| 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
The new standard IFRS 15 “Revenue from contracts with
customers” is of mandatory application since January 1,
2018. Such standard was applied by Cellectis using the full
retrospective method. Therefore, we restated 2016 opening balance
sheet i.e. January 1, 2016. Please see note 2.3 for more
details.
Under IFRS 15, revenue is recognized at an amount that reflects the
consideration to which Cellectis expects to be entitled in exchange
for transferring goods and services to customers (and it will
collect consideration to which it will be entitled). That is,
revenue is recognized when Cellectis satisfies a performance
obligation by transferring a distinct good or service (or a
distinct bundle of goods and or/ services) to a customer, i.e. when
the customer obtains control of these goods or services. Since
January 1 st
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. Such payments are considered variable consideration. We
recognize milestone payments when it is highly probable that any
revenue recognized will not be subsequently reversed. This includes
consideration of whether the performance obligation is achieved and
may be when the triggering event has occurred, depending on the
nature of the triggering event, 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 are recognized once the control over
the delivered products is transferred to the customer. We also
offer research services, which revenue is recognized over time, as
the customer receives the benefits of the services.
Research Tax Credit
The main Research Tax Credit from which 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,
2016 2017 2018
$ in thousands
From France 44,409 24,680 12,495
From USA 399 508 236
Revenues 44,808 25,188 12,731
Research tax credit 10,038 8,327 8,561
Subsidies and other 1,599 201 140
Other income 11,637 8,528 8,701
Total revenues and other income 56,444 33,715 21,432
For the years ended December 31, 2018, 2017 and 2016, the
revenue from France was generated by Cellectis S.A.
For the years ended December 31, 2018, 2017 and 2016, the
revenue from USA was generated by Calyxt, Inc.
Revenues by nature
For the year ended December 31,
2016 2017 2018
$ in thousands
Recognition of previously deferred upfront payments 20,856 14,875 7,114
Other revenues 21,035 7,945 3,383
Collaboration agreements 41,891 22,821 10,497
Licenses 2,771 2,270 2,142
Products & services 145 97 92
Total revenues 44,808 25,188 12,731
Revenues are primarily generated by therapeutics activities, which
are mainly attributable to our entering into two major
collaboration agreements signed with Pfizer Inc. and Les
Laboratoires Servier during 2014. Effective as of April 2018,
Pfizer sold certain assets to which the Research Collaboration and
License Agreement relates to Allogene Therapeutics, Inc.
(“Allogene”) (the “Asset Contribution
Agreement”). As part of this Asset Contribution Agreement,
Pfizer assigned the Research Collaboration and License Agreement to
Allogene. The revenues of plants activities are generated by
technology licenses and amounted to $0.6 million,
$0.5 million and $0.3 million for years ended
December 31, 2016, 2017 and 2018, respectively.
Entity-wide disclosures:
In 2018, two clients represent more than 10% of the total revenue:
Client A with 55% and Client B with 21%.
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%.
3.2 Operating expenses
Accounting policies
Royalty expenses correspond 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,
2016 2017 2018
$ in thousands
Royalty expenses (1,777 ) (2,620 ) (2,739 )
For the year ended
December 31,
2016 2017 2018
$ in
thousands
Research and development expenses
Wages and salaries (11,924 ) (12,986 ) (16,452 )
Social charges on free shares and stock option grants (3,851 ) (1,088 ) (99 )
Non-cash (33,207 ) (23,832 ) (18,057 )
Personnel expenses (48,982 ) (37,906 ) (34,608 )
Purchases and external expenses (27,720 ) (38,458 ) (40,458 )
Other (1,756 ) (2,863 ) (1,501 )
Total research and development expenses (78,458 ) (79,227 ) (76,567 )
For the year ended
December 31,
2016 2017 2018
$ in
thousands
Selling, general and administrative expenses
Wages and salaries (4,978 ) (7,019 ) (11,373 )
Social charges on free shares and stock option grants (3,130 ) (881 ) (29 )
Non-cash (25,415 ) (26,586 ) (19,161 )
Personnel expenses (33,523 ) (34,486 ) (30,563 )
Purchases and external expenses (8,854 ) (9,138 ) (14,251 )
