $ | 2,550 | $ | 992 | ||||||||||||||||||
Three Months Ended March 31, | ||||||||
In Thousands | 2023 | 2022 | ||||||
| Stock-based compensation expense | $ | 311 | $ | 205 | ||||
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As of March 31,September 30, 2023, unrecognized compensation expense related to RSUs was $2.2 million. This expense will be recognized over 29 months on average.$3.5 million which has a weighted average remaining recognition period of 3.4 years.
The Company accountsaccounted for stock-based compensation awards granted to employees of Cellectis as deemed dividends. These awards are fully vested as of December 31, 2022. The Company recorded deemed dividends as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| In Thousands | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Deemed dividends from grants to Cellectis employees | $ | — | $ | 18 | $ | — | $ | 82 | ||||||||||||||||||
Three Months Ended March 31, | ||||||||
In Thousands | 2023 | 2022 | ||||||
| Deemed dividends from grants to Cellectis employees | $ | — | $ | 37 | ||||
Performance Stock Units
Fromthe Company issues PSUs to certain individuals in management in order to align their objectives with stockholders of the Company. Depending upon the type of PSU award, the Company uses a Monte Carlo simulation pricing model when estimating the fair value of these awards.
time-to-time,
2022 Grant
In March 2022, the Company granted 10,600 PSUs under the 2017 Plan to five employees including four executive officers. The PSUs included three annual performance periods (2022, 2023, and 2024) and target performance levels for each of those periods linked to the achievement of Company objectives as determined annually for the respective period by the Compensation Committee. Once the annual objectives are approved, the associated expense will be recognized on a straight-line basis over the period through the determination date, which can be no later than March 15 of the following year. Earned awards will beare settled in shares of Company stockClass A Common Stock no later than the March 15 determination date in the following calendar year. The grant date for the tranche of awards linked to 2022 performance was May 4, 2022, and on March 1, 2023, the Company’s Board determined the 2022 tranche of PSUs would vest at 100%. Determination of expense100 percent. The grant date for the tranche of awards linked to 2023 performance was May 17, 2023, and 2024 trancheson May 31, 2023, in connection with the closing of the Merger Transactions, the Company’s Board determined the 2023 tranche of PSUs forwould vest at 100 percent. Additionally on May 31, 2023, in connection with the four executive officers will be made whenclosing of the associated business objectives are determined.Merger Transactions, the 2024 tranche of PSUs became fully vested.
2021 Grant
In July 2021, the Company granted 60,00012,000 PSUs under the Inducement Plan to Mr. Carr. The PSUs will vest if the Company’s stock remains above three specified price levels for thirty calendar days over the three-year performance period. The PSUs will be settled in unrestricted shares of the Company’s common stockClass A Common Stock on the vesting date. At the close of the Merger Transactions on May 31, 2023, 25 percent of these awards vested per the terms of the award agreement, and the remaining awards were forfeited due to the service period ending with Mr. Carr's termination upon the close of the Merger Transactions.
2019 Grant
In June 2022, PSUs granted to two executive officers in 2019 were forfeited because the underlying performance criteria were not met. These PSUs contained a market condition and had a five-year service period. The Company continuesAt the close of the Merger Transactions, both of these executive officers were terminated. All expense for these awards was reversed in June 2023 due to expense these PSUs over the remaining service period.period ending prior to vesting date.
PSU activity for the threenine months ended March 31, 2022,September 30, 2023, is as follows:
| 22,600 | ||||||||
24,800 | ||||||||
| — | ||||||||
- 27 -
Stock-based compensation expense related to PSUs is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| In Thousands | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Stock-based compensation (benefit) expense | $ | — | $ | 171 | $ | (270) | $ | 478 | ||||||||||||||||||
Three Months Ended March 31, | ||||||||
In Thousands | 2023 | 2022 | ||||||
| Stock-based compensation expense | $ | 163 | $ | 146 | ||||
As of March 31,September 30, 2023, there is no unrecognized compensation expense related to PSUs was $0.8 million. This expense will be recognized over 16 months on average.PSUs.
