NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

Note 1. The Company

Cellectis S.A. (hereinafter “Cellectis” or “we”) is a limited liability company (“société anonyme”) registered and domiciled in Paris, France.

We are a clinical stage biotechnological company, employing our core proprietary technologies to develop products based on gene-editing with a portfolio of allogeneic Chimeric Antigen Receptor T-cells (“UCART”) product candidates in the field of immuno-oncology and gene-edited hematopoietic stem cells (“HSC”) product candidates in other therapeutic indications.

Our UCART product candidates, based on gene-edited T-cells that express Chimeric Antigen Receptors (“CARs”), seek to harness the power of the immune system to target and eradicate cancers. We believe that CAR-based immunotherapy is one of the most promising areas of cancer research, representing a new paradigm for cancer treatment. We are designing next-generation immunotherapies that are based on gene-edited CAR T-cells. Our gene-editing technologies allow us to create allogeneic CAR T-cells, meaning they are derived from healthy donors rather than the patients themselves. We believe that the allogeneic production of CAR T-cells will allow us to develop cost-effective, “off-the-shelf” products and are capable of being stored and distributed worldwide. Our gene-editing expertise also enables us to develop product candidates that feature additional safety and efficacy attributes, including control properties designed to prevent them from attacking healthy tissues, to enable them to tolerate standard oncology treatments, and to equip them to resist mechanisms that inhibit immune-system activity.

Together with our focus on immuno-oncology, we are using, through our HEAL platform, our gene-editing technologies to develop HSC product candidates in genetic diseases.

As of March 31, 2022, Cellectis S.A. also owns 56.1% of the outstanding shares of common stock of Calyxt, Inc., our plant-based synthetic biology subsidiary that 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. Calyxt’s primary focus and commercialization strategy is on engineering synthetic biology solutions through its PlantSpring platform for manufacture using its proprietary and differentiated BioFactory production system.

Cellectis S.A., Cellectis, Inc., Cellectis Biologics Inc. and Calyxt, Inc. (or “Calyxt”) are sometimes referred to as a consolidated group of companies as the “Group.”

COVID-19 Update

While implementing health and safety measures in response to the COVID-19 pandemic, we continued to advance our proprietary allogeneic CAR T-cell programs during the three months ended March 31, 2022.

Although the COVID-19 pandemic has slowed the enrollment of new patients, Cellectis continued to enroll patients in its AMELI-01, BALLI-01 and MELANI-01 clinical trials during the three months ended March 31, 2022.

Despite the increasing availability of COVID-19 vaccines, the COVID-19 pandemic and government actions to contain it continue to result in significant disruptions to various public and commercial activities. With respect to clinical trials for both our proprietary allogeneic CAR T-cell programs and programs conducted by commercial partners, enrollment of new patients and the ability to conduct

 

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patient follow-up is expected to continue to be impacted by the COVID-19 pandemic. The exact timing of delays and overall impact of the COVID-19 pandemic to our business, preclinical studies, clinical trials and manufacturing activities is currently unknown, and we are monitoring the pandemic as it continues to evolve.

At Calyxt, during the first three months of 2022, the COVID-19 pandemic did not have a material impact on operations. However, a resurgence of the COVID-19 pandemic, governmental response measures, and resulting disruptions could adversely affect Calyxt’s operations and results.

The overall impact to Cellectis’ and Calyxt’s businesses will be dependent on future developments, which are highly uncertain and difficult to predict.

Note 2. Accounting principles

2.1 Basis for preparation

The Interim Consolidated Financial Statements of Cellectis as of, and for the three-month period ended, March 31, 2022 were approved by our Board of Directors on May 12, 2022.

The Interim Consolidated Financial Statements are presented in U.S. dollars. See Note 2.2.

The Interim Consolidated Financial Statements as of, and for the three-month period ended March 31, 2022 have been prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”).

