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What changed in Cibus, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Cibus, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+967 added−612 removedSource: 10-K (2024-03-21) vs 10-K (2023-03-02)

Top changes in Cibus, Inc.'s 2023 10-K

967 paragraphs added · 612 removed · 114 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeNevertheless, certain of the Company’s competitors are more established in the synthetic biology industry and many of the Company’s current or potential competitors, either alone or with their R&D or collaboration partners, have significantly greater financial resources and expertise in R&D, manufacturing, testing, and marketing approved products than the Company.
Biggest changeMany of Cibus’ current or potential competitors, either alone or with their R&D or collaboration partners, have significantly greater financial resources and expertise in R&D, manufacturing, testing, and marketing approved products than Cibus does. Smaller or early-stage companies may also prove to be significant competitors, particularly through R&D and collaborative arrangements with large and established companies.
On the Company’s website located at www.calyxt.com, investors can obtain, free of charge, this Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all other filings with the SEC as soon as reasonably practicable after it electronically files or furnish such information with the SEC.
On the Company’s website located at www.cibus.com, investors can obtain, free of charge, this Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all other filings with the SEC as soon as reasonably practicable after it electronically files or furnish such information with the SEC.
Information contained on the Company’s website is not incorporated into this Annual Report on Form 10-K. In addition, the SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. The website can be accessed at www.sec.gov . 11 Table of Contents
Information contained on the Company’s website is not incorporated into this Annual Report on Form 10-K. In addition, the SEC maintains a website that contains reports, proxy statements, and other information regarding issuers that file electronically with the SEC. The website can be accessed at www.sec.gov.
The information contained in, or that can be accessed through, its website is not part of this report. Available Information The Company files or furnishes periodic reports and amendments thereto, including its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, proxy statements, and other information with the SEC.
AVAILABLE INFORMATION The Company files or furnishes periodic reports and amendments thereto, including its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, proxy statements, and other information with the SEC.
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Item 1. Business. Company Overview Calyxt, Inc. was founded in 2010 and incorporated in Delaware. Calyxt is a plant-based synthetic biology company. The Company leverages its proprietary PlantSpring TM technology platform to engineer plant metabolism to produce innovative, high-value, and sustainable materials and products for use in helping customers meet their sustainability targets and financial goals.
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Item 1. Business. COMPANY OVERVIEW Cibus is a leading agricultural biotechnology company that uses proprietary gene editing technologies to develop plant traits (or specific genetic characteristics) in seeds. Its primary business is the development of plant traits that help address specific productivity or yield challenges in farming such as traits addressing plant agronomy, disease, insects, weeds, nutrient-use, or the climate.
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The Company’s primary focus and commercialization strategy is on engineering synthetic biology solutions through its PlantSpring technology platform for manufacture using its proprietary and differentiated BioFactory ™ production system for a diverse base of target customers across a range of end markets, including the cosmeceutical, nutraceutical, and pharmaceutical industries.
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These traits are referred to as productivity traits and drive greater farming profitability and efficiency. They do this in several ways, including, but not limited to, making plants resistant to diseases or pests or enabling plants to process nutrients more efficiently.
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The Company also commercializes its PlantSpring technology platform by licensing elements of the platform and historically developed traditional agriculture seed-trait product candidates, as well as selectively developing product candidates for customers in traditional agriculture. The production of the Company’s plant-based chemistries occurs in its proprietary BioFactory production system. This strategic initiative was announced in October 2021.
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Certain of these traits lead to the reduction in the use of chemicals like fungicides, insecticides, or the reduction of fertilizer use, while others make crops more adaptable to their environment or to climate change.
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In the context of the Company’s PlantSpring technology platform and BioFactory production system, the term “sustainable”, as used in this Annual Report, refers to the plant-based chemistry production methods that use plant biomass as a raw material and are therefore renewable and do not completely use up or destroy natural resources.
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The ability to develop productivity traits in seeds that can increase farming productivity and reduce the use of chemicals in farming is the promise of gene editing technologies.
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The Company also out-licenses elements of the PlantSpring technology platform, has historically developed seed-trait product candidates for the traditional agriculture market, and may selectively develop products for customers in traditional agriculture.
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In addition, Cibus is developing, through partner-funded projects, certain alternative plant-based oils or bio-based fermentation products to meet the functional needs of the new sustainable ingredients industry to replace current ingredients that are identified to raise environmental challenges, such as ingredients derived from fossil fuels, materials that cause deforestation, or materials that raise other sustainability challenges.
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For example, in the third quarter of 2021, the Company announced it had entered into a research collaboration with a global food ingredient manufacturer based in Asia to develop an improved soybean capable of producing oil that would serve as a commercial alternative to palm oil.
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Cibus’ core technology is its propriety gene editing platform called the Rapid Trait Development System™ or RTDS ® . It is the underlying technology in Cibus’ Trait Machine™ process: a standardized end-to-end semi-automated high-throughput gene editing system that directly edits seed companies’ elite germplasm. It is a timebound, reproducible, and predictable science-based breeding process.
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The Company was previously focused on the development of traits for traditional agriculture that it planned to commercialize using either a vertically integrated or licensing business model. The Company’s first commercial product, a high oleic soybean, was launched in this manner in the first quarter of 2019.
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RTDS is covered by over 500 patents or patents pending. It is the core technology platform underpinning the processes at Cibus’ first standardized high-throughput (gene editing) trait development facility (Oberlin Facility) and is the industry's first facility of this kind.
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In August 2020, the Company announced it was winding down the vertically integrated soybean product line. The wind-down of this product line was completed in late 2021 with the final sales of soybean grain to a large soybean processor. The Company’s second product, an improved digestibility alfalfa, was developed with and licensed to S&W Seed Company (S&W).
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The Company considers the Oberlin Facility an important technological milestone that represents a breakthrough in the achievement of a standardized high-throughput gene editing system that provides the speed, precision, and scale that is the promise of gene editing.
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S&W is pursuing regulatory clearance for their product candidate and is targeting commercialization in 2023 at which time the Company expects to begin to receive initial royalty payments. The Company intends to use this licensing strategy for other historically developed, traditional agriculture seed-trait product candidates.
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A key aspect of gene editing is that plant traits using this technology are indistinguishable from plant traits developed using conventional plant breeding (or, from nature).
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The Company has historically operated in a single segment primarily within the United States and its assets are located within the United States. Prior to its initial public offering (IPO) on July 25, 2017, the Company was a wholly owned subsidiary of Cellectis. As of December 31, 2022, Cellectis owned 49.1 percent of the Company’s issued and outstanding common stock.
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Because of this, most major jurisdictions have either passed regulations or started processes to introduce regulations that generally treat traits developed using gene editing on the same basis as traits developed using conventional plant breeding.
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Cellectis has certain contractual rights as well as rights pursuant to the Company’s certificate of incorporation and bylaws, in each case, for so long as it maintains threshold beneficial ownership levels in the Company’s shares.
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All traits developed using RTDS , including the Company's five-trait pipeline, comprise the types of changes that arise - 3 - Table of Contents naturally in conventional plant breeding programs. Genetically modified organism (GMO) technologies enabled major improvements in farming productivity. Unfortunately, because GMO technologies use foreign DNA, or transgenes, the development of major GMO traits has faced headwinds.
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See “Risk Factors—Although Cellectis and its affiliates hold less than a majority of the Company’s outstanding common stock, Cellectis possesses certain rights that prevent other stockholders from influencing significant decisions.” On September 22, 2022, the Company announced that the Board of Directors of the Company (the Board) had begun evaluating potential strategic alternatives to maximize shareholder value, including financing alternatives, merger, reverse merger, other business combinations, sale of assets, licensing, or other transactions.
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For example, in the European Union (EU), GMO traits were essentially banned, and imports were heavily regulated. Changes in place in key countries and presently under consideration in Europe are aimed at harmonizing how gene edited traits are regulated in order to align with regulations for traits from conventional plant breeding.
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On January 13, 2023, the Company and Calypso Merger Subsidiary, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (Merger Subsidiary) entered into an Agreement and Plan of Merger (the Merger Agreement) with Cibus Global, LLC, a Delaware limited liability company (Cibus) and certain other parties thereto.
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These changes highlight the major global evolution away from the heavily regulated GMO technology and acceptance of gene editing technologies. This is a big moment for Cibus that the Company has been working towards since its founding.
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Pursuant to the Merger Agreement, following the Transactions, Calyxt will be organized in an “Up-C” structure and re-named “Cibus, Inc.” and its only material asset will consist of common units of Cibus.
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Cibus believes that its RTDS technologies and Trait Machine process represent a technological breakthrough in plant breeding: the ability to materially change the productivity of the breeding process that currently averages more than a decade with a scientifically based process whose trait products are indistinguishable from traits developed through conventional plant breeding and that are regulated as such.
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If the Transactions are completed, the business of Cibus will continue as the primary business of the combined organization and the equity holders of Cibus will own a substantial majority of the issued and outstanding common stock of the Company.
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The Trait Machine process materially changes not only the speed and scale of the breeding process, but it also exponentially changes the range of possible genetic solutions from breeding and with it, the capability to develop desired characteristics or traits needed for greater farming sustainability and food security.
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The closing of the Transactions is subject to the approval of Calyxt’s stockholders, the approval of Cibus’ members, the receipt of required regulatory approvals (to the extent applicable) and satisfaction of other customary closing conditions. The closing is currently expected to occur in the second quarter of 2023.
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Cibus is a leader in the gene editing era—an industry characterized by high-throughput gene editing facilities serving as extensions of plant breeding operations for seed company customers. Cibus is the leader in this vision. Cibus and its Trait Machine process do not compete with seed companies’ breeding operations, they augment them.
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Additional information regarding the Transactions is included in Calyxt’s registration statement on Form S-4 initially filed with the SEC in February 2023.
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Cibus provides complex traits that it edits in a customer's elite germplasm for commercialization. Its role is to improve the efficiency and effectiveness of developing the complex traits needed to address farming’s most pressing productivity issues.
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In connection with the Transactions, beginning at the earlier of March 15, 2023 and the date Calyxt’s unrestricted cash balance first drops below $1,500,000, Calyxt can request, and Cibus has agreed to provide, an unsecured, interest-free revolving line of credit of up to $3,000,000 in cash, which amount may be increased to $4,000,000 if Cibus elects to extend the outside date (as defined in the Merger Agreement) to June 30, 2023 (the Interim Funding).
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Importantly, Cibus and its Trait Machine process provides the ability to efficiently gene edit these complex traits directly into elite germplasm of any of the major crops with a new speed, precision, and scale. Cibus believes that this is the Future of Breeding™.
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Funds can be drawn by Calyxt in $500,000 increments and may only be used to fund operating expenses incurred in the ordinary course of business consistent with past practice and consistent with the negative covenants in the Merger Agreement.
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Cibus believes that its gene editing technologies and trait products have the potential to accelerate agriculture’s jump to a climate smart, more sustainable crop production system and industry’s move to sustainable, natural, low carbon materials or ingredients.
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The full outstanding balance of the Interim 3 Table of Contents Funding will be reduced to zero in connection with the closing of the Transactions, if consummated.
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The Company believes that a measure of the success of its RTDS technologies and its Trait Machine process is that Cibus has been able to develop a pipeline of five productivity traits, four of which are applicable to multiple crops.
