UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 WASHINGTON, DC 20549

 

FORM 8-K

 

CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported):  March 5, 2020

 

CALYXT, INC.

(Exact Name of Registrant as Specified in Charter)

 

Delaware

(State or Other Jurisdiction of Incorporation)

 

 

2800 Mount Ridge Road, Roseville, MN 55113-1127

(Address of Principal Executive Offices)(Zip Code)

 

(651) 683-2807

(Registrant’s Telephone Number, Including Area Code)

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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Items under Sections 1 and 3 through 6 and 8 are not applicable and therefore omitted.

 

On March 5, 2020, Calyxt, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2019, which press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The information set forth in Item 7.01 of this Form 8-K is incorporated herein by reference.

The information in Item 2.02 of this Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing, regardless of any general incorporation language in any such filing, unless the Company expressly sets forth in such filing that such information is to be considered “filed” or incorporated by reference therein.

Beginning on March 5, 2020 during a webcast relating to the fourth quarter and year ended December 31, 2019 results, representatives of the Company began using an investor presentation, which is furnished as Exhibit 99.2 to this Current Report on Form 8-K. The Company intends to use the investor presentation from time to time in future presentations at conferences and to industry and financial analysts, current stockholders, potential investors and others. The investor presentation also is available under the “Latest Presentations” link in the “Investors” section of the Company’s website, located at www.calytx.com.

The information in Item 7.01 of this Form 8-K (including Exhibit 99.2) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing, regardless of any general incorporation language in any such filing, unless the Company expressly sets forth in such filing that such information is to be considered “filed” or incorporated by reference therein.  The furnishing of this information will not be deemed an admission as to the materiality of any information contained herein.

The following exhibits are furnished herewith:

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

Exhibit 99.1

Calyxt Reports Record Fourth Quarter and Full Year 2019 Financial Results

 

2019 Revenue of $7.3 Million and Expects 2020 Revenue to Nearly Double

 

Expanded Product Pipeline to Nine Crops and 14 Projects Under Development, Compared to Five Crops and Six Projects Under Development One Year Ago

 

Management to Host Conference Call Today at 8:30 a.m. EST

 

Roseville, MN – March 5, 2020 – Calyxt, Inc. (NASDAQ: CLXT), a plant-based technology company, has reported its financial results for the fourth quarter and full year ended December 31, 2019.

 

Key Fourth Quarter and 2019 Financial Highlights

Key Fourth Quarter 2019 and Early 2020 Operational Highlights

 

Product Development and Intellectual Property

1

 

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Exhibit 99.1

Commercialization

Team

2

 

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Exhibit 99.1

Environmental, Social & Governance (ESG)

Full Year 2019 Operational Highlights

Management Commentary

“2019 was a transformative year for Calyxt centered around four major achievements: first, we built the team to execute on our technology-focused business plan; second, we transformed our R&D team and its work systems; third, we established our soybean supply chain to support our growth trajectory and our future wheat product launch; and fourth, we were the first company to commercialize a gene edited food product focused on consumer health, right here in the United States,” said Jim Blome, Chief Executive Officer of Calyxt.

“The commercialization of our HO soybean products serves as proof of concept and sets the stage for future growth. We intend to introduce new products leveraging a capital-light business model while monetizing multiple collaboration projects. Collaboration revenues are expected to be highly accretive to our current gross margins. We also intend to begin optimizing our soybean gross margins in 2020. We have proven to the world that TALEN® technology, which powers our innovation platform, is capable of improving plants, enabling us to bring healthier and more sustainable products to market.”

“We have assembled an industry-leading team across all our major functions. We have energized the organization and revitalized our product pipeline, more than doubling the projects now under development compared to this time a year ago. We are focused on delivering high value projects to the market,” continued Blome.

3

 

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Exhibit 99.1

“Our HO soybean oil has a robust sales funnel and is being tested by multiple customers. The oil orders we received in early 2020 are a validation of our HO soybean oil’s capability and performance. To meet the expected demand for our oil, we nearly tripled our contracted soybean acreage compared to 2019 planting and expect to have a 25 percent market share of all HO soybean acres planted in the United States in 2020.”