The Company provides for a valuation allowance when it is more likely than not that it will not realize a portion of the deferred tax assets. The Company has established a full valuation allowance for deferred tax assets due to the uncertainty that enough taxable income will be generated in the taxing jurisdiction to utilize the assets. Therefore, the Company has not reflected any benefit of such deferred tax assets in the accompanying condensed consolidated financial statements.
The Company uses an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates, and tax planning opportunities available in the various jurisdictions in which the Company operates, to determine its quarterly provision for income taxes. The Company did not record any income tax provision for the three months ended September 30, 2023, due to its history of net operating losses, and the maintenance of a full valuation allowance against its net deferred tax assets.
As of September 30, 2023, there have been no Up-C Units exchanged by Electing Members for Class A Common Stock. As described in Note 2, the Company has recorded a full valuation allowance against its net deferred tax assets as the realizability of the tax benefit is not at the more-likely-than-not threshold. Since the benefit has not been recorded, the Company determined that the TRA liability is not probable and therefore no TRA liability existed as of September 30, 2023.
As of March 31,September 30, 2023, there were no material changes to what the Company disclosed regarding tax uncertainties or penalties as of December 31, 2022.
Leases
The Company had an equipment financing arrangement at the Roseville, Minnesota location that was considered a financing-type lease. This equipment financing arrangement was repaid in full in the first quarter of 2023. The Company was required to deposit cash into a restricted account in an amount equal to the future rent payments required by the lease. As of March 31, 2023, the remaining restricted cash had been returned to the Company.
Upon the completion of the Merger Transactions, the Company assumed financing leases for certain equipment. In the third quarter of 2023, the Company added a financing lease for hardware and software. The ROU asset is included in other non-current assets in the condensed consolidated balance sheets.
The Company is obligated under a
non-cancellable
operating | As of September 30, 2023 | As of December 31, 2022 | |||||||||||||||||||||||||
| In Thousands, except remaining term | Remaining Term (years) | Right-of-Use-Asset | Remaining Term (years) | Right-of-Use-Asset | ||||||||||||||||||||||
| Roseville, Minnesota lease | 14.6 | $ | 13,244 | 15.3 | $ | 13,613 | ||||||||||||||||||||
| San Diego, California laboratory lease | 1.9 | 3,848 | — | — | ||||||||||||||||||||||
| San Diego, California headquarters lease | 1.7 | 3,710 | — | — | ||||||||||||||||||||||
| San Diego, California greenhouse lease | 4.9 | 1,541 | — | — | ||||||||||||||||||||||
| Other leases | < 1.0 - 3.0 | 592 | < 1.0 | 2 | ||||||||||||||||||||||
| Total | $ | 22,935 | $ | 13,615 | ||||||||||||||||||||||
The Roseville, Minnesota lease includes four options to extend the lease for five years. These options to extend the lease are not recognized as part of the ROU assets and operating lease liabilities as it is not reasonably certain that the Company will exercise those options. The Company’s lease agreement does not include options to terminate the lease.
Upon the completion of the Merger Transactions, the company assumed additional operating leases.
The lease for the Company's San Diego, California headquarters includes office and laboratory space with terms that expire in May 2025 and August 2025, respectively. The Company has one option to extend the laboratory space lease for one year. As the Company is not
Upon the completion of the Merger Transactions, the company assumed additional operating leases.
The lease for the Company's San Diego, California headquarters includes office and laboratory space with terms that expire in May 2025 and August 2025, respectively. The Company has one option to extend the laboratory space lease for one year. As the Company is not
- 28 -
reasonably certain to exercise this option at lease commencement, the option was not recognized as part of the associated operating lease ROU asset or liability.
