Cibus(CBUS) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements 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 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 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 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] - 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] Consolidated Statements of Cash Flows 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 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 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] - 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] - 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][45][46] 2. Going Concern 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] - 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] - 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] - 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][57] 3. Financial Instruments Measured at Fair Value and Concentrations of Credit Risk 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][41][61] 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] 4. Related-Party Transactions 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] - 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] 5. Stockholders' Equity 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] - 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][72] - 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] 6. Stock-Based Compensation 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][85][90] - 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] 7. Income Taxes 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] 8. Leases, Commitments, and Contingencies 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][95] 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 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 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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] - 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] 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] - 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] - 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][115][117][118] - 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] Relationship with Cellectis and Comparability of Results 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] - 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][126] Financial Operations Overview 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] - 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] - 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] - 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] - 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] Results of Operations for the Three Months Ended September 30, 2022, Compared to the Three Months Ended September 30, 2021 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] - Non-operating income increased significantly due to a $0.3 million gain from the mark-to-market of Common Warrants derivative liability, driven by a decline in stock price[143] Results of Operations for the Nine Months Ended September 30, 2022, Compared to the Nine Months Ended September 30, 2021 This section analyzes Calyxt, Inc.'s financial performance for the nine-month periods, detailing key revenue and expense trends Key Financial Results (Nine Months Ended September 30) | Metric (In Thousands) | 2022 | 2021 | Change ($) | % 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] - 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] Liquidity and Capital Resources 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 $4.2 million in current liabilities[162] Cash Flows from Operating Activities (Nine Months Ended September 30) | Metric (In Thousands) | 2022 | 2021 | Change ($) | % 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][184] - 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] Contractual Obligations, Commitments, and Contingencies 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] Critical Accounting Estimates 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] 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 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][194][199] 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 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] - 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] Item 4. Controls and Procedures 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] - No material changes in internal control over financial reporting occurred during the nine months ended September 30, 2022[205] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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 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] - 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] - 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] Challenges from Cost Reduction Measures 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][212] - 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][214] Cellectis's Continued Influence 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][217] - 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][220] Nasdaq Controlled Company Status and Compliance 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] Nasdaq Listing Compliance Risk 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][223] - A reverse stock split, if implemented, may not proportionally increase the stock price or permanently improve it, and could reduce liquidity[224] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 5. Other Information 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] Item 6. Exhibits 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] 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][232]