| Information concerning the Group's Consolidated Operations | Note 3. Information concerning the Group’s Consolidated
Operations
3.1 Revenues and other income
Accounting policies
Collaboration agreements and licenses
We enter into research and development collaboration agreements
that may consist of non-refundable
Non-refundable non-cancelable, non-refundable fixed-fee co-contracting
Milestone payments represent amounts received from our
collaborators, the receipt of which is dependent upon the
achievement of certain scientific, regulatory, or commercial
milestones. We recognize milestone payments when the triggering
event has occurred, there are no further contingencies or services
to be provided with respect to that event, and the co-contracting
Royalty revenues arise from our contractual entitlement to receive
a percentage of product sales achieved by co-contracting
Research and development costs reimbursements are recognized with
respect to the policy described in section “Sales of products
and services” below.
Revenues from technology licenses are recognized ratably over the
period of the license agreements.
Sales of products and services
Revenues on sales of products and services are recognized when
significant risks and rewards of ownership have been transferred to
the customer. We also offer research services, which are recognized
as revenues when the services are rendered, either on a time and
materials basis, or ratably over the contract period for fixed
payment arrangements.
Research Tax Credit
The main Research Tax Credit that we benefit is the Crédit
d’Impôt Recherche,
We apply for CIR for research expenditures incurred in each fiscal
year and recognize the amount claimed in the line item “Other
income” in the same fiscal year. Research tax credit is
subject to audit of tax authorities. When tax authorities’
payment related to CIR is late, default interests are applied and
are recognized in “other income”.
Details of revenues and other income
Revenues by country of origin and other income
For the year ended December 31,
2015 2016 2017
$ in
thousands
From France 55,816 44,409 24,680
From USA 49 399 508
Revenues 55,864 44,808 25,188
Research tax credit 5,591 10,038 8,327
Subsidies and other 1,110 1,599 201
Other income 6,701 11,637 8,528
Total revenues and other income 62,565 56,444 33,715
For the years ended December 31, 2017, 2016 and 2015, the
revenue from France was generated by Cellectis S.A.
For the years ended December 31, 2017, 2016 and 2015, the
revenue from USA was generated by Calyxt Inc.
Revenues by nature
For the year ended December 31,
2015 2016 2017
$ in
thousands
Recognition of previously deferred upfront payments 23,864 20,856 14,875
Other revenues 29,716 21,035 7,945
Collaboration agreements 53,580 41,891 22,821
Licenses 2,236 2,771 2,270
Products & services 48 145 97
Total revenues 55,864 44,808 25,188
Revenues are primarily generated by therapeutics activities, which
is mainly attributable to our entering into two major collaboration
agreements signed with Pfizer Inc. and Les Laboratoires Servier
during 2014. The revenues of plants activities are generated by
technology licenses and amounted to $49 thousand,
$0.6 million and $0.5 million for years ended
December 31, 2015, 2016 and 2017, respectively.
Entity-wide disclosures:
In 2017, two clients represent more than 10% of the total revenue:
Client A with 11% and Client B with 69%.
In 2016, two clients represent more than 10% of the total revenue:
Client A with 37% and Client B with 57%.
In 2015, three clients represent more than 10% of the total
revenue: Client A with 49% and Client B with 47%.
3.2 Operating expenses
Accounting policies
Royalty expenses corresponds to costs from license agreements that
we entered into to obtain access to technology that we use in our
product development efforts. Depending on the contractual
provisions, expenses are based either on a percentage of revenue
generated by using the patents or on fixed annual royalties.
Research and development expenses include employee-related costs,
laboratory consumables, materials supplies and facility costs, as
well as fees paid to non-employees
Selling, general and administrative expenses consist primarily of
employee-related expenses for executive, business development,
intellectual property, finance, legal and human resource functions.
Administrative expenses also include facility-related costs and
service fees, other professional services, recruiting fees and
expenses associated with maintaining patents.
We classify a portion of personnel and other costs related to
information technology, human resources, business development,
legal, intellectual property and general management in research and
development expenses based on the time that each employee or person
spent contributing to research and development activities versus
sales, general and administrative activities.