Additionally, the Company has certain leases for greenhouse and warehouse facilities, with terms that expire in August 2028 and August 2026, respectively. The Company had one option to extend the term of the greenhouse lease, for five years, and executed this right with an amended lease agreement beginning in September 2023 and expiring at the end of August 2028. There are no other options to extend this lease. The Company has one option to extend the warehouse lease, for five years. However, as the Company is not reasonably certain to exercise either of those options at lease commencement, neither option was recognized as part of the associated operating lease ROU asset or liability.
Certain leases include rent abatement, rent escalations, tenant improvement allowances, and additional charges for common area maintenance and other costs. The Company is required to pay base rent expense as well as its proportionate share of the facilities operating expenses. The non-lease components, consisting primarily of common area maintenance, are paid separately based on actual costs incurred. Therefore, the variable non-lease components were not included in the ROU asset or lease liability and are reflected as expense in the period incurred.
The components of lease expense were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| In Thousands | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Finance lease costs | $ | 65 | $ | 57 | $ | 79 | $ | 73 | ||||||||||||||||||
| Operating lease costs | 1,635 | 381 | 2,830 | 1,174 | ||||||||||||||||||||||
| Total | $ | 1,700 | $ | 438 | $ | 2,909 | $ | 1,247 | ||||||||||||||||||
Three Months Ended March 31, | ||||||||
In Thousands | 2023 | 2022 | ||||||
| Finance lease costs | $ | 3 | $ | 9 | ||||
| Operating lease costs | 388 | 399 | ||||||
| Variable lease costs | 233 | 231 | ||||||
| Total | $ | 624 | $ | 639 | ||||
Operating lease costcosts for short-term leases was not material for the three and nine months ended March 31,September 30, 2023, or March 31, 2022.
Supplemental cash flow information related to leases was as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| In Thousands, except for lease term and discount rate | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||||||||||||
| Operating cash flows (operating leases) | $ | 1,297 | $ | 70 | $ | 1,848 | $ | 205 | ||||||||||||||||||
| Financing cash flows (finance leases) | $ | 132 | $ | 163 | $ | 242 | $ | 353 | ||||||||||||||||||
Three Months Ended March 31, | ||||||||
In Thousands | 2023 | 2022 | ||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows (operating leases) | $ | 72 | $ | 67 | ||||
| Financing cash flows (finance leases) | 97 | 94 | ||||||
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Supplemental balance sheet information related to leases was as follows:
| As of September 30, 2023 | As of December 31, 2022 | |||||||||||||||||||||||||
| Operating | Financing | Operating | Financing | |||||||||||||||||||||||
| Weighted average remaining lease term (years) | 10.5 | 1.4 | 15.3 | 0.4 | ||||||||||||||||||||||
| Weighted average discount rate | 7.5 | % | 9.5 | % | 7.9 | % | 8.1 | % | ||||||||||||||||||
As of March 31, 2023 | As of December 31, 2022 | |||||||||||||||
Operating | Financing | Operating | Financing | |||||||||||||
| Weighted average remaining lease term (years) | 15.1 | — | 15.3 | 0.4 | ||||||||||||
| Weighted average discount rate | 7.9 | % | — | 7.9 | % | 8.1 | % | |||||||||
As of March 31,September 30, 2023, future minimum payments under operating and finance leases were as follows:
| In Thousands | Operating | Financing | Total | |||||||||||||||||
| Remainder of 2023 | $ | 1,758 | $ | 40 | $ | 1,798 | ||||||||||||||
| 2024 | 7,132 | 210 | 7,342 | |||||||||||||||||
| 2025 | 4,797 | 120 | 4,917 | |||||||||||||||||
| 2026 | 1,993 | — | 1,993 | |||||||||||||||||
| 2027 | 1,920 | — | 1,920 | |||||||||||||||||
| 2028 | 1,863 | — | 1,863 | |||||||||||||||||
| Thereafter | 15,438 | — | 15,438 | |||||||||||||||||
| 34,901 | 370 | 35,271 | ||||||||||||||||||
| Less: interest | (10,621) | (33) | (10,654) | |||||||||||||||||
| Total | $ | 24,280 | $ | 337 | $ | 24,617 | ||||||||||||||
| Current portion | 5,436 | 235 | 5,671 | |||||||||||||||||
