Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(Amounts in thousands, except share and per share data)
1. Organization
Precigen, Inc. ("Precigen"), a Virginia corporation, is a synthetic biology company with an increasing focus on its discovery and clinical stage activities to advance the next generation of gene and cellular therapies to target the most urgent and intractable challenges in immuno-oncology, autoimmune disorders, and infectious diseases.
PGEN Therapeutics, Inc. ("PGEN Therapeutics") is a dedicated discovery and clinical stage biopharmaceutical company advancing the next generation of gene and cellular therapies using precision technology to target urgent and intractable diseases in immuno-oncology, autoimmune disorders, and infectious diseases. PGEN Therapeutics is a wholly owned subsidiary of Precigen with primary operations in Maryland.
Precigen ActoBio, Inc. ("ActoBio") is pioneering a proprietary class of microbe-based biopharmaceuticals that enable expression and local delivery of disease-modifying therapeutics and is a wholly owned subsidiary of Precigen with primary operations in Belgium.
Exemplar Genetics, LLC, doing business as Precigen Exemplar ("Exemplar"), is committed to enabling the study of life-threatening human diseases through the development of MiniSwine Yucatan miniature pig research models and services, as well as enabling the production of cells and organs in its genetically engineered swine for regenerative medicine applications and is a wholly owned subsidiary of Precigen with primary operations in Iowa.
Trans Ova Genetics, L.C. ("Trans Ova") and Progentus, L.C. ("Progentus"), providers of reproductive technologies, including services and products sold to cattle breeders and other producers, are wholly owned subsidiaries with primary operations in California, Iowa, Maryland, Missouri, New York, Oklahoma, Texas, Washington, and Wisconsin.
Effective October 1, 2019, Precigen transferred substantially all of its proprietary methane bioconversion platform assets to a wholly owned subsidiary, MBP Titan LLC ("MBP Titan"). MBP Titan's proprietary technology is designed to convert natural gas into more valuable and usable energy and chemical products through novel, highly engineered bacteria that utilize specific energy feedstocks. Beginning in the second quarter of 2020, the Company suspended MBP Titan's operations, preserved certain of MBP Titan's key intellectual property, and terminated most of the personnel. In the third quarter of 2020, the Company began the process of disposing of certain of its remaining assets and obligations. See Notes 2, 9, and 10 for further discussion, including discussion related to impairment charges recorded related to MBP Titan. Prior to October 1, 2019, the operation transferred to MBP Titan was an operating division within Precigen.
Through April 8, 2019, Precigen consolidated AquaBounty Technologies, Inc. ("AquaBounty"), a company focused on improving productivity in commercial aquaculture and whose common stock is listed on the Nasdaq Stock Market. On April 9, 2019, AquaBounty completed an underwritten public offering that resulted in Precigen no longer having the contractual right to control AquaBounty's board of directors, and accordingly, Precigen deconsolidated AquaBounty resulting in a loss on deconsolidation of $2,648, which is included in other expense, net, on the accompanying condensed consolidated statement of operations for the nine months ended September 30, 2019. After deconsolidating the entity in April 2019, Precigen held its AquaBounty equity securities, which it accounted for using the fair value option, until October 2019 when the independent members of the Company's board of directors, with the recommendation of the audit committee and an independent special committee of the Board, unanimously approved the sale of the Company's common shares held in AquaBounty to an affiliate of Third Security, LLC ("Third Security"), a related party.
On January 31, 2020, Precigen completed the sale of the majority of its bioengineering assets and operations to an affiliate of Third Security, which are presented as discontinued operations for all periods presented. See Notes 3 and 13 for further discussion.
Precigen and its consolidated subsidiaries are hereinafter referred to as the "Company."
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Certain information and footnote disclosures normally included in the Company's annual financial statements have been condensed or omitted. These interim condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for fair statement of the Company's financial position as of September 30, 2020 and results of operations and cash flows for the interim periods ended September 30, 2020 and 2019. The year-end condensed consolidated balance sheet data was derived from the Company's audited financial statements but does not include all disclosures required by U.S. GAAP. These interim financial results are not necessarily indicative of the results to be expected for the year ending December 31, 2020, or for any other future annual or interim period. The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
The accompanying condensed consolidated financial statements reflect the operations of Precigen and its subsidiaries. All intercompany accounts and transactions have been eliminated.
Liquidity
Management believes that existing liquid assets as of September 30, 2020 will allow the Company to continue its operations for at least a year from the issuance date of these condensed consolidated financial statements. These condensed consolidated financial statements are presented in United States dollars and are prepared under U.S. GAAP. The Company is subject to a number of risks similar to those of other companies conducting high-risk, early-stage research and development of product candidates. Principal among these risks are dependence on key individuals and intellectual property, competition from other products and companies, and the technical risks associated with the successful research, development, and clinical manufacturing of its and its collaborators' product candidates. Additionally, the accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the nine months ended September 30, 2020, the Company incurred a net loss of $128,860 and, as of September 30, 2020, had an accumulated deficit of $1,781,729. Management expects operating losses and negative cash flows to continue for the foreseeable future and, as a result, the Company will require additional capital to fund its operations and execute its business plan. In the absence of a significant source of recurring revenue, the Company's long-term success is dependent upon its ability to continue to raise additional capital in order to fund ongoing research and development, reduce uses of cash for operating and investing activities for non-healthcare businesses, obtain regulatory approval of its product candidates, successfully commercialize its product candidates, generate revenue, meet its obligations and, ultimately, attain profitable operations.
Risks and Uncertainties
COVID-19 has had and continues to have an extensive impact on the global health and economic environments.
Commencing in the second half of March, the Company's healthcare business began to experience delays to certain of its clinical trials as a result of COVID-19. For example, starting in March, ActoBio temporarily suspended the Phase 1b/2a cohort for AG019 as a proactive measure to protect the welfare and safety of patients, caregivers, clinical site staff, its employees, and contractors. The temporary suspension of the AG019 trial was voluntary and was not related to any patient safety issues in the study. The voluntary suspension of the AG019 trial was lifted in June 2020, and the study is recruiting patients again. Additionally, from April to May 2020, enrollment of new patients in the Company's PRGN-3005 Phase 1 trial was temporarily suspended due to a mandated hold on certain early and late-stage clinical trials at the Fred Hutchinson Cancer Research Center in Seattle that was instituted in light of the COVID-19 pandemic. The temporary suspension of the PRGN-3005 trial was not related to safety issues in the studies, and in May 2020, recruitment resumed in the PRGN-3005 Phase 1 trial. Furthermore, uncertainty regarding the duration and severity of the ongoing pandemic may adversely impact the Company's clinical as well as preclinical pipeline candidates in the future.
During the second quarter of 2020, as a result of market uncertainty driven by the COVID-19 pandemic and the current state of the energy sector, the Company suspended MBP Titan's operations, preserved certain of MBP Titan's key intellectual property, and began the process of disposing of certain of its remaining assets and obligations.
The Company is closely monitoring the impact of COVID-19 on these and other aspects of its business, including Trans Ova and Exemplar. Given the dynamic nature of these circumstances, the full impact of the COVID-19 pandemic on the Company's
ongoing business, results of operations, and overall financial performance for the balance of 2020 and beyond cannot be reasonably estimated at this time, and it could have a material adverse effect on the Company's results of operations, cash flows, and financial position, including resulting impairments to goodwill and long-lived assets and additional credit losses.
Equity Method Investments
The Company accounts for its investments in each of its joint ventures ("JVs") and for its investments in start-up entities backed by the Harvest Intrexon Enterprise Fund I, LP ("Harvest"), all of which are related parties, using the equity method of accounting based upon relative ownership interest. The Company's investments in these entities are included in investments in affiliates in the accompanying condensed consolidated balance sheets. See additional discussion related to certain of the Company's JVs in Note 4.
Variable Interest Entities
As of September 30, 2020 and December 31, 2019, the Company determined that certain of its collaborators and JVs, as well as Harvest, were variable interest entities ("VIEs"). The Company was not the primary beneficiary for these entities since it did not have the power to direct the activities that most significantly impact the economic performance of the VIEs. The Company's aggregate investment balances of these VIEs as of September 30, 2020 and December 31, 2019 were $337 and $1,461, respectively, which represents the Company's maximum risk of loss related to the identified VIEs. See Note 4 for discussion of the Company's future funding commitments for its significant JVs.
Accounts Receivable
Effective January 1, 2020, the Company applies Financial Accounting Standards Board ("FASB") Accounting Standard Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including accounts receivable. The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under the previous accounting guidance.
The Company is exposed to credit losses primarily through sales of products and services by Trans Ova and Exemplar in the normal course of business. The Company's expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions, and a review of the current status of customers' accounts receivables. The Company's monitoring activities include timely account reconciliation, routine follow-up on past due accounts, and consideration of customers' financial condition, as well as macroeconomic conditions. Past due status is determined based upon contractual terms. Balances are written off at the point when collection attempts have been exhausted.
Estimates are used to determine the loss allowance, which is based on assessment of anticipated payment and other historical, current, and future information that is reasonably available.
The following table shows the activity in the allowance for credit losses for the nine months ended September 30, 2020:
|
|
|
|
|
|
Balance at December 31, 2019
|
$
|
7,513
|
|
Charged to operating expenses
|
759
|
|
Write offs of accounts receivable, net of recoveries
|
(1,110)
|
|
Balance at September 30, 2020
|
$
|
7,162
|
|
Segment Information
The Company's chief operating decision maker ("CODM") regularly reviews disaggregated financial information for various operating segments. As of September 30, 2020, the Company's reportable segments were (i) PGEN Therapeutics, (ii) ActoBio, (iii) MBP Titan, (iv) Trans Ova, and (v) the Human Biotherapeutics division, which is an operating division of Precigen. All of Precigen's consolidated subsidiaries and operating divisions that did not meet the quantitative thresholds to report separately are combined and reported in a single category, All Other. See Note 1 for a description of PGEN Therapeutics, ActoBio, MBP Titan, and Trans Ova. See Note 19 for a description of the Human Biotherapeutics division. Corporate expenses, which are not allocated to the segments and are managed at a consolidated level, include costs associated with general and administrative functions, including the Company's finance, accounting, legal, human resources, information technology, corporate
communication, and investor relations functions. Corporate expenses exclude interest expense, depreciation and amortization, stock-based compensation expense, and equity in net loss of affiliates and, for 2019, include unrealized and realized gains and losses on the Company's securities portfolio as well as dividend income. See Note 19 for further discussion of the Company's segments.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Recently Adopted Accounting Pronouncements
In October 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 ("ASU 2018-18"). The provisions of ASU 2018-18 clarify when certain transactions between collaborative arrangement participants should be accounted for under Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606"), and incorporates unit-of-account guidance consistent with ASC 606 to aid in this determination. The Company adopted this standard effective January 1, 2020, and there was no impact to the accompanying consolidated financial statements.