Details of operating expenses by nature
For the year ended
December 31,
2015 2016 2017
$ in
thousands
Royalty expenses (2,746 ) (1,777 ) (2,620 )
For the year ended
December 31,
Research and development expenses 2015 2016 2017
$ in
thousands
Wages and salaries (10,151 ) (11,924 ) (12,986 )
Social charges on free shares and stock option grants (8,626 ) (3,851 ) (1,088 )
Non-cash (20,563 ) (33,207 ) (23,832 )
Personnel expenses (39,341 ) (48,982 ) (37,906 )
Purchases and external expenses (16,920 ) (27,720 ) (38,458 )
Other (1,893 ) (1,756 ) (2,863 )
Total research and development expenses (58,154 ) (78,458 ) (79,227 )
For the year ended
December 31,
Selling, general and administrative
expenses 2015 2016 2017
$ in
thousands
Wages and salaries (3,959 ) (4,978 ) (7,019 )
Social charges on free shares and stock option grants (4,937 ) (3,130 ) (881 )
Non-cash (12,839 ) (25,415 ) (26,586 )
Personnel expenses (21,735 ) (33,523 ) (34,486 )
Purchases and external expenses (6,765 ) (8,854 ) (9,138 )
Other (1,723 ) (1,035 ) (1,126 )
Total selling, general and administrative expenses (30,223 ) (43,413 ) (44,750 )
For the year ended
December 31,
Personnel expenses 2015 2016 2017
$ in
thousands
Wages and salaries (14,110 ) (16,902 ) (20,005 )
Social charges on free shares and stock option grants (13,564 ) (6,981 ) (1,969 )
Non-cash (33,402 ) (58,622 ) (50,418 )
Total personnel expenses (61,076 ) (82,505 ) (72,392 )
3.3 Financial income and expenses
Accounting policies
Financial income and financial expense include, in particular, the
following:
• Interest income from savings account
and fixed term bank deposits;
• Interest expense from financial
leases;
• Foreign exchange gain (loss) from
transactions in foreign currencies;
• Other financial income and expenses,
mainly derived from fair value adjustments related to our financial
assets and derivative instruments.
Details of financial income and expenses
For the year ended
December 31,
2015 2016 2017
$ in
thousands
Interest income 1,094 1,630 1,974
Foreign exchange gain 9,094 4,832 1,185
Other financial income 65 689 4,102
Total financial 10,253 7,147 7,262
Interest expenses (1 )
—
—
Interest expenses for finance lease (23 ) (7 ) (4 )
Foreign exchange loss (1,846 ) (4,201 ) (17,734 )
Other financial expenses (6 ) (2,895 ) (556 )
Total financial expenses (1,876 ) (7,101 ) (18,294 )
Total 8,378 46 (11,032 )
The decrease in financial income and expenses between 2016 and 2017
of $11.1 million was mainly attributable to the increase in
net foreign exchange loss ($17.2 million), partly offset by the
increase of foreign exchange derivatives fair value adjustment
($5.8 million), the increase in interest income ($0.3 million) and
other immaterial variances.
3.4 Income tax
Accounting policies
Income tax (expense or income) comprises current tax expense
(income) and deferred tax expense (income).
Deferred taxes are recognized for all the temporary differences
arising from the difference between the tax basis and the
accounting basis of assets and liabilities. Tax losses that can be
carried forward or backward may also be recognized as deferred tax
assets. Tax rates that have been enacted as of the closing date are
utilized to determine deferred tax. Deferred tax assets are
recognized only to the extent that it is likely that future profits
will be sufficient to recover them. We have not recorded deferred
tax assets or liabilities in the statements of financial
position.
Tax proof
For the year ended
December 31,
2015 2016 2017
$ in
thousands
Income (loss) before taxes from continuing operations (22,606 ) (67,255 ) (103,683 )
Theoretical group tax rate 34.43 % 34.43 % 34.43 %
Theoretical tax benefit (expense) 7,783 23,156 35,698
Increase/decrease in tax benefit arising from:
Permanent differences 6,426 124 293
Research tax credit 1,926 3,082 2,926
Share-based compensation & other IFRS adjustments (11,500 ) (20,184 ) (8,297 )
Non recognition of deferred tax assets related to tax losses and
temporary differences (4,627 ) (6,158 ) (30,713 )
Other differences (9 ) (20 ) 92
Effective tax expense
—
—
—
Effective tax rate 0.00 % 0.00 % 0.00 %
The Tax Cuts and Jobs Act
On December 22, 2017 the President of the United States signed
legislation commonly known as the Tax Cuts and Jobs Act (“the
Act”) into law. We outline the impact the Act has on our US
subsidiaries’ tax obligations and its deferred tax assets and
liabilities. Since their inception, our US subsidiaries have had
losses and they expect to continue to have losses in the future. As
a result, our US subsidiaries to date have not had taxable income.
