Cibus, Inc. (NASDAQ:CBUS) Q3 2023 Earnings Conference Call November 9, 2023 4:30 PM ET Company Participants Wade King - Chief Financial Officer Rory Riggs - Co-Founder, Chief Executive Officer and Chairman Peter Beetham - Co-Founder, President and Chief Operating Officer Conference Call Participants Bobby Burleson - Canaccord Genuity Kevin Estok - Jefferies Operator Good afternoon, and welcome to the Cibus Third Quarter 2023 Results Conference Call. [Operator Instructions] Please also note, today's event is ...

Business Model and Trait Development - The company's core business model focuses on three crops (canola, rice, soybean) and five traits (PSR, HT1, HT2, HT3, Sclerotinia resistance), which represent a significant business opportunity and economic foundation[107] - Initial transfers of customer elite germplasm have started towards commercialization in the field, indicating strong customer demand for the developed traits in canola and rice[107] - The company positions itself as a leader in gene editing and trait development, aiming to improve efficiency and effectiveness in addressing agriculture's productivity issues[107] - Cibus Global focuses on gene editing technologies to develop plant traits that improve farming productivity and produce low carbon plant products[151] Financial Performance and Metrics - Total assets increased significantly to $796.235 million in September 2023 from $22.421 million in December 2022[137] - Net loss for the three months ended September 30, 2023, was $34.528 million, compared to $5.950 million in the same period in 2022[140] - Comprehensive loss for the nine months ended September 30, 2023, was $60.418 million, compared to $14.054 million in the same period in 2022[140] - Cash and cash equivalents increased to $31.883 million in September 2023 from $3.427 million in December 2022[137] - Goodwill increased to $585.266 million in September 2023 from $0 in December 2022[137] - Total current liabilities increased to $25.079 million in September 2023 from $1.662 million in December 2022[137] - Net cash used by operating activities for the nine months ended September 30, 2023, was $29.193 million, compared to $15.601 million in the same period in 2022[148] - Cash acquired from the merger with Cibus Global, LLC was $59.381 million in the nine months ended September 30, 2023[148] - Total stockholders' equity increased to $463.390 million in September 2023 from $7.233 million in December 2022[137] - Redeemable noncontrolling interest was $129.104 million in September 2023[137] - Revenue for the three months ended September 30, 2023, was $475,000, compared to $42,000 for the same period in 2022[164] - Net loss for the three months ended September 30, 2023, was $34.5 million, compared to $5.95 million for the same period in 2022[164] - Research and development expenses for the three months ended September 30, 2023, were $17.5 million, compared to $3.0 million for the same period in 2022[164] - Selling, general, and administrative expenses for the three months ended September 30, 2023, were $8.75 million, compared to $3.23 million for the same period in 2022[164] - The Company's total operating expenses for the three months ended September 30, 2023, were $26.3 million, compared to $6.2 million for the same period in 2022[164] - Net loss for the nine months ended September 30, 2023 was $60.4 million[183] - Cash used for operating activities was $29.2 million for the nine months ended September 30, 2023[183] - As of September 30, 2023, the company had $31.9 million in cash and cash equivalents and $25.1 million in current liabilities[184] - The company recorded $0.7 million in revenue, $35.5 million in net loss attributable to controlling interest, and $9.9 million in net loss attributable to redeemable noncontrolling interest for the nine months ended September 30, 2023[288] - Pro forma revenues for the nine months ended September 30, 2023, were $1.154 million, compared to $992 million for the same period in 2022[289] Merger and Stock Transactions - The company completed a one-for-ten reverse stock split effective April 24, 2023, and a one-for-five reverse stock split effective May 31, 2023[114][132] - The company completed a merger transaction on May 31, 2023, resulting in an "Up-C" structure with Class A and Class B Common Stock[113] - Cibus, Inc. completed the Merger Transactions with Cibus Global on May 31, 2023, consolidating financial results and reporting redeemable noncontrolling interest[150] - At the closing of the Merger Transactions, the Company issued 16,527,484 shares of Class A Common Stock and 4,642,636 shares of Class B Common Stock to Cibus Global equityholders[152] - Legacy Calyxt stockholders held approximately 4.8% of the issued and outstanding common stock, while legacy Cibus Global holders held approximately 95.2%[152] - The Company effected a one-for-five reverse stock split prior to the Merger Transactions, effective May 31, 2023[154] - The company issued 15,508,202 shares of Class A Common Stock resulting from the merger with Cibus Global, LLC[177] - The company's authorized shares consist of 210,000,000 shares of Class A Common Stock and 90,000,000 shares of Class B Common Stock[181] - As of September 30, 2023, the company had 16,659,996 shares of Class A Common Stock outstanding and 4,642,636 shares of Class B Common Stock outstanding[182] - The company issued 16,527,484 shares of Class A Common Stock and 4,642,636 shares of Class B Common Stock to Cibus Global equityholders as part of the Merger Transactions[304] Liquidity and Capital Resources - The company's primary source of liquidity is its cash and cash equivalents, with additional capital resources accessible from the capital markets[183] - The company anticipates continuing to generate losses for the next several years and expects to finance future cash needs through various means including cash on hand, commercialization activities, and equity or debt financings[202] - Management will need to raise additional capital to support its business plans to continue as a going concern within one year after the date these financial statements are issued[203] - The company received net proceeds of $10.0 million from the Follow-On Offering, after deducting $0.9 million in underwriting discounts and estimated offering expenses[301] Revenue Recognition and Deferred Revenue - The company's revenues represent amounts earned from collaboration agreements related to contract research, recognized under Topic 606 Revenue from Contracts with Customers[194] - Accounts receivable allowance for credit losses was $0 as of September 30, 2023, and December 31, 2022[207] - Deferred revenue recognized as revenue for the three months ended September 30, 2023, was $0.5 million[216] - Deferred revenue recognized as revenue for the nine months ended September 30, 2023, was $0.1 million[216] - The Company's deferred revenue balance as of September 30, 2023, was $1.637 million, up from $107,000 as of December 31, 2022[244] Expenses and Costs - The Company incurred $8.2 million in expenses related to the Merger Transactions, with $3.5 million in legal and professional fees, $1.9 million in severance costs, and $1.1 million in stock compensation expense included in SG&A for the nine months ended September 30, 2023[238] - The Company recognized $0.4 million of deferred financing costs related to Common Warrants in SG&A expense during the second quarter of 2023[245] - The Company's R&D costs include salaries, lab supplies, consultant fees, and allocated facility costs, which are expensed as incurred[218] - The Company's SG&A expense includes costs related to intellectual property portfolio management and patent filing, which were reclassified from R&D to SG&A starting in the second quarter of 2023[217] - The Company recognized $0.2 million related to the Employee Retention Credit (ERC) as of September 30, 2023, with no further credits expected[255] Stock Options and Warrants - The Company's total stock options and unvested equity awards outstanding as of September 30, 2023, were 1,412,013, compared to 323,229 as of September 30, 2022[223] - Weighted average shares of Class A Common Stock outstanding excludes unvested Class A Common Stock, which are treated as issued and outstanding only after vesting[250] - The Company's potential dilutive securities, including Common Warrants and unvested stock units, were excluded from diluted net loss per share calculations due to their anti-dilutive effect[251] - Common Warrants issued in the Follow-On Offering expire on August 23, 2027, and are exercisable for one share of Class A Common Stock at $69.04 per share[252] - The estimated fair value of Common Warrants as of September 30, 2023, was $9.54 million, with an expected volatility of 107.1% and a risk-free interest rate of 4.7%[294] Intangible Assets and Goodwill - The company recognized goodwill totaling $585.3 million from the Merger Transactions with Cibus Global, representing future economic benefits from the acquisition[297] - The company's intangible assets as of September 30, 2023, include $99.051 million in in-process research and development, $14.148 million in developed technology, and $22.230 million in trade name[298] - The Company's definite-lived intangible assets have a weighted average amortization period of 20 years[265] - Total amortization expense for the remainder of 2023 is estimated at $458 thousand, with annual expenses of $1.833 million from 2024 to 2028[279] Tax and Financial Agreements - The Company will pay 85% of net income tax savings to Electing Members under the Tax Receivable Agreement (TRA) related to the Merger Transactions[267] - The fair value of Level 3 liabilities increased from $291 thousand as of December 31, 2022, to $1.512 million as of September 30, 2023[272] Property, Plant, and Equipment - Total property, plant, and equipment increased from $4.516 million as of December 31, 2022, to $17.197 million as of September 30, 2023[276] Other Financial Information - The company's money market funds had a fair value of $7.389 million as of September 30, 2023, classified as Level 1 assets[292] - The company financed its enterprise science platform annual software license at an annual interest rate of 10.9%, with the note maturing in July 2024[299] - Redeemable noncontrolling interest holders owned approximately 22% of Cibus Global as of May 31, 2023, and September 30, 2023[258] - The purchase price for Cibus Global was $634,751,397, calculated based on 20,150,838 shares of Common Stock at a fair value of $31.50 per share[234] Investor Relations and Communication - The company provides email alerts for new press releases posted on its website, allowing investors to stay updated on announcements[136] Industry Risks and Uncertainties - The company's industry is subject to high uncertainty and risk, as outlined in various SEC filings, including Form 8-K and Form 10-Q[135]

Financial Data and Key Metrics Changes - R&D expense increased to $8.4 million for Q2 2023 from $3.2 million in the prior year, primarily due to higher lab supply costs, increased headcount, and stock-based compensation related to the acquisition [6] - Net loss for Q2 2023 was $20.5 million, compared to a net loss of $2.5 million in the same period last year, with net loss per share of Class A common stock at $2.74 versus $2.66 [7][15] - Cash and cash equivalents as of June 30, 2023, were $50.9 million, expected to fund operations into Q1 2024 [14] Business Line Data and Key Metrics Changes - SG&A expense rose to $11.1 million for Q2 2023 from $3.6 million in the previous year, attributed to increased headcount, consulting, legal fees, and stock-based compensation [18] - The merger with Calyxt reflects a transition from legacy operations to combined business operations, impacting financial results [2][4] Market Data and Key Metrics Changes - The company has successfully returned three developed traits to customers, including pod shatter reduction in canola and herbicide tolerance in rice, with expectations for five more canola transfers in 2023 [24] - The company is entering breeding collaborations with major seed companies, including Bayer, to test and validate its Trait Machine process [26] Company Strategy and Development Direction - The merger is seen as a pivotal moment for the company, transitioning from R&D to a commercial entity, with 2023 identified as an inflection year [22] - The company aims to develop advanced traits that can be commercialized quickly, leveraging its Trait Machine technology to enhance productivity in agriculture [33][48] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the regulatory landscape, noting that many markets are moving towards legislation that would regulate gene-edited traits similarly to conventional breeding [47] - The company anticipates that its first royalties from customers will begin to appear in 2025 to 2026, following the completion of necessary validations and registrations [85][106] Other Important Information - The company has a pipeline of six traits, with three developed and in the market, and two in advanced stages of development [75] - The company is focused on complex traits that involve multiple edits, which are difficult to achieve through conventional breeding methods [45] Q&A Session Summary Question: What is the expected cash burn trend? - The operating burn is currently about $6.5 million per month, expected to trend up to $7 million by the end of the year [104][105] Question: What is the timeline for cash revenues from trait transfers? - It is expected to take 2 to 3 years after transferring traits to customers for revenues to start appearing [106] Question: How does the company plan to handle royalties from gene-edited traits? - Royalties will be collected at the end of the planting season, with expectations for first royalties to appear in 2025 to 2026 [84][85] Question: What is HT2 and its significance? - HT2 represents a new mode of action for herbicide tolerance, providing broader weed control options for farmers [91] Question: Are there concerns about saving seeds and royalty collection? - The company does not have concerns about seed saving as customers manage that aspect effectively [92] Question: What are the synergies expected from crop-to-crop learnings? - The company anticipates that learnings from canola and rice will facilitate the introduction of traits into soybean, enhancing collaboration opportunities [95][99]