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The full outstanding balance of the Interim Funding will be forgiven by Cibus if the Merger Agreement is terminated for any reason other than certain under certain conditions, as detailed in the Merger Agreement. The Interim Funding is subject to acceleration in connection with certain bankruptcy events.
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Three of the traits are developed, meaning that they have been edited in a customer's elite germplasm and have been validated in multiple field trials.
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As a result of the Company’s substantially narrowed operational focus and in light of the available Interim Funding from Cibus in connection with the proposed Transactions, the Company believes it has sufficient cash to fund operations through the end of the second quarter of 2023.
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In Canola and Winter Oilseed Rape (WOSR), the Company's Pod Shatter Reduction (PSR) trait has been edited into the elite lines of customer seed company partners and has started “shipping,” meaning that Cibus has begun transferring this PSR trait to these customers in their elite germplasm for potential commercial launch.
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If, for any reason, the Transactions are not completed, the Company will reconsider its available alternatives at such time and could pursue one of the following courses of action, which the Company currently believes to be the most likely alternatives: • Dissolve and liquidate. The Company may decide to dissolve and liquidate its assets.
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In Rice, the Herbicide Tolerance (HT) traits HT1 and HT3 were edited into elite genetics and are now undergoing introgression (breeding) into multiple customers’ genetics both for the USA and Latin America. 2023 was a pivotal year for Cibus.
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In such a circumstance, Calyxt would be required to pay all of its debts and contractual obligations and to set aside certain reserves for potential future claims. In light of Calyxt’s current capital resources, it is highly unlikely, in this case, that substantial resources, if any, would be available for distributions to stockholders. • Pursue another strategic transaction .
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In the first half of 2023, Cibus Global successfully transferred its three developed traits, PSR in Canola and HT1 and HT3 in Rice, to leading seed companies, advancing the commercial development process. Cibus’ developed trait for PSR was successfully transferred in the elite germplasm of Nuseed, a leading canola seed company with operations in North America and Australia.
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The Company may decide to resume the process of evaluating a potential merger, reorganization or other business combination transaction or to sell or otherwise dispose of certain of the Company’s assets. Any of these alternatives would be costly and time-consuming and would require that Calyxt obtain additional near-term funding in parallel to, or as part of, such a strategic transaction.
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Cibus’ HT1 and HT3 traits in Rice were successfully transferred in the elite germplasm of Nutrien, a leading North American Rice seed company. In the second quarter of 2023, Cibus Global merged with Legacy Calyxt to form Cibus, Inc. This merger brought together two pioneers in the plant agricultural gene editing business.
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The Company expects that it would be difficult to secure such funding in a timely manner, on favorable terms or at all. • Operate the business . Although substantially less likely than the alternatives above, the Calyxt board could elect to seek to continue to operate the Company’s business.
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It combined their proprietary technology platforms, patent estates, and facilities to create a leader in precision gene editing focused on driving sustainable agriculture. Legacy Calyxt had gene editing facilities in Roseville, Minnesota and significant patented plant agricultural gene editing technologies including the rights to TALEN ® for use in plants.
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This alternative would require that Calyxt obtain additional near-term funding, which the Company expects would be difficult to secure in a timely manner, on favorable terms or at all. If pursued, Calyxt would likely need to significantly delay or further scale back operations beyond its already narrowly focused operational activities.
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The Merger Transactions brought together some of the world’s most sophisticated facilities for trait development and next-generation plant breeding and consolidated important gene editing intellectual property and the technologies of both companies. Cibus opened its Oberlin Facility which it believes represents the industry’s first timebound, reproducible, and predictable science-based next generation breeding process.
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Current Operational Focus Prior to the announcement of the Transactions, the Company’s primary focus was on the development of synthetic biology products for its customers using its PlantSpring technology to develop various plant-based chemistries for production in its proprietary BioFactory production system.
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The Trait Machine process is operational for Canola and Rice customers and is expected to service Soybean customers when the Soybean platform comes online. During late 2023, Cibus transformed from its focus on research and development (R&D) to its focus toward the commercialization of the products developed by its R&D and the accompanying development of its proprietary production facilities.
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In light of the proposed Transactions and recent capital resource constraints, the Company has substantially scaled back its operations and has focused its current business activities on ensuring it has cash sufficient to achieve a closing of the proposed Transactions.
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By year end, Cibus transferred PSR in Canola to a second unique customer. Beyond Cibus’ focus on its three-crop, five-trait pipeline, Cibus also plans to subsequently develop traits in Corn and Wheat. On January 9, 2024, Cibus announced that it had established a scalable gene editing process in Wheat, having successfully regenerated plants from single cells in a wheat cultivar.
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Accordingly, Calyxt’s management has implemented cost reduction and other cash-focused measures, including reduction of headcount, reductions of capital expenditures, and renegotiation or termination of professional services agreements. To conserve cash, Calyxt has also strategically evaluated its arrangements with suppliers and service providers and has, in several instances, transitioned such relationships to lower cost alternative providers.
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Once the Soybean platform is operational, it will be possible for Cibus to develop and commercialize any trait contemporaneously in any or all of these four major crops—Canola, Rice, Soybean, and Wheat.
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In limiting operations to core activities, the Company has focused its continuing operations on • scaling production of a single Plant Cell Matrix TM (PCM TM ) structures with its manufacturing partner, Evologic Technologies GmbH (Evologic); • licensing efforts with respect to its PlantSpring technology and plant traits, including the TALEN ™ technology; and • continuing to progress its three current customer projects—(1) its research collaboration with a leading global food ingredient manufacturer to develop a soybean trait to serve as an alternative to palm oil, (2) its plant-based chemistry pilot project for a major consumer packaged goods company, and (3) supporting late-stage development activities for its improved digestibility alfalfa trait, which was developed with and licensed to S&W Seed Company.
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A key moment in the evolving global regulation of gene editing technologies in agriculture happened on February 8, 2024, when the Parliament of the EU voted in favor of new laws that would clearly differentiate gene editing technology from GMO technology.
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The Company has suspended non-core activities, such as efforts toward the development and integration of artificial intelligence and machine learning capabilities (AIML) and the initiation, development and commercialization of additional synthetic biology products, or chemistries, beyond those involved in the continuing operations identified above.
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The proposal adopted by the EU Parliament would regulate certain traits from gene editing as “conventional-like” or like traits developed using conventional plant breeding, with the exception that there is still discussion of how to address traits for herbicide tolerance in the EU.
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The PlantSpring Technology Platform and Calyxt’s Development Process The PlantSpring technology platform is founded on the Company’s more than a decade of experience engineering plant metabolism and incorporates its scientific knowledge and its proprietary systems, tools and technologies. PlantSpring also has the potential to incorporate AIML capabilities.
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The EU Parliament’s approved proposal sets the stage for negotiations among the EU Parliament, the Council of the EU, and the European Commission to formulate a mutually agreed joint text for the new legislation.
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PlantSpring offers the potential to unleash the natural capabilities of plants—the original biological systems—and make available commercial innovations that produce unique plant-based chemistries from plant species, including rare or undomesticated species, in a manner that the Company believes is more robust and sustainable than other methods of production.
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The major developed market countries including the United Kingdom, United States, Canada, and the major markets in South America are now treating traits from gene editing as conventional-like and, although there can be no assurance the EU regulation will be adopted in the form approved by the EU Parliament or at all,the final passage of the new EU regulation would bring the territory closer to the other major developed markets in having more - 4 - Table of Contents consistent regulations for the planting, import, and export of products or commodities.
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Plants naturally produce many chemistries that may be valuable inputs for end products. Of the approximately 170,000 known and classified compounds derived from plants, bacteria, and fungi, approximately 78 percent are derived from plants.
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For this reason, Cibus believes the impact of these regulations is the beginning of the gene editing era – an era in which products from the most advanced technologies in breeding and gene editing will be regulated on the same basis as products developed using conventional breeding.
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Moreover, some estimates suggest that there may be up to one million additional chemical compounds yet to be discovered. 4 Table of Contents However, the yield of plant-based chemistries that occurs naturally may be insufficient for commercialization using traditional production methods, the plant that produces the chemistry may be scarce in nature or difficult to harvest, or there may be a socioeconomic concern with the harvest of the plant producing the chemistry.
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An era in which technology promises to change the speed and scale of trait development as new technologies have done in many industries. An era that Cibus believes represents agriculture’s analog to digital moment.
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Additionally, the quality or quantity of a natural plant chemistry may be inconsistent, varying considerably over each variety, harvest, or field, and can be impacted by different contaminants in the soil where grown.
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CIBUS' PRIORITY PRODUCTS: PRODUCTIVITY TRAITS Cibus’ business and its products are based on the use of its gene editing technologies to develop and license a new generation of high value productivity traits.
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In PlantSpring, the Company identifies metabolic pathways to produce plant-based chemistries, designs strategies to reprogram host cells, engineers plant cell metabolism to optimally produce targeted compounds or plant traits.
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Productivity traits are the plant traits that are associated with improving crop yields in the face of challenges such as weeds, pests, and diseases; in the face of factors such as heat and drought as a result of climate change; and in the face of environmental challenges, such as fertilizer use.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

78 edited+315 added−225 removed2 unchanged
Biggest changeIn addition, certain provisions of the Company’s certificate of incorporation, bylaws, and other agreements may now make it more difficult for the Company’s stockholders to influence its decisions or for a third-party to acquire control of the Company, or may discourage a third-party from attempting to acquire control of the Company, in each case, even if these actions were considered beneficial by many stockholders or might involve transactions in which the Company’s stockholders might otherwise receive a premium for their shares of the Company’s common stock.
Biggest changeProvisions included in the Amended Certificate of Incorporation and Amended Bylaws may discourage, delay, or prevent a merger, acquisition, or other change in control of Cibus that stockholders may consider favorable, including transactions in which holders of its Class A Common Stock might otherwise receive a premium price for their shares.
Any claim relating to intellectual property infringement that is successfully asserted against the Company may require it to pay substantial damages, including treble damages and attorneys’ fees if it or its partners are found to be willfully infringing another party’s patents, for past use of the asserted intellectual property and royalties and other consideration going forward if the Company is forced to take a license.
Any claim relating to intellectual property infringement that is successfully asserted against Cibus may require Cibus to pay substantial damages, including treble damages and attorneys’ fees if Cibus or its partners are found to be willfully infringing another party’s patents, for past use of the asserted intellectual property and royalties and other consideration going forward if Cibus is forced to take a license.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of the Company’s confidential information could be compromised by disclosure during this type of litigation.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of Cibus’ confidential information could be compromised by disclosure during this type of litigation.
The Company may not prevail in any lawsuits that initiates, and the damages or other remedies awarded to it, if any, may not be commercially meaningful, while the damages and other remedies the Company may be ordered to pay such third parties may be significant.
Cibus may not prevail in any lawsuits that it initiates and the damages or other remedies awarded to Cibus, if any, may not be commercially meaningful, while the damages and other remedies Cibus may be ordered to pay such third parties may be significant.
The laws of some countries do not protect intellectual property rights to the same extent as United States laws and those countries may lack adequate rules and procedures for defending the Company’s intellectual property rights.
The laws of some countries do not protect intellectual property rights to the same extent as United States laws and those countries may lack adequate rules and procedures for defending Cibus’ intellectual property rights.
The Company’s success will depend in part on its ability to operate without infringing, misappropriating, or otherwise violating the intellectual property and proprietary rights of third parties.