In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities ("ASU 2018-17"). The provisions of ASU 2018-17 modify the guidance under ASC Topic 810 related to the evaluation of indirect interests held through related parties under common control when determining whether fees paid to decision makers and service providers are variable interests. Indirect interests held through related parties that are under common control are no longer considered to be the equivalent of direct interests in their entirety and instead should be considered on a proportional basis. This guidance more closely aligns with accounting of how indirect interests held through related parties under common control are considered for determining whether a reporting entity must consolidate a VIE. The Company adopted this standard effective January 1, 2020, and there was no impact to the accompanying consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). The provisions of ASU 2018-15 clarify the accounting for implementation costs of a hosting arrangement that is a service contract. The new standard requires an entity (customer) in a hosting arrangement that is a service contract to follow existing internal-use software guidance to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. Capitalized implementation costs of a hosting arrangement that is a service contract should be amortized over the term of the hosting arrangement, which might extend beyond the noncancelable period if there are options to extend or terminate. ASU 2018-15 also specifies the financial statement presentation of capitalized implementation costs and related amortization, in addition to required disclosures for material capitalized implementation costs related to hosting arrangements that are service contracts. The Company adopted this standard effective January 1, 2020, on a prospective basis, and there was no material impact to the accompanying consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurements ("ASU 2018-13"). The provisions of ASU 2018-13 modify the disclosures related to recurring and nonrecurring fair value measurements. Disclosures related to the transfer of assets between Level 1 and Level 2 hierarchies have been eliminated and various additional disclosures related to Level 3 fair value measurements have been added, modified, or removed. The Company adopted this standard effective January 1, 2020, and there was no impact to the accompanying consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, which modifies the impairment model to utilize an expected loss methodology in place of the previous incurred loss methodology, and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted this standard effective January 1, 2020, and there was no material impact to the accompanying consolidated financial statements.
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and
Contracts in an Entity's Own Equity ("ASU 2020-06"). The provisions of ASU 2020-06 simplify accounting for convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exception. ASU 2020-06 also simplifies the diluted net income per share calculation in certain areas. The amendments in ASU 2020-06 are effective for annual periods beginning after December 15, 2021. Early adoption is permitted but no earlier than annual periods beginning after December 15, 2020. The guidance must be adopted as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact of the new standard on its consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). The provisions of ASU 2019-12 are intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. An entity that elects early adoption must adopt all the amendments in the same period. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is currently evaluating the impact of the new standard on its consolidated financial statements.
3. Discontinued Operations
On January 1, 2020, the Company and TS Biotechnology Holdings, LLC ("TS Biotechnology"), a related party and an entity managed by Third Security, entered into a Stock and Asset Purchase Agreement pursuant to which the Company agreed to sell a majority of the Company's bioengineering assets and operations to TS Biotechnology for $53,000 and certain contingent payment rights (the "TS Biotechnology Sale"). The TS Biotechnology Sale closed on January 31, 2020. The assets and operations sold in the TS Biotechnology Sale included the following wholly owned subsidiaries, as well as certain equity securities held in Oragenics, Inc. ("Oragenics") and SH Parent, Inc. that were directly related to the subsidiaries sold:
•Intrexon Produce Holdings, Inc., the parent company of two companies focused on the development and sale of non-browning apples, Okanagan Specialty Fruits, Inc. and Fruit Orchard Holdings, Inc.;
•Intrexon UK Holdings, Inc., the parent company of Oxitec Limited and its subsidiaries, which focused on biological insect solutions;
•ILH Holdings, Inc., a company focused on the production of certain fine chemicals focused primarily on microbial production of therapeutic compounds; and
•Blue Marble AgBio LLC, which was formed in January 2020 and included certain agriculture biotechnology assets and operations that were previously an operating division within Precigen.
Additionally, on January 2, 2020, the Company sold its equity interest in EnviroFlight, LLC ("EnviroFlight"), a JV with Darling Ingredients, Inc. ("Darling"), and related intellectual property rights to Darling for $12,200 (the "EnviroFlight Sale"). Unless referenced separately, the TS Biotechnology Sale and the EnviroFlight Sale are collectively referred to as the "Transactions".
The Transactions were approved by the Company's independent members of the board of directors in December 2019. The Transactions represented a strategic shift of the Company towards the Company becoming a primarily healthcare company advancing technologies and products that address complex healthcare challenges. The assets, liabilities, and operations related to the Transactions are reclassified and presented as discontinued operations in the accompanying condensed consolidated financial statements for all periods.
Upon the closing of the TS Biotechnology Sale in January 2020, the cumulative foreign currency translation losses totaling $26,957 were released to earnings and included in loss from discontinued operations. See further discussion below.
The carrying values of the major classes of assets and liabilities included in assets and liabilities held for sale for the Transactions as of December 31, 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TS Biotechnology Sale
|
|
EnviroFlight Sale
|
|
Total
|
Assets
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
2,223
|
|
|
$
|
—
|
|
|
$
|
2,223
|
|
Other current assets
|
9,698
|
|
|
—
|
|
|
9,698
|
|
Property, plant and equipment, net
|
51,975
|
|
|
—
|
|
|
51,975
|
|
Intangible assets, net
|
20,891
|
|
|
4,383
|
|
|
25,274
|
|
Investments in affiliates
|
—
|
|
|
7,817
|
|
|
7,817
|
|
Right-of-use assets
|
13,622
|
|
|
—
|
|
|
13,622
|
|
Other noncurrent assets
|
212
|
|
|
—
|
|
|
212
|
|
Total assets held for sale
|
$
|
98,621
|
|
|
$
|
12,200
|
|
|
$
|
110,821
|
|
Liabilities
|
|
|
|
|
|
Deferred revenue, current (1)
|
$
|
8,723
|
|
|
$
|
—
|
|
|
$
|
8,723
|
|
Operating lease liabilities, current
|
2,459
|
|
|
—
|
|
|
2,459
|
|
Other current liabilities
|
3,058
|
|
|
41
|
|
|
3,099
|
|
Deferred revenue, net of current portion (2)
|
19,410
|
|
|
—
|
|
|
19,410
|
|
Operating lease liabilities, net of current portion
|
12,623
|
|
|
—
|
|
|
12,623
|
|
Other long-term liabilities
|
1,019
|
|
|
—
|
|
|
1,019
|
|
Total liabilities held for sale
|
$
|
47,292
|
|
|
$
|
41
|
|
|
$
|
47,333
|
|
(1)Includes deferred revenue, current, from related parties of $1,243.
(2)Includes deferred revenue, net of current portion, from related parties of $6,836.
The following table presents the financial results of discontinued operations for the nine months ended September 30, 2020. There were no discontinued operations for the three months ended September 30, 2020.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020
|
|
TS Biotechnology Sale
|
|
EnviroFlight Sale
|
|
Total
|
Revenues (1)
|
$
|
1,294
|
|
|
$
|
—
|
|
|
$
|
1,294
|
|
Operating expenses
|
896
|
|
|
—
|
|
|
896
|
|
Operating income
|
398
|
|
|
—
|
|
|
398
|
|
Gain on sale of discontinued operations
|
633
|
|
|
39
|
|
|
672
|
|
Loss on release of cumulative foreign currency translation adjustment
|
(26,957)
|
|
|
—
|
|
|
(26,957)
|
|
Other expense, net
|
(129)
|
|
|
—
|
|
|
(129)
|
|
Equity in net loss of affiliates
|
—
|
|
|
(38)
|
|
|
(38)
|
|
Income (loss) before income taxes
|
(26,055)
|
|
|
1
|
|
|
(26,054)
|
|
Income tax expense
|
(2)
|
|
|
—
|
|
|
(2)
|
|
Income (loss) from discontinued operations
|
$
|
(26,057)
|
|
|
$
|
1
|
|
|
$
|
(26,056)
|
|
(1)Includes revenues recognized from related parties of $436.
The following tables present the financial results of discontinued operations for the three and nine months ended September 30, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019
|
|
TS Biotechnology Sale
|
|
EnviroFlight Sale
|
|
Total
|
Revenues (1)
|
$
|
4,744
|
|
|
$
|
—
|
|
|
$
|
4,744
|
|
Operating expenses
|
8,606
|
|
|
118
|
|
|
8,724
|
|
Operating loss
|
(3,862)
|
|
|
(118)
|
|
|
(3,980)
|
|
Other income, net
|
59
|
|
|
—
|
|
|
59
|
|
Equity in net loss of affiliates
|
—
|
|
|
(1,168)
|
|
|
(1,168)
|
|
Loss before income taxes
|
(3,803)
|
|
|
(1,286)
|
|
|
(5,089)
|
|
Income tax benefit
|
509
|
|
|
—
|
|
|
509
|
|
Loss from discontinued operations
|
$
|
(3,294)
|
|
|
$
|
(1,286)
|
|
|
$
|
(4,580)
|
|
(1)Includes revenues recognized from related parties of $1,577.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019
|
|
TS Biotechnology Sale
|
|
EnviroFlight Sale
|
|
Total
|
Revenues (1)
|
$
|
8,644
|
|
|
$
|
—
|
|
|
$
|
8,644
|
|
Operating expenses
|
26,794
|
|
|
353
|
|
|
27,147
|
|
Operating loss
|
(18,150)
|
|
|
(353)
|
|
|
(18,503)
|
|
Other expense, net
|
(438)
|
|
|
—
|
|
|
(438)
|
|
Equity in net loss of affiliates
|
—
|
|
|
(3,091)
|
|
|
(3,091)
|
|
Loss before income taxes
|
(18,588)
|
|
|
(3,444)
|
|
|
(22,032)
|
|
Income tax benefit
|
1,590
|
|
|
—
|
|
|
1,590
|
|
Loss from discontinued operations
|
$
|
(16,998)
|
|
|
$
|
(3,444)
|
|
|
$
|
(20,442)
|
|
(1)Includes revenues recognized from related parties of $1,807.
The following table presents the significant non-cash items and purchases of property, plant and equipment for the discontinued operations that are included in the accompanying condensed consolidated statements of cash flows.
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
Adjustments to reconcile net loss to net cash used in operating activities
|
|
|
|
Depreciation and amortization
|
$
|
—
|
|
|
$
|
3,740
|
|
|
|
|
|
|
|
|
|
Gain on sale of discontinued operations
|
(672)
|
|
|
—
|
|
Loss on release of cumulative foreign currency translation adjustment
|
26,957
|
|
|
—
|
|
Unrealized and realized depreciation on equity securities and preferred stock, net
|
106
|
|
|
436
|
|
Equity in net loss of EnviroFlight
|
38
|
|
|
3,091
|
|
Stock-based compensation expense
|
(1,346)
|
|
|
1,969
|
|
Deferred income taxes
|
—
|
|
|
(1,389)
|
|
Cash flows from investing activities
|
|
|
|
Investments in EnviroFlight
|
—
|
|
|
(2,000)
|
|
Purchases of property, plant and equipment
|
(382)
|
|
|
(21,514)
|
|
Also see Note 13 below.
Equity Method Investments
The Company accounted for its investment in EnviroFlight using the equity method of accounting.
Summarized financial data for EnviroFlight are shown in the following tables for the periods in which the Company held the equity method investment.
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2019
|
|
|
Current assets
|
$
|
703
|
|
|
|
Noncurrent assets
|
30,549
|
|
|
|
Total assets
|
31,252
|
|
|
|
Current liabilities
|
2,352
|
|
|
|
Non-current liabilities
|
88
|
|
|
|
Total liabilities
|
2,440
|
|
|
|
Net assets
|
$
|
28,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2020
|
|
2019
|
Revenues
|
$
|
139
|
|
|
$
|
16
|
|
|
$
|
363
|
|
Operating expenses
|
2,480
|
|
|
92
|
|
|
6,561
|
|
Operating loss
|
(2,341)
|
|
|
(76)
|
|
|
(6,198)
|
|
Other, net
|
5
|
|
|
—
|
|
|
17
|
|
Net loss
|
$
|
(2,336)
|
|
|
$
|
(76)
|
|
|
$
|
(6,181)
|
|
Where applicable, the notes to the accompanying condensed consolidated financial statements have been updated to reflect information pertaining to the Company's continuing operations.