The Interim Consolidated Financial Statements as of and for the three-month period ended March 31, 2022 have been prepared using the same accounting policies and methods as those applied for the year ended December 31, 2021, except as described below related to the new or amended accounting standards applied.

IFRS include International Financial Reporting Standards (“IFRS”), International Accounting Standards (“the IAS”), as well as the interpretations issued by the Standards Interpretation Committee (“the SIC”), and the International Financial Reporting Interpretations Committee (“IFRIC”).

Application of new or amended accounting standards or new amendments

The following pronouncements and related amendments have been adopted by us from January 1, 2022 but had no significant impact on the Interim Consolidated Financial Statements:

 

•

Amendments to IAS 37 – Onerous Contracts: Cost of Fulfilling a Contract (Effective for the accounting periods as of January 1, 2022)

 

•

Amendments to IAS 16 – Property, Plant and Equipment: Proceeds before Intended Use (Effective for the accounting periods as of January 1, 2022)

 

•

Amendments to IFRS 3 – Reference to the Conceptual Framework (Effective for the accounting periods as of January 1, 2022)

 

•

IFRS 9 Financial Instruments – Fees in the ’10 per cent’ Test for Derecognition of Financial Liabilities (Effective for the accounting periods as of January 1, 2022)

 

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Accounting standards, interpretations and amendments issued but not yet effective

The following pronouncements and related amendments are applicable for first quarter accounting periods beginning after January 1, 2023 or later, as specified below. We are currently evaluating if the adoption of these pronouncements and amendments will have a material impact on our results of operations, financial position, or cash flows:

 

•

IFRS 17 Insurance Contracts (including Amendments to IFRS 17 issued in June 2020 and Amendment to IFRS 17—Initial Application of IFRS 17 and IFRS 9 – Comparative Information issued in December 2021) (issued in May 2017 and Effective for the accounting periods as of January 1, 2023)

 

•

Amendments to IAS 1 – Classification of Liabilities as Current or Non-current (issued in July 2020 and Effective for the accounting periods as of January 1, 2023)

 

•

Amendments to IAS 8 – Definition of Accounting Estimates (issued on 12 February 2021 and Effective for the accounting periods as of January 1, 2023)

 

•

Amendments to IAS 1 and IFRS Practice Statement 2 –Disclosure of Accounting Policies (issued in March 2021 and Effective for the accounting periods as of January 1, 2023)

 

•

Amendments to IAS 12 – Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (issued in May 2021 and Effective for the accounting periods as of January 1, 2023)

2.2 Currency of the financial statements

The Interim Consolidated Financial Statements are presented in U.S. dollars, which differs from the functional currency of Cellectis, which is the euro. We believe that this presentation enhances the comparability with peers, which primarily present their financial statements in U.S. dollars.

All financial information (unless indicated otherwise) is presented in thousands of U.S. dollars.

The statements of financial position of consolidated entities having a functional currency different from the U.S. dollar are translated into U.S. dollars at the closing exchange rate (spot exchange rate at the statement of financial position date) and the statements of operations, statements of comprehensive income (loss) and statements of cash flows of such consolidated entities are translated at the average period to date exchange rate. The resulting translation adjustments are included in equity under the caption “Accumulated other comprehensive income (loss)” in the Statements of Changes in Shareholders’ Equity.

2.3 Consolidated entities and non-controlling interests

Accounting policy

We control all the legal entities included in the consolidation. An investor controls an investee when the investor is exposed to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Control requires power, exposure to variability of returns and a linkage between the two.

To have power, the investor needs to have existing rights that give it the current ability to direct the relevant activities that significantly affect the investee’s returns.

In order to ascertain control, potential voting rights which are substantial are taken into consideration.

 

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Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary.

All intra-Group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full in the consolidation.

Consolidated entities

For the three-month periods ended March 31, 2022 and March 31, 2021, the consolidated group of companies (sometimes referred to as the “Group”) includes Cellectis S.A., Cellectis, Inc., Cellectis Biologics, Inc. and Calyxt.