“All of this sets the stage for a breakthrough 2020, where we expect to power our R&D pipeline with new projects and tools as well as enhanced processes, initiate consultations with regulatory authorities, and continue to make stage advancements in our development process. We expect to begin selling hemp plants we produced using traditional plant breeding techniques. This will be the launch of our second product, and our first of several expected innovations from Calyxt in hemp. What excites me most about this launch is that our scientific team was presented with a challenge in hemp and was able to develop a solution – including a strategy, tools, and work processes – in just a few short months, demonstrating the power of our team. Specific to our soybean products, we expect to expand our customer base across our prioritized market segments, realize synergies in our supply chain, and improve our gross margin profile. We also expect to develop metrics and report on our ESG accomplishments, as much of our innovation is focused in this area as we aggressively push our efforts to revolutionize agriculture.”

“I look forward to providing an update on our technology and R&D pipeline during our upcoming analyst day in the second quarter, and our CFO, Bill Koschak, will be sharing our story with institutional investors at the upcoming 32^nd Annual ROTH Conference in Orange County, California on March 16^th,” concluded Blome.

Fourth Quarter 2019 Financial Results

4

 

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Exhibit 99.1

Full Year 2019 Financial Results

5

 

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Exhibit 99.1

2020 Financial Guidance

6

 

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Exhibit 99.1

“We maintained our cash usage trajectory throughout 2019, while building out infrastructure to support the robust growth in our soybean business,” added Bill Koschak, Chief Financial Officer of Calyxt. “With investment in our corporate infrastructure, we are set to scale operations in 2020 – both in terms of finalizing new collaborations and increased sales volumes of our soybean products. Going forward we continue to see high revenue growth and an improved margin profile as we continue to bring new products to market leveraging our proprietary gene-editing technology.”

“Looking forward into 2020, we expect to continue our cash usage rate in line with what we delivered in 2019. I expect that our cash position will be sufficient to fund operations into mid-2021,” concluded Koschak.

Fourth Quarter and Full Year 2019 Results Conference Call

Calyxt, Inc. will hold a conference call today at 8:30 a.m. Eastern time to discuss its results for the fourth quarter and full year ended December 31, 2019. Chief Executive Officer Jim Blome, Chief Financial Officer Bill Koschak and Chief Science Officer Dan Voytas will host the conference call, which will be accompanied by a presentation and followed by a question and answer session.

 

To access the call, please use the following information:

 

 

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have difficulty connecting with the conference call, please contact MZ Group at +1 (949) 491-8235.

 

The conference call will be broadcast live at http://public.viavid.com/index.php?id=137490 and via the investor relations section of the Company’s website here.

 

The conference call will also be available for replay on the investor section of the Company’s website for one month.

 

 

The presentation used in the conference call and webcast will be available for reference on the Company’s IR website at https://ir.calyxt.com/.

7

 

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Exhibit 99.1

 

About Calyxt

Calyxt (NASDAQ: CLXT), based in Roseville, Minnesota is a plant-based technology company. We partner with like-minded farmers and companies to deliver plant-based products with wellness and sustainability benefits. We use cutting edge plant breeding techniques to innovate and develop solutions to address unmet consumer and market demands. For further information, please visit our website at www.calyxt.com.

Use of Non-GAAP Financial Information

To supplement our audited financial results prepared in accordance with GAAP, we have prepared certain non-GAAP measures that include or exclude special items. These non-GAAP measures are not meant to be considered in isolation or as a substitute for financial information presented in accordance with GAAP and should be viewed as supplemental and in addition to our financial information presented in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures. In addition, other companies may report similarly titled measures, but calculate them differently, which reduces their usefulness as a comparative measure. Management utilizes these non-GAAP metrics as performance measures in evaluating and making operational decisions regarding our business.