Out-of-Period Adjustment
During the nine months ended September 30, 2020, the Company recorded an out-of-period adjustment of $26,572 to loss from discontinued operations which relates to the effect of cumulative foreign translation losses associated with the entities sold in the TS Biotechnology Sale. This charge, which is entirely noncash, should have been recorded in the year ended December 31, 2019 as an additional impairment charge included in loss from discontinued operations. There was no impact to net loss from continuing operations, cash and short-term investments, cash flows, or Segment Adjusted EBITDA. The error also had no impact on the cash consideration received upon closing of the TS Biotechnology Sale nor the representations and warranties made by the Company in the transaction. The Company evaluated the effects of this out-of-period adjustment, both qualitatively and quantitatively, and concluded that this adjustment was not material to the Company's financial position or results of operations for the nine months ended September 30, 2020 or the year ended December 31, 2019.
4. Investments in Joint Ventures
Intrexon Energy Partners
In March 2014, the Company and certain investors (the "IEP Investors"), including an affiliate of Third Security, a related party, entered into a Limited Liability Company Agreement that governs the affairs and conduct of business of Intrexon Energy Partners, LLC ("Intrexon Energy Partners"), a JV formed to optimize and scale-up the Company's methane bioconversion platform technology for the production of certain fuels and lubricants. The Company also entered into an exclusive channel collaboration ("ECC") with Intrexon Energy Partners providing exclusive rights to the Company's technology for the use in bioconversion for the production of certain fuels and lubricants, as a result of which the Company received a technology access fee of $25,000 while retaining a 50% membership interest in Intrexon Energy Partners. The IEP Investors made initial capital contributions, totaling $25,000 in the aggregate, in exchange for pro rata membership interests in Intrexon Energy Partners totaling 50%. In addition, Precigen has committed to make capital contributions of up to $25,000, and the IEP Investors, as a group and pro rata in accordance with their respective membership interests in Intrexon Energy Partners, have committed to make additional capital contributions of up to $25,000, at the request of Intrexon Energy Partners' board of managers (the "Intrexon Energy Partners Board") and subject to certain limitations. As of September 30, 2020, the Company's remaining commitment was $4,225. Intrexon Energy Partners is governed by the Intrexon Energy Partners Board, which has five members. Two members of the Intrexon Energy Partners Board are designated by the Company and three members are designated by a majority of the IEP Investors. The Company and the IEP Investors have the right, but not the obligation, to make additional capital contributions above the initial limits when and if solicited by the Intrexon Energy Partners Board.
The Company's investment in Intrexon Energy Partners was $(423) as of September 30, 2020 and December 31, 2019, and is included in other accrued liabilities in the accompanying condensed consolidated balance sheets, which represents the Company's equity in losses for contractually committed contributions to Intrexon Energy Partners.
Intrexon Energy Partners II
In December 2015, the Company and certain investors (the "IEPII Investors"), including Harvest, entered into a Limited Liability Company Agreement that governs the affairs and conduct of business of Intrexon Energy Partners II, LLC ("Intrexon Energy Partners II"), a JV formed to utilize the Company's methane bioconversion platform technology for the production of 1,4-butanediol, an industrial chemical used to manufacture spandex, polyurethane, plastics, and polyester. The Company also entered into an ECC with Intrexon Energy Partners II that provides exclusive rights to the Company's technology for use in the
field, as a result of which the Company received a technology access fee of $18,000 while retaining a 50% membership interest in Intrexon Energy Partners II. The IEPII Investors made initial capital contributions, totaling $18,000 in the aggregate, in exchange for pro rata membership interests in Intrexon Energy Partners II totaling 50%. In December 2015, the owners of Intrexon Energy Partners II made a capital contribution of $4,000, half of which was paid by the Company. Precigen has committed to make additional capital contributions of up to $10,000, and the IEPII Investors, as a group and pro rata in accordance with their respective membership interests in Intrexon Energy Partners II, have committed to make additional capital contributions of up to $10,000, at the request of Intrexon Energy Partners II's board of managers (the "Intrexon Energy Partners II Board") and subject to certain limitations. As of September 30, 2020, the Company's remaining commitment was $10,000. Intrexon Energy Partners II is governed by the Intrexon Energy Partners II Board, which has five members. One member of the Intrexon Energy Partners II Board is designated by the Company and four members are designated by a majority of the IEPII Investors. The Company and the IEPII Investors have the right, but not the obligation, to make additional capital contributions above the initial limits when and if solicited by the Intrexon Energy Partners II Board.
The Company's investment in Intrexon Energy Partners II was $(435) as of September 30, 2020 and December 31, 2019, and is included in other accrued liabilities in the accompanying condensed consolidated balance sheets, which represents the Company's equity in losses for contractually committed contributions to Intrexon Energy Partners II.
5. Collaboration and Licensing Revenue
The Company's collaborations and licensing agreements may provide for multiple promises to be satisfied by the Company and typically include a license to the Company's technology platforms, participation in collaboration committees, and performance of certain research and development services. Based on the nature of the promises in the Company's collaboration and licensing agreements, the Company typically combines most of its promises into a single performance obligation because the promises are highly interrelated and not individually distinct. Options to acquire additional services are considered to determine if they constitute material rights. At contract inception, the transaction price is typically the upfront payment received and is allocated to the performance obligations. The Company has determined the transaction price should be recognized as revenue based on its measure of progress under the agreement primarily based on inputs necessary to fulfill the performance obligation.
The Company recognizes the reimbursement payments received for research and development efforts in the period when the services are performed, in connection with the single performance obligation discussed above. The reimbursements relate specifically to the Company's efforts to provide services, and the reimbursements are consistent with what the Company would typically charge other collaborators for similar services. The Company assesses the uncertainty of when and if any milestones will be achieved to determine whether the milestone is included in the transaction price. The Company then assesses whether the revenue is constrained based on whether it is probable that a significant reversal of revenue would not occur when the uncertainty is resolved. Royalties, including sales-based milestones, received under the agreements will be recognized as revenue when sales have occurred because the Company applies the sales- or usage-based royalties recognition exception provided for under ASC 606. The Company determined the application of this exception is appropriate because at the time the royalties are generated, the technology license granted in the agreement is the predominant item to which the royalties relate.
The Company determines whether collaborations and licensing agreements are individually significant for disclosure based on a number of factors, including total revenue recorded by the Company pursuant to collaboration and licensing agreements, collaborators or licensees with equity method investments, or other qualitative factors. Collaboration and licensing revenues generated from consolidated subsidiaries are eliminated in consolidation.
The following table summarizes the amounts recorded as revenue in the condensed consolidated statements of operations for each significant counterparty to a collaboration or licensing agreement for the three and nine months ended September 30, 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
ZIOPHARM Oncology, Inc.
|
$
|
—
|
|
|
$
|
431
|
|
|
$
|
100
|
|
|
$
|
2,130
|
|
Oragenics, Inc.
|
2,823
|
|
|
231
|
|
|
3,053
|
|
|
613
|
|
Intrexon Energy Partners, LLC
|
—
|
|
|
823
|
|
|
—
|
|
|
2,596
|
|
Intrexon Energy Partners II, LLC
|
—
|
|
|
293
|
|
|
—
|
|
|
1,217
|
|
Castle Creek Biosciences, Inc.
|
2,394
|
|
|
402
|
|
|
16,967
|
|
|
3,247
|
|
Harvest start-up entities (1)
|
—
|
|
|
100
|
|
|
—
|
|
|
4,862
|
|
Other
|
6
|
|
|
16
|
|
|
139
|
|
|
52
|
|
Total
|
$
|
5,223
|
|
|
$
|
2,296
|
|
|
$
|
20,259
|
|
|
$
|
14,717
|
|
(1)For the three and nine months ended September 30, 2019, revenues recognized from collaborations with Harvest start-up entities include: Thrive Agrobiotics, Inc.; Exotech Bio, Inc.; and AD Skincare, Inc.
Except for the agreements discussed below, there have been no significant changes to the agreements with our collaborators and licensees in the nine months ended September 30, 2020.
Oragenics Collaboration
In June 2015, the Company entered into an ECC with Oragenics, a related party at the time, for the treatment of oral mucositis. In July 2020, the Company and Oragenics mutually agreed to terminate the ECC, and accordingly, the Company recognized the remaining balance of deferred revenue associated with the ECC totaling $2,823. Following the termination of the ECC, Oragenics is no longer considered a related party.
Castle Creek Collaborations
In October 2012, the Company entered into an ECC (the "2012 Castle Creek ECC") with Castle Creek Biosciences, Inc. ("Castle Creek", formerly known as Fibrocell Science, Inc.). Castle Creek was a publicly traded cell and gene therapy company focused on diseases affecting the skin and connective tissue and a related party until it was acquired in December 2019 by Castle Creek Pharmaceutical Holdings, Inc. ("Castle Creek Pharmaceutical"), a privately held company focused on developing medicine for rare genetic disorders. Pursuant to the 2012 Castle Creek ECC, at the transaction effective date, Castle Creek received a license to the Company's technology platform to develop and commercialize genetically modified and non-genetically modified autologous fibroblasts and autologous dermal cells in the United States of America. The 2012 Castle Creek ECC was subsequently amended in June 2013 to expand the field of use defined in the ECC agreement. In March 2020, the Company and Castle Creek terminated the 2012 Castle Creek ECC by mutual agreement ("Termination Agreement") with the parties agreeing that the two drug product candidates, FCX-007 and FCX-013, pursuant to the ECC would be treated as "Retained Products" under the terms of the 2012 Castle Creek ECC. As Retained Products, Castle Creek retains a license under the 2012 Castle Creek ECC to continue to develop and commercialize the Retained Products within the field of use of the 2012 Castle Creek ECC for so long as Castle Creek continues to pursue such development and commercialization. No further licenses to the Company's technology within the field of use are provided to Castle Creek. Royalty provisions set forth in the 2012 Castle Creek ECC remain in effect for the Retained Products. Additionally, the Termination Agreement provides for the Company to perform certain drug product manufacturing activities related to the Retained Products. The Termination Agreement was accounted for as a new contract, and the remaining deferred revenue from the 2012 Castle Creek ECC is being recognized prospectively as the manufacturing activities are performed.
In December 2015, the Company entered into a second ECC with Castle Creek (the "2015 Castle Creek ECC"). Pursuant to the ECC, at the transaction effective date, Castle Creek received a license to the Company's technology platform to develop and commercialize genetically-modified fibroblasts to treat chronic inflammatory and degenerative diseases of the joint, including arthritis and related conditions. In February 2020, the Company and Castle Creek mutually agreed to terminate the 2015 Castle Creek ECC, and accordingly, the Company recognized the remaining balance of deferred revenue associated with the 2015 Castle Creek ECC totaling $10,000.