| Noncurrent portion | $ | 18,844 | $ | 102 | $ | 18,946 | ||||||||||||||
In Thousands | Operating | Financing | Total | |||||||||
| Remainder of 2023 | $ | 1,102 | $ | — | $ | 1,102 | ||||||
| 2024 | 1,480 | — | 1,480 | |||||||||
| 2025 | 1,479 | — | 1,479 | |||||||||
| 2026 | 1,479 | — | 1,479 | |||||||||
| 2027 | 1,479 | — | 1,479 | |||||||||
| 2028 | 1,553 | — | 1,553 | |||||||||
| Thereafter | 15,438 | — | 15,438 | |||||||||
| 24,010 | — | 24,010 | ||||||||||
| Less: imputed interest | (10,268 | ) | — | (10,268 | ) | |||||||
| Total | $ | 13,742 | $ | — | $ | 13,742 | ||||||
Cibus Non-Profit Foundation
During 2022, Cibus Global created the Cibus Charitable Foundation, Inc., a nonprofit legal entity (the Cibus Non-Profit Foundation). As of September 30, 2023, the Cibus Non-Profit Foundation has not received any donations or commenced operations. The Company is obligated to make donations to the Cibus Non-Profit Foundation each fiscal year at a rate of 1.0 percent of all net royalty revenue in the applicable fiscal year that is equal to or greater than $100 million up to, and including, $1.0 billion, and then steps up to 2.0 percent in respect of any portion of such net royalty revenue in excess of $1.0 billion. For purposes of this calculation, net royalty revenue refers to all royalty payments received by the Company, net of all taxes (other than income taxes) and all amounts payable pursuant to the Royalty Liability. The donation payable by the Company may be reduced, including to zero, to the extent necessary to comply with any covenant or obligation in any instrument evidencing third-party indebtedness, to permit a financing to occur, to preclude undercapitalization, to satisfy working capital requirements or provide for strategic needs of the Company, to ensure timely payment of the Company's liabilities and debts to third parties as they become due, or to comply with applicable law. The Company has agreed not to enter any change of control transaction unless the surviving entity assumes the obligation to pay such donations to the Cibus Non-Profit Foundation.
During 2022, Cibus Global created the Cibus Charitable Foundation, Inc., a nonprofit legal entity (the Cibus Non-Profit Foundation). As of September 30, 2023, the Cibus Non-Profit Foundation has not received any donations or commenced operations. The Company is obligated to make donations to the Cibus Non-Profit Foundation each fiscal year at a rate of 1.0 percent of all net royalty revenue in the applicable fiscal year that is equal to or greater than $100 million up to, and including, $1.0 billion, and then steps up to 2.0 percent in respect of any portion of such net royalty revenue in excess of $1.0 billion. For purposes of this calculation, net royalty revenue refers to all royalty payments received by the Company, net of all taxes (other than income taxes) and all amounts payable pursuant to the Royalty Liability. The donation payable by the Company may be reduced, including to zero, to the extent necessary to comply with any covenant or obligation in any instrument evidencing third-party indebtedness, to permit a financing to occur, to preclude undercapitalization, to satisfy working capital requirements or provide for strategic needs of the Company, to ensure timely payment of the Company's liabilities and debts to third parties as they become due, or to comply with applicable law. The Company has agreed not to enter any change of control transaction unless the surviving entity assumes the obligation to pay such donations to the Cibus Non-Profit Foundation.
This obligation is contingent upon the Cibus Non-Profit Foundation obtaining and maintaining its status as a 501(c)(3) charitable organization, although such registration has not yet been achieved. The Cibus Non-Profit Foundation must use all donations received consistent with its mission statement: to drive sustainable agriculture and sustainable agricultural communities in the developing world. Accordingly, as of September 30, 2023, the Company had not recorded a liability related to its obligations to the Cibus Non-Profit Foundation within the accompanying condensed consolidated financial statements.