We provide gross margin, as adjusted, a non-GAAP measure that reflects the impact grain costs expensed as R&D and net realizable value adjustments to inventories have on our reported gross margins. Grain costs expensed as R&D before we commercialize a product have the effect of increasing our reported margins post-launch in periods when product with no associated cost were sold. Net realizable value adjustments to our inventories have the effect of decreasing gross margins in a current period that would have been recorded in the future when the underlying product was sold.

We provide in the tables below a reconciliation of gross margin, as adjusted to gross margin, which is the most directly comparable GAAP financial measure. We provide gross margin, as adjusted, because we believe that this non-GAAP financial metric provides investors with useful supplemental information at this early stage of commercialization as the amounts being adjusted affect the period to period comparability of our gross margins and financial performance.

We do not provide a reconciliation of gross margin, as adjusted, on a forward-looking basis as we are not able to determine this measure without unreasonable effort for future periods. The potential amount of net realizable value adjustments to our inventories at year end 2020 is unknown at this time. We are not able to determine that amount because it involves making assumptions about 2020 ending inventories from 2019 and 2020 plantings, 2021 margin expectations based on future selling prices and product costs and future changes in commodity futures markets prices for soybeans.

8

 

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Exhibit 99.1

The tables below present a reconciliation of gross margin to gross margin, as adjusted:

 

 

We present adjusted EBITDA and define it as net loss excluding interest, net, income tax expense, depreciation and amortization expenses, stock-based compensation expenses, Section 16 officer transition expenses, R&D payroll tax credits that are no longer realizable, grain costs expensed as R&D and net realizable value adjustments to inventories.

We provide in the tables below a reconciliation of adjusted EBITDA to net loss, which is the most directly comparable GAAP financial measure. Because adjusted EBITDA excludes non-cash items and discrete or infrequently occurring items, we believe that adjusted EBITDA provides investors with useful supplemental information about the operational performance of our business and facilitates comparison of our financial results between periods where certain items may vary significantly independent of our business performance.

 

The tables below present a reconciliation of net loss to adjusted EBITDA:

9

 

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Exhibit 99.1

 

 

Forward-Looking Statements

This communication contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are based on our current assumptions and expectations, are subject to risks and uncertainties.  Forward-looking statements in this press release may include statements about our future financial performance, product pipeline and development, commercialization efforts, regulatory progression, potential collaborations and partnerships, growth strategies, and anticipated trends in our business. These statements are predictions based on our current expectations and projections about future events and trends.  Our actual results could be materially different than those expressed, implied, or anticipated by forward-looking statements. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements

10

 

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Exhibit 99.1

expressed or implied by the forward-looking statements, including those factors discussed under the caption entitled “Risk Factors” in our Annual Report on Form 10-K, along with our other filings with the U.S. Securities and Exchange Commission. We do not assume any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by law.

 

Calyxt Media Contact:

Trina Lundblad, Director of Corporate Communications

(612) 790-0514

media@calyxt.com

 

Calyxt Investor Relations Contact:
Chris Tyson, Managing Director

MZ Group – MZ North America 
(949) 491-8235

CLXT@mzgroup.us
www.mzgroup.us

11

 

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Exhibit 99.1

CALYXT, INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Par Value and Share Amounts)

 

 

 

12

 

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Exhibit 99.1

CALYXT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands Except Shares and Per Share Amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

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Exhibit 99.1

CALYXT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

 

 

 

14

 

Exhibit 99.2 INVESTOR PRESENTATION (NASDAQ: CLXT) March 5 , 2020 Exhibit 99.2

FORWARDLOOKINGSTATEMENTS This communication contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are based on our current assumptions and expectations, are subject to risks and uncertainties. Forward-looking statements in this presentation may include statements about our future financial performance, product pipeline and development, commercialization efforts, regulatory progression, potential collaborations and partnerships, growth strategies, and anticipated trends in our business. These statements are predictions based on our current expectations and projections about future events and trends. Our actual results could be materially different than those expressed, implied, or anticipated by forward-looking statements. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those factors discussed under the caption entitled “Risk Factors” in our Annual Report on Form 10-K, along with our other filings with the U.S. Securities and Exchange Commission. We do not assume any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by law.