Deferred Revenue
Deferred revenue primarily consists of consideration received for the Company's collaboration and licensing agreements. Deferred revenue consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2020
|
|
December 31,
2019
|
Collaboration and licensing agreements
|
$
|
30,964
|
|
|
$
|
50,593
|
|
Prepaid product and service revenues
|
2,932
|
|
|
2,805
|
|
Other
|
263
|
|
|
435
|
|
Total
|
$
|
34,159
|
|
|
$
|
53,833
|
|
Current portion of deferred revenue
|
$
|
4,144
|
|
|
$
|
5,697
|
|
Long-term portion of deferred revenue
|
30,015
|
|
|
48,136
|
|
Total
|
$
|
34,159
|
|
|
$
|
53,833
|
|
Revenue is recognized under the collaboration and licensing agreements as services are performed. Certain of the arrangements are not active while the other party evaluates the status of the project and its desired future development activities. The following table summarizes the remaining balance of deferred revenue associated with upfront and milestone payments for each significant counterparty to a collaboration or licensing agreement as of September 30, 2020 and December 31, 2019, as well as the estimated remaining performance period as of September 30, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Remaining Performance Period (Years)
|
|
September 30,
2020
|
|
December 31,
2019
|
Oragenics, Inc.
|
0.0
|
|
$
|
—
|
|
|
$
|
2,864
|
|
Intrexon Energy Partners, LLC
|
3.5
|
|
8,362
|
|
|
8,362
|
|
Intrexon Energy Partners II, LLC
|
4.2
|
|
12,843
|
|
|
12,843
|
|
Castle Creek Biosciences, Inc.
|
0.5
|
|
924
|
|
|
17,697
|
|
Harvest start-up entities (1)
|
4.4
|
|
6,993
|
|
|
6,993
|
|
Other
|
2.5
|
|
1,842
|
|
|
1,834
|
|
Total
|
|
|
$
|
30,964
|
|
|
$
|
50,593
|
|
(1)As of September 30, 2020 and December 31, 2019, the balance of deferred revenue for collaborations with Harvest start-up entities includes: Thrive Agrobiotics, Inc.; Exotech Bio, Inc.; and AD Skincare, Inc.
6. Short-term Investments
The Company's investments are classified as available-for-sale. The following table summarizes the amortized cost, gross unrealized gains and losses, and fair value of available-for-sale investments as of September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Aggregate
Fair Value
|
U.S. government debt securities
|
$
|
85,001
|
|
|
$
|
93
|
|
|
$
|
—
|
|
|
$
|
85,094
|
|
Certificates of deposit
|
264
|
|
|
—
|
|
|
—
|
|
|
264
|
|
Total
|
$
|
85,265
|
|
|
$
|
93
|
|
|
$
|
—
|
|
|
$
|
85,358
|
|
The following table summarizes the amortized cost, gross unrealized gains and losses, and fair value of available-for-sale investments as of December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Aggregate
Fair Value
|
U.S. government debt securities
|
$
|
8,989
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
8,996
|
|
Certificates of deposit
|
264
|
|
|
—
|
|
|
—
|
|
|
264
|
|
Total
|
$
|
9,253
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
9,260
|
|
As of September 30, 2020, all of the available-for-sale investments were due within one year based on their contractual maturities.
Changes in market interest rates and bond yields cause certain investments to fall below their cost basis, resulting in unrealized losses on investments. None of the Company's debt security investments were in an unrealized loss position as of September 30, 2020.
7. Fair Value Measurements
The carrying amount of cash and cash equivalents, receivables, accounts payable, accrued compensation and benefits, other accrued liabilities, and related party payables approximate fair value due to the short maturity of these instruments.
Assets
The following table presents the placement in the fair value hierarchy of financial assets that are measured at fair value on a recurring basis, including the items for which the fair value option has been elected, as of September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in Active Markets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
September 30,
2020
|
Assets
|
|
|
|
|
|
|
|
U.S. government debt securities
|
$
|
—
|
|
|
$
|
85,094
|
|
|
$
|
—
|
|
|
$
|
85,094
|
|
Other
|
—
|
|
|
264
|
|
|
—
|
|
|
264
|
|
Total
|
$
|
—
|
|
|
$
|
85,358
|
|
|
$
|
—
|
|
|
$
|
85,358
|
|
The following table presents the placement in the fair value hierarchy of financial assets that are measured at fair value on a recurring basis, including the items for which the fair value option has been elected, as of December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in Active Markets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|
December 31,
2019
|
Assets
|
|
|
|
|
|
|
|
U.S. government debt securities
|
$
|
—
|
|
|
$
|
8,996
|
|
|
$
|
—
|
|
|
$
|
8,996
|
|
Other
|
—
|
|
|
264
|
|
|
—
|
|
|
264
|
|
Total
|
$
|
—
|
|
|
$
|
9,260
|
|
|
$
|
—
|
|
|
$
|
9,260
|
|
The method used to estimate the fair value of the Level 2 short-term debt investments in the tables above is based on professional pricing sources for identical or comparable instruments, rather than direct observations of quoted prices in active markets.
Liabilities
The carrying values of the Company's long-term debt, excluding the 3.50% convertible senior notes due 2023 (the "Convertible Notes"), approximates fair value due to the length of time to maturity and/or the existence of interest rates that approximate prevailing market rates.
The calculated fair value of the Convertible Notes (Note 11) was approximately $106,000 and $126,000 as of September 30, 2020 and December 31, 2019, respectively, and is based on the recent third-party trades of the instrument as of the balance sheet date. The fair value of the Convertible Notes is classified as Level 2 within the fair value hierarchy as there is not an active market for the Convertible Notes, however, third-party trades of the instrument are considered observable inputs. The Convertible Notes are reflected on the accompanying condensed consolidated balance sheets at amortized cost, which was $165,367 and $157,560 as of September 30, 2020 and December 31, 2019, respectively.
During the nine months ended September 30, 2020, the Company's contingent consideration liability, which was $585 as of December 31, 2019, was reduced to $0 as the period for potential payment of this contingent consideration expired without payment in June 2020. The contingent consideration liability was remeasured to fair value at each reporting date until the contingency was resolved, and those changes in fair value were recognized in earnings. The changes in the fair value of the Level 3 liability during the nine months ended September 30, 2020 were as follows:
|
|
|
|
|
|
Balance at December 31, 2019
|
$
|
585
|
|
Change in fair value of contingent consideration recognized in selling, general and administrative expenses
|
(585)
|
|
Balance at September 30, 2020
|
$
|
—
|
|
See Notes 9 and 10 for discussion of non-recurring fair value estimates used in calculating impairment charges recorded during the three and nine months ended September 30, 2020.
8. Inventory
Inventory consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2020
|
|
December 31,
2019
|
Supplies, embryos and other production materials
|
$
|
2,339
|
|
|
$
|
2,282
|
|
Work in process
|
2,647
|
|
|
3,702
|
|
Livestock
|
3,310
|
|
|
7,553
|
|
Feed
|
2,052
|
|
|
2,560
|
|
Total inventory
|
$
|
10,348
|
|
|
$
|
16,097
|
|
9. Property, Plant and Equipment, Net
Property, plant and equipment consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2020
|
|
December 31,
2019
|
Land and land improvements
|
$
|
9,845
|
|
|
$
|
9,814
|
|
Buildings and building improvements
|
11,765
|
|
|
11,765
|
|
Furniture and fixtures
|
1,380
|
|
|
1,315
|
|
Equipment
|
48,028
|
|
|
54,448
|
|
Leasehold improvements
|
8,785
|
|
|
12,821
|
|
Breeding stock
|
5,533
|
|
|
5,191
|
|
Computer hardware and software
|
9,040
|
|
|
9,434
|
|
Construction and other assets in progress
|
3,670
|
|
|
5,313
|
|
|
98,046
|
|
|
110,101
|
|
Less: Accumulated depreciation and amortization
|
(53,361)
|
|
|
(49,132)
|
|
Property, plant and equipment, net
|
$
|
44,685
|
|
|
$
|
60,969
|
|
Depreciation expense was $2,195 and $2,874 for the three months ended September 30, 2020 and 2019, respectively, and $8,026 and $8,984 for the nine months ended September 30, 2020 and 2019, respectively.
During the second quarter of 2020, the Company suspended MBP Titan's operations. As a result, the Company reviewed the related property, plant and equipment and right-of-use assets for impairment. Based on the estimated undiscounted cash flows, the Company determined that the related asset values were not fully recoverable and calculated estimated fair values using market participant assumptions and discounted cash flow models. The estimated fair values were lower than the carrying values, and the Company recorded impairment losses of $9,914 related to property, plant, and equipment and $2,492 related to the right-of-use assets, which are included in impairment of other noncurrent assets on the accompanying condensed consolidated statement of operations for the nine months ended September 30, 2020.
During the third quarter of 2020, the Company recorded impairment losses of $920, which is included in impairment of other noncurrent assets on the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2020, primarily related to right-of-use assets at certain of the Company's leased locations.
During the three and nine months ended September 30, 2019, the Company recorded $448 of property, plant and equipment impairment losses in conjunction with the closing of two of its reporting units during the third quarter of 2019, which is included in impairment of other noncurrent assets on the accompanying condensed consolidated statements of operations.
10. Goodwill and Intangible Assets, Net
The changes in the carrying amount of goodwill for the nine months ended September 30, 2020 were as follows:
|
|
|
|
|
|
Balance at December 31, 2019
|
$
|
63,754
|
|
Impairment
|
(9,635)
|
|
Foreign currency translation adjustments
|
118
|
|
Balance at September 30, 2020
|
$
|
54,237
|
|
The Company had $53,278 and $43,643 of cumulative impairment losses as of September 30, 2020 and December 31, 2019, respectively.
During the nine months ended September 30, 2020, the Company recorded $9,635 of goodwill impairment in conjunction with the suspension of MBP Titan's operations during the second quarter of 2020. The Company estimated the fair value of MBP Titan using discounted cash flows and determined that the carrying value exceeded its estimated fair value, resulting in the impairment charge.
During the three and nine months ended September 30, 2019, the Company recorded $178 of goodwill impairment in conjunction with the closing of two of its reporting units during the third quarter of 2019.
Intangible assets consist of the following as of September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
Patents, developed technologies and know-how
|
$
|
93,673
|
|
|
$
|
(31,934)
|
|
|
$
|
61,739
|
|
Customer relationships
|
10,850
|
|
|
(9,111)
|
|
|
1,739
|
|
Trademarks
|
5,900
|
|
|
(4,360)
|
|
|
1,540
|
|
Total
|
$
|
110,423
|
|
|
$
|
(45,405)
|
|
|
$
|
65,018
|
|
Intangible assets consist of the following as of December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
Patents, developed technologies and know-how
|
$
|
90,659
|
|
|
$
|
(26,619)
|
|
|
$
|
64,040
|
|
Customer relationships
|
10,700
|
|
|
(8,440)
|
|
|
2,260
|
|
Trademarks
|
5,900
|
|
|
(3,854)
|
|
|
2,046
|
|
Total
|
$
|
107,259
|
|
|
$
|
(38,913)
|
|
|
$
|
68,346
|
|
Amortization expense was $1,913 and $1,891 for the three months ended September 30, 2020 and 2019, respectively, and $5,675 and $5,987 for the nine months ended September 30, 2020 and 2019, respectively.
