Cibus(CBUS) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Presents unaudited condensed consolidated financial statements and accompanying notes for the periods ended September 30, 2024 Condensed Consolidated Balance Sheets Shows a decrease in total assets and stockholders' equity and an increase in total liabilities as of September 30, 2024 Condensed Consolidated Balance Sheets | Metric | September 30, 2024 (Thousands) | December 31, 2023 (Thousands) | | :---------------------------------- | :----------------------------- | :---------------------------- | | Cash and cash equivalents | $28,805 | $32,699 | | Total current assets | $31,573 | $35,220 | | Total assets | $367,874 | $544,411 | | Total current liabilities | $21,918 | $21,323 | | Total liabilities | $246,993 | $206,117 | | Total stockholders' equity | $108,140 | $293,470 | Condensed Consolidated Statements of Operations Reports a significant increase in net loss for Q3 and the nine months ended September 30, 2024, due to goodwill impairment Condensed Consolidated Statements of Operations | Metric (Thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :---------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $1,667 | $475 | $3,050 | $714 | | Research and development | $12,990 | $17,521 | $37,996 | $28,159 | | Selling, general, and administrative| $7,682 | $8,751 | $23,994 | $22,126 | | Goodwill impairment | $181,432 | $— | $181,432 | $— | | Loss from operations | $(200,437) | $(25,797) | $(240,372) | $(49,571) | | Net loss | $(201,459) | $(34,528) | $(256,909) | $(60,431) | | Net loss attributable to Cibus, Inc.| $(179,968) | $(26,429) | $(228,286) | $(50,513) | | Basic and diluted net loss per share| $(7.63) | $(1.59) | $(10.33) | $(6.33) | Condensed Consolidated Statements of Comprehensive Loss Shows a significant increase in comprehensive loss consistent with the net loss trends for the reported periods Condensed Consolidated Statements of Comprehensive Loss | Metric (Thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :---------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(201,459) | $(34,528) | $(256,909) | $(60,431) | | Foreign currency translation adjustments | $6 | $15 | $(27) | $13 | | Comprehensive loss | $(201,453) | $(34,513) | $(256,936) | $(60,418) | | Comprehensive loss attributable to Cibus, Inc. | $(179,962) | $(26,417) | $(228,309) | $(50,503) | Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders' Equity Details changes in redeemable noncontrolling interest and stockholders' equity from net losses and equity offerings Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders' Equity | Metric (Thousands) | Balance at Dec 31, 2023 | Balance at Sep 30, 2024 | | :---------------------------------- | :---------------------- | :---------------------- | | Redeemable Noncontrolling Interest | $44,824 | $12,741 | | Additional Paid-In Capital | $775,017 | $818,210 | | Accumulated Deficit | $(479,778) | $(708,064) | | Total Stockholders' Equity | $293,470 | $108,140 | - Net loss attributable to redeemable noncontrolling interest was $(28,623) thousand for the nine months ended September 30, 2024, compared to $(9,918) thousand for the same period in 2023[30][31] - Stock-based compensation for the nine months ended September 30, 2024, was $8,030 thousand, contributing to additional paid-in capital[30][31] Condensed Consolidated Statements of Cash Flows Indicates increased cash used in operations and decreased cash from investing, offset by cash provided by financing activities Condensed Consolidated Statements of Cash Flows | Metric (Thousands) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Net cash used by operating activities | $(44,048) | $(29,193) | | Net cash (used by) provided by investing activities | $(752) | $55,509 | | Net cash provided by financing activities | $40,904 | $2,043 | | Net (decrease) increase in cash and cash equivalents | $(3,894) | $28,357 | | Cash and cash equivalents – end of period | $28,805 | $31,883 | Notes to the Condensed Consolidated Financial Statements Provides detailed explanations of accounting policies, the Cibus Global merger, and other critical financial information 1. Nature of Business & Summary of Significant Accounting Policies Outlines the company's business, the Cibus Global merger, and critical accounting policies including going concern - Cibus Global is a plant trait company using gene editing technologies to develop and license gene edited plant traits that improve farming productivity or produce renewable low carbon plant products[36] - The Company completed the Merger Transactions with Cibus Global, LLC on May 31, 2023, resulting in an 'Up-C' structure where Cibus, Inc is the sole managing member of Cibus Global[35][37] - The Company effected two reverse stock splits (one-for-ten and one-for-five) prior to the Merger Transactions, which became effective on April 24, 2023, and