The deferred income tax assets and liabilities are recognized for
the differences between the financial statement and income tax
reporting basis of assets and liabilities based on currently
enacted rates and laws. Historically, our US subsidiaries used the
applicable Federal statutory rate of 34% to estimate the benefit of
the deferred tax asset. As of December 31, 2017, they use a lower
rate of 21% passed in the Act.
We provide for a valuation allowance when it is more likely than
not that our U.S. subsidiaries will not realize a portion of the
deferred tax assets. Historically we have 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, we have not
reflected any benefit of such deferred tax assets in the
accompanying financial statements. Going forward, with the lower
tax rate enacted in the Act, the ability to utilize the deferred
tax asset becomes even less probable. We do not expect changes to
the rules regarding net operating losses under the Act to have a
material impact on our financial statements for the year ended
December 31, 2017, as all net deferred tax assets are fully
reserved.
Deferred tax assets and liabilities
As of December 31,
2015 2016 2017
$ in
thousands
Credits and net operating loss carryforwards 37,719 41,985 51,640
Pension commitments 164 193 548
Leases (126 ) (54 ) (12 )
Impairment of assets 16 14 10
Other 284 894 604
Valuation allowance on deferred tax assets (38,057 ) (43,032 ) (52,790 )
Total
—
—
—
We have tax loss carryforwards for the French entity of the Group
totaling $36.1 million as of December 31, 2017. They
amounted to $30.1 million as of December 31, 2016 and
$29.7 million as of December 31, 2015. Such carryforwards
can be offset against future taxable profit within a limit of
$1.0 million per year, plus 50% of the profit exceeding this
limit. Remaining unused losses will continue to be carried forward
indefinitely.
The tax loss carry forwards for the U.S. entities of the Group
totaled $15.5 million as of December 31, 2017,
$11.9 million as of December 31, 2016 and
$8.0 million as of December 31, 2015. As tax loss carry
forwards and R&D tax credit were generated before
January 1, 2018, they will expire 20 years after they are
generated.
3.5 Reportable segments
Accounting policies
Reportable segments are identified as components of the Group that
have discrete financial information available for evaluation by the
Chief Operating Decision Maker (“CODM”), for purposes
of performance assessment and resource allocation.
Cellectis’ CODM is composed of:
• The Chairman and Chief Executive
Officer;
• The Chief Operating Officer;
• The Executive Vice President
Technical Operations;
• The Chief Scientific Officer;
• The Chief Financial Officer;
• The Vice President Business
Development;
• The General Counsel;
• The Senior Vice President Research
and Development and Chief Medical Officer;
• The Chief Regulatory &
Compliance Officer; and
• The Chief Executive Officer of
Calyxt, Inc.
We view our operations and manage our business in two operating and
reportable segments that are engaged in the following
activities:
• Therapeutics:
• Plants:
There are inter-segment transactions between the two reportable
segments, including allocation of corporate general and
administrative expenses by Cellectis S.A. and allocation of
research and development expenses to the reportable segments.
With respect to corporate general and administrative expenses,
Cellectis S.A. provides Calyxt, Inc. with general sales and
administrative functions, accounting and finance functions,
investor relations, intellectual property, legal advice, human
resources, communication and information technology pursuant to a
management agreement. Under the management agreement, Cellectis
S.A. charges Calyxt, Inc. in euros at cost plus a mark-up 12-month
The intersegment revenues represent the transactions between
segments. Intra-segment transactions are eliminated within a
segment’s results and intersegment transactions are
eliminated in consolidation as well as in key performance
indicators by reportable segment.
Information related to each reportable segment is set out below.
Segment revenues and other income, Research and development
expenses, Selling, general and administrative expenses, and
Royalties and other operating income and expenses, and Adjusted net
income (loss) attributable to shareholders of Cellectis (which does
not include non-cash
Adjusted Net Income (Loss) attributable to shareholders of
Cellectis S.A. is not a measure calculated in accordance with IFRS.