11. Lines of Credit and Long-Term Debt
Lines of Credit
Trans Ova has a $5,000 revolving line of credit with First National Bank of Omaha that matures on April 1, 2021. The line of credit bears interest at the greater of the U.S. Prime Rate or 3.00%, and the actual rate was 3.25% as of September 30, 2020. As of September 30, 2020, there was no outstanding balance. The amount available under the line of credit is based on eligible accounts receivable and inventory up to the maximum principal amount and was $5,000 as of September 30, 2020. The line of credit is collateralized by certain of Trans Ova's assets and contains certain restricted covenants that include maintaining minimum tangible net worth and working capital and maximum allowable annual capital expenditures.
Exemplar has a $700 revolving line of credit with American State Bank that matures on October 31, 2021. As of September 30, 2020, the line of credit bore interest at 5.50% per annum, and there was no outstanding balance.
Long-Term Debt
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2020
|
|
December 31,
2019
|
Convertible debt
|
$
|
190,367
|
|
|
$
|
213,771
|
|
Notes payable
|
3,762
|
|
|
4,089
|
|
Other
|
93
|
|
|
131
|
|
Long-term debt
|
194,222
|
|
|
217,991
|
|
Less current portion
|
421
|
|
|
31,670
|
|
Long-term debt, less current portion
|
$
|
193,801
|
|
|
$
|
186,321
|
|
Convertible Debt
Precigen Convertible Notes
In July 2018, Precigen completed a registered underwritten public offering of $200,000 aggregate principal amount of Convertible Notes and issued the Convertible Notes under an indenture (the "Base Indenture") between Precigen and The Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented by the First Supplemental Indenture (together with the Base Indenture, the "Indenture"). Precigen received net proceeds of $193,958 after deducting underwriting discounts and offering expenses of $6,042.
The Convertible Notes are senior unsecured obligations of Precigen and bear interest at a rate of 3.50% per year, payable semiannually in arrears on January 1 and July 1 of each year beginning on January 1, 2019. The Convertible Notes mature on July 1, 2023, unless earlier repurchased or converted. The Convertible Notes are convertible into cash, shares of Precigen's common stock or a combination of cash and shares, at Precigen's election. The initial conversion rate of the Convertible Notes is 58.6622 shares of Precigen common stock per $1,000 principal amount of Convertible Notes (equivalent to an initial conversion price of approximately $17.05 per share of common stock). The conversion rate is subject to adjustment upon the occurrence of certain events, but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date as defined in the Indenture, Precigen will increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such a corporate event in certain circumstances. Prior to April 1, 2023, the holders may convert the Convertible Notes at their option only upon the satisfaction of the following circumstances:
•During any calendar quarter commencing after the calendar quarter ended on September 30, 2018, if the last reported sales price of Precigen's common stock for at least 20 trading days (whether or not consecutive) during the last 30 consecutive trading days of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
•During the five business day period after any five consecutive trading day period in which the trading price, as defined in the Indenture, for the Convertible Notes is less than 98% of the product of the last reported sales price of Precigen's common stock and the conversion rate for the Convertible Notes on each such trading day; or
•Upon the occurrence of specified corporate events as defined in the Indenture.
None of the above events allowing for conversion prior to April 1, 2023 occurred during the three months ended September 30, 2020. On or after April 1, 2023 until June 30, 2023, holders may convert their Convertible Notes at any time. Precigen may not redeem the Convertible Notes prior to the maturity date.
If Precigen undergoes a fundamental change, as defined in the Indenture, holders of the Convertible Notes may require Precigen to repurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The Indenture contains customary events of default, as defined in the agreement, and, if any of the events occur, could require repayment of a portion or all of the Convertible Notes, including accrued and unpaid interest. Additionally, the Indenture provides that Precigen shall not consolidate with or merge with or into, or sell, convey, transfer or lease all or substantially all of its properties and assets to, another entity, unless (i) the surviving entity is organized under the laws of the United States and such entity expressly assumes all of Precigen's obligations under the Convertible Notes and the Indenture; and (ii) immediately after such transaction, no default or event of default has occurred and is continuing under the Indenture.
The net proceeds received from the issuance of the Convertible Notes were initially allocated between long-term debt, the liability component, in the amount of $143,723, and additional paid-in capital, the equity component, in the amount of $50,235. Additional paid-in capital was further reduced by $13,367 of deferred taxes resulting from the difference between the carrying amount and the tax basis of the Convertible Notes that is created by the equity component, which also resulted in deferred tax benefit recognized from the reversal of valuation allowances on the then current year domestic operating losses in the same amount. As of September 30, 2020, the outstanding principal balance on the Convertible Notes was $200,000 and the carrying value of long-term debt was $165,367. The effective interest rate on the Convertible Notes, including amortization of the long-term debt discount and debt issuance costs, is 11.02%. As of September 30, 2020, the unamortized long-term debt discount and debt issuance costs totaled $34,633.
The components of interest expense related to the Convertible Notes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Cash interest expense
|
$
|
1,750
|
|
|
$
|
1,750
|
|
|
$
|
5,250
|
|
|
$
|
5,250
|
|
Non-cash interest expense
|
2,706
|
|
|
2,430
|
|
|
7,807
|
|
|
6,962
|
|
Total interest expense
|
$
|
4,456
|
|
|
$
|
4,180
|
|
|
$
|
13,057
|
|
|
$
|
12,212
|
|
Accrued interest of $1,750 is included in other accrued liabilities on the accompanying condensed consolidated balance sheet as of September 30, 2020.
ActoBio Convertible Notes
In September 2018, ActoBio issued $30,000 of convertible promissory notes (the "ActoBio Notes") to a related party in conjunction with an asset acquisition with Harvest. The ActoBio Notes, which accrued interest at 3.0% compounded annually ("accrued PIK interest"), matured in September 2020. The Company issued 6,293,402 shares of Precigen common stock upon conversion of the outstanding principal balance and accrued PIK interest at maturity. Interest expense was $147 and $232 for the three months ended September 30, 2020 and 2019, respectively, and $616 and $684 for the nine months ended September 30, 2020 and 2019, respectively.
Precigen and PGEN Therapeutics Convertible Note
In December 2018, in conjunction with the Securities Purchase, Assignment and Assumption Agreement with Ares Trading S.A. ("Ares Trading"), Precigen and PGEN Therapeutics jointly and severally issued a $25,000 convertible note (the "Merck Note") to Ares Trading in exchange for cash. The Merck Note has a maturity date of June 28, 2021 although it automatically converts to Precigen common stock on the first trading day following the second anniversary of issuance, which is December 2020, if not otherwise converted prior to that date. Prior to the automatic conversion, Ares Trading may convert the Merck Note, at their election, into (i) Precigen common stock at any time, (ii) Precigen common stock upon the Company's closing of qualified financing as defined in the agreement, (iii) PGEN Therapeutics equity upon PGEN Therapeutics closing a qualified financing as defined in the agreement, and (iv) PGEN Therapeutics common stock upon the closing of a qualified initial public offering ("IPO") of PGEN Therapeutics common stock. There is no stated interest rate on the Merck Note. However, in the event of a conversion upon a qualified IPO, the conversion price will be 90% of the IPO price. In the event Ares Trading elects to convert the Merck Note into PGEN Therapeutics equity, the Merck Note accrues interest at a rate of 5% per year ("PIK interest") and will be converted with the outstanding principal. The Company determined that the potential PIK interest and IPO conversion discount represented embedded derivatives requiring bifurcation from the debt host but had no significant value as of September 30, 2020. The Merck Note is classified as long-term as of September 30, 2020 and December 31, 2019 since the Merck Note will be settled through a conversion to common stock, and no cash payment is required.
See Note 20 for further discussion of the Merck Note.
Notes Payable
Trans Ova has a note payable to American State Bank that matures in April 2033 and had an outstanding principal balance of $3,762 as of September 30, 2020. Trans Ova pays monthly installments of $39, which includes interest at 3.95%. The note payable is collateralized by certain of Trans Ova's real estate and non-real estate assets.
Future Maturities
Future maturities of long-term debt as of September 30, 2020 are as follows:
|
|
|
|
|
|
2020
|
$
|
25,174
|
|
2021
|
331
|
|
2022
|
345
|
|
2023
|
200,359
|
|
2024
|
373
|
|
2025
|
388
|
|
Thereafter
|
1,885
|
|
Total
|
$
|
228,855
|
|
12. Income Taxes
Tax provisions for interim periods are calculated using an estimate of actual taxable income or loss for the respective period, rather than estimating the Company's annual effective income tax rate, as the Company is currently unable to reliably estimate its income for the full year. The Company has U.S. taxable loss of approximately $26,900 and $47,100 for the three months ended September 30, 2020 and 2019, respectively, and $133,900 and $194,400 for the nine months ended September 30, 2020 and 2019, respectively. The following table presents the components of income tax benefit from continuing operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current foreign income tax expense from continuing operations
|
$
|
18
|
|
|
$
|
10
|
|
|
$
|
74
|
|
|
$
|
34
|
|
Deferred income tax benefit from continuing operations
|
(68)
|
|
|
(13)
|
|
|
(204)
|
|
|
(59)
|
|
Total income tax benefit from continuing operations
|
$
|
(50)
|
|
|
$
|
(3)
|
|
|
$
|
(130)
|
|
|
$
|
(25)
|
|
The Company's net deferred tax assets, excluding certain deferred tax liabilities totaling $2,734, are offset by a valuation allowance due to the Company's history of net losses combined with an inability to confirm recovery of the tax benefits of the Company's losses and other net deferred tax assets. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
As of September 30, 2020, the Company has operating loss carryforwards for U.S. federal income tax purposes of approximately $702,700 available to offset future taxable income, including approximately $450,000 generated after 2017, U.S. capital loss carryforwards of approximately $199,700, and federal and state research and development tax credits of approximately $10,000, prior to consideration of annual limitations that may be imposed under Section 382 of the Internal Revenue Code of 1986, as amended. Carryforwards generated prior to 2018 begin to expire in 2022, and capital loss carryforwards will begin to expire if unutilized in 2024. As of September 30, 2020, the Company's foreign subsidiaries have foreign loss carryforwards of approximately $78,200, most of which do not expire.
13. Shareholders' Equity
Issuances of Precigen Common Stock
Concurrent with entering into the TS Biotechnology Sale on January 1, 2020, the Company also entered into a subscription agreement with TS Biotechnology pursuant to which TS Biotechnology purchased 5,972,696 shares of the Company's common stock for $35,000 on January 31, 2020.
See Notes 11 and 20 for discussion regarding additional issuances of Precigen common stock.
Share Lending Agreement
Concurrently with the offering of the Convertible Notes (Note 11), Precigen entered into a share lending agreement (the "Share Lending Agreement") with J.P. Morgan Securities LLC (the "Share Borrower") pursuant to which Precigen loaned and delivered 7,479,431 shares of its common stock (the "Borrowed Shares") to the Share Borrower. The Share Lending Agreement will terminate, and the Borrowed Shares will be returned to Precigen within five business days of such termination, upon (i) termination by the Share Borrower or (ii) the earliest to occur of (a) October 1, 2023 and (b) the date, if any, on which the Share Lending Agreement is either mutually terminated or terminated by one party upon a default by the other party. The Share Borrower maintains collateral in the form of cash or certain permitted non-cash collateral with a market value at least equal to the market value of the Borrowed Shares as security for the obligation of the Share Borrower to return the Borrowed Shares when required by the terms above. The Borrowed Shares were offered and sold to the public at a price of $13.37 per share under a registered offering (the "Borrowed Shares Offering"). Precigen did not receive any proceeds from the sale of the Borrowed Shares to the public or any lending fees from the Share Lending Agreement. The Share Borrower or its affiliates received all the proceeds from the sale of the Borrowed Shares to the public. Affiliates of Third Security purchased all of the shares of common stock in the Borrowed Shares Offering.