[FORM 10-Q](index=1&type=section&id=FORM%2010-Q) [Explanatory Note](index=3&type=section&id=Explanatory%20Note) The Company completed Merger Transactions with Cibus Global on May 31, 2023, adopting an "Up-C" structure and establishing Class A and Class B Common Stock after two reverse stock splits - Cibus, Inc. completed Merger Transactions with Cibus Global, LLC on **May 31, 2023**, adopting an "**Up-C**" structure where Cibus, Inc. is the sole managing member of Cibus Global[256](index=256&type=chunk)[332](index=332&type=chunk) - The Amended Certificate of Incorporation established **Class A Common Stock** (full voting and economic rights) and **Class B Common Stock** (full voting, no economic rights)[256](index=256&type=chunk)[332](index=332&type=chunk) - Prior to the merger, Legacy Calyxt effected a **one-for-ten reverse stock split** on **April 24, 2023**, and a **one-for-five reverse stock split** on **May 31, 2023**[257](index=257&type=chunk)[258](index=258&type=chunk)[333](index=333&type=chunk)[358](index=358&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This report contains forward-looking statements about merger benefits, financial performance, and trait development, subject to risks like integration challenges and funding needs - Forward-looking statements cover anticipated benefits of the Merger Transactions, future financial performance, liquidity, capital resources, cash runway, ability to continue as a going concern, and advancement of platform and trait development[284](index=284&type=chunk) - Key risks include possible failure to realize merger benefits, effects on business relationships, litigation outcomes, competition, intellectual property challenges, increased development time/resources, reliance on third parties, funding needs, and regulatory developments[284](index=284&type=chunk) - The Company does not assume any obligation to publicly revise or update forward-looking statements, except as required by law[284](index=284&type=chunk) [Market Data](index=5&type=section&id=Market%20Data) Industry and market data are based on independent publications and internal assumptions, acknowledging high uncertainty and risks detailed in the 'Risk Factors' section - Industry and market information is derived from independent industry publications and internal assumptions[261](index=261&type=chunk) - The industry faces high uncertainty and risk, as outlined in the 'Risk Factors' section of the Company's Current Report on Form 8-K[261](index=261&type=chunk) [Website Disclosure](index=5&type=section&id=Website%20Disclosure) The Company uses its website and social media for routine information distribution to comply with Regulation FD, but this content is not incorporated into SEC filings - The Company uses its website (www.cibus.com), corporate Twitter (@CibusGlobal), and LinkedIn (https://www.linkedin.com/company/cibus-global) for routine distribution of company information, including press releases, analyst presentations, and supplemental financial information[286](index=286&type=chunk) - These channels are used for disclosing material non-public information and complying with Regulation FD[286](index=286&type=chunk) - Information provided on the Company's website or social media is not incorporated into, or deemed part of, this Quarterly Report on Form 10-Q or any other SEC filing[316](index=316&type=chunk) [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, equity, and cash flows, with notes on accounting policies and merger impacts [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Total assets significantly increased to **$814.3 million** as of June 30, 2023, from **$22.4 million** at December 31, 2022, primarily due to the Cibus Global merger Consolidated Balance Sheet Highlights (in Thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $50,895 | $3,427 | | Total current assets | $54,846 | $4,132 | | Property, plant, and equipment, net | $14,989 | $4,516 | | Operating lease right-of-use assets | $22,550 | $13,615 | | Intangible assets, net | $135,379 | $158 | | Goodwill | $585,266 | $— | | Total assets | $814,268 | $22,421 | | Total current liabilities | $22,445 | $1,662 | | Royalty liability - related parties | $148,977 | $— | | Total liabilities | $193,089 | $15,188 | | Redeemable noncontrolling interest | $136,866 | $— | | Total stockholders' equity | $484,313 | $7,233 | - The significant increase in total assets, goodwill, and intangible assets is primarily attributable to the merger with Cibus Global[317](index=317&type=chunk) [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) Revenue increased, but net losses significantly rose for the three and six months ended June 30, 2023, driven by higher operating expenses and a new Royalty Liability Interest expense post-merger Consolidated Statements of Operations Highlights (in Thousands, except per share) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $197 | $41 | $239 | $73 | | Research and development | $8,429 | $3,250 | $10,638 | $6,191 | | Selling, general, and administrative | $11,079 | $3,556 | $13,375 | $6,736 | | Loss from operations | $(19,311) | $(6,765) | $(23,774) | $(12,854) | | Royalty liability interest expense - related parties | $(2,617) | $— | $(2,617) | $— | | Net loss | $(20,509) | $(2,485) | $(25,903) | $(8,104) | | Net loss attributable to Cibus, Inc. | $(18,690) | $(2,485) | $(24,084) | $(8,104) | | Basic and diluted net loss per share of Class A common stock | $(3.05) | $(2.66) | $(6.73) | $(9.14) | - Revenue increased significantly (**380% YoY for Q2**, **227% YoY for H1**) primarily due to the addition of Cibus Global revenue from collaboration agreements for rice and soybean contract research[132](index=132&type=chunk)[161](index=161&type=chunk) - Net loss increased substantially (**725% YoY for Q2**, **220% YoY for H1**) driven by higher operating expenses and the new Royalty Liability Interest expense[132](index=132&type=chunk)[161](index=161&type=chunk) [Consolidated Statements of Comprehensive Loss](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) Comprehensive loss significantly increased for the three and six months ended June 30, 2023, primarily due to higher net loss and minor foreign currency adjustments Consolidated Statements of Comprehensive Loss Highlights (in Thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(20,509) | $(2,485) | $(25,903) | $(8,104) | | Foreign currency translation adjustments | $(2) | $— | $(2) | $— | | Comprehensive loss | $(20,511) | $(2,485) | $(25,905) | $(8,104) | | Comprehensive loss attributable to redeemable noncontrolling interest | $(1,819) | $— | $(1,819) | $— | | Comprehensive loss attributable to Cibus, Inc. | $(18,692) | $(2,485) | $(24,086) | $(8,104) | - Comprehensive loss for the three and six months ended June 30, 2023, was **$(20,511) thousand** and **$(25,905) thousand**, respectively, compared to **$(2,485) thousand** and **$(8,104) thousand** in the prior year periods[292](index=292&type=chunk) [Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Redeemable%20Noncontrolling%20Interest%20and%20Stockholders'%20Equity) Total stockholders' equity significantly increased to **$484.3 million** as of June 30, 2023, driven by common stock issuance for merger consideration and recognition of **$136.9 million** redeemable noncontrolling interest Stockholders' Equity and Noncontrolling Interest Highlights (in Thousands, except shares) | Metric | December 31, 2022 | June 30, 2023 | | :-------------------------------------- | :---------------- | :------------ | | Redeemable Noncontrolling Interest | $— | $136,866 | | Class A Common Stock (shares) | 976,908 | 16,606,401 | | Class A Common Stock (amount) | $5 | $8 | | Class B Common Stock (shares) | — | 4,642,636 | | Class B Common Stock (amount) | $— | $— | | Additional Paid-In Capital | $220,422 | $722,327 | | Shares in Treasury | $(1,043) | $(1,785) | | Accumulated Deficit | $(212,151) | $(236,235) | | Accumulated Other Comprehensive Loss | $— | $(2) | | Total Stockholders' Equity | $7,233 | $484,313 | - Issuance of common stock (**15,508,202 Class A shares** and **4,642,636 Class B shares**) as merger consideration significantly increased additional paid-in capital by **$634.7 million**[297](index=297&type=chunk)[322](index=322&type=chunk) - Redeemable noncontrolling interest of **$138.7 million** was recognized due to the Cibus Global merger[297](index=297&type=chunk)[322](index=322&type=chunk) [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased to **$14.1 million**, while investing activities provided **$58.8 million** due to the Cibus Global merger, and financing activities decreased to **$2.7 million** for the six months ended June 30, 2023 Consolidated Statements of Cash Flows Highlights (in Thousands) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used by operating activities | $(14,119) | $(11,276) | | Net cash provided by (used) by investing activities | $58,821 | $(1,289) | | Net cash provided by financing activities | $2,662 | $10,058 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $47,369 | $(2,507) | | Cash, cash equivalents, and restricted cash – end of period | $50,895 | $11,914 | - Cash acquired from the merger with Cibus Global, LLC was **$59.4 million**, driving the increase in investing activities[264](index=264&type=chunk) - Financing activities in 2023 included **$2.5 million** from a revolving line of credit from Cibus Global and **$1.3 million** from notes payable, offset by tax payments for vested restricted stock units[264](index=264&type=chunk) [Notes to the Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes detail financial reporting, accounting policies, merger impacts, fair value measurements, assets, liabilities, equity, compensation, taxes, leases, royalty liability, funding, collaborations, and related-party transactions [1. BASIS OF PRESENTATION & SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=13&type=section&id=1.%20BASIS%20OF%20PRESENTATION%20%26%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section details accounting principles, merger impacts, stock splits, going concern, fair value, asset policies, revenue recognition, and the reclassification of IP-related costs from R&D to SG&A - The Company consolidates Cibus Global's financial results and reports redeemable noncontrolling interest[331](index=331&type=chunk) - The Company's management has concluded there is substantial doubt regarding its ability to continue as a going concern, necessitating additional capital[14](index=14&type=chunk)[308](index=308&type=chunk)[336](index=336&type=chunk) - Beginning in **Q2 2023**, intellectual property portfolio costs and patent filing support are classified as **SG&A expense**, reclassified from R&D[96](index=96&type=chunk)[127](index=127&type=chunk)[349](index=349&type=chunk) [2. MERGER WITH CIBUS GLOBAL](index=19&type=section&id=2.%20MERGER%20WITH%20CIBUS%20GLOBAL) The May 31, 2023, merger with Cibus Global led to consolidation, recognition of redeemable noncontrolling interest, significant goodwill and intangible assets, and a Tax Receivable Agreement - Cibus Global is considered a **Variable Interest Entity (VIE)** with Cibus as its sole managing member and primary beneficiary, leading to consolidation[1](index=1&type=chunk) - Redeemable noncontrolling interest represents approximately **22%** of Cibus Global Common Units not owned directly by the Company, classified as temporary equity due to redemption features[414](index=414&type=chunk) Preliminary Purchase Price Allocation (May 31, 2023, in Thousands) | Asset/Liability | Amount | | :-------------------------------------- | :------- | | Cash and cash equivalents | $59,381 | | Accounts receivable | $2,216 | | Property, plant and equipment | $10,588 | | Operating lease right-of-use-assets | $9,519 | | Goodwill | $585,266 | | Intangible assets | $135,429 | | Accounts payable | $(5,582) | | Accrued expenses | $(3,477) | | Royalty liability - related parties | $(146,360) | | Consideration transferred | $634,751 | - The Company entered into a Tax Receivable Agreement (TRA) with Electing Members, obligating it to pay **85%** of net income tax savings from certain tax attributes and basis increases[421](index=421&type=chunk) [3. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE AND CONCENTRATIONS OF CREDIT RISK](index=23&type=section&id=3.%20FINANCIAL%20INSTRUMENTS%20MEASURED%20AT%20FAIR%20VALUE%20AND%20CONCENTRATIONS%20OF%20CREDIT%20RISK) Financial instruments are measured at fair value using a three-tier hierarchy, with Common Warrants classified as Level 3 liabilities, and cash equivalents invested in low-risk, short-dated securities - Fair value measurements are categorized into **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than Level 1), and **Level 3** (significant unobservable inputs)[10](index=10&type=chunk)[274](index=274&type=chunk)[364](index=364&type=chunk)[422](index=422&type=chunk) Fair Value of Common Warrants (in Thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------------------- | :------------ | :---------------- | | Estimated fair value of Common Warrants | $662 | $291 | | Risk-free interest rate | 4.3% | 4.0% | | Expected volatility | 100.0% | 85.0% | | Expected term to liquidation (in years) | 4.2 | 4.6 | - The Company invests cash and cash equivalents in highly liquid, short-dated, high investment-grade securities, diversifying risk and minimizing credit risk[424](index=424&type=chunk) [4. PROPERTY, PLANT, AND EQUIPMENT, NET](index=24&type=section&id=4.%20PROPERTY,%20PLANT,%20AND%20EQUIPMENT,%20NET) Net property, plant, and equipment significantly increased to **$14.99 million** as of June 30, 2023, primarily due to the Cibus Global merger, with an Asset Retirement Obligation also recorded Property, Plant, and Equipment, Net (in Thousands) | Category | June 30, 2023 | December 31, 2022 | | :-------------------------------------- | :------------ | :---------------- | | Buildings | $900 | $900 | | Leasehold improvements | $3,654 | $364 | | Office furniture and equipment | $12,394 | $7,803 | | Computer equipment and software | $2,709 | $912 | | Assets in progress | $1,801 | $— | | Total property, plant, and equipment | $21,831 | $10,393 | | Less accumulated depreciation and amortization | $(6,842) | $(5,877) | | Total | $14,989 | $4,516 | Depreciation and Amortization Expense (in Thousands) | Period | 2023 | 2022 | | :-------------------------------------- | :--- | :--- | | Three Months Ended June 30, | $571 | $365 | | Six Months Ended June 30, | $983 | $722 | - The Asset Retirement Obligation (ARO) increased to **$265 thousand** as of June 30, 2023, from zero at December 31, 2022, due to the Cibus Global merger and accretion expense[427](index=427&type=chunk) [5. GOODWILL AND INTANGIBLE ASSETS](index=24&type=section&id=5.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) **$585.3 million** in goodwill and **$135.4 million** in intangible assets, primarily in-process R&D and developed technology, were recognized from the Cibus Global merger, with a **20-year** amortization period for definite-lived assets - Goodwill of **$585.3 million** was recognized in connection with the Merger Transactions with Cibus Global, representing future economic benefits from its market position and assembled workforce[458](index=458&type=chunk) Intangible Assets (June 30, 2023, in Thousands) | Category | Gross Carrying Amount | Accumulated Amortization | Intangible Assets, Net | | :-------------------------------------- | :-------------------- | :----------------------- | :--------------------- | | In-process research and development | $99,051 | $— | $99,051 | | Developed technology | $14,148 | $59 | $14,089 | | Trade name | $22,230 | $92 | $22,138 | | Other | $150 | $49 | $101 | | Total | $135,579 | $200 | $135,379 | - The weighted average amortization period for definite-lived intangible assets (developed technology and trade names) is **20 years**[391](index=391&type=chunk) Estimated Amortization Expense (in Thousands) | Period | Amortization Expense | | :-------------------------------------- | :------------------- | | Remainder of 2023 | $917 | | 2024 | $1,833 | | 2025 | $1,833 | | 2026 | $1,833 | | 2027 | $1,833 | | 2028 | $1,833 | [6. NOTES PAYABLE](index=25&type=section&id=6.