Other (1,035 ) (1,126 ) (2,433 )
Total selling, general and administrative expenses (43,413 ) (44,750 ) (47,248 )
For the year ended
December 31,
2016 2017 2018
$ in
thousands
Personnel expenses
Wages and salaries (16,902 ) (20,005 ) (27,825 )
Social charges on free shares and stock option grants (6,981 ) (1,969 ) (128 )
Non-cash (58,622 ) (50,418 ) (37,218 )
Total personnel expenses (82,505 ) (72,392 ) (65,171 )
3.3 Financial income and expenses
Accounting policies
Financial income and financial expense include, in particular, the
following:
•
Interest income from savings accounts and fixed term
bank deposits;
•
Interest expense from financial leases;
•
Foreign exchange gain (loss) from transactions in
foreign currencies; and
•
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,
2016 2017 2018
$ in thousands
Interest income 1,630 1,974 6,787
Foreign exchange gain 4,832 1,185 13,597
Other financial revenues 689 4,102 188
Total financial revenues 7,147 7,262 20,572
Interest expenses
—
— (39 )
Interest expenses for finance lease (7 ) (4 ) (7 )
Foreign exchange loss (4,201 ) (17,734 ) (3,090 )
Other financial expenses (2,895 ) (556 ) (677 )
Total financial expenses (7,101 ) (18,294 ) (3,813 )
Total 46 (11,032 ) 16,758
The increase in financial income and expenses between 2017 and 2018
of $27.8 million was mainly attributable to the increase in
net foreign exchange gain ($27.0 million), the increase in interest
income ($4.8 million) partly offset by the decrease of foreign
exchange derivatives fair value adjustment ($4.0 million), included
in other financial revenues and expenses.
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,
2016 2017 2018
$ in thousands
Income (loss) before taxes from continuing operations (67,255 ) (103,683 ) (88,333 )
Theoretical group tax rate 34.43 % 34.43 % 23.66 %
Theoretical tax benefit (expense) 23,156 35,698 20,901
Increase/decrease in tax benefit arising from:
Permanent differences 124 293 832
Research tax credit 3,082 2,926 2,079
Share-based compensation & other IFRS adjustments (20,184 ) (8,297 ) (8,065 )
Non recognition of deferred tax assets related to tax losses and
temporary differences (6,158 ) (30,713 ) (15,652 )
Other differences (20 ) 92 (95 )
Effective tax expense
—
—
—
Effective tax rate 0.00 % 0.00 % 0.00 %
On December 22, 2017 the President of the United States signed
The Tax Cuts and Jobs Act (“the Act”) into law. We
considered the impact the tax reform has on our US
subsidiaries’ tax obligations and its deferred tax assets and
liabilities. Since its inception, our US subsidiaries have had
losses and it expects to continue to have losses in the future. As
a result, our US subsidiaries 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
Federal statutory rate of 34% to estimate the benefit of the
deferred tax asset and going forward they expect to use a lower
rate of 21% passed in the Act.
In France, the income tax rate we anticipate to use our tax loss
carryforwards is 25% based on the 2018 French Finance Act.
We provide for a valuation allowance when it is more likely than
not that we 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 the passing of the Act to have material impact on our
financial statements, as all net deferred tax assets are fully
reserved.
Deferred tax assets and liabilities
As of December 31,
2016 2017 2018
$ in thousands
Credits and net operating loss carryforwards 41,985 51,640 65,555
Pension commitments 193 548 569
Leases (54 ) (12 ) (4 )
Impairment of assets 14 10 10
Revenue recognition
—
— 200
Other 894 604 491
Valuation allowance on deferred tax assets (43,032 ) (52,790 ) (66,823 )
Total
—
—
—
We have cumulative tax loss carryforwards for the French entity of
the Group totaling $186 million as of December 31, 2018,
$144 million as of December 31, 2017 and $87 million
as of December 31, 2016. 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 cumulative tax loss carryforwards for the U.S. entities of the
Group totaled $86 million as of December 31, 2018,
$62 million as of December 31, 2017 and $42 million
as of December 31, 2016. The carryforward periods are as
follows: $32.0 million do not expire; while other expire in
2032 or after.
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 General Counsel;
•
The Senior Vice President Research and Development
(until February 7, 2019);
•
The Chief Medical Officer (until February 28,
2019);
•
The Chief Regulatory & Compliance
Officer.