Litigation and Claims
In the fourth quarter of 2022, the Company reached a settlement with one of its technology vendors regarding alleged intellectual property infringement. As a result of the settlement, the Company received $0.75 million in the fourth quarter of 2022, and it received the final installment of $0.75 million in the first quarter of 2023.
The Company is not currently a party to any material pending legal proceeding.
11. ROYALTY LIABILITY - RELATED PARTIES
The Royalty Liability was assumed following the Company’s acquisition of Cibus Global in the Merger Transactions. In 2014, Cibus Global entered into the Warrant Exchange Agreement with certain members holding Series A Preferred Units, including members of the
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board of directors and management of Cibus Global, who were also the holders of warrants to purchase Series A Preferred Units. Under the Warrant Exchange Agreement, the Royalty Holders are entitled to future royalty payments equal to 10 percent of the subject revenues (Subject Revenues), as defined, which includes all royalty revenues earned by Cibus Global, for licensing of plant traits to seed companies that use traits developed by the Company, but excludes specifically, (i) revenues attributable to the Nucelis product line, (ii) amounts received from the sale or disposition of the Company’s assets to the extent the purchaser agrees to be bound by the Warrant Exchange Agreement, (iii) payments for Cibus Global capital stock, and (iv) revenues attributable to collaboration and research projects. Royalty payments will not begin until the first fiscal quarter after which the aggregate Subject Revenues during any consecutive 12-month period equals or exceeds $50.0 million, at which point Cibus Global will be obligated to pay all aggregated but unpaid payments under the Warrant Exchange Agreement. This condition had not occurred as of September 30, 2023. Additionally, Cibus Global granted the Royalty Holders a continuing security interest in certain intellectual property of Cibus Global to secure the payment and performance of obligations of Cibus Global under the Warrant Exchange Agreement. The initial term of the Warrant Exchange Agreement is 30 years and may be extended for an additional 30-year term if the holders provide written notice and make a payment of $100.
For purposes of determining the Royalty Liability, the Company estimates the total amount of future revenues expected to be received from the Company's customers over the life of the agreement. The Company then calculates the amount of future royalty payments required to be paid based upon the estimated future revenues. The Company will periodically assess the expected royalty payments using a combination of internal projections and external sources. Any change in expected future royalty payments is recognized prospectively as an adjustment to the effective yield as interest expense. As of September 30, 2023, the Royalty Liability reflected an effective yield of 23.7 percent.
For purposes of determining the Royalty Liability, the Company estimates the total amount of future revenues expected to be received from the Company's customers over the life of the agreement. The Company then calculates the amount of future royalty payments required to be paid based upon the estimated future revenues. The Company will periodically assess the expected royalty payments using a combination of internal projections and external sources. Any change in expected future royalty payments is recognized prospectively as an adjustment to the effective yield as interest expense. As of September 30, 2023, the Royalty Liability reflected an effective yield of 23.7 percent.