As of March 31, 2022, Cellectis S.A. owns 100% of Cellectis, Inc., which owns 100% of Cellectis Biologics, Inc., and approximately 56.1% of Calyxt’s outstanding shares of common stock.

On September 21, 2021, Calyxt entered into an At-the-Market Program (“ATM Program”). Under the terms of the ATM Program, Calyxt may, from time-to-time, issue common stock having an aggregate offering value of up to $50.0 million. At its discretion, Calyxt determines the timing and number of shares to be issued under the ATM Program. Based on Calyxt’s public float, as of the date of the filing of its Annual Report on Form 10-K, Calyxt is only permitted to utilize a “shelf” registration statement, including the registration statement under which the ATM Program is operated, subject to Instruction I.B.6 to Form S-3, which is referred to as the “baby shelf” rules. For so long as Calyxt’s public float is less than $75,000,000, it may not sell more than the equivalent of one-third of its public float during any twelve consecutive months pursuant to the baby shelf rules. As of December 31, 2021, the Company had issued approximately 1.4 million shares of common stock under the ATM Program. Calyxt’s balance of cash and cash equivalents includes $3.9 million of net proceeds from those sales, and another $0.2 million of cash was received in early January 2022 following the settlement of those sales with the broker. During the three-month period ended March 31, 2022, Calyxt did not issue any shares of common stock under the ATM Program.

On February 23, 2022, Calyxt completed the placement to an institutional investor in an SEC-registered underwritten offering of (i) 3,880,000 shares of Calyxt common stock, (ii) pre-funded warrants to purchase up to 3,880,000 shares of its common stock, and (iii) common warrants to purchase up to 7,760,000 shares of its common stock (the “Offering”). The shares of common stock and the pre-funded warrants were each sold in combination with corresponding common warrants, with one common warrant to purchase one share of common stock for each share of common stock or each pre-funded warrant sold. The pre-funded warrants are exercisable for an exercise price of $0.0001 per share of Calyxt common stock and the common warrants are exercisable for an exercise price of $1.41 per share of Calyxt common stock. The pre-funded warrants are immediately exercisable and remain exercisable until exercised, while the common warrants will be exercisable six months after the date of issuance and expire on August 23, 2027. The aggregate offering price for each share of common stock and an accompanying common warrant was $1.41. The aggregate offering price for each pre-funded warrant and an accompanying common warrant was $1.4099.

Non-controlling interests

Non-controlling shareholders held a 38.2% interest in Calyxt as of December 31, 2021 and a 43.9% interest in Calyxt as of March 31, 2022. These non-controlling interests were generated during the initial public offering of Calyxt and a subsequent follow-on offering, as well as through vesting and exercises of equity awards and Calyxt’s ATM Program.

 

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Note 3. Information concerning the Group’s Consolidated Operations

3.1 Revenues and other income

Revenues by country of origin and other income

 

		For the three-month period ended March 31,
		2021				2022
		$ in thousands
From France			20,613				1,665
From USA			4,988				32
Revenues			25,601				1,697
Research tax credit			2,363				2,128
Subsidies and other			2				6
Other income			2,365				2,135
Total revenues and other income			27,966				3,832

Revenues by nature

 

		For the three-month period ended March 31,
		2021				2022
		$ in thousands
Recognition of previously deferred upfront payments			—				—
Other revenues from collaboration agreements			20,565				1,532
Collaboration agreements			20,565				1,532
Licenses			48				118
Products & services			4,988				47
Total revenues			25,601				1,697

Recognition of other revenues for the three-month period ended March 31, 2022 mainly reflects (i) the recognition of two milestones related to Cellectis’ agreement with Cytovia for $1.5 million while recognition of other revenues for the three-month period ended March 31, 2021 mainly reflected (i) the recognition of $15.0 million of upfront amounts related to the grant of a right-of-use license as part of the agreement signed between Cellectis and Cytovia on February 12, 2021 and (ii) the recognition of a $5.1 million milestone related to Cellectis’ agreement with Allogene.

