Cibus, Inc.: Form 10-Q for the period ended Mar 31, 2025

The following discussion and analysis of the Company’s financial condition and results of operations should be read together with its condensed consolidated financial statements and related notes, which are included elsewhere in this Quarterly Report on Form 10-Q and with its Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 20,2025 (Annual Report), including the Consolidated Financial Statements and Notes incorporated therein.

OVERVIEW AND BUSINESS UPDATE

Cibus is a leading agricultural biotechnology company that uses proprietary gene editing technologies to develop plant traits, which are specific genetic characteristics in the DNA of a plant’s seed. These characteristics influence how a resulting plant functions and/or interacts with its environment. Its primary business is the development of plant traits for some of the world’s major agricultural food crops that help address specific productivity, profitability, sustainability, or yield challenges in farming. Cibus’ initial focus is on productivity traits, which can be associated with improving crop yields in the face of challenges such as weeds, pests, and diseases, can address environmental challenges with an overall reduction in the use of chemicals like fungicides, insecticides, or fertilizers, or can make crops more adaptable to environmental factors such as heat and drought in the face of climate change.

Cibus’ core technology is its propriety gene editing platform called the Rapid Trait Development System™ or RTDS®. It is the underlying technology for Cibus’ Trait Machine™ process, providing a standardized end-to-end, semi-automated, high-throughput gene editing system that directly edits seed companies’ elite germplasm. It is a time bound, reproducible, and predictable science-based breeding process. Over 500 patents or patents pending cover RTDS and many of the Company’s gene edited traits. The Company considers the Trait Machine process 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 to develop a new class of high value productivity traits that is the promise of gene editing.

Gene-edited traits are importantly distinguishable from traits developed with genetically modified organism (GMO) technologies. While GMO technologies enabled major improvements in farming productivity, they have faced regulatory and adoption headwinds because of their use of foreign DNA, or transgenic material. For example, in the European Union (EU), GMO traits were essentially banned, and imports were heavily regulated.

The first quarter of 2025 has marked significant progress across Cibus' key platforms and initiatives and saw key regulatory validation of Cibus’ RTDS technology in the United States and Ecuador. In January 2025, Cibus established production standards for its proprietary RTDS gene editing process across its Rice and Canola platforms, which the Company believes has the capability to edit and return customer elite germplasm with specific edits within 12 months. This important capability has been valuable with respect to advancing Cibus’ commercial strategies, particularly within Rice where the Company is engaging in discussions with prospective customers in geographies where rice is cultivated globally. Concurrently, this has attracted attention for prospective customers interested in disease tolerance traits in both Canola and Soybean.

In terms of Cibus’ progress within its product platforms, in March 2025, the Company announced the achievement of a milestone in its Rice platform, receiving field trial results for stacked gene edited herbicide tolerance traits, representing the first known trial utilizing stacked gene edited herbicide tolerance traits in Rice for improved weed management. The Company also reported development progress, having completed edits in each of four modes of action (MOA) for its Sclerotinia resistance trait in Canola and continuing ongoing field tests for two of them.

Within its sustainable ingredients program, Cibus advanced its bio-based fermentation biofragrance products supporting the Company’s goal of entering into commercialization agreements with consumer-packaged goods partners.

In January 2025, the Company successfully edited Soybean cells for its HT2 trait, achieving sufficiently high editing rates to enable expanded platform development. The Company continues to work diligently toward a fully operational Soybean platform.

On the regulatory front, the Company achieved a historic milestone when the California Rice Commission's Rice Certification Committee approved Cibus' field research proposal on February 26, 2025, marking the first authorization for planting gene edited Rice in California. In April 2025, USDA-APHIS designated two of Cibus’ Canola traits as not regulated under USDA biotechnology regulations (7 CFR Part 340), including two canola disease resistance traits. This determination with respect to Cibus’ most up-to-date RTDS technologies, as applied in these specific Canola traits, reiterated the regulatory treatment for RTDS precision gene editing technologies in the United States. In Latin America, the Company also saw a positive regulatory development in Ecuador related to Cibus’ HT1 and HT3 Rice traits in April 2025. The Ministry of Agriculture and Livestock in Ecuador determined that Cibus’ HT1 and HT3 Rice traits are equivalent to those developed through conventional breeding and subject to the same regulations as conventional seed in accordance with the provisions of the Organic Law of Agrobiodiversity, Seeds and Promotion of Sustainable Agriculture and its Regulations (LOASFAS). This determination was important since Ecuador strictly prohibits the commercial planting of transgenic (GMO) crops, reinforcing the Company’s view that the global regulatory environment is increasingly supportive of gene editing.