The Share Lending Agreement was entered into at fair value and met the requirements for equity classification. Therefore, the value is netted against the issuance of the Borrowed Shares in additional paid-in capital. Additionally, the Borrowed Shares are not included in the denominator for loss per share attributable to Precigen shareholders unless the Share Borrower defaults on the Share Lending Agreement.
Issuances of AquaBounty Common Stock
In March 2019, AquaBounty completed an underwritten public offering that resulted in net proceeds of $6,611 after deducting discounts, fees, and expenses. See Note 1 for additional discussion of issuances of AquaBounty common stock in April 2019, which resulted in the deconsolidation of AquaBounty.
Components of Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2020
|
|
December 31,
2019
|
Unrealized gain on investments
|
$
|
93
|
|
|
$
|
7
|
|
Income (loss) on foreign currency translation adjustments
|
1,269
|
|
|
(27,475)
|
|
Total accumulated other comprehensive income (loss)
|
$
|
1,362
|
|
|
$
|
(27,468)
|
|
See Note 3 for further discussion of the release of cumulative losses on foreign currency translation adjustments upon the closing of the TS Biotechnology Sale.
14. Share-Based Payments
The Company measures the fair value of stock options and restricted stock units ("RSUs") issued to employees and nonemployees as of the grant date for recognition of stock-based compensation expense. Stock-based compensation expense for employees and nonemployees is recognized over the requisite service period, which is typically the vesting period. Stock-based compensation costs included in the condensed consolidated statements of operations are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Cost of products
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
7
|
|
|
$
|
16
|
|
Cost of services
|
35
|
|
|
52
|
|
|
99
|
|
|
169
|
|
Research and development
|
407
|
|
|
1,382
|
|
|
1,360
|
|
|
4,083
|
|
Selling, general and administrative
|
4,157
|
|
|
3,367
|
|
|
13,749
|
|
|
8,301
|
|
Discontinued operations
|
—
|
|
|
618
|
|
|
(1,346)
|
|
|
1,969
|
|
Total
|
$
|
4,600
|
|
|
$
|
5,423
|
|
|
$
|
13,869
|
|
|
$
|
14,538
|
|
Precigen Stock Option Plans
In April 2008, Precigen adopted the 2008 Equity Incentive Plan (the "2008 Plan") for employees and nonemployees pursuant to which Precigen's board of directors granted share-based awards, including stock options, to officers, key employees and nonemployees. Upon the effectiveness of the 2013 Omnibus Incentive Plan (the "2013 Plan"), no new awards may be granted under the 2008 Plan. As of September 30, 2020, there were 191,470 stock options outstanding under the 2008 Plan.
Precigen adopted the 2013 Plan for employees and nonemployees pursuant to which Precigen's board of directors may grant share-based awards, including stock options and shares of common stock, to employees, officers, consultants, advisors, and nonemployee directors. The 2013 Plan became effective in August 2013, and as of September 30, 2020, there were 27,000,000 shares authorized for issuance under the 2013 Plan, of which 10,342,887 stock options and 1,261,960 RSUs were outstanding and 6,929,362 shares were available for grant.
In April 2019, Precigen adopted the 2019 Incentive Plan for Non-Employee Service Providers (the "2019 Plan"), which became effective upon shareholder approval in June 2019. The 2019 Plan permits the grant of share-based awards, including stock options, restricted stock awards, and RSUs, to non-employee service providers, including board members. As of September 30, 2020, there were 5,000,000 shares authorized for issuance under the 2019 Plan, of which 845,248 stock options and 551,083 RSUs were outstanding and 2,432,624 shares were available for grant.
Stock option activity was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Contractual Term (Years)
|
Balances at December 31, 2019
|
9,022,282
|
|
|
$
|
21.94
|
|
|
6.10
|
Granted
|
5,560,748
|
|
|
10.13
|
|
|
|
|
|
|
|
|
|
Exercised
|
(21,669)
|
|
|
(3.17)
|
|
|
|
Forfeited
|
(941,298)
|
|
|
(15.57)
|
|
|
|
Expired
|
(2,240,458)
|
|
|
(26.86)
|
|
|
|
Balances at September 30, 2020
|
11,379,605
|
|
|
15.77
|
|
|
7.36
|
Exercisable at September 30, 2020
|
5,620,375
|
|
|
19.68
|
|
|
5.68
|
RSU activity was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Restricted Stock Units
|
|
Weighted Average Grant Date Fair Value
|
|
Weighted Average Remaining Contractual Term (Years)
|
Balances at December 31, 2019
|
1,781,982
|
|
|
$
|
8.71
|
|
|
1.24
|
Granted
|
3,157,390
|
|
|
3.09
|
|
|
|
Vested
|
(2,727,593)
|
|
|
(4.04)
|
|
|
|
Forfeited
|
(398,736)
|
|
|
(8.62)
|
|
|
|
Balances at September 30, 2020
|
1,813,043
|
|
|
5.96
|
|
|
0.65
|
Precigen currently uses authorized and unissued shares to satisfy share award exercises.
The Company's Executive Chairman ("Executive Chairman"), who previously served as the Company's Chief Executive Officer ("CEO") until January 1, 2020, and as an employee and executive officer until September 24, 2020, received a base salary of $200 per month through March 31, 2020, payable in fully-vested shares of Precigen common stock with such shares subject to a three-year lock-up on resale. The monthly number of shares of common stock was calculated based on the closing price on the last trading day of each month through March 2019 and based on the volume weighted average of the price of Precigen common stock over the 30 day period ending on the last calendar day of each month thereafter, and the shares were issued pursuant to the terms of a Restricted Stock Unit Agreement ("RSU Agreement") between Precigen and the Executive Chairman pursuant to the terms of the 2013 Plan. The RSU Agreement expired March 31, 2020. The fair value of the shares issued as compensation for services is included in selling, general, and administrative expenses in the Company's condensed consolidated statements of operations and totaled $444 for the three months ended September 30, 2019, and $454 and $1,425 for the nine months ended September 30, 2020 and 2019, respectively.
In September 2020, the Company's board of directors, upon the recommendation of the compensation committee of the board, approved a new compensation arrangement for the Executive Chairman. The new arrangement consists of (i) an annual retainer of $100 payable in cash or, at the Executive Chairman's election, shares of Precigen common stock; (ii) an annual grant of fully vested stock options having a grant date fair value of $250; and (iii) an annual grant of RSUs having a grant date fair value of $250. The compensation arrangement begins in calendar year 2021 and the foregoing elements are prorated for the nine months of 2020 not covered by the Executive Chairman's previous compensation arrangement discussed above. The terms of the equity awards granted to the Executive Chairman are pursuant to the 2019 Plan.
15. Operating Leases
The Company leases certain facilities and equipment under operating leases. Leases with a lease term of twelve months or less are considered short-term leases and are not recorded on the balance sheet, and expense for these leases is recognized over the term of the lease. All other leases have remaining terms of one to ten years, some of which may include options to extend the lease and some of which may include options to terminate the lease within one year. The Company uses judgment to determine whether it is reasonably possible to extend the lease beyond the initial term or terminate before the initial term ends and the length of the possible extension or early termination. The leases are renewable at the option of the Company and do not contain residual value guarantees, covenants, or other restrictions.
The components of lease costs were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Operating lease costs
|
$
|
1,803
|
|
|
$
|
1,821
|
|
|
$
|
5,319
|
|
|
$
|
5,439
|
|
Short-term lease costs
|
480
|
|
|
530
|
|
|
1,332
|
|
|
1,544
|
|
Variable lease costs
|
474
|
|
|
619
|
|
|
1,511
|
|
|
1,641
|
|
Lease costs
|
$
|
2,757
|
|
|
$
|
2,970
|
|
|
$
|
8,162
|
|
|
$
|
8,624
|
|
As of September 30, 2020, maturities of lease liabilities, excluding short-term and variable leases, were as follows:
|
|
|
|
|
|
2020
|
$
|
1,334
|
|
2021
|
7,548
|
|
2022
|
7,118
|
|
2023
|
5,943
|
|
2024
|
5,839
|
|
2025
|
3,516
|
|
Thereafter
|
846
|
|
Total
|
32,144
|
|
Present value adjustment
|
(7,237)
|
|
Total
|
$
|
24,907
|
|
Current portion of operating lease liabilities
|
$
|
4,584
|
|
Long-term portion of operating lease liabilities
|
20,323
|
|
Total
|
$
|
24,907
|
|
Other information related to operating leases in continuing operations was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2020
|
|
December 31,
2019
|
Weighted average remaining lease term (years)
|
4.61
|
|
5.24
|
Weighted average discount rate
|
10.96
|
%
|
|
10.96
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
Supplemental disclosure of cash flow information
|
|
|
|
Cash paid for operating lease liabilities
|
$
|
5,659
|
|
|
$
|
5,461
|
|
Operating lease right-of-use assets added in exchange for new lease liabilities
|
395
|
|
|
—
|
|
16. Commitments and Contingencies
Contingencies
In March 2012, Trans Ova was named as a defendant in a licensing and patent infringement suit brought by XY, LLC ("XY"), alleging that Trans Ova's sale of semen-sorting products and services breached a 2004 licensing agreement and infringed on XY's patents related to semen sorting. Trans Ova counterclaimed for breach of contract, antitrust, and patent invalidity, and the matter proceeded to a jury trial in the United States District Court for the District of Colorado in January 2016. The jury determined that XY and Trans Ova had each breached the licensing agreement and that Trans Ova had infringed on XY's patents. In April 2016, the court issued its post-trial final judgment, awarding $528 in damages to Trans Ova and $6,066 in damages to XY. The order also provided Trans Ova with the ability to continue to practice XY's technology, subject to an ongoing royalty obligation of 12.5% of gross proceeds on Trans Ova's standard sorted semen products, plus a 2% enhancement on those products utilizing "reverse-sorted semen", or semen that is frozen before being sorted. In addition, the court assigned a $5.00 minimum royalty for a straw of sexed semen. Both parties appealed the district court's order. In May 2018, the Court of Appeals for the Federal Circuit denied Trans Ova's appeal of its claims for antitrust, breach of contract and patent invalidity (except as to one patent, for which the Federal Circuit affirmed invalidity in a separate, same-day ruling in a third-party case). The Federal Circuit remanded the district court's calculation of the ongoing royalty and instructed the district court to re-calculate the ongoing royalty in light of post-verdict economic factors. In March 2019, the district court clarified the royalty base and reset the royalty rates consistent with the Federal Circuit's opinion. In an amended final judgment, the district court increased the royalty rate on Trans Ova's standard sorted semen products to 18.75%. For the reverse-sort enhancement, however, it applied a weighted, blended royalty of 12.63% to Trans Ova's entire in vitro fertilization ("IVF") service cycle that utilizes reverse-sorted semen. The district court also changed the minimum royalty for a straw of sexed semen to $6.25 for a 2-
million cell straw (prorated appropriately for straws of higher cell counts), and assigned a minimum royalty for a sexed embryo at $6.25 per embryo. The new royalty rates were made retroactive to February 2016 (the end date of the trial).