Cibus’ success will depend in part on its ability to operate without infringing, misappropriating, or otherwise violating the intellectual property and proprietary rights of third parties.
The Company is subject to numerous federal, state, local and foreign environmental, health and safety laws and regulations, including those governing laboratory procedures, the handling, use, storage, treatment, manufacture and disposal of hazardous materials and wastes, discharge of pollutants into the environment and human health and safety matters.
Cibus is subject to federal, state, local, and foreign environmental, health, and safety laws and regulations, including those governing laboratory procedures, the handling, use, storage, treatment, manufacture, and disposal of hazardous materials and wastes discharge of pollutants into the environment, and human health and safety matters.
Such litigation or proceedings could substantially increase the Company’s operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities.
Such litigation or proceedings could substantially increase Cibus’ operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities.
Such a license may not be available on commercially reasonable terms, or at all. Even if the Company was able to obtain a license, it could be non-exclusive, thereby giving its competitors access to the same intellectual property rights or technologies licensed to the Company.
Such a license may not be available on commercially reasonable terms, or at all. Even if Cibus was able to obtain a license, it could be non-exclusive, thereby giving Cibus’ competitors access to the same intellectual property rights or technologies licensed to Cibus.
If the Company is unable to avoid infringing the patent rights of others, it may be required to seek a license, defend an infringement action, or challenge the validity of the patents in court, or redesign its products. Patent litigation is costly and time consuming. The Company may not have enough resources to bring these actions to a successful conclusion.
If Cibus is unable to avoid infringing the patent rights of others, Cibus may be required to seek a license, defend an infringement action, or challenge the validity of the patents in court, or redesign its products. Patent litigation is costly and time consuming. Cibus may not have sufficient resources to bring these actions to a successful conclusion.
The licensing and acquisition of third-party intellectual property and proprietary rights is a competitive area, and several more established companies are also pursuing strategies to license or acquire third-party intellectual property and proprietary rights that the Company may consider attractive or necessary.
The licensing and acquisition of third party intellectual property and proprietary rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third party intellectual property and proprietary rights that Cibus may consider attractive or necessary.
If the Company cannot successfully negotiate sufficient ownership and commercial rights to the inventions that result from the Company’s use of a third-party partner’s materials, or if disputes otherwise arise with respect to the intellectual property developed through the use of a partner’s samples, the Company may be limited in its ability to capitalize on the full market potential of these inventions.
If Cibus cannot successfully negotiate sufficient ownership and commercial rights to the inventions that result from Cibus’ use of a third party partner’s materials when required, or if disputes otherwise arise with respect to the intellectual property developed through the use of a partner’s samples, Cibus may be limited in its ability to capitalize on the full market potential of these inventions.
Consequently, the Company may not be able to prevent third parties from practicing its inventions in all countries outside the United States, or from selling or importing products made using its inventions in and into the United States or other jurisdictions.
Consequently, Cibus may not be able to prevent third parties from practicing Cibus’ inventions in all countries outside the United States, or from selling or importing products made using Cibus’ inventions in and into the United States or other jurisdictions.
Furthermore, proceedings to enforce the Company’s licensors’ and its patent rights and other intellectual property rights in foreign jurisdictions could result in substantial costs and divert its efforts and attention from other aspects of its business, could put the Company or its licensors’ patents at risk of being invalidated or interpreted narrowly, could put it or its licensors’ patent applications at risk of not issuing and could provoke third parties to assert claims against it or its licensors.
Furthermore, proceedings to enforce Cibus’ licensors’ and Cibus’ own patent rights and other intellectual property rights in foreign jurisdictions could result in substantial costs and divert Cibus’ efforts and attention from other aspects of its business, could put Cibus’ or its licensors’ patents at risk of being invalidated or interpreted narrowly, could put Cibus’ or its licensors’ patent applications at risk of not issuing, and could provoke third parties to assert claims against Cibus or its licensors.
In addition, changes in, or different interpretations of, patent laws in the United States and other countries may permit others to use the Company’s discoveries or to develop and commercialize its technology and products without providing any notice or compensation or may limit the scope of patent protection that the Company or its licensors are able to obtain.
In addition, changes in, or different interpretations of, patent laws in the United States and other countries may permit others to use Cibus’ discoveries or to develop and commercialize Cibus’ technologies and products without providing any notice or compensation to Cibus, or may limit the scope of patent protection that Cibus or its licensors are able to obtain.
If the Company is unable to successfully acquire or in-license rights to required third-party intellectual property and proprietary rights or maintain the existing intellectual property and proprietary rights the Company has, it may have to cease development of the relevant program, product, or product candidate, which could have a material adverse effect on its business.
If Cibus is unable to successfully acquire or in-license rights to required third party intellectual property and proprietary rights or maintain the existing intellectual property and proprietary rights Cibus has, Cibus may have to cease development of the relevant program, product, or productivity trait or sustainable ingredient candidate, which could have a material adverse effect on its business.
Compliance with such laws and regulations and any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.
Compliance with environmental, health, and safety laws and regulations, and any claims relating to improper handling, storage, or disposal of these materials could be time consuming and costly.
Accordingly, rights under any of the Company or its licensors’ patents may not provide it with enough protection against competitive products or processes and any loss, denial, or reduction in scope of any of such patents and patent applications may have a material adverse effect on its business.
Accordingly, rights under any of Cibus’ or its licensors’ patents may not provide Cibus with sufficient protection against competitive products or processes and any loss, denial, or reduction in scope of any of such patents and patent applications may have a material adverse effect on Cibus’ business.
Third parties may in the future make claims challenging the inventorship or ownership of the Company or its licensors’ intellectual property. The Company has written agreements with R&D partners that provide for the ownership of intellectual property arising from the relationship.
Third parties may in the future make claims challenging the inventorship or ownership of Cibus’ or its licensors’ intellectual property. Cibus has written agreements with R&D partners that provide for the ownership of intellectual property arising from its strategic alliances.
Accordingly, the Company’s licensors and its efforts to enforce its intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that it develops or licenses. Third parties may assert rights to inventions the Company develops or otherwise regards as its own.
Accordingly, Cibus’ licensors’ and Cibus’ own efforts to enforce its intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that Cibus develops or licenses. Third parties may assert rights to inventions Cibus develops or otherwise regards as its own.
In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of the Company’s common stock.
In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments and if investors perceive these results to be negative, it could have a substantial adverse effect on the value of Cibus’ securities.
The interpretation and breadth of claims allowed in some patents covering biological compositions may be uncertain and difficult to determine and are often affected materially by the facts and circumstances that pertain to the patented compositions and the related patent claims. The issuance and scope of patents cannot be predicted with certainty.
In particular, the interpretation and breadth of claims allowed in some patents covering biological compositions may be uncertain and difficult to determine, and are often affected materially by the facts and circumstances that pertain to the patented compositions and the related patent claims.
Risks Related to Intellectual Property Patents and patent applications involve highly complex legal and factual questions, which, if determined adversely to the Company, could negatively impact its competitive position. The patent positions of biotechnology companies and other actors in the Company’s fields of business can be highly uncertain and involve complex scientific, legal, and factual analyses.
Patents and patent applications involve highly complex legal and factual questions, which, if determined adversely to Cibus, could negatively impact its competitive position. The patent positions of biotechnology companies and other actors in Cibus’ fields of business can be highly uncertain and typically involve complex scientific, legal, and factual analyses.
Any unused annual limitation may, subject to certain limits, be carried over to later years, and the limitation may under certain circumstances be increased by built-in gains in the assets held by such corporation at the time of the ownership change.
Any unused annual limitation may, subject to certain limits, be carried over to later years, and the limitation may under certain circumstances be increased by built-in gains in the assets held by such corporation at the time of the ownership change. Similar rules and limitations may apply for state income tax purposes.
Competitors may use the Company’s technologies in jurisdictions where it or its licensors do not pursue and obtain patent protection. Further, competitors may export otherwise infringing products to territories where the Company or its licensors have patent protection, but where the ability to enforce those patent rights is not as strong as in the United States.
Competitors may use Cibus’ technologies in jurisdictions where Cibus or its licensors do not pursue and obtain patent protection to develop their own products and further, may export otherwise infringing products to territories where Cibus or its licensors have patent protection, but where the ability to enforce Cibus’ or its licensors’ patent rights is not as strong as in the United States.
If the Company’s relationship with any of these infrastructure partners is terminated, it may be unable to enter arrangements with alternative infrastructure partners on commercially reasonable terms, or at all. Switching or adding infrastructure partners can involve substantial cost and require extensive management time and focus.
If Cibus’ relationship with any of these third parties is terminated, Cibus may be unable to enter into arrangements with alternative third parties on commercially reasonable terms, or at all. Switching or adding third parties can involve substantial cost and require extensive management time and focus.
Under Section 382, a current or future ownership change would subject the Company to an annual limitation that applies to the amount of pre-ownership change NOLs that may be used to offset post-ownership change taxable income. This limitation is generally determined by multiplying the value of a corporation’s stock immediately before the ownership change by the applicable long-term tax-exempt rate.
If a corporation experiences an ownership change, the corporation will be subject to an annual limitation that applies to the amount of pre-ownership change NOLs that may be used to offset post-ownership change taxable income. This limitation is generally determined by multiplying the value of the corporation’s stock immediately before the ownership change by the applicable long-term tax-exempt rate.
If the Company or its licensors fail to obtain and maintain patent protection and trade secret protection of its product candidates and technology, it could lose competitive advantage and competition the Company faces would increase, reducing any potential revenues and have a material adverse effect on its business. 18 Table of Contents The Company will not seek to protect its intellectual property rights in all jurisdictions throughout the world and it may not be able to adequately enforce its intellectual property rights even in the jurisdictions where it seeks protection.
If Cibus or its licensors fail to obtain and maintain patent protection and trade secret protection of Cibus’ productivity trait or sustainable ingredient product, processes, and technologies, Cibus could lose its competitive advantage and competition it faces would increase, potentially reducing revenues and having a material adverse effect on its business. - 34 - Table of Contents Cibus will not seek to protect its intellectual property rights in all jurisdictions throughout the world and Cibus may not be able to adequately enforce its intellectual property rights even in the jurisdictions where Cibus seeks protection.
Compliance with environmental, health and safety laws and regulations may be expensive and may impair the Company’s R&D efforts. If the Company fails to comply with these requirements, it could incur substantial costs and liabilities, including civil or criminal fines and penalties, clean-up costs or capital expenditures for control equipment or operational changes necessary to achieve and maintain compliance.
Compliance with environmental, health, and safety laws and regulations is time consuming and expensive. If Cibus fails to comply with these requirements, it could incur substantial costs and liabilities, including civil or criminal fines and penalties, clean-up costs, or capital expenditures for control equipment or operational changes necessary to achieve and maintain compliance.
The Company’s programs may involve additional product candidates that may require the use of intellectual property or proprietary rights held by third parties; the growth of its business may depend in part on its ability to acquire, in-license or use these intellectual property and proprietary rights.
Because Cibus’ programs may involve the use of intellectual property or proprietary rights held by third parties, the growth of Cibus’ business will likely depend in part on its ability to acquire, in-license, or use these intellectual property and proprietary rights.
The Company also may be unable to license or acquire third-party intellectual property and proprietary rights on terms that would allow it to make an appropriate return on its investment or at all.