On March 14, 2025, EU member states endorsed the EU Council's (Council) negotiating mandate on the regulation of plants obtained by New Genomic Techniques (NGTs). This important advancement enables the Council to engage in 3-way discussions (known as trilogue discussions) with the EU Parliament and the European Commission to agree on the final text of the legislation to be proposed for final adoption.

In summary, the first quarter of 2025 has demonstrated clear validation of the Company’s commercial strategy and the transformative potential of its RTDS technology platform. Cibus’ time bound and predictable approach to trait development is resonating strongly with customers and partners alike, attracting significant commercial interest across its Rice, Canola, and Soybean platforms. Cibus is positioned at an important inflection point in the agricultural industry with regulatory progress advancing globally, the Company’s Rice traits moving into customer germplasm, and its disease resistance program showing remarkable results.

The Company has incurred net losses since its inception. As of March 31, 2025, the Company had an accumulated deficit of $778.1 million. The Company’s net loss was $49.4 million for the three months ended March 31, 2025. 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.

January 2025 Registered Direct Offering

In January 2025, the Company issued 4,340,000 shares of its Class A Common Stock and, in lieu of Class A Common Stock to one of the Company’s then executive officers and other investors, pre-funded warrants (2025 Pre-Funded Warrants) to purchase 4,700,000 shares of Class A Common Stock, in each case, together with an accompanying common warrant (2025 Common Warrants) to purchase up to 4,340,000 shares of Class A Common Stock and 4,700,000 shares of Class A Common Stock, respectively, in a registered direct offering (January 2025 Follow-On Offering). The combined offering price for each share of Class A Common Stock and the accompanying 2025 Common Warrant was $2.50. The combined offering price for each 2025 Pre-Funded Warrant and the accompanying 2025 Common Warrant was $2.4999. The 2025 Common Warrants have an exercise price of $2.50 per share of Class A Common Stock and are only exercisable after the Company receives certain approvals from its stockholders. The 2025 Common Warrants will be exercisable for five years following the date of receipt of certain stockholder approvals, subject to beneficial ownership limitations. The 2025 Pre-Funded Warrants were immediately exercisable at the time of issuance and will be exercisable until they are fully exercised at an exercise price of $0.0001 per share of Class A Common Stock, subject to beneficial ownership limitations. Through the date of this filing, the Company has received net proceeds related to the January 2025 Follow-On Offering of approximately $21.4 million after deducting approximately $1.2 million for the underwriting discounts and commissions and other offering expenses payable by the Company.

Certain investors in the January 2025 Follow-On Offering are holders of outstanding 2024 Common Warrants to purchase up to 1,198,040 shares of Class A Common Stock. The exercise price for the 2024 Common Warrants initially was $10.00 per share (or $10.07 per share, in the case of 2024 Common Warrants issued to one of the Company’s then executive officers). Concurrent with the January 2025 Follow-On Offering, the Company agreed to contractual amendments with those certain investors (Warrant Amendment Agreement) to (i) reduce the exercise price of those 2024 Common Warrants to $2.50 per share, (ii) reduce the threshold for satisfaction of the trading condition in respect of the redemption provisions from $20.00 per share to $5.00 per share as well as adding a redemption notice of 30 days, and (iii) extend the termination date of those 2024 Common Warrants held by those certain investors to five years following the closings of the January 2025 Follow-On Offering. The Warrant Amendment Agreement, with respect to one of the Company’s then executive officers, is conditioned on, and will not be effective until, the trading day after the Company obtains the requisite approval from its stockholders with respect to those 2024 Common Warrants held by one of the Company’s then executive officers.

Resignation of Executive Officer

On February 24, 2025, Rory Riggs resigned as the Chief Executive Officer of the Company. Mr. Riggs continues to serve as a director and Chairman of the Board of Directors. Pursuant to the Company’s succession planning strategy, Peter Beetham, the Company’s President and Chief Operating Officer, was appointed as Interim Chief Executive Officer while the Company’s Board of Directors initiates a search for the Company’s next Chief Executive Officer.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2025, COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2024

A summary of the Company’s results of operations for the three months ended March 31, 2025, and 2024 follows:

In Thousands, except per share and percentage values

NM – not meaningful

Revenue

Revenue was $1.0 million in the first quarter of 2025, an increase of $0.5 million from the first quarter of 2024. The increase was driven by amounts earned from collaboration agreements related to contract research for Rice and Soybean.

Research and Development Expense

R&D expense was $11.8 million in the first quarter of 2025, a decrease of $0.2 million from the first quarter of 2024. The decrease was primarily due to cost reduction initiatives.

Selling, General, and Administrative Expense

SG&A expense was $9.9 million in the first quarter of 2025, an increase of $2.9 million from the first quarter of 2024. The increase was primarily due to a $3.0 million estimated litigation liability (see Note 8 for further details) partially offset by a decrease due to cost reduction initiatives.