Calyxt is a technology company focused on delivering plant-based solutions that are healthy and sustainable. Proprietary and patented gene editing technologies enable us to deliver the promise of plant-based solutions using a process that mimics how plants could have developed in nature. Broad IP Portfolio and Strong Product Pipeline: we have over 70 patent families across gene editing platforms, we have 14 innovative new products in our development process, and expect to launch as many as six product candidates over the next four years. First to Commercialize a Gene-Edited Food Product: completed successful voluntary consultation with the FDA in February 2019 and launched our high oleic (HO) soybean products shortly thereafter. Diversified Revenue Streams Expected: may include revenues from direct sales of products, royalties and other payments from collaboration arrangements, and payments from the strategic licensing of our innovation to others. Gross margin profile improves as we optimize margins for our soybean products and introduce new revenue streams from collaborations, where we expect gross margins >80%. CORPORATEOVERVIEW

ESGGUIDINGPRINCIPLES Business Success and Strong Corporate Governance Our business success could revolutionize agriculture. Our Code of Business Conduct and Ethics establishes the principles of ethical business to which we adhere. Environmental Stewardship • We are developing unique science-based products and solutions intended to deliver sustainability benefits. We are committed to reducing emissions to align with the fight against climate change. Social Responsibility We support sustainable agricultural and fair labor practices. We strive to: Improve the sustainability of our supply chain systems Foster a diverse work environment Give back to the communities where we live and work

TECHNOLOGY & PIPELINE 2019ACCOMPLISHMENTS Bill Koschak Chief Financial Officer Debra Frimerman General Counsel Travis Frey, Ph.D. Chief Technology Officer Keith Blanks SVP Sales & Marketing Vince Restucci VP Agronomy Services Bobby Williams, Ph.D. Director of Gene Editing Achieved 2019 revenue and cash objectives Successfully launched our HO soybean oil and meal products and secured industry leading foodservice distributors Contracted with industry-leading processors, enabling infrastructure scalability in soybean business Contracted estimated 25% market share of H0 soybean acres for 2020 planting from marketing efforts in 2019 1st to launch a gene edited food product in the U.S. improvement in 50% assembly time to make a TALEN® construct Cut cycle time to grow 1/2 an edited plant in > 2xthe projects in development candidates from now through 2024 Launch 6 new product COMMERCIALIZATION COMPANY LEADERSHIP

FROM TRAIT TO FIELD 6 Indentify target, develop TALEN and edit plant cell Grow and collect seeds from gene-edited plants Validate seeds and plain on farm

PRODUCTPIPELINE Disclosed product concepts include only those at Phase 2 or later in our development funnel. In Phase 2 we perform validation testing and voluntarily consult with regulatory authorities, if necessary.7 Expanded R&D pipeline to 14 product candidates, up from six a year ago We expect to launch at least six product candidates now through 2024 First hemp product expected to launch in the second quarter of 2020 CROP TRAIT DISCOVER PHASE I PHASE II PHASE III COLLABORATORS CURRENT PROJECTED LAUNCH Alfalfa Improved Digestibility Wheat Hihg Fiber Potato Cold Storable Hemp, Oeats, Canola, Peanuts, Peas, Soybeans Focused on Wellness and Sustainability 2021 2022 Post-2024 Various 10 1

ALFALFACOLLABORATIONSUMMARY In 2016 we entered into a collaboration agreement with S&W Seeds to develop alfalfa with improved digestibility. The project reduced lignin in the alfalfa, enabling better digestibility and may lower the herd’s water intake and methane gas output. SIZING THE OPPORTUNITY FOR ALFALFA ANTICIPATED COMMERCIALIZATION PLAN Royalties on S&W seed sales Revenues Acres & Share 2.2 million acres planted annually in U.S. – targeting 5-7% market share

2020R&DOBJECTIVES Advancing our technology and expanding our IP portfolio Driving exploration of new targets, pathways and transformation methods Accelerating product development in: Sustainable oil replacements Non-gluten alternatives Protein and flavor enhancements Hemp, multiple projects