In addition, companies that perceive Cibus to be a competitor may be unwilling to assign or license intellectual property and proprietary rights to Cibus. Cibus also may be unable to license or acquire third party intellectual property and proprietary rights on terms that would allow it to make an appropriate return on its investment or at all.
There can be no assurance that the Company will be successful in attracting or retaining such personnel and the failure to do so could have a material adverse effect on its business, financial condition, and results of operations. The Company’s business and operations would suffer in the event of computer system failures, cyber-attacks, or a deficiency in its cyber-security.
There can be no assurance that Cibus will be successful in attracting or retaining such personnel and the failure to do so could have a material adverse effect on its business, results of operations, and financial condition.
In addition, the Company cannot predict the impact on its business of new or amended environmental, health and safety laws or regulations or any changes in the way existing and future laws and regulations are interpreted and enforced.
In addition, Cibus cannot predict the impact on its business of new or amended environmental, health, and safety laws or regulations or any changes in the way existing and future laws and regulations are interpreted and enforced. These current or future laws and regulations may impair Cibus’ research, development, or production efforts.
Even if not challenged, the Company or its licensors’ patents and patent applications may not adequately protect its product candidates or technology or prevent others from designing their products or technology to avoid being covered by the Company or its licensors’ patent claims.
Furthermore, even if not challenged, Cibus’ or its licensors’ patents and patent applications may not adequately protect its productivity traits or sustainable ingredient products, processes, or technologies or prevent others from designing their products or technology to avoid being covered by Cibus’ or its licensors’ patent claims.
Any of these risks coming to fruition could have a material adverse effect on the Company’s business, results of operations, financial condition, and prospects. The Company may be unsuccessful in developing, licensing, or acquiring intellectual property that may be required to develop and commercialize its product candidates.
Any of these risks coming to fruition could have a material adverse effect on Cibus’ business, results of operations, financial condition, and prospects. Cibus may be unsuccessful in licensing or acquiring intellectual property from third parties that may be required to develop and commercialize Cibus’ products or productivity trait or sustainable ingredient candidates.
If the breadth or strength of protection provided by the patents the Company owns or licenses is threatened, it could dissuade companies from partnering with it to develop, and could threaten the ability to successfully commercialize, the Company’s product candidates.
If the breadth or strength of protection provided by the patents Cibus owns or licenses with respect to its productivity traits or sustainable ingredient products, processes, or technologies is threatened, it could dissuade companies from partnering with Cibus to develop, and could threaten its ability to successfully commercialize, its products and productivity trait or sustainable ingredient candidates.
The Company’s intellectual property rights in some countries outside the United States could be less extensive than those in the United States, assuming that rights are obtained in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.
In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.
The Company’s R&D processes involve the controlled use of hazardous materials, including biological materials. The Company may be sued for any injury or contamination that results from its use or the use by third parties of these materials, or may otherwise be required to remediate such contamination, and its liability may exceed any insurance coverage and its total assets.
Cibus may be sued for any injury or contamination that results from its use or the use by third parties of these materials, or may otherwise be required to remediate such contamination, and Cibus’ liability with respect to such claims may exceed any insurance coverage that it maintains or the value of its total assets.
The Company’s ability to utilize its NOLs may be limited if it experiences an “ownership change” as defined in Section 382 (Section 382) of the Internal Revenue Code of 1986, as amended.
In general, a corporation's ability to utilize its NOLs may be limited if it experiences an “ownership change” as defined in Section 382.
The Company has established a full valuation allowance for its deferred tax assets, including NOLs, due to the uncertainty that enough taxable income will be generated to utilize the assets.
In addition, Cibus may generate - 40 - Table of Contents additional NOLs in future years. Cibus established a full valuation allowance for its deferred tax assets, including NOLs, due to the uncertainty that enough taxable income will be generated to utilize the assets.
You should carefully consider these risk factors in connection with Part 2, Item 7, “Management’s Discussion and Analysis of Financial Conditions and Results of Operations,” the consolidated financials and the other information in this Annual Report. Risk Related to the Transactions There is no assurance that the Transactions will be completed in a timely manner or at all.
You should carefully consider these risk factors in connection with Part II, Item 7, “Management’s Discussion and Analysis of Financial Conditions and Results of Operations,” the consolidated financials, and the other information in this Annual Report.
The Company cannot assure that its business operations, products developed, historically developed agriculture-focused product candidates, and methods and the business operations, products, product candidates and methods of its customers or licensees do not or will not infringe, misappropriate, or otherwise violate the patents or other intellectual property rights of third parties.
Cibus cannot assure you that its business operations, productivity trait or sustainable ingredient product and methods and the business operations, or productivity trait or sustainable ingredient product and methods of its partners do not or will not infringe, misappropriate, or otherwise violate the patents or other intellectual property rights of third parties.
If the Company’s licensees are delayed, are unsuccessful in their development and commercialization efforts, or if they fail to devote sufficient time and resources to support the marketing and selling efforts of products developed using the licenses of the Company’s technology, it may not receive milestone and/or royalty payments as expected, and its financial results could be harmed.
If Cibus’ licensees are delayed or unsuccessful in introducing Cibus’ licensed intellectual property into their products or commercializing the products that contain Cibus’ licensed intellectual property, or if they fail to devote sufficient time and resources to support the marketing and selling efforts of those products, Cibus may not receive royalty payments as expected and its financial results could be - 26 - Table of Contents harmed.
Moreover, negative publicity associated with such cost-reduction activities and Calyxt’s failure to consummate the merger could adversely affect Calyxt’s relationships with its suppliers, service providers, customers and potential customers, employees, and other third parties, which in turn could further adversely affect its operations and financial condition.
Negative publicity associated with cost reduction activities could adversely affect Cibus’ relationships with its suppliers, service providers, customers and potential customers, and employees, which could adversely affect its operations and financial condition.
Additionally, if the Company is unable to maintain or enter into agreements with infrastructure partners on acceptable terms, or if engagement is terminated prematurely, it may be unable to conduct or complete research, development, and production in the anticipated manner.
Additionally, if Cibus is unable to enter into, or maintain, agreements with such third parties on acceptable terms, or if any such engagement is terminated prematurely, Cibus may be unable to conduct or complete its field trials in the manner it anticipates.
Patents, if issued, may be challenged, invalidated, narrowed, or circumvented. Challenges to the Company or its licensors’ patents and patent applications, if successful, may result in the denial of it or its licensors’ patent applications or the loss or reduction in their scope. In addition, defending against such challenges may be costly and involve the diversion of significant management time.
Challenges to Cibus’ or its licensors’ patents and patent applications, if successful, may result in the denial of Cibus’ or its licensors’ patent applications or the loss or reduction in their scope. In addition, such interference, reexamination, post-grant review, inter parties review, opposition proceedings, and other administrative proceedings may be costly and involve the diversion of significant management time.
In addition, the Company may face claims by third parties that its agreements with employees, contractors, or consultants obligating them to assign intellectual property to it are ineffective or are in conflict with prior or competing contractual obligations of assignment.
In addition, Cibus may face claims by third parties that its agreements with employees, contractors, or consultants obligating them to assign intellectual property to Cibus are ineffective, or are in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property Cibus has developed or will develop and could interfere with Cibus’ ability to capture the full commercial value of such inventions.
Due to the lead time involved in developing a product for a customer using the Company’s platform, its potential customers will be required to make a number of assumptions and estimates regarding the commercial feasibility of the plant-based chemistry, including assumptions and estimates regarding the demand for those end-products and processes that will utilize the plant-based chemistry developed with the Company’s technology, the existence or non-existence of products being simultaneously developed by competitors, potential market penetration and obsolescence, whether planned or unplanned,.
Due to the lead time involved in developing a gene edited plant product, Cibus and its licensee customers must make a number of assumptions and estimates regarding the commercial feasibility of development, including assumptions and estimates regarding the demand for end-products containing Cibus licensed intellectual property, the existence or non-existence of products being simultaneously developed by competitors, global and regional agricultural and macro-economic conditions, and potential market penetration and obsolescence, whether planned or unplanned.
Further, these provisions could limit the price that investors might be willing to pay in the future for shares of the Company’s common stock, possibly depressing the market price of its common stock. As a result, stockholders may be limited in their ability to obtain a premium for their shares.
These provisions could also limit the price that investors might be willing to pay in the future for the Class A Common Stock, thereby depressing the market price of the Class A Common Stock.
These products may compete with the Company’s products and its intellectual property rights and such rights may not be effective or enough to prevent such competition.
These products may compete with Cibus’ products and its intellectual property rights and such rights may not be effective or sufficient to prevent such competition. The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States.
As of December 31, 2022, the Company had approximately $239.2 million of net operating losses, or NOLs, for federal and state income tax purposes, which may be available to offset federal income tax liabilities in the future. In addition, the Company may generate additional NOLs in future years.
The United States net operating loss carryforwards and certain other tax attributes of Cibus may be subject to limitations. As of December 31, 2023, Cibus had approximately $362.5 million of net operating loss carryforwards (NOLs) for federal and state income tax purposes, which may be available to offset federal income tax liabilities in the future.
In addition, if any such claim were successfully asserted against the Company and it could not obtain a license, the Company or its partners may be forced to stop or delay developing, manufacturing, selling or otherwise commercializing its products, product candidates or other infringing technology, or those it develops with its R&D partners. 19 Table of Contents Even if the Company is successful in these proceedings, it may incur substantial costs and divert management time and attention pursuing these proceedings, which could have a material adverse effect on the organization.
In addition, if any such claim were successfully asserted against Cibus and Cibus could not obtain a license, Cibus or its partners may be forced to stop or delay developing, manufacturing, selling, or otherwise commercializing its productivity trait or sustainable ingredient product or other infringing technology, or those Cibus develops with its R&D partners.
Litigation may be necessary to resolve an ownership dispute, and if the Company is not successful, it may be precluded from using certain intellectual property and associated products and technology, which could have a material adverse effect on its business.
Litigation may be necessary to resolve an ownership dispute, and if Cibus is not successful, Cibus may be precluded from using certain intellectual property and associated products, processes, and technologies, or may lose its rights in that intellectual property.
However, the Company may be unable to acquire or in-license any third-party intellectual property or proprietary rights that may be key to development. Even if the Company can acquire or in-license such rights, it may be unable to do so on commercially reasonable terms.
Even if Cibus is able to acquire or in-license such rights, Cibus may be unable to do so on commercially reasonable terms.
There is no assurance that the Company will not experience a current or future ownership change under Section 382 that would significantly limit or possibly eliminate its ability to use its NOLs.
Due to the existence of the valuation allowance, limitations created by historical ownership changes will not impact the Company’s effective tax rate in the future. There is no assurance that Cibus will not experience additional ownership changes under Section 382 that would further limit or possibly eliminate its ability to use its NOLs.
In addition, the Company may experience ownership changes as a result of shifts in the direct or indirect ownership of its stock, some of which may be outside of its control.
In addition, Cibus may experience ownership changes as a result of shifts in the direct or indirect ownership of its stock, some of which may be outside of its control. There is also a risk that future legal or regulatory changes may limit Cibus’ ability to use current or future NOLs to offset its future federal income tax liabilities.