Goodwill Impairment

Goodwill impairment was $21.0 million in the first quarter of 2025, an increase of $21.0 million from the first quarter of 2024. The increase was due to the impairment of goodwill resulting from a fair value assessment, based on the decline of the Company’s stock price, performed in the first quarter of 2025 versus no impairment in the first quarter of 2024.

Royalty Liability Interest Expense - Related Parties

Royalty liability interest expense - related parties was $8.4 million in the first quarter of 2025, a nominal increase from the first quarter of 2024. The nominal increase is driven by the recognition of interest expense on the Royalty Liability.

Other Interest Income, net

Other interest income, net was $0.1 million in the first quarter of 2025, a decrease of $0.1 million from the first quarter of 2024. The decrease was driven by lower cash balances.

Non-Operating Income (Expense), net

Non-operating income (expense), net was income of $0.4 million in the first quarter of 2025, an increase in income of $0.8 million from the first quarter of 2024. The increase in income was driven by the fair value adjustment of the Common Warrants (as defined in Note 1 to the accompanying condensed consolidated financial statements).

Net Loss Attributable to Noncontrolling Interest and Redeemable Noncontrolling Interest

Net loss attributable to noncontrolling interest and redeemable noncontrolling interest was $2.5 million in the first quarter of 2025, a decrease in net loss attributable to noncontrolling interest and redeemable noncontrolling interest of $1.0 million from the first quarter of 2024. The decrease in net loss attributable to noncontrolling interest and redeemable noncontrolling interest is a result of less Up-C Units, and the amount for the period is based on the percentage of Cibus Global that is not owned by Cibus, Inc.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

The Company’s primary source of liquidity is its cash and cash equivalents, with additional capital resources accessible from the capital markets, subject to market conditions and other factors, including limitations that may apply to the Company under applicable Nasdaq regulations.

The Company has an effective shelf registration on Form S-3 on file with the SEC; however, amounts available under the shelf registration statement, including pursuant to the ATM Facility, are significantly limited because the Company’s public float is less than $75,000,000. Subject to Instruction I.B.6 to Form S-3, which is referred to as the “baby shelf” rules, for so long as the Company’s public float is less than $75,000,000, it may not use the Form S-3 to sell more than the equivalent of one-third of its public float during any 12 consecutive months pursuant to the baby shelf rules.

The Company’s liquidity funds its non-discretionary cash requirements and its discretionary spending. The Company has contractual 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. Until the Company is able to obtain additional public or private financing, it currently expects to satisfy its near-term requirements with existing cash on hand and potential proceeds raised from the ATM Facility.

As of March 31, 2025, the Company had $23.6 million of cash and cash equivalents. Current liabilities were $21.0 million as of March 31, 2025. The Company incurred a net loss of $49.4 million for the three months ended March 31, 2025. As of March 31, 2025, the Company had an accumulated deficit of $778.1 million and expects to continue to incur losses in the future.

Cash Flows from Operating Activities

In Thousands, except percentage values

NM – not meaningful

Net cash used by operating activities was $11.8 million in the first three months of 2025, a decrease in cash used of $1.7 million from the first three months of 2024. The decrease in cash used was primarily due to $0.7 million related to the rent free period of the San Diego, CA headquarters lease, $0.2 million in lower accounts receivable balances, and a $0.7 million decrease in cash expenses within net loss, primarily the result of cost reduction initiatives.

The Company expects cash used by operating activities in 2025 to be lower than 2024 driven by the Restructuring Initiative (defined below under the heading Operating Capital Requirements).

Cash Flows from Investing Activities

In Thousands, except percentage values

Net cash used by investing activities was $0.3 million in the first three months of 2025, an increase in cash used of $0.1 million from the first three months of 2024. The increase in cash used was driven by an increase from purchases of property, plant, and equipment from the prior year.

The Company expects cash used by investing activities in 2025 to be similar to 2024 driven by the Company’s focus to preserve capital resources for the advancement of its streamlined priority objectives.

Cash Flows from Financing Activities

In Thousands, except percentage values

Net cash provided by financing activities was $21.3 million in the first three months of 2025, an increase of $15.8 million from the first three months of 2024. The increase was primarily due to an increase of $15.4 million of net proceeds from additional capital raised in 2025, a reduction in repayments of notes payable of $0.3 million, and a reduction in payments of taxes related to vested restricted stock units of $0.1 million.

Subject to market conditions, the Company expects cash provided by financing activities in 2025 to be similar to 2024 driven by the need to raise capital to fulfill the Company’s anticipated spending in 2025 and beyond.

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 Nasdaq and SEC 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.

During the three months ended March 31, 2025, the Company did not issue any shares of Class A Common Stock from the ATM Facility.