%20NOTES%20PAYABLE) Notes payable for equipment carry **7.3% to 17.6%** interest over **3.1 years**, while insurance notes have **6.3% to 7.5%** interest, maturing by February 2024 - Notes on financed equipment are subject to annual interest rates between **7.3%** and **17.6%**, with a weighted average remaining term of **3.1 years**, maturing between **October 2023** and **March 2028**[46](index=46&type=chunk) - Insurance notes have annual interest rates between **6.3%** and **7.5%**, with a weighted average remaining term of **0.7 years**, maturing between **July 2023** and **February 2024**[403](index=403&type=chunk) Future Minimum Payments Under Notes Payable (June 30, 2023, in Thousands) | Period | Licenses | Financed Equipment | Insurance | Total Notes Payable | | :-------------------------------------- | :------- | :----------------- | :-------- | :------------------ | | Remainder of 2023 | $185 | $278 | $593 | $1,056 | | 2024 | $216 | $450 | $193 | $859 | | 2025 | $— | $351 | $— | $351 | | 2026 | $— | $151 | $— | $151 | | 2027 | $— | $89 | $— | $89 | | 2028 | $— | $15 | $— | $15 | | Total | $401 | $1,334 | $786 | $2,521 | | Less: interest | $(21) | $(197) | $(22) | $(240) | | Total (net of interest) | $380 | $1,137 | $764 | $2,281 | | Current portion | $380 | $418 | $764 | $1,562 | | Noncurrent portion | $— | $719 | $— | $719 | [7. STOCKHOLDERS' EQUITY](index=26&type=section&id=7.%20STOCKHOLDERS'%20EQUITY) This section details changes in stockholders' equity, including the 2022 Follow-On Offering, warrant exercises, ATM Facility, and the issuance of Class A and Class B Common Stock and Cibus Global Common Units from the Merger Transactions - In **February 2022**, the Company completed a Follow-On Offering, issuing Class A Common Stock, Pre-Funded Warrants, and Common Warrants, generating **$10.0 million** in net proceeds[19](index=19&type=chunk) - Pre-Funded Warrants were exercised in full on **May 4, 2022**, at an exercise price of **$0.0001 per share**[48](index=48&type=chunk) - Common Warrants, exercisable for Class A Common Stock at **$69.04 per share** and expiring **August 23, 2027**, are classified as a liability due to a contingent put option election available to holders in case of a Fundamental Transaction[380](index=380&type=chunk)[463](index=463&type=chunk) - In **2022**, the Company issued approximately **40,000 shares** of Class A Common Stock under the ATM Facility for net proceeds of **$0.1 million**, with no additional shares issued in **2023**[21](index=21&type=chunk) - In the Merger Transactions, the Company issued **16,527,484 shares** of Class A Common Stock (including restricted shares) and **4,642,636 shares** of Class B Common Stock to Cibus Global unitholders[50](index=50&type=chunk)[86](index=86&type=chunk) - Class B Common Stock carries full voting rights but no economic rights, with holders receiving pro rata distributions from Cibus Global through corresponding Common Units[51](index=51&type=chunk) - As of **June 30, 2023**, there were **21,249,038 Cibus Common Units** outstanding, with **16,606,402** held by Cibus Inc. and **4,642,636** by Electing Members (noncontrolling interest)[23](index=23&type=chunk) [8. STOCK-BASED COMPENSATION](index=27&type=section&id=8.%20STOCK-BASED%20COMPENSATION) Stock-based compensation, including options, RSAs, RSUs, and PSUs, significantly increased in 2023 due to the Cibus Global merger and accelerated vesting - Stock options generally vest over **three to six years** and expire **10 years** after grant, with strike prices at **100%** or more of the closing share price[55](index=55&type=chunk) - On **March 1, 2023**, the Board modified outstanding stock options to extend the post-separation exercise period from **90 days to five years** from the grant date, resulting in **$0.2 million** incremental stock compensation expense[27](index=27&type=chunk) Stock-Based Compensation Expense (in Thousands) | Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock options | $1,441 | $709 | $1,795 | $890 | | Restricted Stock Awards (RSAs) | $1,924 | $— | $1,924 | $— | | Restricted Stock Units (RSUs) | $2,082 | $453 | $2,393 | $658 | | Performance Stock Units (PSUs) | $(433) | $161 | $(270) | $307 | | Total | $5,014 | $1,323 | $5,842 | $1,855 | - RSAs were granted in connection with the Merger Transactions to Cibus Global members, with **$30.2 million** in unrecognized compensation expense as of **June 30, 2023**, to be recognized over **2.5 years**[30](index=30&type=chunk)[58](index=58&type=chunk) - PSUs were granted under the 2017 Plan and Inducement Plan, with significant vesting events occurring in connection with the Merger Transactions, resulting in no unrecognized compensation expense for PSUs as of **June 30, 2023**[65](index=65&type=chunk)[445](index=445&type=chunk)[446](index=446&type=chunk)[477](index=477&type=chunk) [9. INCOME TAXES](index=32&type=section&id=9.%20INCOME%20TAXES) No income tax provision was recorded for the three months ended June 30, 2023, due to net operating losses and a full valuation allowance against deferred tax assets, with no material changes to tax uncertainties - No income tax provision was recorded for the three months ended **June 30, 2023**, due to net operating losses and a full valuation allowance against deferred tax assets[98](index=98&type=chunk) - The Company has established a full valuation allowance for deferred tax assets due to uncertainty of generating sufficient taxable income[35](index=35&type=chunk) - No material changes to tax uncertainties or penalties were disclosed as of **June 30, 2023**[66](index=66&type=chunk) [10. LEASES, COMMITMENTS, AND CONTINGENCIES](index=32&type=section&id=10.%20LEASES,%20COMMITMENTS,%20AND%20CONTINGENCIES) The Company holds non-cancellable operating leases for various facilities, with terms expiring between September 2023 and August 2026, and assumed additional leases post-merger - The Company holds non-cancellable operating leases for office, laboratory, greenhouse, and warehouse space, with terms expiring between **September 2023** and **August 2026**[67](index=67&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) - Operating lease costs for short-term leases were not material for the three and six months ended **June 30, 2023**, or **2022**[38](index=38&type=chunk) Components of Lease Expense (in Thousands) | Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Finance lease costs | $11 | $7 | $14 | $16 | | Operating lease costs | $807 | $394 | $1,195 | $793 | | Total | $818 | $401 | $1,209 | $809 | Future Minimum Payments Under Operating and Finance Leases (June 30, 2023, in Thousands) | Period | Operating Lease Obligations | Financing Lease Obligations | Total | | :-------------------------------------- | :-------------------------- | :-------------------------- | :---- | | Remainder of 2023 | $3,370 | $83 | $3,453 | | 2024 | $6,788 | $90 | $6,878 | | 2025 | $4,414 | $— | $4,414 | | 2026 | $1,580 | $— | $1,580 | | 2027 | $1,479 | $— | $1,479 | | 2028 | $1,553 | $— | $1,553 | | Thereafter | $15,438 | $— | $15,438 | | Total | $34,622 | $173 | $34,795 | | Less: interest | $(10,650) | $(9) | $(10,659) | | Total (net of interest) | $23,972 | $164 | $24,136 | | Current portion | $5,102 | $164 | $5,266 | | Noncurrent portion | $18,870 | $— | $18,870 | [11. ROYALTY LIABILITY - RELATED PARTIES](index=34&type=section&id=11.%20ROYALTY%20LIABILITY%20-%20RELATED%20PARTIES) A Royalty Liability, assumed from the Cibus Global merger, obligates **10%** of Subject Revenues to Royalty Holders, contingent on **$50.0 million** aggregate revenues, and is valued using a **23.7%** annual discount rate - The Royalty Liability was assumed following the acquisition of Cibus Global in the Merger Transactions[41](index=41&type=chunk) - Royalty Holders are entitled to future royalty payments equal to **10%** of Subject Revenues, excluding certain revenue types[41](index=41&type=chunk)[202](index=202&type=chunk) - Royalty payments begin in the first fiscal quarter after aggregate Subject Revenues exceed **$50.0 million** over any consecutive **12-month period**; this condition had not occurred as of **June 30, 2023**[41](index=41&type=chunk)[178](index=178&type=chunk)[202](index=202&type=chunk) Royalty Liability Activity (in Thousands) | Metric | Amount | | :-------------------------------------- | :------- | | Balance as of December 31, 2022 | $— | | Acquired from merger with Cibus Global, LLC | $146,360 | | Interest expense recognized | $2,617 | | Balance as of June 30, 2023 | $148,977 | - As of **June 30, 2023**, an annual discount rate of **23.7%** was used to calculate the present value of future royalty payments[104](index=104&type=chunk)[208](index=208&type=chunk) [12. SUPPLEMENTAL INFORMATION](index=35&type=section&id=12.%20SUPPLEMENTAL%20INFORMATION) This section provides supplemental balance sheet and statement of operations details, including accrued expenses and non-cash transactions Accrued Expenses (in Thousands) | Category | June 30, 2023 | December 31, 2022 | | :-------------------------------------- | :------------ | :---------------- | | Accrued consulting and professional fees | $3,479 | $119 | | Accrued field trials | $1,264 | $— | | Other | $293 | $54 | | Total | $5,036 | $173 | Non-Cash Transactions (Six Months Ended June 30, in Thousands) | Transaction | 2023 | 2022 | | :-------------------------------------- | :--- | :--- | | Property, plant, and equipment acquired through assuming liabilities | $307 | $(618) | | Shares issued for consideration in the merger with Cibus Global | $634,751 | $— | | Forgiveness of interim funding resulting from merger with Cibus Global | $2,500 | $— | | Establishment of operating lease right-of-use assets and associated operating lease liabilities | $28 | $14,090 | [13. INTERIM FUNDING](index=35&type=section&id=13.%20INTERIM%20FUNDING) The Company received **$2.5 million** in unsecured, interest-free Interim Funding from Cibus Global prior to the merger, which was reduced to zero upon closing - The Company received **$2.5 million** in aggregate Interim Funding from Cibus Global through an unsecured, interest-free revolving line of credit[489](index=489&type=chunk) - The Interim Funding was used for operating expenses and was reduced to zero upon the closing of the Merger Transactions[489](index=489&type=chunk) [14. COLLABORATION AGREEMENT](index=35&type=section&id=14.%20COLLABORATION%20AGREEMENT) Cibus Global collaborated with P&G to develop sustainable ingredients, resulting in **$1.5 million** deferred revenue and **$0.1 million** recognized revenue as of June 30, 2023 - Cibus Global and Procter & Gamble (P&G) entered a collaboration agreement to develop sustainable low-carbon ingredients[75](index=75&type=chunk)[76](index=76&type=chunk) - As of **June 30, 2023**, the Company had **$1.5 million** of deferred revenue from R&D activities under the P&G agreement[76](index=76&type=chunk) - The Company recognized **$0.1 million** in revenue from the P&G agreement for the six months ended **June 30, 2023**[76](index=76&type=chunk) [15. RELATED-PARTY TRANSACTIONS](index=36&type=section&id=15.%20RELATED-PARTY%20TRANSACTIONS) This section details the Company's relationship with Cellectis, including a guaranteed lease, an exclusive TALEN technology license, and the termination of management fee expenses post-merger - Cellectis guaranteed the lease agreement for the Company's Roseville, Minnesota facility, but the Company's indemnification obligation was triggered in **October 2022**[77](index=77&type=chunk)[123](index=123&type=chunk) - The Company holds an amended exclusive license from Cellectis for **TALEN technology** for commercial use in plants within the Calyxt Field (microorganism, agricultural, and food products, excluding animals and therapeutic applications)[77](index=77&type=chunk) - Management fee expenses with Cellectis were terminated upon the closing of the Merger Transactions[110](index=110&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section reviews the Company's business, post-merger operational progress, financial performance for Q2 and H1 2023, liquidity, capital resources, contractual obligations, and critical accounting estimates [EXECUTIVE OVERVIEW](index=37&type=section&id=EXECUTIVE%20OVERVIEW) Cibus is an agricultural gene editing company developing and licensing plant traits using its RTDS and Trait Machine™ platforms, with products regulated as "conventional-like" in the US and EU - Cibus is a gene editing-based agricultural technology company focused on developing and licensing plant traits to seed companies for royalties[493](index=493&type=chunk) - The Company's patented **Rapid Trait Development System™ (RTDS)** and **Trait Machine™** process enable high-throughput gene editing, developing traits at a fraction of the time and cost of conventional breeding[80](index=80&type=chunk)[113](index=113&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) - Products from Cibus' **RTDS gene editing platform** are regulated as "**conventional-like**" in the United States and are proposed to be similarly regulated in the European Union[80](index=80&type=chunk)[139](index=139&type=chunk) [BUSINESS UPDATE](index=38&type=section&id=BUSINESS%20UPDATE) Post-merger, Cibus Global is the core focus, with the Oberlin Facility operational for canola and rice, and a pipeline of six productivity traits, including PSR, HT1, HT3, Sclerotinia resistance, and NUE, in advanced development - Cibus Global is the Company's core focus following the Merger Transactions, with significant commercial and operational progress in **H1 2023**[87](index=87&type=chunk) - The **Oberlin Facility**, the first stand-alone high-throughput gene editing trait development facility, is operational for canola and rice, with soybean expected to be operational in the **second half of 2023**[80](index=80&type=chunk)[502](index=502&type=chunk) - The Company's lead developed traits include **Pod Shatter Resistance (PSR)** in canola and winter oilseed rape, and herbicide tolerance traits (**HT1** and **HT3**) in rice, with initial transfers to customers underway[81](index=81&type=chunk)[88](index=88&type=chunk)[118](index=118&type=chunk)[495](index=495&type=chunk) - Other traits in advanced development include **Sclerotinia resistance** in canola and soybean, and a new herbicide tolerance trait (**HT2**); **Nitrogen-use efficiency (NUE)** is in the initial editing stage[90](index=90&type=chunk)[120](index=120&type=chunk)[495](index=495&type=chunk)[501](index=501&type=chunk) - Cibus is collaborating with Bayer AG to evaluate its **Trait Machine platform** and entered a collaboration with Procter & Gamble to develop sustainable soybean output products[91](index=91&type=chunk)[138](index=138&type=chunk) [Pre-Merger Transactions and Legacy Calyxt Projects](index=38&type=section&id=Pre-Merger%20Transactions%20and%20Legacy%20Calyxt%20Projects) Legacy Calyxt focused on plant-based synthetic biology using its PlantSpring™ platform, and the Company is progressing three customer projects, including an improved quality alfalfa trait - Prior to the merger, Legacy Calyxt focused on plant-based synthetic biology, leveraging its **PlantSpring™ technology platform** to engineer plant metabolism for innovative, high-value, and sustainable materials[84](index=84&type=chunk) - The Company is progressing three customer projects from the Legacy Calyxt business: improved quality alfalfa trait (**IQA**) with S&W Seed Company, a research collaboration for a palm oil alternative soybean trait, and a plant-based chemistry pilot project[118](index=118&type=chunk)[498](index=498&type=chunk) [RELATIONSHIP WITH CELLECTIS AND COMPARABILITY OF