Item 1A. Risk Factors. This section includes a discussion of what the Company believes to be the material factors that make an investment in the Company speculative or risky and that could affect its business, operating results, financial condition, and the trading price of the Company’s common stock. The risks described below are not the only risks the Company faces.
This section includes a discussion of what the Company believes to be the material factors that make an investment in the Company speculative or risky and that could affect its business, operating results, financial condition, and future growth prospects or cause actual results to differ materially from those contained in forward-looking statements the Company has made or may make from time-to-time.
The biotechnology industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may allege that the Company’s product development activities, products, product candidates or the use of its technologies infringe, misappropriate, or otherwise violate patent claims or other intellectual property rights held by them or that it is employing their proprietary technology without authorization.
Other parties may allege that Cibus’ productivity traits or sustainable ingredient products, processes, or technologies infringe, misappropriate, or otherwise violate patent claims or other intellectual property rights held by them or that Cibus is employing their proprietary technology without authorization. Patent and other types of intellectual property litigation can involve complex factual and legal questions, and their outcome is uncertain.
Filing, prosecuting, and defending patents in all countries and jurisdictions throughout the world would be prohibitively expensive. Patent protection must be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes.
Patent protection must be sought on a country-by-country basis, which is an expensive and time consuming process with uncertain outcomes. Accordingly, Cibus and its licensors may choose not to seek patent protection in certain countries, and Cibus will not have the benefit of patent protection in such countries.
To the extent the Company enters into such product development agreements, their success will depend heavily on the efforts and activities of its customer’s commercialization efforts and as a result its ability to achieve milestone payments or generate royalties will not be within its direct control.
In such cases, Cibus’ ability to achieve milestone payments or generate royalties is not within its direct control and will substantially depend on the efforts and success of its licensee customers.
Further, if these licensee customers fail to market the licensed seed-trait products or products developed with the Company’s licensed technology at prices that will achieve or sustain market acceptance for those products, its future royalty revenues could be further harmed.
Further, if these licensee customers fail to market products incorporating Cibus’ intellectual property at prices that will achieve or sustain market acceptance for those products, Cibus’ royalty revenues could be further harmed. Customer relationships that Cibus establishes may not result in revenue generating commercial contracts.
Any infringement, misappropriation, or other violation by the Company of intellectual property rights of others may prevent or delay its product development efforts and may prevent or increase the costs of successful commercialization by the Company, its customers or its licensees.
Any infringement, misappropriation, or other violation by Cibus of intellectual property rights of others may prevent or delay Cibus’ product development efforts and may prevent or increase the costs of Cibus successfully commercializing its products or productivity trait or sustainable ingredient candidates, if approved. The biotechnology industry is characterized by extensive litigation regarding patents and other intellectual property rights.
If the regulatory burden and expense required for the utilization of the Company’s products becomes too significant, its customers may seek alternatives that involve lesser regulatory costs. 21 Table of Contents If the Company is sued for defective products and if such lawsuits were determined adversely, it could be subject to substantial damages, for which insurance coverage is not available.
If the regulatory burden and expense required for the utilization of Cibus’ products becomes too significant, its customers may seek alternatives that involve lesser regulatory costs.
The market for products developed with synthetic biology is highly competitive, and the Company faces significant direct and indirect competition in several aspects of its business. See “Item 1. Business – Competition.” Many of these competitors have substantially greater financial, technical, marketing, sales, distribution, and other resources than the Company.
Cibus faces significant competition and many of its competitors have substantially greater financial, technical, and other resources than Cibus does. The markets in which Cibus operates are highly competitive, and Cibus faces significant competition in its business.
If the Transactions are not completed and Calyxt does not pursue a liquidation and dissolution or an alternative strategic transaction, Calyxt expects to continue to incur significant expenses and operating losses for the next several years.
Accordingly, Cibus expects to continue to incur significant expenses and operating losses for at least the next several years.
Even if the Company’s infrastructure partners adhere to protocols, production runs and other R&D activities may fail to succeed for a variety of other reasons. Ultimately, the Company remains responsible for ensuring work performed is conducted in accordance with the applicable protocol and standards, and reliance on infrastructure partners does not relieve the Company of its responsibilities.
Ultimately, Cibus remains responsible for ensuring that each of its field trials is conducted in accordance with the applicable protocol, legal and regulatory, and agronomic standards, and its reliance on third parties does not relieve Cibus of its responsibilities.
The regulatory environment around gene editing and genetic modification in plants is greatly uncertain outside of the United States and varies greatly from jurisdiction to jurisdiction. Each jurisdiction may have its own regulatory framework regarding genetically modified and gene edited products and materials, which continue to evolve, and which may encapsulate the Company’s products.
The regulatory environment varies greatly from region-to-region and in many countries is less developed than in the United States and the European Union. Outside of the United States and the EU, the regulatory environment around gene editing in plants and microorganisms is uncertain and varies greatly from jurisdiction-to-jurisdiction.
In addition, cost reduction and cash-focused measures that Calyxt has undertaken may result in weaknesses in Calyxt’s infrastructure and operations, an inability to effectively execute on customer acquisition and business development efforts, loss of business opportunities, reduced productivity among remaining employees, and challenges in complying with legal and regulatory requirements.
In addition, cost reduction measures may result in additional execution challenges, including in respect of customer acquisition and business development efforts and maintaining productivity among remaining employees.
The Company takes precautions to safeguard its facilities, including insurance, health and safety protocols, and off-site storage of critical research results and computer data. Although the Company maintains levels of insurance that it believes are customary for its industry, its insurance policies may not cover certain losses, or losses may exceed the Company’s coverage limits.
Cibus takes precautions to safeguard its facilities, including restricting access to its facilities, maintaining customary insurance coverage, implementing safety protocols, and keeping critical research results and computer data backed-up on off-site storage networks.
The Company’s business activities are currently conducted at a limited number of locations, which makes it susceptible to damage or business disruptions caused by natural disasters or acts of vandalism. The Company’s current headquarters and R&D facilities, which include an office, labs, the BioFactory pilot facility, greenhouses, and field-testing plots are in Roseville, Minnesota.
Cibus’ business activities are currently conducted at a limited number of locations, and damage or business disruptions at these locations would have an adverse effect on its business. Cibus’ current headquarters, as well as its Oberlin Facility, are located in San Diego, California. At present, Cibus’ R&D operations are conducted at both its San Diego, California and Roseville, Minnesota facilities.
It is difficult to predict whether regulators, such as the USDA or the MDA, will alter the manner in which they interpret existing federal and state laws and regulations on hemp or institute new regulations, or otherwise modify regulations in a way that will render compliance more burdensome.
Governments of, or regulators within, such jurisdictions could institute new laws or regulations, modify existing laws or regulations, or change the way they interpret existing laws and regulations, in each case, in a way that subjects Cibus and its trait products to more burdensome standards.
As a result, Calyxt’s management may need to divert a disproportionate amount of its attention away from Calyxt’s day-to-day strategic and operational activities and devote a substantial amount of time to managing organizational changes. Further, cash-focused headcount reduction measures may yield unintended consequences, such as attrition beyond Calyxt’s intended reduction in headcount and reduced employee morale.
Cibus’ ability to successfully execute on its strategy depends on retaining key remaining personnel, and unanticipated attrition, which may occur on short notice, could potentially harm Cibus’ business and operations. As a result of headcount reductions, Cibus’ management may need to divert attention away from day-to-day strategic and operational activities and devote additional time to managing organizational changes.
If it does not comply with obligations under the license agreements, it may be subject to damages, which may be significant, and in some cases Cellectis and/or the University of Minnesota may have the right to terminate the license agreement.
If Cibus fails to comply with its obligations under these agreements, or Cibus is subject to a bankruptcy, its licensors may have the right to terminate the license, in which event Cibus would not be able to market products or productivity trait or sustainable ingredient candidates covered by the license.
If the Company fails to achieve the necessary level of efficiency in its organization as it evolves, its business, financial condition and results of operations would be adversely impacted. 25 Table of Contents The Company depends on key management personnel and attracting and retaining other qualified personnel, and its business could be harmed if it loses key management personnel.
Cibus depends on key management personnel and attracting and retaining other qualified personnel, and its business could be harmed if Cibus loses key management personnel or cannot attract and retain other qualified personnel.
Some agreements provide that the Company must negotiate certain commercial rights at a later date and others may not include or clearly address the allocation of intellectual property rights.
These agreements provide that Cibus must negotiate certain commercial rights with such partners with respect to joint inventions or inventions made by Cibus’ partners that arise from the results of the strategic alliance. In some instances, there may not be adequate written provisions to address clearly the allocation of intellectual property rights that may arise from the respective alliance.
Any termination of the Company’s license agreement with Cellectis or the University of Minnesota could have a material adverse effect on its business and results of operations.
Any failure to realize such demand forecasts for Cibus’ products or downstream products containing Cibus’ intellectual property could have a material adverse effect on Cibus’ business, results of operations, and financial condition.
If the Transactions are not completed and Calyxt does not pursue a liquidation and dissolution, its ability to continue as a going concern and advance its operations and key products will depend on its ability to obtain in the near-term additional financing.
Cibus’ ability to continue as a going concern will depend on its ability to obtain additional financing in the near term. - 24 - Table of Contents As of December 31, 2023, Cibus had $32.7 million of cash and cash equivalents. Current liabilities were $21.3 million as of December 31, 2023.
In addition, Calyxt is substantially dependent on its remaining employees to facilitate the consummation of the Transactions. The Company’s success depends to a significant degree upon the technical skills and continued service of certain members of its management and other key employees.
Cibus’ success depends to a significant degree upon the technical skills and continued service of certain members of its management team, particularly Rory Riggs, Peter Beetham, Noel Sauer, and Greg Gocal. The loss of the services of any of these key executive officers could have a material adverse effect on Cibus.
Removed
If the Transactions are not consummated, the Company’s business could suffer materially and its stock price could decline. The closing is subject to a number of closing conditions, including the approval by the Company’s stockholders of the issuance of shares of Calyxt’s common stock pursuant to the Merger Agreement and other customary closing conditions.
Added
In these circumstances, the market price of the Company's Class A Common Stock could decline, and you may lose all or part of your investment. Cibus cannot assure you that any of the events discussed below will not occur. Further, the risks described below are not the only risks the Company faces.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeCellectis has guaranteed all obligations under the lease, as discussed in Note 8 to the Consolidated Financial Statements, “Leases, Other Commitments, and Contingencies”.
Biggest changeCellectis, the Company's former majority stockholder, has guaranteed all obligations under the lease, as discussed in Note 15 to the consolidated financial statements included in this Annual Report. Cibus also has offices in different locations in Canada, the United States, and Europe.
The lease has an initial term that began in May 2018 and expires on the last day of May 2038, with monthly base rent of $0.1 million for the first five years with scheduled rent increases every five years thereafter until the end of the lease.
The lease has an initial term that began in May 2018 and expires on May 31, 2038, with monthly base rent with scheduled rent increases every five years thereafter until the end of the lease.
Item 2. Properties The Company leases a 44,000 square-foot corporate headquarters facility in Roseville, Minnesota. The facility includes office, research laboratories, the first pilot BioFactory production system, greenhouses, and outdoor growing plots.
The Company also continues to lease its former corporate headquarters facility in Roseville, Minnesota totaling 44,000 square feet. This facility includes office, research laboratories, greenhouses, and outdoor growing plots.