Operating Capital Requirements

The Company has incurred losses since its inception and its net loss was $49.4 million for the three months ended March 31, 2025, and it used $11.8 million of cash for operating activities for the three months ended March 31, 2025.

As of March 31, 2025, the Company had $23.6 million of cash and cash equivalents. Current liabilities were $21.0 million as of March 31, 2025.

In the fourth quarter of 2024, Cibus announced a restructuring initiative (Restructuring Initiative), which included a reduction in its workforce. The Restructuring Initiative instituted cost reduction actions designed to preserve capital resources for the advancement of its streamlined priority objectives, which initiatives include reductions in expenditures for consultants and other third-party service providers, organizational restructuring and related talent optimization, and streamlining of rent and facility expenses, including the non-renewal of the lease for the Company’s trait development facility for editing plants in San Diego, California upon expiration in August 2025.

The Company has incurred losses since its inception and anticipates that it will continue to generate losses for the next several years. 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. However, capital generated by commercialization activities, if any, is expected to be received over a period of time and near-term additional capital may not be available on reasonable terms, if at all.

The accompanying condensed 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. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

The Company’s ability to continue as a going concern will depend on its ability to obtain additional public or private equity or debt financing (including through the continued availability of the ATM Facility, subject to the applicable baby shelf limitations), obtain government or private grants and other similar types of funding, attain further operating efficiencies, reduce or contain expenditures, and, ultimately, to generate revenue. The Company believes that its cash and cash equivalents as of March 31, 2025, is not sufficient to fund its operations for a period of 12 months or more from the date of this filing. Taking into account the impact of cost saving initiatives implemented through the date of this report and without giving effect to potential financing transactions Cibus is pursuing, Cibus expects that existing cash and cash equivalents is sufficient to fund planned operating expenses and capital expenditure requirements into the third quarter of 2025. The Company’s assessment of the period of time through which its financial resources will be adequate to support its operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. The Company has based this estimate on assumptions that may prove to be wrong. Circumstances and business conditions may change that would require the Company to use its cash resources for purposes beyond those that are currently forecast. For example, the recent decision of the Ninth Circuit Court of Appeals, as described under “Contractual Obligations, Commitments, and Contingencies,” resulted in an unplanned current liability in the amount of $3.0 million. Any such unexpected uses of cash resources necessarily shorten the Company’s cash runway, as projected without taking into account such matters. In addition, changes in market conditions, including market volatility arising out of dynamic and shifting global trade policies, may reduce the Company’s opportunities to raise additional capital, including through the ATM Facility.

The Company will need to raise additional capital to support its business plans to continue as a going concern within one year after the date that the accompanying condensed consolidated financial statements are issued. If the Company is unable to raise additional capital in a sufficient amount or on acceptable terms in the near term, 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. If the Company raises additional funds through the issuance of additional debt or equity securities, including as part of a strategic alternative, it could result in substantial dilution to its existing stockholders and increased fixed payment obligations, and these securities may have rights senior to those of the Company’s shares of common stock. These factors raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date of issuance of the accompanying condensed consolidated financial statements. Any of these events could impact the Company’s business, financial condition, and prospects.

The Company’s financing needs are subject to change depending on, among other things, the success of its trait and product development efforts, the effective execution of its business model, its revenue, and its efforts to effectively manage expenses. The effects of macroeconomic events and potential geopolitical developments on the financial markets and broader economic uncertainties may make obtaining capital through equity or debt financings more challenging and may exacerbate the risk that such capital, if available, may not be available on terms acceptable to the Company.

CONTRACTUAL OBLIGATIONS, COMMITMENTS, AND CONTINGENCIES

From time-to-time, the Company may be involved in legal proceedings arising in the ordinary course of business.

The Company is not a party to any material pending legal proceedings as of March 31, 2025. Notwithstanding the foregoing, based on an unexpected recent decision from the Ninth Circuit Court of Appeals, the Company has accrued an estimate of $3.0 million for litigation liability. This amount represents a potential repayment of insurance coverage proceeds previously awarded to the Company. The Company continues to evaluate its options in respect of the Ninth Circuit’s decision.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preceding discussion and analysis of the Company’s financial condition and results of operations are based upon its condensed consolidated financial statements and the related disclosures, which have been prepared in accordance with United States GAAP. The preparation of these condensed consolidated financial statements requires the Company to make estimates, assumptions, and judgments that affect the reported amounts in its condensed consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. 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.

As of March 31, 2025, there were no material changes in the Company's critical accounting policies and estimates as disclosed in its Annual Report.

Management’s Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of the Company’s management, its principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, were effective as of March 31, 2025.

Changes in Internal Control over Financial Reporting

No changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There have been 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, 2024, filed with the SEC on March 20, 2025.