RESULTS](index=39&type=section&id=RELATIONSHIP%20WITH%20CELLECTIS%20AND%20COMPARABILITY%20OF%20RESULTS) Cellectis' ownership significantly decreased post-merger, losing governance rights, while the Company's indemnification obligation for a lease guarantee was triggered in October 2022, and it retains a broad plant gene editing license - Cellectis' ownership of the Company's Class A Common Stock decreased from approximately **48.0%** to **2.9%** immediately following the Merger Transactions, and it no longer holds contractual governance rights[92](index=92&type=chunk) - The Company's indemnification obligation to Cellectis for its guarantee of the Roseville, Minnesota facility lease was triggered in **October 2022**[123](index=123&type=chunk) - The Company holds a license from Cellectis broadly covering the use of engineered nucleases for plant gene editing[123](index=123&type=chunk) [FINANCIAL OPERATIONS OVERVIEW](index=40&type=section&id=FINANCIAL%20OPERATIONS%20OVERVIEW) This section outlines revenue recognition, R&D expense policies, reclassification of IP costs to SG&A, Royalty Liability Interest expense, and components of interest and non-operating income/expenses - Revenue is recognized from research collaboration agreements, product sales, technology licenses, and product development activities, with an increasing expectation for royalty payments from trait development[124](index=124&type=chunk)[505](index=505&type=chunk) - R&D expenses are recognized as incurred, primarily consisting of personnel costs, third-party contractors, development costs for trait validation, laboratory supplies, and facilities costs[95](index=95&type=chunk)[142](index=142&type=chunk) - Beginning in **Q2 2023**, intellectual property portfolio costs and patent filing support are included in **SG&A expense**, reclassified from R&D[96](index=96&type=chunk)[127](index=127&type=chunk) - Royalty Liability Interest expense is based on the Warrant Exchange Agreement, requiring ongoing quarterly payments equal to a portion of aggregate worldwide revenues[509](index=509&type=chunk) - Non-operating income (expenses) primarily includes gains and losses from mark-to-market of Common Warrants, legal settlements, and foreign exchange transactions, with merger-related costs reclassified to **SG&A**[130](index=130&type=chunk)[407](index=407&type=chunk) [RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2023, COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2022](index=42&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20THREE%20MONTHS%20ENDED%20JUNE%2030,%202023,%20COMPARED%20TO%20THE%20THREE%20MONTHS%20ENDED%20JUNE%2030,%202022) Revenue increased by **380%** to **$0.2 million**, but net loss surged by **725%** to **$(20.5) million** for Q2 2023, driven by the Cibus Global merger, higher operating expenses, and a new **$2.6 million** Royalty Liability Interest expense Three Months Ended June 30, 2023 vs. 2022 (in Thousands, except per share) | Metric | 2023 | 2022 | $ Change | % Change | | :-------------------------------------- | :--- | :--- | :------- | :------- | | Revenue | $197 | $41 | $156 | 380% | | Research and development | $8,429 | $3,250 | $5,179 | 159% | | Selling, general, and administrative | $11,079 | $3,556 | $7,523 | 212% | | Loss from operations | $(19,311) | $(6,765) | $(12,546) | (185)% | | Royalty liability interest expense - related parties | $(2,617) | $— | $(2,617) | NM | | Interest, net | $99 | $(16) | $115 | 719% | | Non-operating income (expenses) | $1,320 | $4,296 | $(2,976) | (69)% | | Net loss | $(20,509) | $(2,485) | $(18,024) | (725)% | | Net loss attributable to redeemable noncontrolling interest | $(1,819) | $— | $(1,819) | NM | | Net loss attributable to Cibus, Inc. | $(18,690) | $(2,485) | $(16,205) | (652)% | | Basic and diluted net loss per share of Class A common stock | $(3.05) | $(2.66) | $(0.39) | (15)% | - R&D expense increased by **$5.2 million (159%)** due to **$4.2 million** from Cibus Global acquisition (headcount, supplies, facilities), **$1.3 million** one-time stock compensation, and **$1.0 million** stock compensation for RSAs, partially offset by **$1.2 million** decrease in Legacy Calyxt expenses[133](index=133&type=chunk) - SG&A expense increased by **$7.5 million (212%)** due to **$6.5 million** one-time merger expenses (**$3.5M** legal/professional, **$1.9M** severance, **$1.1M** stock comp), **$1.7 million** from Cibus Global, and **$1.0 million** stock compensation for RSAs, partially offset by **$2.1 million** decrease in Legacy Calyxt expenses[134](index=134&type=chunk) - Net loss attributable to redeemable noncontrolling interest was **$1.8 million** in **Q2 2023**, a new item resulting from the Up-C Units created in the merger[160](index=160&type=chunk) [RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2023, COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2022](index=43&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20SIX%20MONTHS%20ENDED%20JUNE%2030,%202023,%20COMPARED%20TO%20THE%20SIX%20MONTHS%20ENDED%20JUNE%2030,%202022) Revenue increased by **227%** to **$0.2 million**, but net loss surged by **220%** to **$(25.9) million** for H1 2023, driven by the Cibus Global merger, higher operating expenses, and a **$2.6 million** Royalty Liability Interest expense Six Months Ended June 30, 2023 vs. 2022 (in Thousands, except per share) | Metric | 2023 | 2022 | $ Change | % Change | | :-------------------------------------- | :--- | :--- | :------- | :------- | | Revenue | $239 | $73 | $166 | 227% | | Research and development | $10,638 | $6,191 | $4,447 | 72% | | Selling, general, and administrative | $13,375 | $6,736 | $6,639 | 99% | | Loss from operations | $(23,774) | $(12,854) | $(10,920) | (85)% | | Royalty liability interest expense - related parties | $(2,617) | $— | $(2,617) | NM | | Interest, net | $78 | $(33) | $111 | 336% | | Non-operating income (expenses) | $410 | $4,783 | $(4,373) | (91)% | | Net loss | $(25,903) | $(8,104) | $(17,799) | (220)% | | Net loss attributable to redeemable noncontrolling interest | $(1,819) | $— | $(1,819) | NM | | Net loss attributable to Cibus, Inc. | $(24,084) | $(8,104) | $(15,980) | (197)% | | Basic and diluted net loss per share of Class A common stock | $(6.73) | $(9.14) | $2.41 | 26% | - R&D expense increased by **$4.4 million (72%)** due to **$4.2 million** from Cibus Global acquisition (headcount, supplies, facilities), **$1.3 million** one-time stock compensation, and **$1.0 million** stock compensation for RSAs, partially offset by **$2.1 million** decrease in Legacy Calyxt expenses[162](index=162&type=chunk) - SG&A expense increased by **$6.6 million (99%)** due to **$6.5 million** one-time merger expenses (**$3.5M** legal/professional, **$1.9M** severance, **$1.1M** stock comp), **$1.7 million** from Cibus Global, and **$1.0 million** stock compensation for RSAs, partially offset by **$2.9 million** decrease in Legacy Calyxt expenses[163](index=163&type=chunk) - Non-operating income decreased by **$4.4 million (91%)** primarily due to a **$5.1 million** increase in expense related to the mark-to-market of Common Warrants, partially offset by a **$0.8 million** gain from a legal settlement[152](index=152&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=44&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) As of June 30, 2023, the Company had **$50.9 million** in cash and **$22.4 million** in current liabilities, but significant net losses and operating cash usage raise substantial doubt about its going concern ability without additional capital, leading to a **$200 million** Form S-3 filing - As of **June 30, 2023**, the Company had **$50.9 million** of cash and cash equivalents and **$22.4 million** of current liabilities[166](index=166&type=chunk)[172](index=172&type=chunk) - The Company incurred net losses of **$25.9 million** and used **$14.1 million** in cash for operating activities for the six months ended **June 30, 2023**[167](index=167&type=chunk)[195](index=195&type=chunk) - Management concluded there is substantial doubt about the Company's ability to continue as a going concern for **12 months** or more without raising additional capital[175](index=175&type=chunk)[199](index=199&type=chunk) - Net cash used by operating activities increased by **$2.8 million (25%)** to **$14.1 million** for **H1 2023**, driven by increased net loss offset by non-cash adjustments and changes in operating assets/liabilities from the merger[168](index=168&type=chunk)[191](index=191&type=chunk) - Net cash provided by investing activities increased by **$60.1 million (4,663%)** to **$58.8 million** for **H1 2023**, primarily due to **$59.4 million** cash acquired from the Cibus Global merger[169](index=169&type=chunk) - Net cash provided by financing activities decreased by **$7.4 million (74%)** to **$2.7 million** for **H1 2023**, mainly due to **$10.0 million** net proceeds from a **2022** offering not recurring, partially offset by interim funding and notes payable[156](index=156&type=chunk)[194](index=194&type=chunk) - The Company filed a Form S-3 registration statement for up to **$200 million** in various securities, which has not yet been declared effective[196](index=196&type=chunk) [CONTRACTUAL OBLIGATIONS, COMMITMENTS, AND CONTINGENCIES](index=46&type=section&id=CONTRACTUAL%20OBLIGATIONS,%20COMMITMENTS,%20AND%20CONTINGENCIES) Contractual obligations totaled **$26.4 million** net of interest as of June 30, 2023, with the Royalty Liability contingent on **$50.0 million** Subject Revenues, and no material off-balance sheet arrangements exist Contractual Obligations and Commitments (June 30, 2023, in Thousands) | Period | Operating Lease Obligations | Financing Lease Obligations | Notes Payable | Total | | :-------------------------------------- | :-------------------------- | :-------------------------- | :------------ | :---- | | Remainder of 2023 | $3,370 | $83 | $1,056 | $4,509 | | 2024 | $6,788 | $90 | $859 | $7,737 | | 2025 | $4,414 | $— | $351 | $4,765 | | 2026 | $1,580 | $— | $151 | $1,731 | | 2027 | $1,479 | $— | $89 | $1,568 | | 2028 | $1,553 | $— | $15 | $1,568 | | Thereafter | $15,438 | $— | $— | $15,438 | | Total | $34,622 | $173 | $2,521 | $37,316 | | Less: interest | $(10,650) | $(9) | $(240) | $(10,899) | | Total (net of interest) | $23,972 | $164 | $2,281 | $26,417 | | Current portion | $5,102 | $164 | $1,562 | $6,828 | | Noncurrent portion | $18,870 | $— | $719 | $19,589 | - The Royalty Liability is contingent upon aggregate Subject Revenues reaching **$50.0 million** over a **12-month period**, a condition not met as of **June 30, 2023**[178](index=178&type=chunk)[202](index=202&type=chunk) - The Cibus Charitable Foundation, created in **2022**, has not yet received donations or commenced operations, and the Company's donation obligation is contingent on its **501(c)(3)** status and certain revenue thresholds[40](index=40&type=chunk)[103](index=103&type=chunk)[179](index=179&type=chunk)[205](index=205&type=chunk) - The Company does not have any off-balance sheet arrangements as defined under applicable SEC rules and regulations, other than seed and grain production agreements[181](index=181&type=chunk)[206](index=206&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=47&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) Critical accounting estimates include Common Warrant valuation using Black-Scholes, Royalty Liability discounted at **23.7%**, and business combination accounting involving significant judgment in fair value allocation - Common Warrants are classified as a liability and valued using a **Black-Scholes option pricing model**, with changes in fair value reported in earnings[183](index=183&type=chunk)[380](index=380&type=chunk) - The Royalty Liability is estimated based on total future royalty payments, periodically assessed using internal projections and external sources, and discounted at an annual rate of **23.7%** as of **June 30, 2023**[104](index=104&type=chunk)[208](index=208&type=chunk) - Accounting for business combinations (ASC 805) requires significant judgment in determining the fair value of acquired assets and assumed liabilities, particularly property, plant, and equipment and intangible assets, impacting future depreciation and amortization and initial goodwill[227](index=227&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Interest rate risk for cash and cash equivalents is not significant, and foreign currency exchange risk, primarily in Euros, is limited, with no current hedging activities - Interest rate risk related to cash and cash equivalents is not significant due to their short-term duration and low-risk profile[210](index=210&type=chunk) - The Company is exposed to a limited amount of foreign currency exchange risk, principally in **Euros**, from its foreign subsidiaries[228](index=228&type=chunk) - The Company does not currently engage in hedging activity to reduce its potential exposure to currency fluctuations[228](index=228&type=chunk) [Item 4. Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2023, with no material changes in internal control over financial reporting during the quarter, except for Cibus Global integration - The Company's disclosure controls and procedures were effective as of **June 30, 2023**[213](index=213&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended **June 30, 2023**, except for changes related to the integration of Cibus Global[214](index=214&type=chunk) [PART II. OTHER INFORMATION](index=50&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) As of June 30, 2023, the Company is not involved in any material legal proceedings, having settled an IP infringement case with the final installment received in Q1 2023 - The Company is not a party to any material pending legal proceedings as of **June 30, 2023**[70](index=70&type=chunk)[215](index=215&type=chunk) - A settlement with a technology vendor for alleged intellectual property infringement resulted in **$0.75 million** received in **Q4 2022** and the final **$0.75 million** in **Q1 2023**[70](index=70&type=chunk) [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors occurred during the period, with a comprehensive discussion available in Exhibit 99.3 of the Form 8-K filed on June 1, 2023 - No material changes in risk factors occurred during the period covered by this report[216](index=216&type=chunk) - Risk factors are discussed in Exhibit 99.3 to the Company's Current Report on Form 8-K filed on **June 1, 2023**[216](index=216&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) The Company issued no unregistered equity securities or repurchased Class A or Class B Common Stock, but **30,640** Class A shares were withheld for net share settlement from RSU vesting - The Company did not issue any unregistered equity securities during the period, other than previously disclosed transactions[217](index=217&type=chunk) - No shares of Class A or Class B Common Stock were repurchased[231](index=231&type=chunk) - **30,640 shares** of Class A Common Stock were withheld for net share settlement resulting from restricted stock unit award vesting[231](index=231&type=chunk) [Item 5. Other Information](index=50&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2023 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended **June 30, 2023**[232](index=232&type=chunk) [Item 6. Exhibits](index=50&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including merger agreement amendments, corporate documents, employment and warrant agreements, and various certifications - Exhibits include amendments to the Agreement and Plan of Merger, certificates of incorporation, and amended and restated bylaws[510](index=510&type=chunk) - Key agreements listed are executive employment agreements, Warrant IP Security Agreement, Warrant Transfer and Exchange Agreement, Registration Rights Agreement, Exchange Agreement, Tax Receivable Agreement, and the First Amendment to the License Agreement with Cellectis S.A[219](index=219&type=chunk)[510](index=510&type=chunk) - Certifications from the CEO and CFO pursuant to Exchange Act rules and Sarbanes-Oxley Act are included[235](index=235&type=chunk) [SIGNATURE](index=53&type=section&id=SIGNATURE) [SIGNATURE](index=53&type=section&id=SIGNATURE) The report was signed on behalf of Cibus, Inc. by Rory Riggs, CEO and Chairman, and Wade King, CFO, on August 10, 2023 - The report was signed by **Rory Riggs**, Chief Executive Officer and Chairman (Principal Executive Officer)[223](index=223&type=chunk) - The report was signed by **Wade King**, Chief Financial Officer (Principal Financial and Accounting Officer)[237](index=237&type=chunk)[511](index=511&type=chunk) - The signing date was **August 10, 2023**[238](index=238&type=chunk)