Because Adjusted Net Income (Loss) attributable to shareholders of
Cellectis excludes Non-cash non-cash
The net income (loss) includes the impact of the operations between
segments while the intra-segment operations are eliminated.
Details of key performance indicators by reportable
segment
For the year ended
For the year ended
For the year ended
$ in thousands Plants Therapeutics Total Plants Therapeutics Total Plants Therapeutics Total
Segment revenues and other income (1) 49 65,159 65,208 716 59,458 60,173 914 35,584 36,498
Inter-segment revenues (1)
— (2,643 ) (2,643 ) (130 ) (3,599 ) (3,729 ) (167 ) (2,615 ) (2,782 )
External revenues and other income 49 62,516 62,565 585 55,859 56,444 747 32,969 33,715
Research and development expenses (2,874 ) (55,280 ) (58,154 ) (4,112 ) (74,345 ) (78,458 ) (6,057 ) (73,170 ) (79,227 )
Selling, general and administrative expenses (1,834 ) (28,390 ) (30,223 ) (4,809 ) (38,603 ) (43,413 ) (13,143 ) (31,607 ) (44,750 )
Royalties and other operating income and expenses (272 ) (4,899 ) (5,171 ) (474 ) (1,402 ) (1,876 ) (384 ) (2,005 ) (2,389 )
Total operating expenses (4,980 ) (88,569 ) (93,549 ) (9,395 ) (114,351 ) (123,746 ) (19,584 ) (106,782 ) (126,366 )
Operating income (loss) before tax (4,931 ) (26,053 ) (30,984 ) (8,810 ) (58,492 ) (67,302 ) (18,837 ) (73,813 ) (92,650 )
Financial gain (loss) 259 8,119 8,378 87 (41 ) 46
— (11,033 ) (11,032 )
Net income (loss) (4,672 ) (17,934 ) (22,606 ) (8,722 ) (58,533 ) (67,255 ) (18,837 ) (84,846 ) (103,683 )
Non controlling interests
— (190 ) (190 )
—
—
— 4,315
— 4,315
Net income (loss) attributable to shareholders of
Cellectis (4,672 ) (18,124 ) (22,796 ) (8,722 ) (58,533 ) (67,255 ) (14,522 ) (84,846 ) (99,368 )
Adjustment of share-based compensation attributable to shareholders
of Cellectis 789 32,613 33,402 1,098 57,524 58,622 5,957 42,968 48,925
Adjusted net income (loss) attributable to shareholders of
Cellectis (3,883 ) 14,489 10,606 (7,625 ) (1,009 ) (8,633 ) (8,565 ) (41,877 ) (50,442 )
Depreciation and amortization (99 ) (1,838 ) (1,937 ) (345 ) (1,866 ) (2,211 ) (551 ) (2,820 ) (3,371 )
Additions to tangible and intangible assets 526 3,886 4,413 10,410 4,164 14,573 792 1,849 2,642
Impairment of tangible assets
—
—
—
—
—
— — (798 ) (798 )
(1) Intersegment revenues and other
income of Therapeutics segment for 2015 as disclosed in prior years
amounted to €0.8 million, or $0.9 million. In this
statement, Intersegment revenues and other income of Therapeutics
segment for 2015 amount to $2.6 million and comprise both
management fees and direct costs reinvoicing. The counterpart of
this change is the line Segment revenues and other income. It has
no impact on External revenues of Therapeutics segment.
Reconciliation of Plant result of operations
Since Calyxt, Inc., the agricultural biotechnology subsidiary of
Cellectis, is a U.S. entity, its financial statements have been
prepared in accordance with U.S. GAAP. However, the Plant segment
operations, as previously described, have been prepared in
accordance with IFRS. The tables below present a reconciliation of
the main figures of results of operations for our Plant segment
with Calyxt stand-alone financial statements.