Since the inception of the 2004 licensing agreement, Trans Ova has remitted payments to XY pursuant to the terms of that agreement, or pursuant to the terms of the district court's April 2016 post-trial order and its March 2019 post-remand order, and has recorded these payments in cost of services in the condensed consolidated statements of operations for the respective periods. For the period from inception of the 2004 licensing agreement through the district court's April 2016 order, aggregate royalty and license payments were $3,170, of which $2,759 had not yet been deposited by XY. In 2016, the Company recorded the expense of $4,228, representing the excess of the net damages awarded to XY, including prejudgment interest, over the liability previously recorded by Trans Ova for uncashed checks previously remitted to XY. In August 2016, Trans Ova deposited the net damages amount, including prejudgment interest, into the district court's registry, to be held until the appeals process was complete and final judgment amounts were determined. After the appeal, the district court subsequently released the funds held in its registry to XY in January 2019. As for post-trial damages, Trans Ova continued to remit payment to XY every quarter based on the original ongoing royalty rates set by the district court, though XY refused to cash those checks.
Under the district court's March 2019 post-remand order clarifying the royalty base and resetting the royalty rates, Trans Ova recalculated royalties owed from February 2016 through the first quarter of 2019, plus applicable pre- and post-judgment interest, and remitted that payment, totaling $5,801, to XY in May 2019. In June 2019, XY deposited the $5,801 into the district court's registry while the parties resolved two separate disputes over the appropriate calculation of royalties. In the first dispute, XY filed a motion claiming over $1,000 in additional back royalties. Trans Ova contested XY's motion. On February 6, 2020, the district court denied XY's motion without prejudice, holding that XY failed to satisfy its obligation under the court's local rules to meaningfully confer with Trans Ova before filing its motion. The district court held that, should XY choose to re-file its motion, it must include a substantial certificate of conferral demonstrating that it seriously and in good faith tried to resolve its disputes with Trans Ova.
In the second dispute, Trans Ova moved for partial relief from judgment in December 2019, shortly after XY's last patent not expressly limited to reverse sorting expired. Trans Ova sought an appropriate reduction in its royalty obligation in light of the fact that many of its products and services do not employ reverse sorting, and thus were no longer covered by any non-expired XY patents. On May 5, 2020, the court granted Trans Ova's motion in its entirety and issued a second amended final judgment, which substantially reduced Trans Ova's royalty obligation. The court held that, as of December 4, 2019, Trans Ova's royalty obligation on standard sorted semen products terminated. For the reverse-sort enhancement, the court held that, from December 4, 2019 through January 14, 2022, Trans Ova owes a weighted, blended royalty of 3.93% on each component of the IVF service cycle. From January 15, 2022 through May 21, 2022, Trans Ova will owe XY a royalty rate of 5% on just the reverse-sort and IVF procedure components of the IVF service cycle, with no royalty being owed on the ovum pick-up and IVF drug components of the cycle. On May 22, 2022, Trans Ova will cease owing XY any royalty for the litigated patents.
In June 2020, XY filed a notice of appeal with the Federal Circuit, seeking reversal of the district court's May 5, 2020 order and second amended final judgment that reduced Trans Ova's royalty obligation. XY's appeal is expected to be argued and decided sometime in 2021.
In December 2016, XY filed a complaint for patent infringement, trade secret misappropriation, and various state law claims against Trans Ova in the United States District Court for the Western District of Texas in Waco, Texas. Since the claims in the 2016 complaint directly relate to the parties' other litigation, Trans Ova succeeded in transferring the case to the same Colorado district court that presided over the 2012 litigation. That court subsequently dismissed nine of the complaint's twelve counts, including all five non-patent counts and four patent counts. The court subsequently dismissed a fifth patent count after ruling that the patent was invalid, leaving only two patent counts left in the case. In February 2019, a Wisconsin district court invalidated one of the two remaining patents, which XY had asserted against another competitor. After initially appealing the Wisconsin court's invalidation of its patent, XY subsequently withdrew the appeal. In March 2019, the Colorado district court stayed the two remaining patent counts (including the one later invalidated by the Wisconsin court) and entered final judgment against XY's ten other dismissed counts. The 2016 litigation is administratively closed, pending disposition of XY's appeal to the Federal Circuit, in which XY has appealed the district court's dismissal of four of its patent causes of action. XY did not appeal the dismissal of any of the non-patent causes of action. The Federal Circuit opinion was issued on July 31, 2020. The appellate court reversed the Colorado district court's dismissal of the appealed patents and remanded the disposition of those patents back to the district court for further proceedings consistent with its opinion.
Trans Ova shall continue to utilize the technology consistent with the determinations of the court proceedings. Nonetheless, these disputes remain subject to a number of uncertainties, including the outcome of appellate proceedings, the possibility of further claims by XY, and the impact of these matters on Trans Ova's ability to utilize the technology. Trans Ova and the Company could elect to enter into a settlement agreement in order to avoid the further costs and uncertainties of litigation.
In October 2018, the Company received a subpoena from the Division of Enforcement of the Securities and Exchange Commission ("SEC") informing the Company of a non-public, fact-finding investigation concerning the Company's disclosures regarding its methane bioconversion platform. The Company produced documents to, and met with, the staff of the SEC and voluntarily cooperated with the SEC investigation. In September 2020, the Company reached a final settlement with the SEC regarding the matter. Under the terms of the settlement, the Company, without admitting or denying the allegations of the SEC, consented to the entry of an administrative order requiring that the Company: (i) cease and desist from committing or causing any violations and future violations under Section 13(a) of the Securities Exchange Act of 1934, as amended, and Rules 13a-11 and 12b-20 promulgated thereunder; and (ii) pay a $2,500 civil money penalty to the SEC.
In October 2020, three purported shareholder class action lawsuits, captioned Abadilla v. Precigen, Inc., F/K/A Intrexon Corp., et al, Chen v. Precigen, Inc. F/K/A Intrexon Corp., et al., and Seppen v. Precigen, Inc. F/K/A Intrexon Corp., et al., were filed in the U.S. District Court for the Northern District of California on behalf of certain purchasers of the Company's common stock. The complaints name as defendants the Company and certain of its current officers and, in one matter, a former officer. Plaintiff's claims track the allegations in the SEC's administrative order described above. The plaintiffs seek compensatory damages, interest and an award of reasonable attorney's fees and costs. The Company intends to defend the lawsuits vigorously; however there can be no assurances regarding the ultimate outcome of these lawsuits.
On July 10, 2020, the Company received a notice of arbitration from Harvest pursuant to the Collaboration Investment Opportunity Agreement dated March 13, 2015. The Company intends to defend itself vigorously, but there can be no assurance as to the ultimate outcome of this arbitration.
The Company has previously entered into strategic collaborations, including ECCs and JVs, to fund and develop products enabled by its technologies. These relationships involve complex interests, and the Company's interests may diverge with those of its collaborators, which can occur as a result of operations under those collaborations, business or technological developments, or as the Company transitions away from, or terminates, certain strategic collaborations. The Company has had, and has, disagreements and disputes with certain collaborators and JV partners, including Harvest, the IEP Investors, and the IEPII Investors. While the Company believes it is entitled to payment for work performed per its collaborations and JVs, consistent with its policy for accounting for accounts receivable, the Company has fully reserved the amount of any disputed accounts receivable that remained outstanding as of September 30, 2020. These disagreements and disputes result in management distraction and may result in litigation, unfavorable settlements, or concessions by the Company, or adverse regulatory action, any of which could harm the Company's business or operations.
In the course of its business, the Company is involved in litigation or legal matters, including governmental investigations. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. The Company accrues liabilities for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. As of September 30, 2020, the Company does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company's business, financial condition, results of operations, or cash flows.
17. Related Party Transactions
Third Security and Affiliates
The Company's Executive Chairman is also the Senior Managing Director and CEO of Third Security and owns 100% of the equity interests of Third Security. Through December 2019, the Company was party to a Services Agreement ("Services Agreement") with Third Security pursuant to which Third Security provided the Company with certain professional, legal, financial, administrative, and other support services necessary to support the Company and its Executive Chairman. Under the Services Agreement, as consideration for providing these services, Third Security was entitled to a fee paid in the form of fully-vested shares of Precigen common stock that approximated $800 per month. In 2019, the number of shares of common stock was calculated based on the volume weighted average of the closing price of the Company's common stock over the 30-day period ending on the 15th day of the calendar month when the applicable services were provided. For the three and nine months ended September 30, 2019, the Company issued 340,453 shares and 1,180,446 shares, respectively, with values of $1,855 and $6,217, respectively, to Third Security as payment for services rendered pursuant to the Services Agreement.
Following the expiration of the Services Agreement, the Company entered into a new agreement with Third Security under which the Company reimburses Third Security for certain tax-related services performed by Third Security as requested by the Company. The Company also reimburses Third Security for certain out-of-pocket expenses incurred on the Company's behalf prior to and after the expiration of the Services Agreement under a separate agreement. The total expenses incurred by the Company under these arrangements were $56 and $8 for the three months ended September 30, 2020 and 2019, respectively, and $132 and $26 for the nine months ended September 30, 2020 and 2019, respectively.
See also Note 14 regarding compensation arrangements between the Company and its Executive Chairman.
The Company also subleases certain administrative offices to Third Security. The significant terms of the lease mirror the terms of the Company's lease with the landlord, and the Company recorded sublease income of $18 and $22 for the three months ended September 30, 2020 and 2019, respectively, and $64 and $66 for the nine months ended September 30, 2020 and 2019, respectively.
See Notes 1, 3, and 13 regarding additional transactions with affiliates of Third Security.
Transactions with ECC Parties
Collaborators in which the Company holds more than a de minimis equity interest, including interests received as upfront or milestone payments through collaborations, are considered related parties. The Company held Series A Convertible Preferred Stock (the "Convertible Preferred Shares"), a convertible note, common shares of Castle Creek, and warrants to purchase shares of Castle Creek common stock previously acquired through collaborations and other transactions. As a result of the acquisition of Castle Creek by Castle Creek Pharmaceutical in December 2019, the Company received $1,280 in December 2019 for its shares of Castle Creek common stock and received a total of $3,311 in January 2020 for the Convertible Preferred Shares and the convertible note, including accrued interest thereon. The $3,311 is included in other receivables on the accompanying condensed consolidated balance sheet as of December 31, 2019. Subsequent to the acquisition by Castle Creek Pharmaceutical, Castle Creek is no longer a related party.