As of September 30, 2023, the Royalty Liability activity is as follows:
| In Thousands | Royalty Liability - Related Parties | |||||||
| Balance as of December 31, 2022 | $ | — | ||||||
| Acquired from merger with Cibus Global, LLC | 146,360 | |||||||
| Interest expense recognized | 10,753 | |||||||
| Balance as of September 30, 2023 | $ | 157,113 | ||||||
12. SUPPLEMENTAL INFORMATION
Certain balance sheet amounts are as follows:
| In Thousands | As of September 30, 2023 | As of December 31, 2022 | ||||||||||||
| Accrued Expenses: | ||||||||||||||
| Accrued consulting and professional fees | $ | 2,980 | $ | 119 | ||||||||||
| Accrued field trials | 1,716 | — | ||||||||||||
| Other | 396 | 54 | ||||||||||||
| Total | $ | 5,092 | $ | 173 | ||||||||||
In Thousands | As of March 31, 2023 | As of December 31, 2022 | ||||||
| Cash, cash equivalents, and restricted cash: | ||||||||
| Cash and cash equivalents | $ | 2,054 | $ | 3,427 | ||||
| Restricted cash | — | 99 | ||||||
| Total | $ | 2,054 | $ | 3,526 | ||||
In Thousands | As of March 31, 2023 | As of December 31, 2022 | ||||||
| Prepaid expenses and other current assets: | ||||||||
| Common warrants – financing costs | $ | 375 | $ | 396 | ||||
| Prepaid expenses and other current assets | 154 | 210 | ||||||
| Total | $ | 529 | $ | 606 | ||||
In Thousands | As of March 31, 2023 | As of December 31, 2022 | ||||||
| Other current liabilities: | ||||||||
| Operating lease obligations – current | $ | 400 | $ | 367 | ||||
| Other current liabilities | 83 | 112 | ||||||
| Total | $ | 483 | $ | 479 | ||||
Certain statementsstatement of operations amounts are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| In Thousands | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
| Stock-based compensation expense: | ||||||||||||||||||||||||||
| Research and development | $ | 2,853 | $ | 210 | $ | 5,531 | $ | 620 | ||||||||||||||||||
| Selling, general, and administrative | 2,975 | 825 | 6,139 | 2,270 | ||||||||||||||||||||||
| Total | $ | 5,828 | $ | 1,035 | $ | 11,670 | $ | 2,890 | ||||||||||||||||||
Three Months Ended March 31, | ||||||||
In Thousands | 2023 | 2022 | ||||||
| Stock-based compensation expense: | ||||||||
| Research and development | $ | 184 | $ | 30 | ||||
| Selling, general, and administrative | 644 | 501 | ||||||
| Total | $ | 828 | $ | 531 | ||||
Three Months Ended March 31, | ||||||||
In Thousands | 2023 | 2022 | ||||||
| Interest, net: | ||||||||
| Interest expense | $ | (3 | ) | $ | (10 | ) | ||
| Interest income | 3 | 1 | ||||||
| Common stock warrants - financing costs amortization | (21 | ) | (8 | ) | ||||
| Total | $ | (21 | ) | $ | (17 | ) | ||
Supplemental statement of cash flows information is as follows:
| Nine Months Ended September 30, | ||||||||||||||
| In Thousands | 2023 | 2022 | ||||||||||||
| Interest paid | $ | 98 | $ | 67 | ||||||||||
As of March 31, | ||||||||
In Thousands | 2023 | 2022 | ||||||
| Interest paid | $ | 3 | $ | 8 | ||||
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Non-cash
transactions not reported in the condensed consolidated statement of cash flows is as follows:| Nine Months Ended September 30, | ||||||||||||||
| In Thousands | 2023 | 2022 | ||||||||||||
| Receivable from Jefferies for shares issued under ATM facility | $ | — | $ | (260) | ||||||||||
| Property, plant, and equipment acquired through assuming liabilities | 419 | (687) | ||||||||||||
| Shares issued for consideration in the merger with Cibus Global | 634,751 | — | ||||||||||||
| Forgiveness of interim funding resulting from merger with Cibus Global | 2,500 | — | ||||||||||||
| Cumulative effect of adoption of lease accounting standard on stockholders’ equity | — | 832 | ||||||||||||
| Establishment of financing lease right-of-use assets and associated operating lease liabilities | 307 | — | ||||||||||||
| Establishment of operating lease right-of-use assets and associated operating lease liabilities | $ | 1,606 | $ | 14,090 | ||||||||||
As of March 31, | ||||||||
In Thousands | 2023 | 2022 | ||||||
| Receivable from Jefferies for shares issued under ATM facility | $ | — | $ | (260 | ) | |||
Non-cash additions to land, buildings, and equipment | $ | — | $ | (202 | ) | |||
| Unpaid stock offering costs included in stockholders’ equity | $ | — | $ | 257 | ||||
| Cumulative effect of adoption of lease accounting standard on stockholders’ equity | $ | — | $ | 832 | ||||
Establishment of operating lease right-of-use | $ | — | $ | 14,090 | ||||
Pursuant to the Merger Agreement, beginning at the earlier of March 15, 2023, and the date Calyxt’sthe Company's unrestricted cash balance first dropsdropped below $1.5 million, Calyxtthe Company could request, and Cibus Global agreed to provide, an unsecured, interest-free revolving line of credit of up to $3.0 million in cash which amount may be increased to $4.0 million if Cibus elects to extend the outside date (as defined in the Merger Agreement) to June 30, 2023.(Interim Funding). Funds cancould be drawn by Calyxtthe Company in $0.5 million increments and maycould only be used to fund operating expenses incurred in the ordinary course of business consistent with past practice and consistent with the negative covenants in the Merger Agreement. The Company received $2.5 million of Interim Funding in the aggregate from Cibus Global. The full outstanding balance of the Interim Funding will bewas reduced to zero in connection with the closing of the Merger Transactions if consummated. The full outstanding balancepursuant to the terms of the Interim Funding will be forgiven by Cibus ifMerger Agreement.