Revenues related to licenses include royalties received under our various license agreements.

Products and services revenues mainly include the revenues of plants activities which are primarily attributable to Calyxt’s seed and grain crop sales for $5.0 million during the first three months of 2021. The decreases in revenue and cost of goods sold were driven by the late 2021 completion of the wind-down of Calyxt’s soybean product line. All of Calyxt’s revenue in the first quarter of 2022 was associated with Calyxt’s agreement with a large food ingredient manufacturer to develop a palm oil alternative.

 

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3.2 Operating expenses

 

Cost of revenue		For the three-month period ended March 31,
		2021				2022
Cost of goods sold			(7,331	)			—
Royalty expenses			(814	)			(385	)
Cost of revenue			(8,145	)			(385	)
		For the three-month period ended March 31,
Research and development expenses		2021				2022
Wages and salaries			(10,638	)			(12,281	)
Social charges on stock option grants			(761	)			(7	)
Non-cash stock-based compensation expense			(1,711	)			(1,660	)
Personnel expenses			(13,111	)			(13,948	)
Purchases and external expenses			(15,040	)			(10,953	)
Other			(2,854	)			(4,578	)
Total research and development expenses			(31,004	)			(29,479	)
		For the three-month period ended March 31,
Selling, general and administrative expenses		2021				2022
Wages and salaries			(6,129	)			(3,190	)
Social charges on stock option grants			(333	)			(47	)
Non-cash stock-based compensation expense			1,681				(1,247	)
Personnel expenses			(4,782	)			(4,484	)
Purchases and external expenses			(2,831	)			(3,387	)
Other			(1,166	)			(1,409	)
Total selling, general and administrative expenses			(8,779	)			(9,279	)
		For the three-month period ended March 31,
Personnel expenses		2021				2022
Wages and salaries			(16,768	)			(15,471	)
Social charges on stock option grants			(1,094	)			(54	)
Non-cash stock-based compensation expense			(30	)			(2,907	)
Total personnel expenses			(17,892	)			(18,431	)

 

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3.3 Reportable segments

Accounting policies

Reportable segments are identified as components of the Group that have discrete financial information available for evaluation by the Chief Operating Decision Maker (“CODM”), for purposes of performance assessment and resource allocation.

For the three-month periods ended March 31, 2022, Cellectis’ CODM is composed of:

 

•

The Chief Executive Officer;

 

•

The Executive Vice President CMC and Manufacturing (previously The Executive Vice President Strategic Initiatives);

 

•

The Senior Vice President of US Manufacturing;

 

•

The Chief Scientific Officer;

 

•

The Chief Financial Officer;

 

•

The General Counsel;

 

•

The Chief Business Officer;

 

•

The Chief Regulatory & Pharmaceutical Compliance Officer;

 

•

The Chief Medical Officer; and

 

•

The Chief Human Resources Officer.

We view our operations and manage our business in two operating and reportable segments that are engaged in the following activities:

 

•

Therapeutics: This segment is focused on the development of (i) gene-edited allogeneic Chimeric Antigen Receptor T-cells product candidates (UCART) in the field of immuno-oncology (UCART) and (ii) gene-edited hematopoetic stem cells (HSC) product candidates in other therapeutic indications. These approaches are based on our core proprietary technologies. All these activities are supported by Cellectis S.A., Cellectis, Inc. and Cellectis Biologics, Inc. The operations of Cellectis S.A., the parent company, are presented entirely in the Therapeutics segment which also comprises research and development, management and support functions.

 

•

Plants: This segment is focused on using Calyxt’s proprietary PlantSpringTM 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. Calyxt’s diversified product offerings will primarily be delivered through its proprietary BioFactory™ production system. It corresponds to the activity of our U.S.-based majority-owned subsidiary, Calyxt, which is currently based in Roseville, Minnesota.

There are inter-segment transactions between the two reportable segments, including allocation of corporate general and administrative expenses by Cellectis S.A. and allocation of research and development expenses to the reportable segments.