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) [General Information](index=1&type=section&id=General%20Information) Provides Calyxt, Inc.'s Q1 2023 Form 10-Q filing details, covering registration, exchange listing, and SEC compliance - Calyxt, Inc. filed a Quarterly Report on Form 10-Q for the period ended **March 31, 2023**[3](index=3&type=chunk) - The company's common stock is listed on The NASDAQ Stock Market LLC (Nasdaq Capital Market) under the symbol CLXT[2](index=2&type=chunk) - The registrant has filed all required reports during the preceding **12 months** and has been subject to such filing requirements for the past **90 days**[4](index=4&type=chunk) [Filer Status and Shares Outstanding](index=2&type=section&id=Filer%20Status%20and%20Shares%20Outstanding) Calyxt, Inc. is a non-accelerated filer and not a shell company, with **4,973,687** common shares outstanding as of April 28, 2023 - Calyxt, Inc. is a non-accelerated filer[5](index=5&type=chunk) - The registrant is not a shell company[5](index=5&type=chunk) Common Stock Outstanding as of April 28, 2023 | Shares Outstanding | | :----------------- | | **4,973,687** | [Explanatory Notes and Forward-Looking Statements](index=4&type=section&id=Explanatory%20Notes%20and%20Forward-Looking%20Statements) [Explanatory Note on Reverse Stock Split](index=4&type=section&id=Explanatory%20Note%20on%20Reverse%20Stock%20Split) Calyxt, Inc. executed a one-for-ten reverse stock split on April 24, 2023, to meet Nasdaq's bid price rule, retroactively adjusting all share and per share amounts - A one-for-ten reverse stock split became effective on **April 24, 2023**, to comply with the Nasdaq Capital Market's **$1.00** bid price rule[7](index=7&type=chunk) - All share and per share amounts in the consolidated financial statements have been retroactively adjusted for all periods presented[7](index=7&type=chunk) - No fractional shares were issued; instead, they were rounded up to the nearest whole share[7](index=7&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section warns that the report contains forward-looking statements, particularly about the proposed merger with Cibus Global, LLC, future financial performance, and business strategies, which are subject to risks and uncertainties - Forward-looking statements include those about the proposed merger with Cibus Global, LLC, future financial performance, liquidity, capital resources, and ability to continue as a going concern[9](index=9&type=chunk) - Actual results may differ materially due to factors such as merger conditions, Nasdaq listing, competition, supply chain disruptions, and macroeconomic conditions[9](index=9&type=chunk)[17](index=17&type=chunk) - The company does not assume any obligation to publicly revise or update forward-looking statements[11](index=11&type=chunk) [Market Data and Website Disclosure](index=5&type=section&id=Market%20Data%20and%20Website%20Disclosure) Calyxt uses its website and social media as routine channels for company information, including material non-public data, advising investors to monitor these platforms - Calyxt uses its website (www.calyxt.com), corporate Twitter (@Calyxt_Inc), and LinkedIn (https://www.linkedin.com/company/calyxt-inc) as routine channels for distributing company information and complying with Regulation FD[18](index=18&type=chunk) - Information on these platforms is not incorporated into, or deemed part of, this Form 10-Q[19](index=19&type=chunk) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements](index=6&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) Presents Calyxt, Inc.'s unaudited consolidated financial statements for Q1 2023, including balance sheets, statements of operations, stockholders' equity, and cash flows, with detailed notes on accounting policies and interim funding [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (in Thousands) | Metric | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Cash and cash equivalents | **$2,054** | **$3,427** | | Total current assets | **$2,583** | **$4,132** | | Total assets | **$20,285** | **$22,421** | | Total current liabilities | **$4,215** | **$1,662** | | Total liabilities | **$17,618** | **$15,188** | | Total stockholders' equity | **$2,667** | **$7,233** | - Current liabilities increased significantly from **$1,662k** at December 31, 2022, to **$4,215k** at March 31, 2023, primarily due to increases in accrued expenses, common stock warrants, and short-term debt[24](index=24&type=chunk) [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) Consolidated Statements of Operations Highlights (Three Months Ended March 31, in Thousands) | Metric | 2023 | 2022 | Change ($) | Change (%) | | :-------------------------------------- | :-------- | :-------- | :--------- | :--------- | | Revenue | **$42** | **$32** | **$10** | **31%** | | Gross profit | **$42** | **$32** | **$10** | **31%** | | Research and development | **$2,209**| **$2,941**| **$(732)** | **(25)%** | | Selling, general, and administrative | **$2,296**| **$3,180**| **$(884)** | **(28)%** | | Loss from operations | **$(4,463)**| **$(6,089)**| **$1,626** | **27%** | | Net loss | **$(5,394)**| **$(5,619)**| **$225** | **4%** | | Basic and diluted net loss per share | **$(1.09)**| **$(1.34)**| **$0.25** | **19%** | - Net loss improved by **4%** year-over-year, primarily driven by a **25%** reduction in R&D expenses and a **28%** reduction in SG&A expenses[27](index=27&type=chunk)[156](index=156&type=chunk) [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Consolidated Statements of Stockholders' Equity Highlights (in Thousands) | Metric | March 31, 2023 | December 31, 2022 | | :----------------------------------- | :------------- | :---------------- | | Total Stockholders' Equity | **$2,667** | **$7,233** | | Net loss (Q1 2023) | **$(5,394)** | N/A | | Stock-based compensation (Q1 2023) | **$828** | N/A | - Total stockholders' equity decreased by **$4,566k** from December 31, 2022, to March 31, 2023, primarily due to the net loss incurred[32](index=32&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Highlights (Three Months Ended March 31, in Thousands) | Metric | 2023 | 2022 | Change ($) | Change (%) | | :----------------------------------------------------- | :-------- | :--------- | :--------- | :--------- | | Net cash used by operating activities | **$(2,375)**| **$(6,404)**| **$4,029** | **63%** | | Net cash used by investing activities | **$0** | **$(545)** | **$545** | **100%** | | Net cash provided by financing activities | **$903** | **$10,411**| **$(9,508)**| **(91)%** | | Net (decrease) increase in cash, cash equivalents, and restricted cash | **$(1,472)**| **$3,462** | **$(4,934)**| **(143)%** | | Cash, cash equivalents, and restricted cash – end of period | **$2,054**| **$17,883**| **$(15,829)**| **(89)%** | - Net cash used by operating activities improved by **63%** year-over-year, while net cash provided by financing activities decreased by **91%** due to the absence of a large follow-on offering in **2023**[37](index=37&type=chunk)[170](index=170&type=chunk)[175](index=175&type=chunk) [Notes to the Consolidated Financial Statements](index=10&

Financial Performance - Total revenue for 2022 was $157,000, a significant decrease from $25,987,000 in 2021, representing a decline of approximately 99.4%[267]. - The company recorded stock-based compensation expenses totaling $3,998,000 in 2022, up from $2,090,000 in 2021, indicating an increase of about 91.5%[267]. - Interest expense decreased to $(75,000) in 2022 from $(1,431,000) in 2021, reflecting a reduction of approximately 94.8%[268]. - The company recognized a gain of $1.5 million from the forgiveness of a PPP loan in 2021, which positively impacted its financial position[268]. - As of December 31, 2022, Calyxt had $3.4 million in cash and cash equivalents, with a net loss of $16.9 million for the fiscal year 2022[161]. - Calyxt used $19.4 million in cash for operating activities during the fiscal year ended December 31, 2022[161]. Shareholder and Stock Information - As of June 30, 2022, the aggregate market value of shares of common stock held by non-affiliates was $5,446,012 based on a closing sale price of $0.24[135]. - The number of outstanding shares of common stock on March 1, 2023, was 49,376,160 shares[136]. - As of March 1, 2023, Cellectis holds 48.5% of the outstanding Common Stock, maintaining control over significant operational decisions[249]. - The estimated fair value of Common Warrants as of December 31, 2022, is $0.04, with an expected volatility of 85.0%[261]. - As of December 31, 2022, the company had 7,760,000 common warrants outstanding with an average exercise price of $1.41[280]. Operational Challenges - Calyxt has incurred significant expenses related to the proposed Transactions and may be obligated to pay a termination fee of up to $1.0 million if the merger is not completed[124]. - If the Transactions are not consummated, Calyxt's board may consider liquidation, which would likely result in minimal resources available for distribution to stockholders[125]. - Calyxt has implemented cost reduction measures, including headcount reductions, which may adversely affect its operations and ability to complete the merger[130]. - As of January 31, 2023, Calyxt had 28 full-time employees, with ten in administrative, legal, and finance functions, highlighting potential operational risks due to reduced personnel[132]. - The company faces challenges in securing additional funding and may struggle to find a new strategic partner if the current merger does not proceed[127]. - Calyxt's cost-focused measures may lead to weaknesses in infrastructure and operations, impacting customer acquisition and business development efforts[134]. - The company is focused on three key customer projects, none of which are expected to generate material revenue in the near term[166]. - The company has streamlined its operations to preserve cash sufficient for the merger closing[174]. - Calyxt's ability to continue as a going concern depends on obtaining additional financing if the merger is not completed[164]. Strategic Initiatives - Calyxt's management has focused on scaling production of its Plant Cell Matrix and licensing efforts, indicating a strategic pivot towards core technologies[131]. - The company is pursuing a merger with Cibus, which is expected to close in the second quarter of 2023, subject to various approvals[152]. - If the merger is completed, Cibus equity holders will own a substantial majority of the combined company's common stock, significantly diluting Calyxt's current stockholders[155]. - The Company’s strategy includes licensing its technology, but delays or failures by licensees could harm its financial results[202]. Intellectual Property and Regulatory Risks - The Company may face significant risks related to intellectual property, including inadequate protection of its patents and potential challenges in enforcement[206]. - The Company faces substantial costs and risks in enforcing its intellectual property rights, which may not yield significant commercial advantages[211]. - The uncertainty surrounding patent positions in biotechnology could adversely affect the Company's ability to protect its innovations[212]. - Competitors may exploit the Company's technologies in jurisdictions lacking strong patent protections, potentially undermining its market position[213]. - Changes in patent laws could limit the Company's ability to secure adequate intellectual property protection, impacting its competitive edge[214]. - The Company may face challenges regarding the ownership of intellectual property developed in collaboration with third parties, which could restrict its market potential[215]. - The U.S. government holds certain rights to the Company's government-funded technologies, which could adversely affect its business if exercised[216]. Market and Competitive Environment - The synthetic biology industry is highly competitive, with many competitors having greater resources, which may hinder the Company's market acceptance[185]. - The Company’s ability to attract customers is hampered by capital resource constraints and cost reduction efforts[187]. - The Company’s success in product development is dependent on customer collaborations, which are influenced by its market reputation and technical capabilities[192]. - Market skepticism regarding the viability of the PlantSpring technology platform could adversely affect the Company's ability to raise capital and the value of its common stock[181]. Compliance and Regulatory Environment - The regulatory environment for genetically modified products is uncertain, which could hinder the Company's ability to market its technologies effectively[229]. - The Company is exploring hemp product candidates, but increasing regulations could lead to higher compliance costs[231]. - The Company may face significant challenges in monitoring and controlling the distribution of its products, leading to potential regulatory issues[236]. - The Company is subject to numerous environmental, health, and safety laws, which may incur substantial compliance costs and liabilities[238]. - The regulatory environment in the United States is uncertain and evolving, potentially impacting customer willingness to utilize the Company's products[239]. - The Company anticipates that its customers will bear the costs associated with regulatory activities, which may significantly increase due to changes in regulations[240]. - If the Company fails to comply with Nasdaq's listing requirements, it may face delisting, adversely affecting its financial condition and stock liquidity[255]. Cost Management - Calyxt's management has implemented cost reduction measures, including headcount reductions and renegotiation of service agreements, to manage liquidity[163]. - The Company has suspended non-core activities, including the development of artificial intelligence and machine learning capabilities, to preserve cash[186]. - The Company expects to incur substantial costs in correcting any failures to meet customer specifications, which could adversely affect its business[241]. - Employee benefit plan expenses for the year ended December 31, 2022, were $259,000, a decrease from $274,000 in 2021[266].