May 31, 2023, respectively[41][42] - The Company incurred a net loss of $256.9 million and used $44.0 million in cash for operating activities for the nine months ended September 30, 2024, raising substantial doubt about its ability to continue as a going concern for at least one year without additional capital[47][55] - Goodwill was impaired by $181.4 million for the three and nine months ended September 30, 2024, due to a decline in the Company's stock price[63] Deferred Revenue Activity (Nine Months Ended September 30, 2024) | Metric | Amount (Thousands) | | :----------------------------- | :----------------- | | Balance as of December 31, 2023| $1,210 | | Consideration earned | $(3,050) | | Consideration received | $2,922 | | Balance as of September 30, 2024| $1,082 | 2. Merger with Cibus Global Details the accounting for the May 2023 merger, including purchase price allocation and acquired intangible assets - Redeemable noncontrolling interest, representing the economic interest in Cibus Global held by other members, decreased from approximately 22% at merger closing to 11% as of September 30, 2024[92] - The purchase price for Cibus Global was $634.75 million, based on the fair value of Class A Common Stock issued as merger consideration[93] - No Tax Receivable Agreement (TRA) liability was recorded as of September 30, 2024, because the Company has a full valuation allowance against its net deferred tax assets, making the realizability of the tax benefit not probable[104] Intangible Assets Acquired (May 31, 2023) | Asset Category | Amount (Thousands) | Weighted Average Amortization (Years) | | :----------------------------- | :----------------- | :------------------------------------ | | In-process research and development | $99,051 | Indefinite | | Developed technology | $14,148 | 20 | | Trade name | $22,230 | 20 | | Total | $135,429 | | 3. Financial Instruments Measured at Fair Value and Concentrations of Credit Risk Details the fair value measurement of financial instruments, primarily Common Warrants, and credit risk management Fair Value Measurements of Liabilities (Thousands) | Instrument | September 30, 2024 (Level 3) | December 31, 2023 (Level 3) | | :----------------------------- | :--------------------------- | :-------------------------- | | Common Warrants | $2,661 | $1,418 | - The fair value of Common Warrants is estimated using a Black-Scholes option pricing model, with assumptions including a risk-free interest rate of 3.5%-3.6% and expected volatility of 105.1%-110.4% as of September 30, 2024[110][112] - The Company invests cash and cash equivalents in highly liquid, short-dated, high investment-grade securities and has not experienced any counterparty credit losses[113] 4. Property, Plant, and Equipment, Net Provides a breakdown of property, plant, and equipment, showing a decrease in total net value Property, Plant, and Equipment, Net (Thousands) | Asset Category | September 30, 2024 | December 31, 2023 | | :----------------------------- | :----------------- | :---------------- | | Total property, plant, and equipment | $25,636 | $24,752 | | Less accumulated depreciation and amortization | $(12,726) | $(8,977) | | Total | $12,910 | $15,775 | Depreciation and Amortization Expense (Thousands) | Period | 2024 | 2023 | | :----------------------------- | :----------------- | :---------------- | | Three Months Ended Sep 30 | $1,172 | $1,225 | | Nine Months Ended Sep 30 | $3,755 | $2,208 | 5. Goodwill and Intangible Assets Details the goodwill from the Cibus Global merger and the significant impairment charge recorded in Q3 2024 Goodwill (Thousands) | Metric | Amount | | :----------------------------- | :----------------- | | Balance as of December 31, 2023| $434,898 | | Impairment | $(181,432) | | Balance as of September 30, 2024| $253,466 | Intangible Assets, Net (Thousands) | Asset Category | September 30, 2024 | December 31, 2023 | | :----------------------------- | :----------------- | :---------------- | | Developed technology | $14,148 | $14,148 | | Trade name | $22,230 | $22,230 | | Other | $150 | $150 | | Total intangible assets | $36,528 | $36,528 | | Less accumulated amortization | $(2,492) | $(1,117) | | Total | $34,036 | $35,411 | Amortization Expense (Thousands) | Period | 2024 | 2023 | | :----------------------------- | :----------------- | :---------------- | | Three Months Ended Sep 30 | $458 | $459 | | Nine Months Ended Sep 30 | $1,375 | $667 | 6. Stockholders' Equity Outlines capital raising activities through various equity offerings and the structure of the company's equity instruments - The Company issued 2,106,723 shares of Class A Common Stock and 50,000 pre-funded warrants in a December 2023 offering, generating approximately $18.6 million in net proceeds[121] - In June 2024, the Company issued 1,298,040 shares of Class A Common Stock and accompanying 2024 Common Warrants, raising