Added
Item 2. Properties. The Company's headquarters are located in San Diego, California where it has leases for its headquarters facility, which includes office and laboratory space and for the first standardized high-throughput (gene editing) trait development facility for editing plants (the Oberlin Facility).
Added
The headquarters facility and the Oberlin Facility are 53,423 and 31,939 square feet, respectively, with terms that expire in May 2025 and August 2025, respectively. The Company has one option to extend the lease for the Oberlin Facility for one year.
Added
Additionally, the Company has certain leases for greenhouse and warehouse facilities, totaling 30,800 and 6,207 square feet, respectively, with terms that expire in August 2028 and August 2026, respectively.
Added
The Company had one option to extend the term of the greenhouse lease, for five years, and executed this right with an amended lease agreement beginning in September 2023 and expiring at the end of August 2028. There are no other options to extend this lease. The Company has one option to extend the warehouse lease for five years.
Added
For the years ended December 31, 2023, and 2022, Cibus incurred rent expenses under these leases of $4.5 million and $1.5 million, respectively.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings The Company is not a party to any material pending legal proceedings as of December 31, 2022. From time to time, the Company may be involved in legal proceedings arising in the ordinary course of business. Item 4. Mine Safety Disclosures. Not Applicable. PART II
Biggest changeItem 3. Legal Proceedings. The Company is not a party to any material pending legal proceedings as of December 31, 2023. From time-to-time, the Company may be involved in legal proceedings arising in the ordinary course of business. Item 4. Mine Safety Disclosures. Not applicable. - 45 - Table of Contents Part II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 27 PART II 27 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 27 Item 6. [Reserved] 28 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 38 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 45 PART II 46 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 46 Item 6. [Reserved] 46 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 47 Item 7.A. Quantitative and Qualitative Disclosures About Market Risk 59 Item 8.
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Financial Statements and Supplementary Data 59 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 59 Item 9.A. Controls and Procedures 60 Item 9.B. Other Information 60

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends The Company has not paid dividends on its common stock and does not currently plan to pay any cash dividends in the foreseeable future.
Biggest changeThe number of holders of record of the Company’s Class A Common Stock does not reflect the number of beneficial holders whose shares are held by banks, depositaries, brokers, or other nominees. Dividends The Company has not paid dividends on its Class A Common Stock and does not currently plan to pay any cash dividends in the foreseeable future.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The Company’s common stock has traded on the NASDAQ Global Market under the ticker symbol of CLXT since its IPO on July 25, 2017. Prior to that time, there was no established public trading market for the Company’s common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The Company’s Class A Common Stock trades on the Nasdaq Capital Market under the ticker symbol of “CBUS.” The Company's Class B Common Stock is not listed or traded on any stock exchange.
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Holders of Common Stock As of February 28, 2023, there were 89 holders of record of 49,376,160 outstanding shares of the Company’s common stock. The number of holders of record of the Company’s common stock does not reflect the number of beneficial holders whose shares are held by banks, depositaries, brokers, or other nominees.
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Holders of Common Stock As of March 19, 2024, there were 447 holders of record of 20,989,373 outstanding shares of the Company’s Class A Common Stock and 35 holders of record of 3,142,636 outstanding shares of the Company’s Class B Common Stock.
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Stock Performance Graph The following graph shows a comparison from July 25, 2017 (the date the Company’s common stock commenced trading on The NASDAQ Global Market) through December 31, 2022, of the cumulative total return for its common stock, the Russell 2000 Index, the Standard & Poor’s 500 Stock Index (S&P 500 Index) and the NASDAQ Composite Index (NASDAQ Composite).
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In the future, dividends on Class A Common Stock, if any, will be paid at the discretion of the Board, which will consider, among other things, the Company’s business, operating results, financial condition, current and expected cash needs, plans for expansion, and any legal or contractual limitations on its ability to pay such dividends.
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The graph assumes that $100 was invested at the close of the market on July 20, 2017, in the Company’s common stock, the S&P 500 Index and the NASDAQ Composite, and data for the S&P 500 Index and the NASDAQ Composite assumes reinvestments of dividends.
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Unregistered Sales of Equity Securities During the period covered by this Annual Report on Form 10-K, the Company did not issue any unregistered equity securities, other than pursuant to transactions previously disclosed in the Company’s Current Reports on Form 8-K.
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The stock price performance of the following graph is not necessarily indicative of future stock price performance. 27 Table of Contents This performance graph shall not be deemed soliciting material or to be filed with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act or the Exchange Act.
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Issuer Purchases of Equity Securities The Company did not repurchase any shares of Class A Common Stock or Class B Common Stock during the period covered by this Annual Report on Form 10-K.
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Securities Authorized for Issuance under Equity Compensation Plans The following table sets forth certain information related to the Company’s compensation plans under which shares of its common stock are authorized for issuance as of December 31, 2022: Plan Category (A) Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A) Equity compensation plans approved by security holders 1 7,600,659 2 $ 7.35 3 3,112,568 4 Equity compensation plans not approved by security holders 5 600,000 — — Total 8,200,659 $ 7.35 3,112,568 1 Includes the Calyxt, Inc.
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During the period covered by this Annual Report on Form 10-K, 30,656 shares of Class A Common Stock were withheld for net share settlement resulting from restricted stock unit award vesting.
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Equity Incentive Plan (2014 Plan) and the 2017 Omnibus Plan (2017 Plan). 2 Includes stock options, RSUs, and the 2022 grant of PSUs.
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The number of shares underlying the 2022 PSUs included in these amounts is the maximum amount that holders are eligible to earn if the applicable performance metrics are fully achieved under terms of the PSU awards. 3 Represents the weighted average exercise price of options outstanding under the 2014 Plan and the 2017 Plan.
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Does not take into account outstanding RSUs and PSUs which, when settled, will be settled in shares of the Company’ common stock on a one-for-one basis at no additional cost. 4 Of these shares, none are available for future issuance from the 2014 Plan and 3,112,568 remain available for future issuance from the 2017 Plan.
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The total number of Shares available for issuance under the 2017 Plan will be increased on the first day of each Company fiscal year following the effective date of the Company’s IPO in an amount equal to the least of (i) 2,000,000 Shares, (ii) 5% of outstanding Shares on the last day of the immediately preceding fiscal year or (iii) such number of Shares as determined by the Board in its discretion All these shares are available for issuance other than upon exercise of options, warrants, or rights. 5 Includes the Calyxt, Inc. 2021 Employee Inducement Plan (Inducement Plan).
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In July 2021, the Company adopted the Inducement Plan, pursuant to which shares of common stock are issuable upon the settlement of performance stock units (PSUs) granted to Mr. Michael A. Carr in July 2021 as a material inducement to accept employment as the Company’s President and Chief Executive Officer.
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The PSUs will vest if the Company’s stock remains above three specified price levels for 30 calendar days over the three-year performance period. The PSUs will be settled in unrestricted shares of the Company’s common stock on the vesting date.
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Repurchases of Equity Securities by the Issuer or Affiliate Purchasers There were no repurchases of the Company’s equity securities, including any repurchases by affiliates, for the year ended December 31, 2022. Unregistered Sales of Equity Securities None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCash Flows from Operating Activities Year Ended December 31, In Thousands 2022 2021 $ Change % Change Net loss $ (16,891 ) $ (29,199 ) $ 12,308 42 % Gain upon extinguishment of Payroll Protection Program loan — (1,528 ) 1,528 100 % Depreciation and amortization expenses 1,534 2,338 (804 ) (34 )% Stock-based compensation 3,998 2,090 1,908 91 % Unrealized (gain) loss on mark-to-market of common stock warrants (5,120 ) — (5,120 ) NM Changes in operating assets and liabilities (2,885 ) 7,488 (10,373 ) (139 )% Net cash used by operating activities $ (19,364 ) $ (18,811 ) $ (553 ) (3 )% NM- not meaningful Net cash used by operating activities was $19.4 million in 2022, an increase in cash used of $0.6 million, or three percent, from 2021.
Biggest changeCash Flows from Operating Activities Year Ended December 31, In Thousands, except percentage values 2023 2022 $ Change % Change Net loss $ (337,639) $ (16,891) $ (320,748) (1,899) % Royalty liability interest expense - related parties 18,892 — 18,892 NM Goodwill and intangible assets impairment 249,419 — 249,419 NM Depreciation and amortization 4,693 1,534 3,159 206 % Stock-based compensation 16,092 3,998 12,094 303 % Loss on disposal of property, plant, and equipment 224 — 224 NM Change in fair value of liability classified Class A common stock warrants 1,127 (5,120) 6,247 122 % Other 21 — 21 NM Changes in operating assets and liabilities 961 (2,885) 3,846 133 % Net cash used by operating activities $ (46,210) $ (19,364) $ (26,846) (139) % NM – not meaningful Net cash used by operating activities was $46.2 million in 2023, an increase in cash used of $26.8 million from 2022.
However, the Company previously agreed to indemnify Cellectis for any obligations under this guaranty, effective upon Cellectis’ ownership falling to 50 percent or less of the Company’s outstanding common stock. Accordingly, the Company’s indemnification obligation was triggered in October 2022. The Company holds an exclusive license from Cellectis that broadly covers the use of engineered nucleases for plant gene editing.
However, the Company previously agreed to indemnify Cellectis for any obligations under this guaranty, effective upon Cellectis’ ownership falling to 50 percent or less of the Company’s outstanding common stock. Accordingly, the Company’s indemnification obligation was triggered in October 2022. The Company holds a license from Cellectis that broadly covers the use of engineered nucleases for plant gene editing.
The preparation of these consolidated financial statements requires the Company to make estimates, assumptions, and judgments that affect the reported amounts in the Company’s consolidated financial statements and accompanying notes.
The preparation of these consolidated financial statements requires the Company to make estimates, assumptions, and judgments that affect the reported amounts in its consolidated financial statements and accompanying notes.
CRITICAL ACCOUNTING ESTIMATES The accompanying discussion and analysis of the Company’s financial condition and results of operations are based upon its consolidated financial statements and the related disclosures, which have been prepared in accordance with accounting principles generally accepted in the United States.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES The accompanying discussion and analysis of the Company’s financial condition and results of operations are based upon its consolidated financial statements and the related disclosures, which have been prepared in accordance with United States GAAP.
In the less likely scenario in which the Company seeks to continue to operate its business and until the Company can generate cash flows sufficient to support its operating capital requirements, it would seek to finance a portion of future cash needs through (i) cash on hand, (ii) commercialization activities, which may result in various types of revenue streams from (a) future product development agreements and technology licenses, including upfront and milestone payments, annual license fees, and royalties; and (b) product sales from its proprietary BioFactory production system; (iii) government or other third-party funding, (iv) public or private equity or debt financings, or (v) a combination of the foregoing.
Over the longer term and until the Company can generate cash flows sufficient to support its operating capital requirements, it expects to finance a portion of future cash needs through (i) cash on hand, (ii) commercialization activities, which may result in various types of revenue streams from future trait R&D collaboration agreements and technology licenses, including upfront and milestone payments, annual license fees, and royalties; (iii) government or other third party funding (iv) public or private equity or debt financings, or (v) a combination of the foregoing.
Non-operating income (expenses) Non-operating income (expenses) are income or expenses that are not directly related to ongoing operations and are primarily comprised of gains and losses from the mark-to-market of Common Warrants, gain from a legal settlement, expenses associated with the evaluation of strategic alternatives, foreign exchange-related transactions, and disposals of land, buildings, and equipment.