14. COLLABORATION AGREEMENT
Prior to the MergerAgreement is terminated for any reason other thanTransactions, Cibus Global and Procter & Gamble (P&G), a leading multi-national consumer product company, entered into a collaboration agreement under certain conditions, as detailed inwhich P&G will fund a multi-year program to develop sustainable low carbon ingredients or materials that do not negatively impact the Merger Agreement. The Interim Funding is subjectenvironment during production, use, or disposal to acceleration in connection with certain bankruptcy events.help P&G advance its sustainability objectives. As of March 31,September 30, 2023, the Company had received $1.0$1.6 million of Interim Fundingdeferred revenue from Cibus.Subsequent15. RELATED-PARTY TRANSACTIONS
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Prior to the Merger
R&D activities under the P&G agreement. The Company has determined the P&G agreement should be accounted for under Topic 606, and it will recognize revenue over time proportional to the R&D activities performed by the Company related to the collaboration agreement. During the nine months endedSeptember 30, 2023, the Company recognized $0.4 million in revenue in the condensed consolidated statements of operations.
Prior to March 31,the completion of the Merger Transactions, the Company was party to several agreements that governed its relationship with Cellectis, some of which required the Company to make payments to Cellectis. Pursuant to the Company’s management services agreement with Cellectis, it incurred no management fee expenses for the three and nine months ended September 30, 2023, and prior2022. The management services agreement was terminated with respect to the filing dateCompany upon the closing of this Form 10-Q,the Merger Transactions.
Cellectis has guaranteed the lease agreement for the Company’s Roseville, Minnesota facility. Cellectis’ guarantee of the Company’s obligations under the lease will terminate at the end of the second consecutive calendar year in which the Company’s tangible net worth exceeds $300 million. The Company agreed to indemnify Cellectis for any obligations incurred by Cellectis under its guaranty of the obligations under the lease, effective upon Cellectis’ ownership falling to 50 percent or less of the Company’s outstanding common stock. This indemnification obligation was triggered in October 2022.
Cellectis has guaranteed the lease agreement for the Company’s Roseville, Minnesota facility. Cellectis’ guarantee of the Company’s obligations under the lease will terminate at the end of the second consecutive calendar year in which the Company’s tangible net worth exceeds $300 million. The Company agreed to indemnify Cellectis for any obligations incurred by Cellectis under its guaranty of the obligations under the lease, effective upon Cellectis’ ownership falling to 50 percent or less of the Company’s outstanding common stock. This indemnification obligation was triggered in October 2022.