 

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With respect to corporate general and administrative expenses, Cellectis S.A. has provided Calyxt, with general sales and administrative functions, accounting and finance functions, investor relations, intellectual property, legal advice, human resources, communication and information technology under a Management Services Agreement. Effective with the end of the third quarter 2019, Calyxt has internalized nearly all of the services previously provided by Cellectis under this agreement. Under the Management Services Agreement, Cellectis S.A. charges Calyxt, in euros at cost plus a mark-up ranging between zero to 10%, depending on the nature of the service. Amounts due to Cellectis S.A. pursuant to inter-segment transactions bear interest at a rate of the 12-month Euribor plus 5% per annum.

The intersegment revenues represent the transactions between segments. Intra-segment transactions are eliminated within a segment’s results and intersegment transactions are eliminated in consolidation as well as in key performance indicators by reportable segment.

Information related to each reportable segment is set out below. Segment revenues and other income, research and development expenses, selling, general and administrative expenses, and cost of revenue and other operating income and expenses, and adjusted net income (loss) attributable to shareholders of Cellectis (which does not include non-cash stock-based compensation expense) are used by the CODM for purposes of making decisions about allocating resources to the segments and assessing their performance. The CODM does not review any asset or liability information by segment or by region.

Adjusted net income (loss) attributable to shareholders of Cellectis S.A. is not a measure calculated in accordance with IFRS. Because adjusted net income (loss) attributable to shareholders of Cellectis excludes non-cash stock-based compensation expense—a non-cash expense, our management believes that this financial measure, when considered together with our IFRS financial statements, can enhance an overall understanding of Cellectis’ financial performance. Moreover, our management views the Company’s operations, and manages its business, based, in part, on this financial measure.

The net income (loss) by segment includes the impact of the operations between segments while the intra-segment operations are eliminated.

 

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		For the three-month period ended March 31, 2021												For the three-month period ended March 31, 2022
$ in thousands		Plants				Therapeutics				Total reportable segments				Plants				Therapeutics				Total reportable segments
External revenues			4,988				20,613				25,601				32				1,665				1,697
External other income			—				2,365				2,365				—				2,135				2,135
External revenues and other income			4,988				22,978				27,966				32				3,800				3,832
Cost of revenue			(7,369	)			(776	)			(8,145	)			—				(385	)			(385	)
Research and development expenses			(3,025	)			(27,979	)			(31,004	)			(2,878	)			(26,601	)			(29,479	)
Selling, general and administrative expenses			(4,118	)			(4,660	)			(8,779	)			(3,216	)			(6,063	)			(9,279	)
Other operating income and expenses			(24	)			80				56				43				21				65
Total operating expenses			(14,536	)			(33,336	)			(47,872	)			(6,050	)			(33,028	)			(39,078	)
Operating income (loss) before tax			(9,548	)			(10,358	)			(19,907	)			(6,019	)			(29,228	)			(35,247	)
Net financial gain (loss)			(290	)			4,851				4,561				(422	)			912				490
Net income (loss)			(9,839	)			(5,507	)			(15,346	)			(6,441	)			(28,316	)			(34,757	)
Non-controlling interests			3,478				—				3,478				2,846				—				2,846
Net income (loss) attributable to shareholders of Cellectis			(6,361	)			(5,507	)			(11,868	)			(3,595	)			(28,316	)			(31,911	)
R&D non-cash stock-based expense attributable to shareholder of Cellectis			262				1,305				1,567				(11	)			1,680				1,669
SG&A non-cash stock-based expense attributable to shareholder of Cellectis			(1,295	)			323				(973	)			342				636				979
Adjustment of share-based compensation attributable to shareholders of Cellectis			(1,033	)			1,628				595				332				2,316				2,648
Adjusted net income (loss) attributable to shareholders of Cellectis			(7,394	)			(3,879	)			(11,273	)			(3,263	)			(26,000	)			(29,263	)
Depreciation and amortization			(604	)			(3,186	)			(3,791	)			(708	)			(4,934	)			(5,641	)
Additions to tangible and intangible assets			268				6,332				6,601				363				581				945

 

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Note 4. Impairment tests

Our cash-generating units (“CGUs”) correspond to the operating/reportable segments: Therapeutics and Plants.