Non-Operating Income (Expenses) Non-operating income (expenses) are income or expenses that are not directly related to ongoing operations and are primarily comprised of gains and losses from the mark-to-market of the Common Warrants (as defined below under “Liquidity and Capital Resources—Capital Resources"), gain from a legal settlement, and foreign exchange-related transactions.
Operating Capital Requirements The Company has incurred losses since its inception and its net loss was $16.9 million for the year ended December 31, 2022, and it used $19.4 million of cash for operating activities for the year ended December 31, 2022. The Company has incurred losses since its inception.
Operating Capital Requirements The Company has incurred losses since its inception and its net loss was $337.6 million for the year ended December 31, 2023, and it - 55 - Table of Contents used $46.2 million of cash for operating activities for the year ended December 31, 2023.
The Company believes the following policies to be the most critical to understanding its financial condition and results of operations because they require the use of estimates, assumptions, and judgments about matters that are inherently uncertain.
The Company believes the policies discussed in Note 1, Nature of Business & Summary of Significant Accounting Policies, are the most critical to an understanding of its financial condition and results of operations because they require it to make estimates, assumptions, and judgments about matters that are inherently uncertain.
Revenue in the 2022 was primarily associated with the Company’s agreement with a large food ingredient manufacturer to develop a palm oil alternative. Research and Development Expense R&D expense was $11.6 million in 2022, an increase of $0.2 million, or 2 percent, from 2021.
Revenue from Legacy Calyxt's operations in 2023 and 2022 was primarily associated with the Company’s agreement with a large food ingredient manufacturer to develop a palm oil alternative. - 52 - Table of Contents Research and Development Expense R&D expense was $42.4 million in 2023, an increase of $30.8 million from 2022.
Current liabilities were $1.7 million as of December 31, 2022. The Company’s current cash, cash equivalents, and restricted cash is sufficient to cover all of its current liabilities as of December 31, 2022. The Company’s liquidity funds its non-discretionary cash requirements and its discretionary spending.
As of December 31, 2023, the Company had $32.7 million of cash and cash equivalents. Current liabilities were $21.3 million as of December 31, 2023. The Company’s liquidity funds its non-discretionary cash requirements and its discretionary spending.
As of December 31, 2022, the Company had an accumulated deficit of $212.2 million. The Company’s net losses were $16.9 million for the year ended December 31, 2022. The Company expects to continue to incur significant expenses and operating losses for the next several years. Those expenses and losses may fluctuate significantly from quarter-to-quarter and year-to-year.
The Company’s net loss was $337.6 million for the year ended December 31, 2023. As Cibus continues to develop its pipeline of productivity traits and as a result of its limited commercial activities, Cibus expects to continue to incur significant expenses and operating losses for the next several years. Those expenses and losses may fluctuate significantly from quarter-to-quarter and year-to-year.
The Company’s principal discretionary cash spending is for capital expenditures, short-term working capital payments, and professional and other transaction-related expenses incurred as the Company pursues additional financing and evaluates potential alternative transactions. 32 Table of Contents The Company incurred net losses of $16.9 million for the year ended December 31, 2022.
The Company has contractual - 53 - Table of Contents obligations related to recurring business operations, primarily related to lease payments for its corporate and laboratory facilities. The Company’s principal discretionary cash spending is for salaries, capital expenditures, short-term working capital payments, and professional and other transaction-related expenses incurred as the Company pursues additional financing.
The Company’s management has concluded there is substantial doubt regarding its ability to continue as a going concern for a period of 12 months or more from the date of this filing. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.
It is also driven by balances, yields, and timing of financing and other capital raising activities.
Other Interest Income (Expense), net Other interest income (expense), net is comprised of interest income resulting from investments of cash and cash equivalents and interest expense incurred related to financing lease obligations and notes payable. It is also driven by balances, yields, and timing of financing and other capital raising activities.
The Company recognizes R&D expenses as they are incurred. 30 Table of Contents Selling, General, and Administrative Expense Selling, general, and administrative (SG&A) expenses consist primarily of employee-related expenses for selling and licensing the Company’s products and employee-related expenses for its executive, legal, intellectual property, information technology, finance, and human resources functions.
Selling, General, and Administrative Expenses SG&A expense consists primarily of employee-related expenses, such as salaries for its executive, business development, legal, intellectual property, information technology, finance, human resources, and other administrative functions. These costs include legal, professional, and consulting fees for external firms and contractors.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS For more information on recently issued accounting pronouncements, see the Company’s consolidated financial statements and related financial statement schedules on page F-1.
The Company has not recognized any impairment losses related to long-lived assets or finite-lived intangible assets for the years ended December 31, 2023, and 2022. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS For more information on recently issued accounting pronouncements, see the Company’s consolidated financial statements and footnotes on page F-1 and specifically Note 1.
If the Company is unable to consummate the Transactions, the Company may have to implement increasingly stringent cost saving measures and significantly delay, scale back, or cease operations, in part or in full.
Although the Company has implemented a strategic realignment, which has included headcount reductions, and has initiated cost reduction initiatives designed to preserve capital resources, if the Company is unable to raise additional capital in a sufficient amount or on acceptable terms, the Company may have to implement additional, more stringent cost reduction measures to manage liquidity, and the Company may have to significantly delay, scale back, or cease operations, in part or in full.
LIQUIDITY AND CAPITAL RESOURCES Liquidity The Company’s primary sources of liquidity are its cash and cash equivalents. As of December 31, 2022, the Company had $3.5 million of cash, cash equivalents, and restricted cash.
As of December 31, 2023, the Company had $32.7 million of cash and cash equivalents. Current liabilities were $21.3 million as of December 31, 2023.
As of December 31, 2022, the Company had an accumulated deficit of $212.2 million and expects to continue to incur losses in the future.
The Company currently expects to satisfy these requirements with existing cash on hand and proceeds raised from the ATM Facility. The Company incurred a net loss of $337.6 million for the year ended December 31, 2023. As of December 31, 2023, the Company had an accumulated deficit of $479.8 million and expects to continue to incur losses in the future.
Selling, General, and Administrative Expense SG&A expense was $11.0 million in 2022, a decrease of $4.5 million, or 29 percent, from 2021.
Non-Operating Income (Expenses) Non-operating income (expenses) was expense of $0.4 million in 2023, a decrease in income of $6.0 million from 2022.
To the extent the Transactions are not consummated for any reason and the Company is not liquidated and dissolved, it anticipates that it will continue to generate losses for the next several years or until such time as an alternative strategic transaction is consummated.
The Company has incurred losses since its inception and anticipates that it will continue to generate losses for the next several years.
In the aggregate, the Company received net proceeds of $10.0 million, after deducting approximately $0.9 million of underwriting discounts and estimated other offering expenses. • On October 3, 2022, the Company entered into an amendment to the Open Market Sale Agreement with Jefferies for the ATM Facility that enables it, subject to the applicable baby shelf rules, to offer and sell up to 15,661,000 shares of its common stock.
In the aggregate, the Company received net proceeds of $10.0 million, after deducting approximately $0.9 million of underwriting discounts and estimated other offering expenses.
The Company expects cash used by operating activities in 2023 to be lower than 2022 driven by reductions in operating expenses as a result of the Company’s cost reduction initiatives and streamlining of operational focus prior to the anticipated closing of the Transactions.
The Company expects cash used by operating activities in 2024 to be higher than 2023 driven by a full year of combined companies in 2024 versus only seven months of combined companies in 2023.
Capital Resources The Company has an effective shelf registration on Form S-3 on file with the SEC and additional capital is accessible from the capital markets, including pursuant to its ATM Facility. However, amounts available under the shelf registration statement, including the ATM Facility, are significantly limited 33 Table of Contents because the Company’s public float is less than $75,000,000.
Capital Resources The Company’s primary source of liquidity is its cash and cash equivalents, with additional capital resources accessible, subject to market conditions and other factors, including limitations that may apply to the Company under applicable SEC and Nasdaq regulations, from the capital markets, including through stock offerings of common stock or other securities, which may be implemented pursuant to the Company’s effective registration statement on Form S-3.
Cash Flows from Investing Activities Year Ended December 31, In Thousands 2022 2021 $ Change % Change Sales and (purchases) of short-term investments, net $ — $ 11,698 $ (11,698 ) (100 )% Purchases of land, buildings, and equipment (1,520 ) (497 ) (1,023 ) (206 )% Net cash (used) provided by investing activities $ (1,520 ) $ 11,201 $ (12,721 ) (114 )% Net cash used by investing activities was $1.5 million in 2022, an increase in cash used of $12.7 million, or 114 percent, from 2021.
Cash Flows from Investing Activities Year Ended December 31, In Thousands, except percentage values 2023 2022 $ Change % Change Cash acquired from merger with Cibus Global, LLC $ 59,381 $ — $ 59,381 NM Purchases of property, plant, and equipment (4,321) (1,520) (2,801) (184) % Net cash provided by (used in) investing activities $ 55,060 $ (1,520) $ 56,580 3,722 % NM – not meaningful Net cash provided by investing activities was $55.1 million in 2023, an increase of $56.6 million from 2022.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations EXECUTIVE OVERVIEW Calyxt is a plant-based synthetic biology company. The Company leverages its proprietary PlantSpring technology platform to engineer plant metabolism to produce innovative, high-value, and sustainable materials and products for use in helping customers meet their sustainability targets and financial goals.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of the Company’s financial condition and results of operations should be read together with its consolidated financial statements and related notes, which are included elsewhere in this Annual Report on Form 10-K.
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In October 2021, the Company announced the launch of a strategic initiative which focused is on engineering synthetic biology solutions through its PlantSpring platform for manufacture using its proprietary and differentiated BioFactory production system for a diverse base of target customers across a range of end markets, including the cosmeceutical, nutraceutical, and pharmaceutical industries.
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OVERVIEW AND BUSINESS UPDATE Cibus is a leading agricultural biotechnology company that uses proprietary gene editing technologies to develop plant traits (or specific genetic characteristics) in seeds. Its primary business is the development of plant traits that help address specific productivity or yield challenges in farming such as traits addressing plant agronomy, disease, insects, weeds, nutrient-use, or the climate.
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The Company also commercializes its PlantSpring technology platform by licensing elements of the platform and historically developed traditional agriculture seed-trait product candidates, as well as selectively developing product candidates for customers in traditional agriculture. The business is described in greater detail in “Item 1. Business—Company Overview.” The Company is an early-stage company and has incurred net losses since its inception.
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These traits are referred to as productivity traits and drive greater farming profitability and efficiency. They do this in several ways, including, but not limited to, making plants resistant to diseases or pests or enabling plants to process nutrients more efficiently.
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Historically, the Company’s expenses in connection with the execution of its long-term business plan have been primarily driven by: • R&D expenses associated with developing and enhancing the capabilities of its PlantSpring technology platform; • R&D expenses and capital expenditures to expand its BioFactory production system; • regulatory expenses associated with R&D and product development; • maintaining, protecting, expanding, and defending its intellectual property portfolio, including intellectual property related to the PlantSpring technology platform and BioFactory production system; • human capital related expenses associated with attracting and retaining skilled personnel; and • pursuing and negotiating agreements with customers, licensees, and infrastructure partners.