2020 SOYBEANACREAGEEXPANSIONCONTINUES We anticipate having 25% of the HO soybean acre market share in 2020 With distribution into Iowa, Nebraska and Kansas we have access to 45% of soybean acres in the U.S. + + + + 2018 2019

TARGETING70%OFPREMIUMMARKET 2018 U.S. Domestic Edible Oils1 1. Source: USDA, Economic Research Service, Fats and Oils Yearbook, March 2019 Target Premium Oil Market Segments Market Segment Estimated Share2 LBS (Millions) Foodservice Food Ingredients Industrial Animal Nutrition Target Segments Share of Premium Oil Market ~70% 10,500 Oil Type Market Share LBS (Millions) Commodity Oils 66% 29,000 Premium Oils 34% 14,948 Total Oil Market 100% 43,948 2. Company estimates of premium oil market size in total for the four market segments Premium oils are ~34% of total oil demand, including canola, coconut, cottonseed, olive, palm, peanut, safflower and sesame Foodservice and Food Ingredients represent the largest premium oil market segments Most Industrial oil is premium because of the oil properties and application benefits Animal Nutrition is a developing market segment for premium oils

HOSOYBEANOILVALUEPROPOSITION BYMARKETSEGMENT Represents market segments where we are currently selling. Testing occurring in other market segments. Extended fry life reducing oil cost and increasing food quality No flavor transfer FOODSERVICE Less oil absorption Low polymerization Reduced residue buildup in fryer Extended shelf life Clean, neutral taste Less oil absorption FOOD INGREDIENTS VersatilityHeart Healthy Allergen and Gluten Free Kosher ANIMAL NUTRITION High stabilityImproved palatability Extended shelf lifeHeart healthy Clean, neutral taste Stable viscosity across wide temperature range Slower oxidation rates INDUSTRIAL Environmentally friendly Non-toxic and non- irritating Allergen free Food grade Value Added Superior Performance and Stability Sustainable Identity Preservation

POTENTIALCUSTOMERSBYPRODUCTCATEGORY Baked Snacks, Beverages, Cereal, Confectionary, Dressings & Sauces, Nutritional Supplements, Powdered Oils, Roasting FOODSERVICE FOOD INGREDIENTS Salty & Grain SnacksPlant-Based Protein Large Operators Industrial Frying Dairy | Creamers Other Categories of Opportunity 13 The trademarks and logos on this slide are owned by third parties and do not constitute an endorsement by them of our products or any information contained herein. Inclusion does not indicate any existing contracts with such brands.

2019FINANCIALRESULTS 14 ¹ Gross margin, as adjusted and adjusted EBITDA are non-GAAP measures. Reconciliations provided to gross margin and net loss, the associated GAAP measures. $ in millions Q4 FULL YEAR 2019 2018 2019 2018 Revenue $ 3.8 $ - $ 7.3 $ 0.2 Gross margin $ (1.7) $ - $ (2.0) $ 0.2 Gross margin (%) (44%) 100% (27%) 100% Gross margin, as adjusted ¹ $ (1.6) $ - $ (4.5) $ 0.2 Gross margin, as adjusted (%) (43%) 100% (61%) 100% Net loss $ (12.2) $ (8.5) $ (39.6) $ (27.9) Adjusted EBITDA ¹ $ (8.7) $ (5.5) $ (29.8) $ (18.9) Net cash used $ 7.9 $ 6.6 $ 35.3 $ 18.4

2020GUIDANCE ¹ Gross margin, as adjusted, reflects just our soybean products and is a non-GAAP measure. FINANCIAL METRIC Revenue Gross margin, as adjusted ¹ Net cash used EXPECTATION + 90% to + 110% + 3,000 bps to + 3,500 bps $34M to $38M

2020GOALS Power R&D pipeline with new projects, new tools and enhanced processes Initiate consultations with regulatory authorities Continue to progress product candidates through development process Launch the first product from our new hemp plant breeding program Technology Platform Expand our customer base across our prioritized market segments Realize synergies in supply chain and improve gross margin profile Soybean Business Develop and report on ESG accomplishments ESG Priorities