approximately $12.0 million in net proceeds[123] - A September 2024 underwritten offering of 3,289,953 shares of Class A Common Stock generated approximately $12.1 million in net proceeds[126] - Through its ATM Facility, the Company issued 974,727 shares of Class A Common Stock for approximately $16.9 million in net proceeds during the nine months ended September 30, 2024[127] - As of September 30, 2024, Electing Members held 3,112,516 Cibus Global Common Units, representing approximately 11% of Cibus Global, which are generally exchangeable for Class A Common Stock[130] 7. Stock-Based Compensation Details the company's stock-based compensation plans, including activity, fair value, and associated expense Stock-Based Compensation Expense (Thousands) | Award Type | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2024 | | :----------------------------- | :------------------------------ | :----------------------------- | | Stock options | $78 | $346 | | Restricted Stock Awards (RSAs) | $2,418 | $7,274 | | Restricted Stock Units (RSUs) | $191 | $410 | | Performance Stock Units (PSUs) | $— | $— | | Total | $2,687 | $8,030 | - As of September 30, 2024, unrecognized compensation expense for non-vested stock options was $0.2 million (0.6 years remaining recognition period), for RSAs was $12.3 million (1.8 years remaining), and for RSUs was $1.9 million (3.0 years remaining)[137][139][141] 8. Income Taxes Maintains a full valuation allowance against deferred tax assets due to uncertainty of generating sufficient taxable income - The Company has established a full valuation allowance for deferred tax assets due to the uncertainty that enough taxable income will be generated to utilize the assets[144] - A nominal income tax provision was recorded for foreign jurisdictions, and no current income tax provision for U.S. operations, for the three and nine months ended September 30, 2024[145] 9. Leases, Commitments, and Contingencies Details operating and financing lease obligations, including the extension of its headquarters lease Operating Lease Right-of-Use Assets (Thousands) | Lease Location | September 30, 2024 | December 31, 2023 | | :----------------------------- | :----------------- | :---------------- | | Roseville, Minnesota | $12,724 | $13,117 | | San Diego, California headquarters | $18,126 | $3,178 | | Total | $34,432 | $21,685 | Total Lease Expense (Thousands) | Period | 2024 | 2023 | | :----------------------------- | :----------------- | :---------------- | | Three Months Ended Sep 30 | $1,869 | $1,700 | | Nine Months Ended Sep 30 | $5,353 | $2,909 | - The Company's San Diego headquarters facility lease term was extended until March 2033, increasing the associated operating lease right-of-use asset and liability by $16.4 million[150][170][243] - The Company has a contingent obligation to donate 1.0% to 2.0% of net royalty revenue to the Cibus Non-Profit Foundation, but no liability has been recorded as of September 30, 2024, as the foundation has not yet obtained 501(c)(3) status[159][160] 10. Royalty Liability - Related Parties Explains the Royalty Liability entitling certain related parties to 10% of specified Subject Revenues - Royalty Holders are entitled to 10% of specified Subject Revenues, with payments contingent on aggregate Subject Revenues exceeding $50.0 million over any consecutive 12-month period[163][164] - The Royalty Liability reflected an effective yield of 17.8% as of September 30, 2024, compared to 21.7% as of December 31, 2023[167] Royalty Liability - Related Parties Activity (Thousands) | Metric | Amount | | :----------------------------- | :----------------- | | Balance as of December 31, 2023| $165,252 | | Interest expense recognized | $25,953 | | Balance as of September 30, 2024| $191,205 | 11. Supplemental Information Provides a breakdown of stock-based compensation expense by function and details of non-cash transactions Stock-Based Compensation Expense (Thousands) | Category | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2024 | | :----------------------------- | :------------------------------ | :----------------------------- | | Research and development | $807 | $2,467 | | Selling, general, and administrative | $1,880 | $5,563 | | Total | $2,687 | $8,030 | Non-Cash Transactions (Thousands) | Transaction | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------- | :----------------------------- | :----------------------------- | | Property, plant, and equipment acquired through assuming liabilities | $239 | $419 | | Shares issued for consideration in the merger with Cibus Global | $— | $634,751 | | Establishment of operating lease right-of-use assets and associated operating lease liabilities | $16,491 | $1,606 | 12. Collaboration Agreement Describes the collaboration agreement with Procter & Gamble for developing sustainable low carbon ingredients - The Company has a multi-year