Financial Data and Key Metrics Changes - As of September 30, 2022, the company reported cash and cash equivalents of $7.2 million, with a cash burn of $4.7 million in Q3 2022, which is $1.2 million less than Q2 2022 [17][19] - The company achieved the lowest cash burn rate in recent years, indicating effective cash resource management [17] Business Line Data and Key Metrics Changes - The company received 37 new chemistries for evaluation in Q3 2022, bringing the total to 132, with 43 meeting target product profile criteria for further evaluation [10] - The pilot project for a major consumer packaged goods company is on track, with delivery expected by early 2023, potentially leading to a development agreement [11] Market Data and Key Metrics Changes - The global squalene market is identified as a significant and growing opportunity, driven by increasing demand for natural ingredients in cosmetics and vaccines [9] - The company is part of a Department of Defense-sponsored initiative, BioMADE, which connects it with other synthetic biology companies and enables access to federal grants [14] Company Strategy and Development Direction - The company is focused on optimizing shareholder value and is evaluating a range of strategic alternatives with the assistance of Canaccord Genuity [15] - The partnership with Evologic Technologies aims to scale the Plant Cell Matrix technology platform, supporting the company's speed-to-scale strategy [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged unprecedented headwinds in capital markets and macroeconomic challenges but emphasized substantial progress in business development and partnerships [7][15] - The company believes in the potential of its technology and the progress made validates its efforts [15] Other Important Information - A settlement with a technology vendor will provide the company with $750,000 upon execution of an amended master services agreement and another $750,000 by January 31, 2023 [18] - The company has amended its open market sale agreement, allowing it to issue up to 15,661,000 shares, raising $0.1 million since October 3, 2022 [20] Q&A Session Summary Question: What are the company's future plans regarding its technology and market opportunities? - The company is focused on advancing its technology in plant-based chemistries and is optimistic about the growing demand for sustainable ingredients in various markets [9][14]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents Calyxt, Inc.'s unaudited consolidated financial statements, including the balance sheets, statements of operations, statements of stockholders' equity, and statements of cash flows, along with detailed notes on accounting policies, going concern status, financial instruments, related-party transactions, equity, stock-based compensation, income taxes, leases, and supplemental information for the periods ended September 30, 2022 and 2021 [Consolidated Balance Sheets](index=6&type=section&id=CALYXT%2C%20INC.%20CONSOLIDATED%20BALANCE%20SHEETS) This statement provides a snapshot of Calyxt, Inc.'s financial position, detailing assets, liabilities, and stockholders' equity at specific points in time | Assets (In Thousands) | Sep 30, 2022 (unaudited) | Dec 31, 2021 | | :-------------------- | :----------------------- | :----------- | | Cash and cash equivalents | $7,031 | $13,823 | | Restricted cash | $174 | $499 | | Prepaid expenses and other current assets | $739 | $859 | | Total current assets | $7,944 | $15,181 | | Non-current restricted cash | — | $99 | | Land, buildings, and equipment | $4,859 | $21,731 | | Operating lease right-of-use assets | $13,736 | — | | Other non-current assets | $163 | $183 | | Total assets | $26,702 | $37,194 | | | | | | Liabilities and Stockholders' Equity (In Thousands) | Sep 30, 2022 (unaudited) | Dec 31, 2021 | | :-------------------- | :----------------------- | :----------- | | Accounts payable | $435 | $1,260 | | Accrued expenses | $380 | $339 | | Accrued compensation | $2,356 | $2,522 | | Due to related parties | $138 | $172 | | Current portion of financing lease obligations | $120 | $370 | | Common stock warrants | $402 | — | | Other current liabilities | $397 | $191 | | Total current liabilities | $4,228 | $4,854 | | Financing lease obligations | — | $17,506 | | Operating lease obligations | $13,550 | — | | Other non-current liabilities | $80 | $702 | | Total liabilities | $17,858 | $23,062 | [Consolidated Statements of Operations](index=7&type=section&id=CALYXT%2C%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) This statement details Calyxt, Inc.'s revenues, expenses, and net loss over specific reporting periods | (Unaudited and in Thousands Except Shares and Per Share Amounts) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $42 | $7,762 | $115 | $24,044 | | Cost of goods sold | — | $8,281 | — | $26,553 | | Gross profit | $42 | $(519) | $115 | $(2,509) | | Research and development | $3,016 | $2,579 | $9,207 | $8,473 | | Selling, general, and administrative | $3,229 | $3,859 | $9,965 | $11,640 | | Total operating expenses | $6,245 | $6,438 | $19,172 | $20,113 | | Loss from operations | $(6,203) | $(6,957) | $(19,057) | $(22,622) | | Gain upon extinguishment of Payroll Protection Program loan | — | — | — | $1,528 | | Interest, net | $(47) | $(356) | $(80) | $(1,059) | | Non-operating income (expenses) | $300 | $6 | $5,083 | $11 | | Loss before income taxes | $(5,950) | $(7,307) | $(14,054) | $(22,142) | | Income taxes | — | — | — | — | | Net loss | $(5,950) | $(7,307) | $(14,054) | $(22,142) | | Basic and diluted net loss per share | $(0.13) | $(0.20) | $(0.31) | $(0.60) | | Weighted average shares outstanding – basic and diluted | 46,784,445 | 37,279,703 | 45,173,455 | 37,205,655 | [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=CALYXT%2C%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS%27%20EQUITY) This statement tracks changes in Calyxt, Inc.'s equity accounts, reflecting net income/loss, stock issuances, and other comprehensive income - For the nine months ended September 30, 2022, the company reported a **net loss of $14,054 thousand**, which reduced total stockholders' equity. Stock-based compensation added **$2,890 thousand** to additional paid-in capital. The company issued common stock and pre-funded warrants in a registered offering, resulting in a **$5,051 thousand increase** in total stockholders' equity. The cumulative effect of adopting the lease accounting standard increased accumulated deficit by **$832 thousand**[27](index=27&type=chunk) - For the nine months ended September 30, 2021, the company reported a **net loss of $22,142 thousand**. Stock-based compensation increased additional paid-in capital by **$865 thousand**. The issuance of common stock for net share settlement of restricted stock units added **$227 thousand** to additional paid-in capital[27](index=27&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=CALYXT%2C%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This statement summarizes Calyxt, Inc.'s cash inflows and outflows from operating, investing, and financing activities | (Unaudited and in Thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------------------- | :----------------------------- | :----------------------------- | | Operating activities | | | | Net loss | $(14,054) | $(22,142) | | Net cash used by operating activities | $(15,601) | $(14,654) | | Investing activities | | | | Purchases of land, buildings, and equipment | $(1,509) | $(376) | | Net cash (used by) provided by investing activities | $(1,509) | $11,322 | | Financing activities | | | | Proceeds from the issuance of common stock, and pre-funded warrants | $11,209 | — | | Net cash provided by (used by) financing activities | $9,894 | $(44) | | Net (decrease) in cash, cash equivalents, and restricted cash | $(7,216) | $(3,376) | | Cash, cash equivalents, and restricted cash – beginning of period | $14,421 | $18,289 | [Notes to the Consolidated Financial Statements](index=10&type=section&id=CALYXT%2C%20INC.%20NOTES%20TO%20THE%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) These notes provide essential details and explanations supporting the consolidated financial statements, clarifying accounting policies and significant events [1. Basis of Presentation & Summary of Significant Accounting Policies](index=10&type=section&id=1.%20BASIS%20OF%20PRESENTATION%20%26%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the accounting principles and policies used in preparing Calyxt, Inc.'s financial statements - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC rules, reflecting all necessary adjustments for fair presentation, though not all footnotes required for complete financial statements are included[34](index=34&type=chunk) - Due to net losses, all outstanding stock options, restricted stock units (RSUs), performance stock units (PSUs), and common warrants are considered anti-dilutive and excluded from net loss per share calculation[38](index=38&type=chunk) - The company adopted ASU No. 2016-02, Leases (Topic 842) on January 1, 2022, recording operating lease assets and liabilities of **$14.1 million** and a **$0.8 million** cumulative effect to stockholders' equity, with no impact on operations or cash flows[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) [2. Going Concern](index=11&type=section&id=2.%20GOING%20CONCERN) This section addresses Calyxt, Inc.'s ability to continue operations for the foreseeable future, given its financial condition - Calyxt has incurred losses since inception, with a **net loss of $14.1 million** and **$15.6 million cash used in operations** for the nine months ended September 30, 2022[48](index=48&type=chunk) - As of September 30, 2022, the company had **$7.2 million in cash, cash equivalents, and restricted cash**, and current liabilities of **$4.2 million**[49](index=49&type=chunk) - Management believes current liquidity, including ATM facility proceeds and a legal settlement, is sufficient to fund operations into Q2 2023, but concludes there is substantial doubt about its ability to continue as a going concern for 12+ months without additional capital[55](index=55&type=chunk) - The company is evaluating strategic alternatives (financing, merger, asset sale, licensing) to maximize shareholder value and manage liquidity, including cost reduction measures like capital expenditure and headcount reductions[53](index=53&type=chunk)[57](index=57&type=chunk) [3. Financial Instruments Measured at Fair Value and Concentrations of Credit Risk](index=13&type=section&id=3.%20FINANCIAL%20INSTRUMENTS%20MEASURED%20AT%20FAIR%20VALUE%20AND%20CONCENTRATIONS%20OF%20CREDIT%20RISK) This section details the valuation methods for financial instruments and potential credit risk exposures - Common stock warrants are classified as a Level 3 liability and measured at fair value quarterly using a Black-Scholes option pricing model, with changes reported in non-operating income (expenses)[40](index=40&type=chunk)[41](index=41&type=chunk)[61](index=61&type=chunk) Common Warrants Fair Value and Assumptions (September 30, 2022) | Metric | Value | | :-------------------------------- | :------ | | Estimated fair value of Common Warrants | $0.05 | | Risk-free interest rate | 4.1% | | Expected volatility | 85.0% | | Expected term to liquidation (in years) | 4.9 | - The company is exposed to foreign exchange risk primarily from payments to Cellectis in euros but does not hedge these exposures, considering the current level insignificant[65](index=65&type=chunk) [4. Related-Party Transactions](index=14&type=section&id=4.%20RELATED-PARTY%20TRANSACTIONS) This section describes transactions and relationships between Calyxt, Inc. and its related parties, primarily Cellectis - Cellectis, the company's largest stockholder, guaranteed the headquarters lease, but Calyxt's indemnification obligation was triggered in October 2022 when Cellectis' ownership fell below 50%[68](index=68&type=chunk) - Calyxt holds an exclusive license from Cellectis for TALEN® technology and other gene-editing technologies for commercial use in plants, with Cellectis entitled to royalties on revenue and sublicense revenues[69](index=69&type=chunk) [5. Stockholders' Equity](index=14&type=section&id=5.%20STOCKHOLDERS%27%20EQUITY) This section outlines changes in Calyxt, Inc.'s capital structure, including stock issuances and warrant activities - On February 23, 2022, Calyxt completed a Follow-On Offering, issuing **3,880,000 shares of common stock**, **3,880,000 Pre-Funded Warrants**, and **7,760,000 Common Warrants**, generating **$10.0 million in net proceeds**[70](index=70&type=chunk) - Pre-Funded Warrants were exercised in full on May 4, 2022. Common Warrants became exercisable on August 23, 2022, at an exercise price of **$1.41 per share** and expire on August 23, 2027, recorded as a liability due to a Change of Control Put option[71](index=71&type=chunk)[72](index=72&type=chunk) - The ATM Facility was amended on October 3, 2022, allowing the company to sell up to **15,661,000 shares**, with approximately **2.0 million shares issued for $0.1 million net proceeds** from October 3, 2022, through the report date[74](index=74&type=chunk) [6. Stock-Based Compensation](index=15&type=section&id=6.