CONCLUSION & Q&A

USEOFNON-GAAPFINANCIALINFORMATION 18 To supplement our audited financial results prepared in accordance with GAAP, we have prepared certain non-GAAP measures that include or exclude special items. These non-GAAP measures are not meant to be considered in isolation or as a substitute for financial information presented in accordance with GAAP and should be viewed as supplemental and in addition to our financial information presented in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures. In addition, other companies may report similarly titled measures, but calculate them differently, which reduces their usefulness as a comparative measure. Management utilizes these non-GAAP metrics as performance measures in evaluating and making operational decisions regarding our business. We provide gross margin, as adjusted, a non-GAAP measure that reflects the impact grain costs expensed as R&D and net realizable value adjustments to inventories have on our reported gross margins. Grain costs expensed as R&D before we commercialize a product have the effect of increasing our reported margins post-launch in periods when product with no associated cost were sold. Net realizable value adjustments to our inventories have the effect of decreasing gross margins in a current period that would have been recorded in the future when the underlying product was sold. We provide in the table below a reconciliation of gross margin, as adjusted to gross margin, which is the most directly comparable GAAP financial measure. We provide gross margin, as adjusted, because we believe that this non-GAAP financial metric provides investors with useful supplemental information at this early stage of commercialization as the amounts being adjusted affect the period to period comparability of our gross margins and financial performance. We do not provide a reconciliation of gross margin, as adjusted, on a forward-looking basis as we are not able to determine this measure without unreasonable effort for future periods. The potential amount of net realizable value adjustments to our inventories at year end 2020 is unknown at this time. We are not able to determine that amount because it involves making assumptions about 2020 ending inventories from 2019 and 2020 plantings, 2021 margin expectations based on future selling prices and product costs and future changes in commodity futures markets prices for soybeans. We present adjusted EBITDA and define it as net loss excluding interest, net, income tax expense, depreciation and amortization expenses, stock- based compensation expenses, Section 16 officer transition expenses, R&D payroll tax credits that are no longer realizable, grain costs expensed as R&D and net realizable value adjustments to inventories. We provide in the table below a reconciliation of adjusted EBITDA to net loss, which is the most directly comparable GAAP financial measure. Because adjusted EBITDA excludes non-cash items and discrete or infrequently occurring items, we believe that adjusted EBITDA provides investors with useful supplemental information about the operational performance of our business and facilitates comparison of our financial results between periods where certain items may vary significantly independent of our business performance.

GAAPTONON-GAAPRECONCILIATIONS $ in thousands Q4 FUL L YE AR 2019 2018 2019 2018 Gross margin (GAAP measure) $ (1,651) $ 2 $ (1,984) $ 236 Gross margin percentage (44%) 100% (27%) 100% Non-GAAP adjustments: Grain costs expensed as R&D in a prior period — — (3,349) — Net realizable value adjustment to inventories 37 — 869 — Gross margin, as adjusted $ (1,614) $ 2 $ (4,464) $ 236 Gross margin, as adjusted percentage (43%) 100% (61%) 100%

GAAPTONON-GAAPRECONCILIATIONS $ in thousands Q4 FUL L YEA R 2019 2018 2019 2018 Net loss (GAAP measure) $ (12,165) $ (8,468) $ (39,612) $ (27,897) Non-GAAP adjustments: Interest, net 186 (176) (110) (264) Income tax expense — — — — Depreciation and amortization expenses 556 354 1,607 1,081 Stock-based compensation expenses 2,610 1,369 9,175 4,385 Section 16 officer transition expenses 117 336 1,169 740 Research and development payroll tax credit — (130) 411 (250) Grain costs expensed as R&D — 1,230 (3,349) 3,349 Net realizable value adjustment to inventories 37 — 869 — Adjusted EBITDA $ (8,659) $ (5,485) $ (29,840) $ (18,856)