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 December 31, 2016
For the year ended December 31, 2017
For the year ended December 31, 2018
$ in thousands Plants Therapeutics Total Plants Therapeutics Total Plants Therapeutics Total
External revenues 399 44,409 44,808 508 24,680 25,188 236 12,495 12,731
External other income 186 11,450 11,637 239 8,290 8,528 178 8,523 8,701
External revenues and other income 585 55,859 56,444 747 32,969 33,715 414 21,018 21,432
Royalty expenses (468 ) (1,309 ) (1,777 ) (390 ) (2,230 ) (2,620 ) (595 ) (2,144 ) (2,739 )
Research and development expenses (4,112 ) (74,345 ) (78,458 ) (6,057 ) (73,170 ) (79,227 ) (8,638 ) (67,929 ) (76,567 )
Selling, general and administrative expenses (4,809 ) (38,603 ) (43,413 ) (13,143 ) (31,607 ) (44,750 ) (21,067 ) (26,180 ) (47,248 )
Other operating income and expenses (6 ) (93 ) (99 ) 6 225 232 (50 ) 81 31
Total operating expenses (9,395 ) (114,351 ) (123,746 ) (19,584 ) (106,782 ) (126,366 ) (30,351 ) (96,172 ) (126,523 )
Operating income (loss) before tax (8,810 ) (58,492 ) (67,302 ) (18,837 ) (73,813 ) (92,650 ) (29,937 ) (75,154 ) (105,091 )
Financial gain (loss) 87 (41 ) 46
— (11,032 ) (11,032 ) 1,420 15,339 16,758
Net income (loss) (8,722 ) (58,533 ) (67,255 ) (18,837 ) (84,846 ) (103,683 ) (28,517 ) (59,816 ) (88,333 )
Net income (loss) from discontinued operations
—
—
—
—
—
—
—
—
—
Non controlling interests
—
—
— 4,315
— 4,315 9,640
— 9,640
Net income (loss) attributable to shareholders of
Cellectis (8,722 ) (58,533 ) (67,255 ) (14,522 ) (84,846 ) (99,368 ) (18,877 ) (59,816 ) (78,693 )
R&D non-cash 477 32,731 33,208 967 22,623 23,590 838 16,852 17,689
SG&A non-cash 621 24,793 25,414 4,990 20,345 25,335 5,218 11,655 16,873
Adjustment of share-based compensation attributable to
shareholders of Cellectis 1,098 57,524 58,622 5,957 42,967 48,924 6,056 28,507 34,563
Adjusted net income (loss) attributable to shareholders of
Cellectis (7,625 ) (1,009 ) (8,633 ) (8,565 ) (41,877 ) (50,443 ) (12,821 ) (31,309 ) (44,130 )
Depreciation and amortization (345 ) (1,866 ) (2,211 ) (551 ) (2,820 ) (3,371 ) (637 ) (1,740 ) (2,377 )
Additions to tangible and intangible assets 10,410 4,164 14,573 792 1,849 2,642 1,871 3,040 4,911
Impairment of tangible assets
—
—
—
— (798 ) (798 )
—
—
—
Reconciliation of Plant result of operations
The tables below present a reconciliation between the Plant segment
figures that are prepared in accordance with IFRS for the Group
with Calyxt, Inc. stand alone financial statements which are
prepared in accordance with US GAAP for the domestic
registration.
Reconciliation of Plant Segment result of operations for the
year ended December 31, 2018
$ in thousands
For the full year ended December 31, 2018
Cellectis Reportable Non-cash stock-based IFRS (1) Non-cash stock-based compensation in US GAAP (1) Intersegment Reclassifications Other (4) Calyxt Stand alone (US GAAP)
External revenues and other income 414
—
—
— (177 )
— 236
Research and development expenses (8,638 ) 1,205 (630 )
— (1,783 )
— (9,846 )
Selling, general and administrative expenses (21,067 ) 7,506 (3,756 ) (3,090 ) 1,245 657 (18,505 )
Royalties and other operating income and expenses (645 )
—
— (71 ) 716
—
—
Total operating expenses (30,350 ) 8,711 (4,386 ) (3,161 ) 177 657 (28,351 )
Operating income (loss) before tax (29,937 ) 8,711 (4,386 ) (3,161 )
— 657 (28,115 )
Financial gain (loss) 1,420
—
— 51
— (1,244 ) 218
Net income (loss) (28,517 ) 8,711 (4,386 ) (3,110 )
— (587 ) (27,897 )
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 award plan IFRS/US GAAP Cellectis and Calyxt equity award IFRS/US GAAP Intersegment Reclassifications 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 award plan IFRS/US GAAP
Cellectis equity award IFRS/US GAAP Intersegment Reclassifications 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 )
(1)
In IFRS, non-cash
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
statements.
(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 includes 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 U.S. GAAP and as an operating lease under IFRS. |