18. Net Loss per Share
The following table presents the computation of basic and diluted net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Historical net loss per share:
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
Net loss from continuing operations attributable to Precigen
|
$
|
(29,508)
|
|
|
$
|
(49,054)
|
|
|
$
|
(102,804)
|
|
|
$
|
(132,667)
|
|
Net loss from discontinued operations attributable to Precigen
|
—
|
|
|
(4,580)
|
|
|
(26,056)
|
|
|
(20,442)
|
|
Net loss attributable to Precigen
|
$
|
(29,508)
|
|
|
$
|
(53,634)
|
|
|
$
|
(128,860)
|
|
|
$
|
(153,109)
|
|
Denominator:
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
165,527,024
|
|
|
154,596,257
|
|
|
163,318,375
|
|
|
153,770,785
|
|
Net loss per share:
|
|
|
|
|
|
|
|
Net loss from continuing operations attributable to Precigen per share, basic and diluted
|
$
|
(0.18)
|
|
|
$
|
(0.32)
|
|
|
$
|
(0.63)
|
|
|
$
|
(0.86)
|
|
Net loss from discontinued operations attributable to Precigen per share, basic and diluted
|
—
|
|
|
(0.03)
|
|
|
(0.16)
|
|
|
(0.14)
|
|
Net loss attributable to Precigen per share, basic and diluted
|
$
|
(0.18)
|
|
|
$
|
(0.35)
|
|
|
$
|
(0.79)
|
|
|
$
|
(1.00)
|
|
The following potentially dilutive securities as of September 30, 2020 and 2019, have been excluded from the above computations of diluted weighted average shares outstanding for the three and nine months then ended as they would have been anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
2020
|
|
2019
|
Convertible debt
|
17,843,715
|
|
|
21,055,805
|
|
Options
|
11,379,605
|
|
|
9,530,483
|
|
Restricted stock units
|
1,813,043
|
|
|
2,108,509
|
|
Warrants
|
133,264
|
|
|
133,264
|
|
Total
|
31,169,627
|
|
|
32,828,061
|
|
19. Segments
The Company's CODM assesses the operating performance of and allocates resources for several operating segments using Segment Adjusted EBITDA. Management believes this financial metric is a key indicator of operating results since it excludes noncash revenues and expenses that are not reflective of the underlying business performance of an individual enterprise. The Company defines Segment Adjusted EBITDA as net loss before (i) interest expense, (ii) income tax expense or benefit, (iii) depreciation and amortization, (iv) stock-based compensation expense, (v) adjustments for bonuses paid in equity awards, (vi) loss on impairment of goodwill and other noncurrent assets, (vii) equity in net loss of affiliates, and (viii) recognition of previously deferred revenue associated with upfront and milestone payments as well as cash outflows from capital expenditures and investments in affiliates. For the nine months ended September 30, 2020, the Company modified the current period definition of Segment Adjusted EBITDA to exclude adjustments recorded to reverse the difference of bonuses accrued as of December 31, 2019 compared to the value of equity awards granted, as the Company determined in March 2020 that those accrued bonuses would be paid through the grant of equity awards instead of cash. Segment Adjusted EBITDA for the three and nine months ended September 30, 2019 was not impacted by this change.
Because the Company uses Segment Adjusted EBITDA as its primary measure of segment performance, it has included this measure in its discussion of segment operating results. The Company has also disclosed revenues from external customers and intersegment revenues for each reportable segment. Corporate expenses are not allocated to the segments and are managed at a consolidated level. The CODM does not use total assets by segment to evaluate segment performance or allocate resources, and accordingly, these amounts are not required to be disclosed. The Company's segment presentation excludes consideration of all of the businesses included in the Transactions (Note 3).
For the three and nine months ended September 30, 2020, the Company's reportable segments were (i) PGEN Therapeutics, (ii) ActoBio, (iii) MBP Titan, (iv) Trans Ova, and (v) the Human Biotherapeutics division. These identified reportable segments met the quantitative thresholds to be reported separately for the nine months ended September 30, 2020. See Note 1 for a description of PGEN Therapeutics, ActoBio, MBP Titan, and Trans Ova. The Company's Human Biotherapeutics division is an operating division within Precigen which includes the Company's majority-owned subsidiary, Triple-Gene LLC, and its collaborations with Castle Creek (Note 5). The All Other category as reported below reflects Precigen's other operating segments that do not meet the quantitative thresholds to be reported separately.
Information by reportable segment was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020
|
|
PGEN Therapeutics
|
|
ActoBio
|
|
MBP Titan
|
|
Trans Ova
|
|
Human Biotherapeutics
|
|
All Other
|
|
Total
|
Revenues from external customers
|
$
|
164
|
|
|
$
|
2,823
|
|
|
$
|
—
|
|
|
$
|
15,228
|
|
|
$
|
2,394
|
|
|
$
|
2,974
|
|
|
$
|
23,583
|
|
Intersegment revenues
|
1,992
|
|
|
—
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
—
|
|
|
2,047
|
|
Total segment revenues
|
$
|
2,156
|
|
|
$
|
2,823
|
|
|
$
|
—
|
|
|
$
|
15,283
|
|
|
$
|
2,394
|
|
|
$
|
2,974
|
|
|
$
|
25,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA
|
$
|
(6,739)
|
|
|
$
|
(1,602)
|
|
|
$
|
(1,765)
|
|
|
$
|
(1,606)
|
|
|
$
|
(420)
|
|
|
$
|
1,654
|
|
|
$
|
(10,478)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019
|
|
PGEN Therapeutics
|
|
ActoBio
|
|
MBP Titan
|
|
Trans Ova
|
|
Human Biotherapeutics
|
|
All Other
|
|
Total
|
Revenues from external customers
|
$
|
444
|
|
|
$
|
231
|
|
|
$
|
1,117
|
|
|
$
|
13,981
|
|
|
$
|
402
|
|
|
$
|
2,124
|
|
|
$
|
18,299
|
|
Intersegment revenues
|
2,313
|
|
|
6
|
|
|
—
|
|
|
257
|
|
|
—
|
|
|
72
|
|
|
2,648
|
|
Total segment revenues
|
$
|
2,757
|
|
|
$
|
237
|
|
|
$
|
1,117
|
|
|
$
|
14,238
|
|
|
$
|
402
|
|
|
$
|
2,196
|
|
|
$
|
20,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA
|
$
|
(5,953)
|
|
|
$
|
(4,634)
|
|
|
$
|
(9,024)
|
|
|
$
|
(5,560)
|
|
|
$
|
(142)
|
|
|
$
|
(1,345)
|
|
|
$
|
(26,658)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020
|
|
PGEN Therapeutics
|
|
ActoBio
|
|
MBP Titan
|
|
Trans Ova
|
|
Human Biotherapeutics
|
|
All Other
|
|
Total
|
Revenues from external customers
|
$
|
542
|
|
|
$
|
3,053
|
|
|
$
|
—
|
|
|
$
|
55,858
|
|
|
$
|
16,967
|
|
|
$
|
7,371
|
|
|
$
|
83,791
|
|
Intersegment revenues
|
5,707
|
|
|
(3)
|
|
|
7
|
|
|
254
|
|
|
—
|
|
|
281
|
|
|
6,246
|
|
Total segment revenues
|
$
|
6,249
|
|
|
$
|
3,050
|
|
|
$
|
7
|
|
|
$
|
56,112
|
|
|
$
|
16,967
|
|
|
$
|
7,652
|
|
|
$
|
90,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA
|
$
|
(19,356)
|
|
|
$
|
(4,727)
|
|
|
$
|
(15,728)
|
|
|
$
|
3,723
|
|
|
$
|
(2,253)
|
|
|
$
|
2,783
|
|
|
$
|
(35,558)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019
|
|
PGEN Therapeutics
|
|
ActoBio
|
|
MBP Titan
|
|
Trans Ova
|
|
Human Biotherapeutics
|
|
All Other
|
|
Total
|
Revenues from external customers
|
$
|
2,174
|
|
|
$
|
813
|
|
|
$
|
3,813
|
|
|
$
|
53,307
|
|
|
$
|
3,247
|
|
|
$
|
10,219
|
|
|
$
|
73,573
|
|
Intersegment revenues
|
7,090
|
|
|
501
|
|
|
2
|
|
|
1,204
|
|
|
—
|
|
|
145
|
|
|
8,942
|
|
Total segment revenues
|
$
|
9,264
|
|
|
$
|
1,314
|
|
|
$
|
3,815
|
|
|
$
|
54,511
|
|
|
$
|
3,247
|
|
|
$
|
10,364
|
|
|
$
|
82,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA
|
$
|
(20,789)
|
|
|
$
|
(11,196)
|
|
|
$
|
(26,238)
|
|
|
$
|
(2,854)
|
|
|
$
|
(719)
|
|
|
$
|
(5,062)
|
|
|
$
|
(66,858)
|
|
The table below reconciles total segment revenues from reportable segments to total consolidated revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Total segment revenues from reportable segments
|
$
|
22,656
|
|
|
$
|
18,751
|
|
|
$
|
82,385
|
|
|
$
|
72,151
|
|
Other revenues, including from other operating segments
|
2,974
|
|
|
2,196
|
|
|
8,714
|
|
|
10,511
|
|
Elimination of intersegment revenues
|
(2,047)
|
|
|
(2,648)
|
|
|
(7,254)
|
|
|
(8,942)
|
|
Total consolidated revenues
|
$
|
23,583
|
|
|
$
|
18,299
|
|
|
$
|
83,845
|
|
|
$
|
73,720
|
|
The table below reconciles Segment Adjusted EBITDA for reportable segments to consolidated net loss from continuing operations before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Segment Adjusted EBITDA for reportable segments
|
$
|
(12,132)
|
|
|
$
|
(25,313)
|
|
|
$
|
(38,341)
|
|
|
$
|
(61,796)
|
|
All Other Segment Adjusted EBITDA
|
1,654
|
|
|
(1,345)
|
|
|
2,783
|
|
|
(5,062)
|
|
Remove cash paid for capital expenditures and investments in affiliates
|
984
|
|
|
4,869
|
|
|
5,604
|
|
|
12,536
|
|
Add recognition of previously deferred revenue associated with upfront and milestone payments
|
7,132
|
|
|
3,957
|
|
|
25,178
|
|
|
14,816
|
|
Other expenses:
|
|
|
|
|
|
|
|
Interest expense
|
(4,646)
|
|
|
(4,466)
|
|
|
(13,830)
|
|
|
(13,124)
|
|
Depreciation and amortization
|
(4,108)
|
|
|
(4,764)
|
|
|
(13,701)
|
|
|
(14,971)
|
|
Impairment losses
|
(920)
|
|
|
(626)
|
|
|
(22,961)
|
|
|
(626)
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
(4,600)
|
|
|
(4,805)
|
|
|
(15,215)
|
|
|
(12,569)
|
|
Adjustment related to bonuses paid in equity awards
|
—
|
|
|
—
|
|
|
2,833
|
|
|
—
|
|
Equity in net loss of affiliates
|
(523)
|
|
|
(479)
|
|
|
(1,125)
|
|
|
(1,943)
|
|
Other
|
4
|
|
|
35
|
|
|
16
|
|
|
35
|
|
Unallocated corporate costs
|
(10,412)
|
|
|
(13,028)
|
|
|
(27,938)
|
|
|
(42,476)
|
|
Eliminations
|
(1,991)
|
|
|
(3,092)
|
|
|
(6,237)
|
|
|
(9,104)
|
|
Consolidated net loss from continuing operations before income taxes
|
$
|
(29,558)
|
|
|
$
|
(49,057)
|
|
|
$
|
(102,934)
|
|
|
$
|
(134,284)
|
|
As of September 30, 2020 and December 31, 2019, the Company had $5,954 and $6,724, respectively, of long-lived assets in foreign countries. The Company recognized revenues derived in foreign countries totaling $118 and $243 for the three months ended September 30, 2020 and 2019, respectively, and $481 and $1,008 for the nine months ended September 30, 2020 and 2019, respectively.
20. Subsequent Events
In October 2020, pursuant to the terms of the Merck Note, Ares Trading voluntarily elected to convert the entire $25,000 outstanding into 6,758,400 shares of Precigen common stock. The shares are restricted from resale by Ares Trading for a period of 180 days from the date of issuance.