collaboration agreement with Procter & Gamble (P&G) to develop sustainable low carbon ingredients, with $1.1 million in deferred revenue as of September 30, 2024[171] Collaboration Agreement Deferred Revenue Recognized (Thousands) | Period | 2024 | 2023 | | :----------------------------- | :----------------- | :---------------- | | Three Months Ended Sep 30 | $1,447 | $312 | | Nine Months Ended Sep 30 | $2,238 | $399 | 13. Related-Party Transactions Outlines Cellectis' guarantee of the Roseville facility lease and the Company's related indemnification obligation - Cellectis, the Company's former largest shareholder, guaranteed the lease for the Roseville, Minnesota facility, and the Company's indemnification obligation to Cellectis was triggered in October 2022[172] 14. Subsequent Events Discloses a strategic realignment approved in October 2024, including a workforce reduction and other cost-saving initiatives - On October 16, 2024, the Board approved a strategic realignment, including a reduction of approximately 26 full-time employees[174] - The Company estimates one-time cash expenses of approximately $0.4 million and non-cash stock compensation expense of approximately $0.2 million in Q4 2024 due to the workforce reduction[174] - Additional cost reduction actions include reductions in consultant expenditures, organizational restructuring, and streamlining rent and facility expenses, such as non-renewal of the San Diego trait development facility lease in August 2025[175] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on financial condition, operational results, and liquidity and capital resources Overview and Business Update Cibus is a commercial-stage agricultural biotechnology company focused on gene editing to develop productivity traits - Cibus utilizes its proprietary Rapid Trait Development System™ (RTDS®) and Trait Machine™ process for high-throughput gene editing to develop plant traits for improved farming productivity and sustainable ingredients[177][179] - The company has a pipeline of five productivity traits, with three developed (Pod Shatter Reduction in Canola/WOSR, HT1 and HT3 in Rice) and two advanced (Sclerotinia resistance, HT2 in Canola)[183][184][185] - A strategic realignment in October 2024 included a workforce reduction and other cost-saving initiatives, expected to save approximately $10.0 million annually and reduce monthly cash use by 20% by early 2025[186][199][200] - Global regulation of gene editing technologies is progressing positively, with Canada and the EU moving towards treating gene-edited traits similarly to conventionally bred traits[193][194] - The Company incurred a net loss of $256.9 million for the nine months ended September 30, 2024, and expects to continue incurring significant expenses and operating losses[195] Results of Operations for the Three Months Ended September 30, 2024, Compared to the Three Months Ended September 30, 2023 Revenue increased while operating expenses decreased, but a goodwill impairment charge drove a significant net loss Key Financial Results (Three Months Ended September 30, Thousands) | Metric | 2024 | 2023 | Change ($) | Change (%) | | :---------------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Revenue | $1,667 | $475 | $1,192 | 251% | | Research and development | $12,990 | $17,521 | $(4,531) | (26)% | | Selling, general, and administrative| $7,682 | $8,751 | $(1,069) | (12)% | | Goodwill impairment | $181,432 | $— | $181,432 | NM | | Loss from operations | $(200,437) | $(25,797) | $(174,640) | (677)% | | Royalty liability interest expense - related parties | $(8,875) | $(8,136) | $(739) | (9)% | | Non-operating income (expense), net | $7,706 | $(876) | $8,582 | 980% | | Net loss attributable to Cibus, Inc.| $(179,968) | $(26,429) | $(153,539) | (581)% | | Basic and diluted net loss per share| $(7.63) | $(1.59) | $(6.04) | (380)% | - Revenue increased by $1.2 million, or 251%, primarily due to collaboration agreements related to contract research for Soybean[203] - Goodwill impairment of $181.4 million was recognized due to a fair value assessment based on the decline of the Company's stock price[206] Results of Operations for the Nine Months Ended September 30, 2024, Compared to the Nine Months Ended September 30, 2023 Revenue and operating expenses increased, while a goodwill impairment charge led to a significantly higher net loss Key Financial Results (Nine Months Ended September 30, Thousands) | Metric | 2024 | 2023 | Change ($) | Change (%) | | :---------------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Revenue | $3,050 | $714 | $2,336 | 327% | | Research and development | $37,996 | $28,159 | $9,837 | 35% | | Selling, general, and administrative| $23,994 | $22,126 | $1,868 | 8% | | Goodwill impairment | $181,432 | $— | $181,432 | NM | | Loss from operations | $(240,372) | $(49,571) | $(190,801) | (385)% | | Royalty liability interest expense - related parties | $(25,953) | $(10,753) | $(15,200) | (141)% | | Non-operating income (expense), net | $8,917 | $(466) | $9,383 | 2,014% | | Net loss attributable to Cibus, Inc.