Reconciliation of Plant Segment result of operations for the
year ended December 31, 2017
$ in thousands For the full year ended
December 31, 2017
Cellectis Reportable Calyxt equity IFRS/US GAAP Cellectis and Calyxt equity award IFRS/US GAAP Intersegment Reclassifications (3) Other (4) Calyxt Stand alone (US GAAP)
External revenues and other income 747
—
— 167 (405 ) (1 ) 508
Research and development expenses (6,057 ) 1,134 (6,086 )
— (563 ) 16 (11,556 )
Selling, general and administrative expenses (13,143 ) 6,316 (6,006 ) (2,501 ) 436 157 (14,741 )
Royalties and other operating income and expenses (384 )
—
— (114 ) 504 (7 )
—
Total operating expenses (19,584 ) 7,450 (12,092 ) (2,615 ) 378 166 (26,297 )
Operating income (loss) before tax (18,837 ) 7,450 (12,092 ) (2,448 ) (27 ) 165 (25,789 )
Financial gain (loss)
—
—
— (1 ) 27 (218 ) (191 )
Net income (loss) (18,837 ) 7,450 (12,092 ) (2,449 )
— (53 ) (25,980 )
Reconciliation of Plant Segment result of operations for the
year ended December 31, 2016
$ in thousands For the year ended December 31,
2016
Cellectis Reportable Calyxt equity IFRS/US Cellectis IFRS/US Intersegment Reclassifications (3) Other (4) Calyxt Stand alone (US GAAP)
External revenues and other income 585
—
— 131 (317 )
— 399
Research and development expenses (4,112 ) 477 (928 )
— (1,058 ) (17 ) (5,638 )
Selling, general and administrative expenses (4,809 ) 621 (20 ) (3,443 ) 945 37 (6,670 )
Royalties and other operating income and expenses (474 )
—
— (155 ) 430 (1 ) (200 )
Total operating expenses (9,395 ) 1,098 (948 ) (3,598 ) 317 19 (12,508 )
Operating income (loss) before tax (8,810 ) 1,098 (948 ) (3,468 )
— 19 (12,109 )
Financial gain (loss) 87
—
— (64 )
— (1 ) 23
Net income (loss) (8,722 ) 1,098 (948 ) (3,532 )
— 18 (12,086 )
Reconciliation of Plant Segment result of operations for the
year ended December 31, 2015
$ in thousands For the year ended December 31,
2015
Cellectis Reportable Calyxt equity IFRS/US Cellectis IFRS/US Intersegment Reclassifications (3) Other (4) Calyxt Stand alone (US GAAP)
External revenues and other income 49
—
— 72 (72 ) 1,223 1,272
Research and development expenses (2,874 ) 384 (583 )
— 8 298 (2,766 )
Selling, general and administrative expenses (1,834 ) 405 (109 ) (2,568 ) 535
— (3,569 )
Royalties and other operating income and expenses (272 )
—
— (75 ) (403 ) (1 ) (751 )
Total operating expenses (4,980 ) 789 (692 ) (2,643 ) 141 297 (7,086 )
Operating income (loss) before tax (4,931 ) 789 (692 ) (2,571 ) 69 1,521 (5,814 )
Financial gain (loss) 259
—
— (261 ) (69 ) (4 ) (75 )
Net income (loss) (4,672 ) 789 (692 ) (2,832 )
— 1,517 (5,889 )
(1) Calyxt equity award plan: In IFRS,
the Calyxt equity award plan non-cash
Cellectis equity award: Since 2016,
Cellectis allocates share-based compensation to the share-related
entity (rather than the entity related to the employee that
benefited from such compensation), considering that the share-based
compensation is an expense linked to such entity’s
performance. Consequently, in the segment disclosure, all
share-based compensation based on Cellectis shares have been
charged in the Therapeutics segment, even if some Calyxt employees
are included in a Cellectis stock-option plan. However, the
Cellectis equity award plan non-cash
(2) Intersegment transactions primarily
relate to management fees invoiced by Cellectis to Calyxt.
Intersegment transactions are eliminated in the consolidated
financial statements as well as in Cellectis’ presentation of
key performance indicators by reportable segment. However,
intersegment transactions are included in Calyxt’s
stand-alone financial metrics.
(3) Reclassifications relate to expenses,
which are classified differently under IFRS for Cellectis’
consolidated financials and U.S. GAAP for Calyxt’s
stand-alone financial statements.
(4) Other principally reflects
adjustments recorded in the Calyxt stand-alone financial
statements, which are immaterial when considered by Cellectis on a
consolidated basis for purposes of the Cellectis consolidated
financial statements. Note that this category includes (i) in
2017, the restatement of Calyxt’s sale and lease back
transaction with respect to its Roseville, Minnesota property,
which is recorded as a finance lease in US GAAP and an
operating lease under IFRS and (ii) in 2015, the restatement
of stand-alone financial statement related to previous years’
revenue recognition. |