TALEN® is one of the Company's gene editing technologies. TALEN® technology was invented by researchers at the University of Minnesota and Iowa State University and exclusively licensed to Cellectis. The Company originally obtained an exclusive license for the TALEN® technology for commercial use in plants from Cellectis. Upon the closing of the Merger Transactions, the license agreement was amended (the Amended Cellectis License) to provide exclusive use to certain intellectual property in the field of developing and commercializing microorganism, agricultural, and food products, including, but not limited to traits, seeds, proteins, oils, carbohydrates, food, and food and animal feed ingredients, excluding (i) any application in connection with animals and animal cells and (ii) therapeutic applications (the Calyxt Field). This grant is non-exclusive solely in the non-exclusive fields as described in the Amended Cellectis License. Cellectis also grants to the Company received anothera non-exclusive, worldwide, perpetual, irrevocable, royalty-free, and fully paid-up license (with certain rights to sublicense) under certain licensed plant patents in the Calyxt Field. Cellectis is entitled to royalties on any revenue the Company generates from sales of products less certain amounts as defined in the license agreement, royalties on certain cumulative revenue thresholds, and a percentage of any sublicense revenues. The Company has incurred nominal license and royalty fees for the three and nine months ended September 30, 2023, and 2022.
Prior to the Merger Transactions, amounts payable to Cellectis were reported in the Company's condensed consolidated balance sheets as Due to related parties. Beginning with the three months ended June 30, 2023, any amounts payable to Cellectis are included in accrued
Prior to the Merger Transactions, amounts payable to Cellectis were reported in the Company's condensed consolidated balance sheets as Due to related parties. Beginning with the three months ended June 30, 2023, any amounts payable to Cellectis are included in accrued
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expenses in the Company's condensed consolidated balance sheets.
16. SUBSEQUENT EVENTS
Strategic Realignment
On October 18, 2023, Cibus implemented a strategic realignment to align with its primary commercial objective of advancing its late-stage activities.
The strategic realignment resulted in a reduction in workforce in full time employees from 242 full-time employees as of October 17, 2023, to approximately 185 full-time employees. The Company estimates that it will incur approximately $0.5 million ofInterim Funding from Cibus.one-time costs in connection with the reduction in workforce, primarily related to cash payments for accrued vacation and severance payments. The Company expects the majority of the associated costs to be incurred during the quarter ending December 31, 2023.
Loan Agreement
On October 20, 2023, Cibus entered into a binding term sheet (Binding Term Sheet) with Rory Riggs, the Company’s Chairman and Chief Executive Officer. Pursuant to the Binding Term Sheet, Mr. Riggs has agreed to make available to the Company a line of credit (the Loan) in the aggregate principal amount of $5.0 million (the Loan Amount). Cibus may make draws, in increments of $1.0 million, against the Loan Amount at any time during the period commencing January 1, 2024, and terminating on March 1, 2024. Amounts drawn under the Loan will bear simple interest at a rate of 12 percent per annum and are repayable at maturity on January 1, 2026. The Loan is unsecured and may be prepaid by the Company at any time without penalty. The Binding Term Sheet shall automatically terminate if the Company secures debt and/or equity financing in the aggregate amount of $20.0 million prior to January 1, 2024.
Strategic Realignment
On October 18, 2023, Cibus implemented a strategic realignment to align with its primary commercial objective of advancing its late-stage activities.
The strategic realignment resulted in a reduction in workforce in full time employees from 242 full-time employees as of October 17, 2023, to approximately 185 full-time employees. The Company estimates that it will incur approximately $0.5 million of
Loan Agreement
On October 20, 2023, Cibus entered into a binding term sheet (Binding Term Sheet) with Rory Riggs, the Company’s Chairman and Chief Executive Officer. Pursuant to the Binding Term Sheet, Mr. Riggs has agreed to make available to the Company a line of credit (the Loan) in the aggregate principal amount of $5.0 million (the Loan Amount). Cibus may make draws, in increments of $1.0 million, against the Loan Amount at any time during the period commencing January 1, 2024, and terminating on March 1, 2024. Amounts drawn under the Loan will bear simple interest at a rate of 12 percent per annum and are repayable at maturity on January 1, 2026. The Loan is unsecured and may be prepaid by the Company at any time without penalty. The Binding Term Sheet shall automatically terminate if the Company secures debt and/or equity financing in the aggregate amount of $20.0 million prior to January 1, 2024.
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