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Certain of these traits lead to the reduction in the use of chemicals like fungicides, insecticides, or the reduction of fertilizer use, while others make crops more adaptable to their environment or to climate change.
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On September 22, 2022, the Company announced that the Board had begun evaluating potential strategic alternatives to maximize shareholder value, including financing alternatives, merger, reverse merger, other business combinations, sale of assets, licensing, or other transactions. On January 13, 2023, the Company and Merger Subsidiary entered into the Merger Agreement with Cibus.
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The ability to develop productivity traits in seeds that can increase farming productivity and reduce the use of chemicals in farming is the promise of gene editing technologies.
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Pursuant to the Merger Agreement, following the Transactions, Calyxt will be organized in an “Up-C” structure and re-named “Cibus, Inc.” and its only material asset will consist of common units of Cibus.
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In addition, Cibus is developing, through partner-funded projects, certain alternative plant-based oils or bio-based fermentation products to meet the functional needs of the new sustainable ingredients industry to replace current ingredients that are identified to raise environmental challenges, such as ingredients derived from fossil fuels, materials that cause deforestation, or materials that raise other sustainability challenges.
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If the Transactions are completed, the business of Cibus will continue as the primary business of the combined organization and the equity holders of Cibus will own a substantial majority of the issued and outstanding common stock of the Company.
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Cibus’ core technology is its propriety gene editing platform called the Rapid Trait Development System™ or RTDS ® . It is the underlying technology in Cibus’ Trait Machine™ process: a standardized end-to-end semi-automated high-throughput gene editing system that directly edits seed companies’ elite germplasm. It is a timebound, reproducible, and predictable science-based breeding process.
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The closing of the Transactions is subject to the approval of Calyxt’s stockholders, the approval of Cibus’ members, the receipt of required regulatory approvals (to the extent applicable) and satisfaction of other customary closing conditions. The closing is currently expected to occur in the second quarter of 2023.
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RTDS is covered by over 500 patents or patents pending. It is the core technology platform underpinning the processes at Cibus’ first standardized high-throughput (gene editing) trait development facility (Oberlin Facility) and is the industry's first facility of this kind.
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Additional information regarding the Transactions is included in Calyxt’s registration statement on Form S-4 initially filed with the SEC in February 2023.
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The Company considers the Oberlin Facility an important technological milestone that represents a breakthrough in the achievement of a standardized high-throughput gene editing system that provides the speed, precision, and scale that is the promise of gene editing.
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If, for any reason, the Transactions are not completed, the Company will reconsider its available alternatives at such time and could pursue one of the following courses of action, which the Company currently believes to be the most likely alternatives: • Dissolve and liquidate. The Company may decide to dissolve and liquidate its assets.
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A key aspect of gene editing is that plant traits using this technology are indistinguishable from plant traits developed using conventional plant breeding (or, from nature).
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In such a circumstance, Calyxt would be required to pay all of its debts and contractual obligations and to set aside certain reserves for potential future claims. In light of Calyxt’s current capital resources, it is highly unlikely, in this case, that substantial resources, if any, would be available for distributions to stockholders. • Pursue another strategic transaction .
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Because of this, most major jurisdictions have either passed regulations or started processes to introduce regulations that generally treat traits developed using gene editing on the same basis as traits developed using conventional plant breeding. All traits developed using RTDS , including the Company's five-trait pipeline, comprise the types of changes that arise naturally in conventional plant breeding programs.
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The Company may decide to resume the process of evaluating a potential merger, reorganization or other business combination transaction or to sell or otherwise dispose of certain of the Company’s assets. Any of these alternatives would be costly and time-consuming and would require that Calyxt obtain additional near-term funding in parallel to, or as part of, such a strategic transaction.
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GMO technologies enabled major improvements in farming productivity. Unfortunately, because GMO technologies use foreign DNA, or transgenes, the development of major GMO traits has faced headwinds. For example, in the EU, GMO traits were essentially banned, and imports were heavily regulated.
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The Company expects that it would be difficult to secure such funding in a timely manner, on favorable terms or at all. • Operate the business . Although substantially less likely than the alternatives above, the Calyxt board could elect to seek to continue to operate the Company’s business.
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Changes in place in key countries and presently under consideration in Europe are aimed at harmonizing how gene edited traits are regulated in order to align with regulations for traits from conventional plant breeding. These changes highlight the major global evolution away from the heavily regulated GMO technology and acceptance of gene editing technologies.
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This alternative would require that Calyxt obtain additional near-term funding, which the Company expects would be difficult to secure in a timely manner, on favorable terms or at all.
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This is a big moment for Cibus that the Company has been working towards since its founding.
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If pursued, Calyxt would likely need to significantly delay or further scale back operations beyond its already narrowly focused operational activities. 29 Table of Contents Current Operational Focus Prior to the announcement of the Transactions, the Company’s primary focus was on the development of synthetic biology products for its customers using its BioFactory production system.
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Cibus believes that its RTDS technologies and Trait Machine process represent a technological breakthrough in plant breeding: the ability to materially change the productivity of the breeding process that currently averages more than a decade with a scientifically based process whose trait products are indistinguishable from traits developed through conventional plant breeding and that are regulated as such.
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In light of the proposed Transactions and recent capital resource constraints, the Company has substantially scaled back its operations and has focused its current business activities on ensuring it has cash sufficient to achieve a closing of the proposed Transactions.
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The Trait Machine process materially changes not only the speed and scale of the breeding process, but it also exponentially changes the range of possible genetic solutions from breeding and with it, the capability to develop desired characteristics or traits needed for greater farming sustainability and food security.
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Accordingly, Calyxt’s management has implemented cost reduction and other cash-focused measures, including reduction of capital expenditures, headcount reductions, and renegotiation or termination of professional services agreements. To conserve cash, Calyxt has also strategically evaluated its arrangements with suppliers and service providers and has, in several instances, transitioned such relationships to lower cost alternative providers.
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Cibus is a leader in the gene editing era—an industry characterized by high-throughput gene editing facilities serving as extensions of plant breeding operations for seed company customers. Cibus is the leader in this vision. Cibus and its Trait Machine process do not compete with seed companies’ breeding operations, they augment them.
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In limiting operations to core activities, the Company has focused its continuing operations on • scaling production of a single Plant Cell Matrix with its manufacturing partner, Evologic; • licensing efforts with respect to its PlantSpring technology and plant traits, including the TALEN technology; and • continuing to progress its three current customer projects—(1) its research collaboration with a leading global food ingredient manufacturer to develop a soybean trait to serve as an alternative to palm oil, (2) its plant-based chemistry pilot project for a major consumer packaged goods company, and (3) supporting late-stage development activities for its improved digestibility alfalfa trait, which was developed with and licensed to S&W Seed Company.
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Cibus provides complex traits that it edits in the elite germplasm of its customers for commercialization. Its role is to improve the efficiency and effectiveness of developing the complex traits needed to address farming’s most pressing productivity issues.
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The Company has suspended non-core activities, such as efforts toward the development and integration of AIML and the initiation, development and commercialization of additional synthetic biology products, or chemistries, beyond those involved in the continuing operations identified above. RELATIONSHIP WITH CELLECTIS AND COMPARABILITY OF RESULTS The Company’s largest shareholder is Cellectis.
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Importantly, Cibus and its Trait Machine process provides the ability to efficiently gene edit these complex traits directly into elite germplasm of any of the major crops with a new speed, precision, and scale. Cibus believes that this is the Future of Breeding™.
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As of December 31, 2022, Cellectis owned 49.1 percent of the Company’s issued and outstanding common stock. Cellectis has certain contractual rights as well as rights pursuant to the Company’s certificate of incorporation and bylaws, in each case, for so long as it maintains threshold beneficial ownership levels in the Company’s shares.
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Cibus believes that its gene editing technologies and trait products have the potential to accelerate agriculture’s jump to a climate smart, more sustainable, crop production system and industry’s move to sustainable, natural, and low carbon materials or ingredients.
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See “Risk Factors—Although Cellectis and its affiliates hold less than a majority of the Company’s outstanding common stock, Cellectis possesses certain rights that prevent other stockholders from influencing significant decisions.” In addition, Cellectis has guaranteed the lease agreement for the Company’s headquarters.
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The Company believes that a measure of the success of its RTDS technologies and its Trait Machine process is that Cibus has been able to develop a pipeline of five productivity traits, four of which are applicable to multiple crops.
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This intellectual property covers methods to edit plant genes using “chimeric restriction endonucleases,” which include TALEN ® , CRISPR/Cas9, zinc finger nucleases, and some types of meganucleases. FINANCIAL OPERATIONS OVERVIEW Revenue Revenue is recognized from sales of products, from licenses of technology, and from product development activities for customers.
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Three of the traits are developed, meaning that they have been edited in a customer's elite germplasm and have been validated in multiple field trials.
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Cost of Goods Sold Cost of goods sold are recognized as products are sold. There are minimal cost of goods sold associated with the Company’s technology licensing activities.
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In Canola and Winter Oilseed Rape (WOSR), the Company's Pod Shatter Reduction (PSR) trait has been edited into the elite lines of customer seed company partners and has started “shipping,” meaning that Cibus has begun transferring this PSR trait to these customers in their elite germplasm for potential commercial launch.
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Research and Development Expense The Company’s R&D expenses primarily consist of employee-related costs for personnel who research and develop its product candidates, fees for contractors who support product development activities, purchasing material and supplies for its laboratories, licensing, an allocation of facility and information technology expenses, and other costs associated with owning and operating its own laboratories and pilot BioFactory capabilities.
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In Rice, the Herbicide Tolerance (HT) traits HT1 and HT3 were edited into elite genetics and are now undergoing introgression (breeding) into multiple customers’ genetics both for the USA and Latin America. - 47 - Table of Contents 2023 was a pivotal year for Cibus.
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This includes the costs of performing activities to discover and develop products and advance the Company’s PlantSpring technology platform, including its intellectual property portfolio. BioFactory expenses from lab through pilot, unless incurred related to a specific product sold to a customer, are also classified as R&D expense.
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In the first half of 2023, Cibus Global successfully transferred its three developed traits, PSR in Canola and HT1 and HT3 in Rice, to leading seed companies, advancing the commercial development process. Cibus’ developed trait for PSR was successfully transferred in the elite germplasm of Nuseed, a leading canola seed company with operations in North America and Australia.
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R&D expenses also include costs to write and support the research for filing patents.
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Cibus’ HT1 and HT3 traits in Rice were successfully transferred in the elite germplasm of Nutrien, a leading North American Rice seed company. In the second quarter of 2023, Cibus Global merged with Legacy Calyxt to form Cibus, Inc. This merger brought together two pioneers in the plant agricultural gene editing business.
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In periods prior to 2021, these expenses also included employee-related and other expenses for selling soybean oil and meal, soybean acreage acquisition, and managing the soybean product supply chain.
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It combined their proprietary technology platforms, patent estates, and facilities to create a leader in precision gene editing focused on driving sustainable agriculture. Legacy Calyxt had gene editing facilities in Roseville, Minnesota and significant patented plant agricultural gene editing technologies including the rights to TALEN ® for use in plants.
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Other SG&A expenses include facility and information technology expenses not otherwise allocated to R&D expenses, professional fees for auditing, tax and legal services, expenses associated with maintaining patents, consulting costs and other costs of the Company’s information systems, and costs to market its products.

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