No indicator of impairment has been identified for any intangible or tangible assets in the CGUs for the three-month period ended March 31, 2022.

Note 5. Right-of-use assets

Details of Right-of-use assets

Under the provision of IFRS 16 “Leases”, the Company recognizes a right of use asset and lease liability on the Statement of financial position.

The breakdown of right-of-use assets is as follows:

 

		Building lease				Office and laboratory equipment				Total
		$ in thousands
Net book value as of January 1, 2021			62,424				11,421				73,845
Additions to tangible assets			—				668				668
Depreciation expense			(1,442	)			(916	)			(2,358	)
Translation adjustments			(831	)			(111	)			(942	)
Net book value as of March 31, 2021			60,150				11,063				71,213
Gross value at end of period			70,662				14,216				84,878
Accumulated depreciation and impairment at end of period			(10,512	)			(3,153	)			(13,665	)
Net book value as of January 1, 2022			55,197				14,226				69,423
Additions			487				328				816
Depreciation expense			(1,418	)			(1,225	)			(2,642	)
Translation adjustments			(304	)			(64	)			(369	)
Net book value as of March 31, 2022			53,962				13,265				67,227
Gross value at end of period			69,847				19,875				89,721
Accumulated depreciation at end of period			(15,885	)			(6,609	)			(22,494	)

 

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Note 6. Property, plant and equipment

 

		Lands and Buildings				Technical equipment				Fixtures, fittings and other equipment				Assets under construction				Total
		$ in thousands
Net book value as of January 1, 2021			16,765				4,436				3,171				47,301				71,673
Additions to tangible assets			1,645				937				426				3,593				6,601
Disposal of tangible assets			(35	)			(0	)			—				—				(36	)
Reclassification			929				3,882				323				(5,135	)			—
Depreciation expense			(492	)			(675	)			(151	)			—				(1,317	)
Translation adjustments			(453	)			(94	)			(862	)			(108	)			(1,517	)
Net book value as of March 31, 2021			18,358				8,486				2,908				45,651				75,402
Gross value at end of period			24,346				22,881				4,466				45,651				97,345
Accumulated depreciation and impairment at end of period			(5,989	)			(14,394	)			(1,559	)			(0	)			(21,941	)
Net book value as of January 1, 2022			14,733				58,072				3,109				2,932				78,846
Additions to tangible assets			78				(23	)			96				793				945
Disposal of tangible assets			—				54				(143	)			—				(90	)
Reclassification			78				1,254				8				(1,362	)			(23	)
Depreciation expense			(571	)			(2,139	)			(117	)			—				(2,827	)
Translation adjustments			(212	)			(71	)			(19	)			(25	)			(327	)
Net book value as of March 31, 2022			14,106				57,146				2,933				2,338				76,523
Gross value at end of period			22,227				76,379				5,012				2,338				105,955
Accumulated depreciation and impairment at end of period			(8,121	)			(19,233	)			(2,078	)			(0	)			(29,432	)

Assets under construction as of March 31, 2022 primarily relates to Cellectis’ raw and starting materials manufacturing facility and offices in Paris ($1.4 million) and the manufacturing facility in Raleigh, North Carolina ($0.9 million). The assets put into service in 2022 mainly concern Calyxt’s pilot BioFactory and technical equipment for $1.2 million.

Note 7. Non-current financial assets

As of March 31, 2022, non-current financial assets primarily include a $2.6 million deposit for the Company’s Raleigh’s building, $1.9 million related to a leasing agreement for equipment and a $0.1 million deposit for Calyxt’s headquarters building, which correspond to long-term restricted cash. The residual amount mainly relates to deposits and guarantees.

 

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