%20STOCK-BASED%20COMPENSATION) This section details the expenses and accounting treatment for stock options, restricted stock units, and performance stock units Stock-Based Compensation Expense (In Thousands) | Expense Type | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Stock Options | $530 | $698 | $1,420 | $1,103 | | Restricted Stock Units | $334 | $416 | $992 | $(105) | | PSUs | $171 | $122 | $478 | $(133) | | Total | $1,035 | $1,236 | $2,890 | $865 | - As of September 30, 2022, unrecognized compensation expense for non-vested stock options was **$3.7 million** (recognized over 23 months), for restricted stock units was **$1.6 million** (recognized over 25 months), and for PSUs was **$1.1 million** (recognized over 22 months)[84](index=84&type=chunk)[85](index=85&type=chunk)[90](index=90&type=chunk) - In March 2022, **530,000 PSUs** were granted to five employees, including executive officers, with vesting tied to annual performance objectives for 2022, 2023, and 2024[87](index=87&type=chunk) [7. Income Taxes](index=18&type=section&id=7.%20INCOME%20TAXES) This section explains Calyxt, Inc.'s income tax provisions, deferred tax assets, and valuation allowances - The company has established a full valuation allowance for deferred tax assets due to uncertainty regarding the generation of sufficient taxable income to utilize these assets, thus no benefit is reflected in the financial statements[91](index=91&type=chunk) [8. Leases, Commitments, and Contingencies](index=18&type=section&id=8.%20LEASES%2C%20COMMITMENTS%2C%20AND%20CONTINGENCIES) This section details Calyxt, Inc.'s lease obligations, contractual commitments, and potential contingent liabilities - The company adopted the new lease accounting standard (ASU No. 2016-02) on January 1, 2022, which required removing previously reported land, buildings, and equipment associated with its headquarters lease and recording operating lease assets and liabilities of **$14.1 million**[93](index=93&type=chunk)[95](index=95&type=chunk) Components of Lease Expense (In Thousands) | Lease Type | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | | :----------- | :------------------------------ | :----------------------------- | | Finance lease costs | $57 | $73 | | Operating lease costs | $381 | $1,174 | | Variable lease costs | $260 | $717 | | Total | $698 | $1,964 | Future Minimum Lease Payments (In Thousands) | Period | Operating Lease | Financing Lease | Total | | :------------- | :-------------- | :-------------- | :---- | | Remainder of 2022 | $345 | $25 | $370 | | 2023 | $1,446 | $100 | $1,546 | | 2024 | $1,480 | — | $1,480 | | 2025 | $1,479 | — | $1,479 | | 2026 | $1,479 | — | $1,479 | | 2027 | $1,479 | — | $1,479 | | Thereafter | $16,991 | — | $16,991 | | Total | $24,699 | $125 | $24,824 | | Less: imputed interest | $(10,814) | $(5) | $(10,819) | | Total (present value) | $13,885 | $120 | $14,005 | [9. Supplemental Information](index=21&type=section&id=9.%20SUPPLEMENTAL%20INFORMATION) This section provides additional financial details not presented elsewhere, enhancing the understanding of Calyxt, Inc.'s financial performance Stock-based Compensation Expense (In Thousands) | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | R&D | $210 | $252 | $620 | $1,061 | | SG&A | $825 | $984 | $2,270 | $(196) | | Total | $1,035 | $1,236 | $2,890 | $865 | Interest, Net (In Thousands) | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Interest expense | $(57) | $(356) | $(73) | $(1,075) | | Interest income | $31 | — | $44 | $16 | | Common stock warrants - financing costs amortization | $(21) | — | $(51) | — | | Total | $(47) | $(356) | $(80) | $(1,059) | Cash, Cash Equivalents, and Restricted Cash (In Thousands) | Category | As of Sep 30, 2022 | As of Dec 31, 2021 | | :--------- | :----------------- | :----------------- | | Cash and cash equivalents | $7,031 | $13,823 | | Restricted cash | $174 | $499 | | Non-current restricted cash | — | $99 | | Total | $7,205 | $14,421 | [10. Subsequent Event](index=22&type=section&id=10.%20SUBSEQUENT%20EVENT) This section discloses significant events that occurred after the reporting period but before the financial statements were issued - In early November 2022, the company reached a settlement with a technology vendor regarding alleged intellectual property infringement, expecting to receive **$0.75 million** upon execution of an amended master services agreement and another **$0.75 million** by January 31, 2023[106](index=106&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Calyxt's financial condition and operational results, highlighting the company's transition to a plant-based synthetic biology model, its ongoing net losses, and strategies for future growth and liquidity management. It details revenue and expense trends, the impact of the soybean product line wind-down, and the pursuit of strategic alternatives to address financial challenges [Executive Overview](index=23&type=section&id=EXECUTIVE%20OVERVIEW) This overview introduces Calyxt, Inc.'s business model, financial performance, and strategic priorities - Calyxt is a plant-based synthetic biology company leveraging its PlantSpring™ technology platform to engineer plant metabolism for high-value, sustainable materials in cosmeceutical, nutraceutical, and pharmaceutical industries[108](index=108&type=chunk) - The company is an early-stage company with an **accumulated deficit of $209.3 million** as of September 30, 2022, and expects to incur significant expenses and operating losses for several years[109](index=109&type=chunk) - Near-term focus includes managing operational expenses, implementing cost reduction measures due to liquidity challenges, and increasing professional expenses related to seeking additional financing and evaluating strategic alternatives[111](index=111&type=chunk) [Business](index=23&type=section&id=BUSINESS) This section describes Calyxt, Inc.'s core business, technology platform, and market focus - Calyxt's business model for PlantSpring technology and BioFactory is customer demand-driven, focusing on cosmeceutical, nutraceutical, and pharmaceutical markets for plant-based chemistries[112](index=112&type=chunk) - The company successfully produced squalene using engineered Plant Cell Matrix™ technology, offering a sustainable alternative to shark liver-sourced squalene for personal care and vaccine adjuvants[113](index=113&type=chunk) - Calyxt evaluated **132 chemistries** from potential customers, with **43 meeting target product profile criteria**, and is negotiating agreements for two to three compounds by year-end, focusing on scaling and standardizing pilot BioFactory production[114](index=114&type=chunk)[115](index=115&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - An agreement with Evologic Technologies GmbH was signed to further develop and scale the Plant Cell Matrix technology, supporting an asset-lite approach to accelerate chemistry commercialization[119](index=119&type=chunk) [Relationship with Cellectis and Comparability of Results](index=24&type=section&id=RELATIONSHIP%20WITH%20CELLECTIS%20AND%20COMPARABILITY%20OF%20RESULTS) This section details Calyxt, Inc.'s relationship with its largest shareholder, Cellectis, and its impact on financial comparability - Cellectis, Calyxt's largest shareholder, owned **51.2% of common stock** as of September 30, 2022, which diluted to **49.1%** in October 2022 following ATM Facility sales[124](index=124&type=chunk) - Cellectis maintains substantial contractual rights, including nominating a majority of board directors and approval rights over key operational and management decisions, despite its reduced ownership[125](index=125&type=chunk)[126](index=126&type=chunk) [Financial Operations Overview](index=25&type=section&id=FINANCIAL%20OPERATIONS%20OVERVIEW) This overview summarizes Calyxt, Inc.'s revenue recognition, expense categories, and future financial expectations - Revenue is recognized from product sales, technology licenses, and customer product development activities[127](index=127&type=chunk) - R&D expenses primarily cover employee costs, contractor fees, materials, licensing, facility allocation, and patent-related costs for enhancing the PlantSpring platform and BioFactory system[130](index=130&type=chunk) - SG&A expenses include employee-related costs for sales, licensing, executive, legal, IP, IT, finance, HR functions, professional fees, patent maintenance, consulting, and marketing[131](index=131&type=chunk) - The company anticipates near-term revenues from product development and technology licensing, with future BioFactory product sales expected to grow and yield strong positive gross profit margins[134](index=134&type=chunk) - The COVID-19 pandemic did not materially impact operations for the nine months ended September 30, 2022, but long-term effects on financial markets and capital access remain uncertain[136](index=136&type=chunk) [Results of Operations for the Three Months Ended September 30, 2022, Compared to the Three Months Ended September 30, 2021](index=27&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20THREE%20MONTHS%20ENDED%20SEPTEMBER%2030%2C%202022%2C%20COMPARED%20TO%20THE%20THREE%20MONTHS%20ENDED%20SEPTEMBER%2030%2C%202021) This section analyzes Calyxt, Inc.'s financial performance for the three-month periods, highlighting key revenue and expense changes Key Financial Results (Three Months Ended September 30) | Metric (In Thousands) | 2022 | 2021 | Change ($) | % Change | | :-------------------- | :-------- | :-------- | :--------- | :------- | | Revenue | $42 | $7,762 | $(7,720) | (99)% | | Cost of goods sold | — | $8,281 | $(8,281) | (100)% | | Gross profit | $42 | $(519) | $561 | 108% | | R&D expense | $3,016 | $2,579 | $437 | 17% | | SG&A expense | $3,229 | $3,859 | $(630) | (16)% | | Loss from operations | $(6,203) | $(6,957) | $754 | 11% | | Interest, net | $(47) | $(356) | $309 | 87% | | Non-operating income (expenses) | $300 | $6 | $294 | 4,900% | | Net loss | $(5,950) | $(7,307) | $1,357 | 19% | | Basic and diluted net loss per share | $(0.13) | $(0.20) | $0.07 | 35% | | Adjusted EBITDA | $(4,610) | $(6,941) | $2,331 | 34% | - The significant decrease in revenue and cost of goods sold, and improvement in gross profit, were primarily due to the wind-down of the soybean product line in late 2021 and the transition to synthetic biology, which is an early-stage field[139](index=139&type=chunk) - Non-operating income increased significantly due to a **$0.3 million gain** from the mark-to-market of Common Warrants derivative liability, driven by a decline in stock price[143](index=143&type=chunk) [Results of Operations for the Nine Months Ended September 30, 2022, Compared to the Nine Months Ended September 30, 2021](index=28&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20NINE%20MONTHS%20ENDED%20SEPTEMBER%2030%2C%202022%2C%20COMPARED%20TO%20THE%20NINE%20MONTHS%20ENDED%20SEPTEMBER%2030%2C%202021) This section analyzes Calyxt, Inc.'s financial performance for the nine-month periods, detailing key revenue and expense trends Key Financial Results (Nine Months Ended September 30) | Metric (In Thousands) | 2022 | 2021 | Change ($) | % Change | | :-------------------- | :---------- | :---------- | :--------- | :------- | | Revenue | $115 | $24,044 | $(23,929) | (100)% | | Cost of goods sold | — | $26,553 | $(26,553) | (100)% | | Gross profit | $115 | $(2,509) | $2,624 | 105% | | R&D expense | $9,207 | $8,473 | $734 | 9% | | SG&A expense | $9,965 | $11,640 | $(1,675) | (14)% | | Loss from operations | $(19,057) | $(22,622) | $3,565 | 16% | | Gain upon extinguishment of PPP loan | — | $1,528 | $(1,528) | (100)% | | Interest, net | $(80) | $(1,059) | $979 | 92% | | Non-operating income (expenses) | $5,083 | $11 | $5,072 | 46,109% | | Net loss | $(14,054) | $(22,142) | $8,088 | 37% | | Basic and diluted net loss per share | $(0.31) | $(0.60) | $0.29 | 48% | | Adjusted EBITDA | $(14,379) | $(19,582) | $5,203 | 27% | - The **100% decrease in revenue** and cost of goods sold, and **105% improvement in gross profit**, were primarily due to the completion of the soybean product line wind-down in late 2021 and the shift to synthetic biology[151](index=151&type=chunk) - Non-operating income saw a substantial improvement of **$5.1 million**, driven by the mark-to-market gain on the Common Warrants derivative liability due to a decline in stock price[155](index=155&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section assesses Calyxt, Inc.'s ability to meet its short-term and long-term financial obligations and fund operations - As of September 30, 2022, Calyxt had **$7.2 million in cash, cash equivalents, and restricted cash**, sufficient to cover its **$4.2 million in current liabilities**[162](index=162&type=chunk) Cash Flows from Operating Activities (Nine Months Ended September 30) | Metric (In Thousands) | 2022 | 2021 | Change ($) | % Change | | :-------------------- | :---------- | :---------- | :--------- | :------- | | Net loss | $(14,054) | $(22,142) | $8,088 | 37% | | Net cash used by operating activities | $(15,601) | $(14,654) | $(947) | (7)% | Cash Flows from Investing Activities (Nine Months Ended September 30) | Metric (In Thousands) | 2022 | 2021 | Change ($) | % Change | | :-------------------- | :---------- | :---------- | :--------- | :------- | | Proceeds from sales of short-term investments | — | $11,698 | $(11,698) | (100)% | | Purchases of land, buildings, and equipment | $(1,509) | $(376) | $(1,133) | (301)% | | Net cash (used by) provided by investing activities | $(1,509) | $11,322 | $(12,831) | (113)% | Cash Flows from Financing Activities (Nine Months Ended September 30) | Metric (In Thousands) | 2022 | 2021 | Change ($) | % Change | | :-------------------- | :---------- | :---------- | :--------- | :------- | | Proceeds from common stock issuance | $11,209 | — | $11,209 | NM | | Net cash provided by (used by) financing activities | $9,894 | $(44) | $9,938 | 22,586% | - The company's ability to continue as a