| $(228,286) | $(50,513) | $(177,773) | (352)% | - Revenue increased by $2.3 million, or 327%, primarily due to the acquisition of Cibus Global and collaboration agreements for Rice and Soybean[212] - R&D expense increased by $9.8 million, or 35%, mainly due to the Cibus Global acquisition, partially offset by lower stock compensation and one-time merger expenses[213] - Royalty liability interest expense increased by $15.2 million, or 141%, due to the assumption of the Royalty Liability as part of the Merger Transactions[217] Liquidity and Capital Resources The company requires additional capital to fund operations beyond Q1 2025, raising substantial doubt about its going concern ability - As of September 30, 2024, the Company had $28.8 million in cash and cash equivalents and $21.9 million in current liabilities[221][234] - The Company expects existing cash and cash equivalents to fund planned operating expenses and capital expenditure requirements into late in the first quarter of 2025[239] - Management needs to raise additional capital to support business plans and continue as a going concern within one year, with factors raising substantial doubt about this ability[240] - During the nine months ended September 30, 2024, the Company received approximately $16.9 million in net proceeds from its ATM Facility[233] Cash Flows (Nine Months Ended September 30, Thousands) | Activity | 2024 | 2023 | Change ($) | Change (%) | | :---------------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Net cash used by operating activities | $(44,048) | $(29,193) | $(14,855) | (51)% | | Net cash (used by) provided by investing activities | $(752) | $55,509 | $(56,261) | (101)% | | Net cash provided by financing activities | $40,904 | $2,043 | $38,861 | 1,902% | Contractual Obligations, Commitments, and Contingencies The company extended its headquarters lease until March 2033, increasing operating lease assets and liabilities - The Company's headquarters facility lease term was extended until March 2033, resulting in an additional operating lease right-of-use asset and associated operating lease liability of $16.4 million[243] Critical Accounting Policies and Estimates There have been no material changes to the company's critical accounting policies and estimates as disclosed in its Annual Report - There were no material changes in the Company's critical accounting policies and estimates as of September 30, 2024, from those disclosed in its Annual Report[245] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective and reported no material changes in internal control Management's Evaluation of Disclosure Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2024 - The Company's disclosure controls and procedures were effective as of September 30, 2024[246] Changes in Internal Control over Financial Reporting No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2024 - No material changes in internal control over financial reporting occurred during the three months ended September 30, 2024[247] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material pending legal proceedings as of September 30, 2024 - The Company is not a party to any material pending legal proceedings as of September 30, 2024[249] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report - No material changes in risk factors from those disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023[250] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not issue any unregistered equity securities or repurchase common stock during the period - The Company did not issue any unregistered equity securities during the period[250] - The Company did not repurchase any shares of Class A or Class B Common Stock; however, 12,514 shares of Class A Common Stock were withheld for net share settlement from restricted stock unit award vesting[250] Item 5. Other Information Director Gerhard Prante entered into a Rule 10b5-1(c) plan to sell shares to satisfy personal tax liability - Director Gerhard Prante entered into a Rule 10b5-1(c) plan on August 16, 2024, to sell up to 71,785 shares of Class A Common Stock to cover personal tax liability[251] Item 6. Exhibits This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q - The exhibits include the Agreement and Plan of Merger, Amended and Restated Certificate of Incorporation, Bylaws, CEO and CFO certifications, and Inline XBRL documents[253] SIGNATURES Signatures The report is signed by the Chief Executive Officer and Interim Chief Financial Officer on November 7, 2024 - The report was signed by Rory Riggs, Chief Executive Officer and Chairman, and Cornelis (Carlo) Broos, Interim Chief Financial Officer, on November 7, 2024[255]