going concern depends on securing additional financing (equity, debt, grants) or consummating a strategic transaction, as current liquidity is projected to fund operations only into Q2 2023[183](index=183&type=chunk)[184](index=184&type=chunk) - Management has implemented cost reduction measures, including capital expenditure and headcount reductions, and renegotiating supplier agreements, but warns that failure to raise capital could lead to scaling back or ceasing operations[182](index=182&type=chunk) [Contractual Obligations, Commitments, and Contingencies](index=34&type=section&id=CONTRACTUAL%20OBLIGATIONS%2C%20COMMITMENTS%2C%20AND%20CONTINGENCIES) This section outlines Calyxt, Inc.'s long-term financial commitments and potential liabilities - As of September 30, 2022, there were no material changes to the company's contractual obligations and commitments from those disclosed in its Annual Report[187](index=187&type=chunk) [Critical Accounting Estimates](index=34&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) This section highlights accounting estimates that require significant judgment and can materially impact Calyxt, Inc.'s financial statements - The valuation of Common Warrants is a critical accounting estimate, classified as a liability and remeasured quarterly using a Black-Scholes option pricing model due to a contingent put option[189](index=189&type=chunk) Common Warrants Valuation Assumptions (September 30, 2022) | Assumption | Value | | :-------------------------- | :---- | | Estimated fair value | $0.05 | | Risk-free interest rate | 4.1% | | Expected volatility | 85.0% | | Expected term (in years) | 4.9 | [Use of Non-GAAP Financial Information](index=34&type=section&id=USE%20OF%20NON-GAAP%20FINANCIAL%20INFORMATION) This section explains Calyxt, Inc.'s use of non-GAAP financial measures to provide additional insights into its performance - The company presents non-GAAP measures like adjusted net loss and adjusted EBITDA to supplement GAAP results, excluding special items such as commodity derivatives, officer transition expenses, PPP loan gain, and non-operating income/expenses, to provide better period-to-period comparability[191](index=191&type=chunk)[194](index=194&type=chunk)[199](index=199&type=chunk) Reconciliation of Net Loss to Adjusted Net Loss (In Thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss (GAAP) | $(5,950) | $(7,307) | $(14,054) | $(22,142) | | Non-GAAP adjustments | | | | | | Commodity derivative impact, net | — | $(2,073) | — | $(2,520) | | Net realizable value adjustment to inventories | — | $(88) | — | $(160) | | Section 16 officer transition expenses | $44 | $345 | $276 | $3,079 | | Recapture of non-cash stock compensation | — | — | — | $(2,540) | | Gain upon extinguishment of PPP loan | — | — | — | $(1,528) | | Non-operating income (expenses) | $(300) | $(6) | $(5,083) | $(11) | | Adjusted net loss | $(6,206) | $(9,129) | $(18,861) | $(25,822) | Reconciliation of Net Loss to Adjusted EBITDA (In Thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss (GAAP) | $(5,950) | $(7,307) | $(14,054) | $(22,142) | | Non-GAAP adjustments | | | | | | Interest, net | $47 | $356 | $80 | $1,059 | | Depreciation and amortization expenses | $395 | $596 | $1,158 | $1,776 | | Operating lease right-of-use asset amortization expenses | $119 | — | $354 | — | | Stock-based compensation expenses | $1,035 | $1,236 | $2,890 | $865 | | Commodity derivative impact, net | — | $(2,073) | — | $(2,520) | | Net realizable value adjustment to inventories | — | $(88) | — | $(160) | | Section 16 officer transition expenses | $44 | $345 | $276 | $3,079 | | Gain upon extinguishment of PPP loan | — | — | — | $(1,528) | | Non-operating income (expenses) | $(300) | $(6) | $(5,083) | $(11) | | Adjusted EBITDA | $(4,610) | $(6,941) | $(14,379) | $(19,582) | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses Calyxt's exposure to market risks, primarily focusing on the impact of its common stock price on the fair value of common stock warrants liability. It notes that changes in stock price can significantly affect the company's net loss due to mark-to-market adjustments - The company is exposed to common stock price risk, as the fair value of its common stock warrants liability is remeasured quarterly using the stock price as an input[202](index=202&type=chunk) - Increases in the common stock price will likely lead to losses in the consolidated statements of operations due to increased fair value of the warrant liability, while decreases will likely result in gains[203](index=203&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the principal executive and financial officers, concluded that Calyxt's disclosure controls and procedures were effective as of September 30, 2022. There were no material changes in internal control over financial reporting during the nine months ended September 30, 2022 - The company's disclosure controls and procedures were effective as of September 30, 2022[204](index=204&type=chunk) - No material changes in internal control over financial reporting occurred during the nine months ended September 30, 2022[205](index=205&type=chunk) [PART II. OTHER INFORMATION](index=34&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) Calyxt is not currently involved in any material pending legal proceedings as of September 30, 2022, beyond those arising in the ordinary course of business - The company is not a party to any material pending legal proceedings as of September 30, 2022[206](index=206&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section outlines supplemental risk factors, emphasizing the uncertainty and potential dilutive effects of strategic alternatives, challenges arising from cost reduction measures, Cellectis's continued influence despite reduced ownership, and the risks associated with maintaining Nasdaq listing compliance [Strategic Alternatives and Shareholder Dilution Risks](index=37&type=section&id=Although%20the%20Company%20is%20exploring%20a%20range%20of%20strategic%20alternatives%2C%20there%20is%20no%20certainty%20that%20the%20Company%20will%20be%20able%20to%20execute%20on%20any%20transaction%20in%20the%20near%20term%20or%20at%20all%20or%20that%20such%20a%20transaction%20will%20enhance%20stockholder%20value%2C%20and%20any%20such%20transaction%2C%20if%20available%20and%20achieved%2C%20may%20be%20highly%20dilutive%20to%20the%20Company%27s%20stockholders.) This section highlights the uncertainties and potential dilutive impacts associated with Calyxt, Inc.'s pursuit of strategic alternatives - The company's exploration of strategic alternatives (financing, merger, asset sale, licensing) offers no certainty of execution or shareholder value enhancement, and any transaction could be highly dilutive[208](index=208&type=chunk) - Given the current stock price, any potential financing or strategic transaction may not be sufficient for the company's needs and could result in substantial dilution or senior rights for new securities[209](index=209&type=chunk) - Failure to secure sufficient financing or consummate a strategic transaction could force the company to significantly delay, scale back, or cease operations, potentially leaving no substantial resources for stockholders in liquidation[210](index=210&type=chunk) [Challenges from Cost Reduction Measures](index=37&type=section&id=The%20Company%20has%20engaged%20in%20cost%20reduction%20and%20other%20cash-focused%20measures%2C%20which%20may%20result%20in%20challenges%20in%20managing%20its%20business%20and%20executing%20on%20its%20business%20strategy.) This section discusses the potential negative consequences and operational challenges arising from Calyxt, Inc.'s cost reduction initiatives - Cost reduction measures, including headcount reductions and renegotiating agreements, may lead to loss of institutional knowledge, diverted management attention, reduced employee morale, and attrition[211](index=211&type=chunk)[212](index=212&type=chunk) - These measures could result in weaknesses in infrastructure, inability to execute business development, loss of opportunities, reduced productivity, and challenges in regulatory compliance, materially impacting business and reputation[213](index=213&type=chunk)[214](index=214&type=chunk) [Cellectis's Continued Influence](index=38&type=section&id=Although%20Cellectis%20and%20its%20af%20iliates%20hold%20less%20than%20a%20majority%20of%20the%20Company%27s%20outstanding%20common%20stock%2C%20Cellectis%20possesses%20certain%20rights%20that%20prevent%20other%20stockholders%20from%20influencing%20significant%20decisions.) This section highlights Cellectis's ongoing ability to influence Calyxt, Inc.'s decisions despite its reduced ownership stake - Despite Cellectis's ownership falling to **49.1%** as of November 3, 2022, it retains substantial rights under the stockholders' agreement, including nominating a majority of directors and approval rights over key operational and management decisions[216](index=216&type=chunk)[217](index=217&type=chunk) - These continuing rights, incorporated into the company's constitutive documents, allow Cellectis to exert extensive influence, potentially preventing other stockholders from influencing significant decisions[217](index=217&type=chunk)[220](index=220&type=chunk) [Nasdaq Controlled Company Status and Compliance](index=38&type=section&id=Although%20the%20Company%20is%20no%20longer%20considered%20to%20be%20a%20%22controlled%20company%22%20under%20the%20Nasdaq%27s%20corporate%20governance%20rules%2C%20the%20Company%20is%20able%20to%20phase-in%20full%20compliance%20with%20applicable%20independence%20requirements.) This section addresses Calyxt, Inc.'s status regarding Nasdaq's corporate governance rules and its path to full compliance - Calyxt is no longer a 'controlled company' under Nasdaq rules as Cellectis's voting power is below **50%**, but it can phase-in full compliance with independence requirements for its nominating and corporate governance and compensation committees[221](index=221&type=chunk) [Nasdaq Listing Compliance Risk](index=39&type=section&id=If%20the%20Company%20is%20unable%20to%20maintain%20compliance%20with%20Nasdaq%27s%20listing%20requirements%2C%20its%20common%20stock%20may%20be%20delisted%20from%20The%20Nasdaq%20Capital%20Market%2C%20which%20could%20have%20a%20material%20adverse%20ef%20ect%20on%20the%20Company%27s%20financial%20condition%20and%20could%20make%20it%20more%20dif%20icult%20for%20holders%20of%20the%20Company%27s%20common%20stock%20to%20sell%20their%20shares.) This section discusses the potential risks of Calyxt, Inc. failing to meet Nasdaq's listing requirements, including delisting - Failure to maintain compliance with Nasdaq Capital Market listing requirements (e.g., market value, bid price, stockholder's equity) could lead to delisting, adversely affecting financing, trading, stock value, and investor confidence[222](index=222&type=chunk)[223](index=223&type=chunk) - A reverse stock split, if implemented, may not proportionally increase the stock price or permanently improve it, and could reduce liquidity[224](index=224&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Calyxt did not engage in any unregistered sales of equity securities or stock repurchases during the nine months ended September 30, 2022 - The company did not repurchase any shares or have unregistered sales of equity securities during the nine months ended September 30, 2022[225](index=225&type=chunk) [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) This section notes that Cellectis's guarantee of Calyxt's headquarters lease terminated in October 2022, triggering Calyxt's indemnification obligation to Cellectis - Cellectis's guarantee of the company's headquarters lease terminated in October 2022, triggering Calyxt's indemnification obligation to Cellectis[226](index=226&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, amendments to agreements, indemnification agreements, and certifications from executive officers - The exhibits include the Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, Amendment No. 1 to Open Market Sale Agreement with Jefferies LLC, Indemnification Agreement with Cellectis S.A., and certifications from the CEO and CFO[228](index=228&type=chunk) [Signature](index=41&type=section&id=SIGNATURE) The report is duly signed on behalf of Calyxt, Inc. by Michael A. Carr, President & Chief Executive Officer, and William F. Koschak, Chief Financial Officer, on November 3, 2022 - The report was signed by Michael A. Carr, President & Chief Executive Officer, and William F. Koschak, Chief Financial Officer, on November 3, 2022[230](index=230&type=chunk)[232](index=232&type=chunk)

Calyxt, Inc. (CLXT) Q2 2022 Earnings Conference Call August 4, 2022 4:30 PM ET Company Participants Bill Koschak - Chief Financial Officer Michael Carr - President and Chief Executive Officer Conference Call Participants Bobby Burleson - Canaccord Amit Dayal - H.C. Wainwright Brian Wright - ROTH Capital Partners Operator Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Calyxt Second Quarter 2022 Earnings Results Conference Call and Webcast. [Operator Instructions] This call is bei ...

| --- | --- | --- | --- | |--------------------------------------------------------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2Q 2022 Earnings Results Conference Call and Webcast | | | | | AUGUST 4, 2022 | | | | Management on Today's Call Michael A. Carr President and Chief Executive Officer Bill Koschak Chief Financial Officer ©calyxt 2 Forward Looking Statements This presentation contains "forward-looking statements" within the meaning of the safe harbor provis ...