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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     .
Commission File Number: 001-36042
 PRECIGEN, INC.
(Exact name of registrant as specified in its charter)
Virginia 26-0084895
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification Number)
20374 Seneca Meadows Parkway 
Germantown,Maryland 20876
(Address of principal executive offices) (Zip Code)
(301) 556-9900
(Registrant's telephone number, including area code) 
N/A
(Former name, former address and former fiscal year, if changed since last report) 
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, no par value PGEN Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  Accelerated filer 
Non-accelerated filer  Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of July 31, 2023, 255,482,753 shares of common stock, no par value per share, were issued and outstanding.


Table of Contents
PRECIGEN, INC.
FORM 10-Q
TABLE OF CONTENTS
 
Item No. Page
1.
2.
3.
4.
1.
1A.
2.
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Precigen®, UltraCAR-T®, RheoSwitch®, UltraVector®, RTS®, UltraPorator®, ActoBiotics® and RheoSwitch Therapeutic System® are our and/or our affiliates' registered trademarks in the United States and GenVec™, AdenoVerse™, ActoBio Therapeutics™, AttSite™, and Precigen Therapeutics™ are our and/or our affiliates' common law trademarks in the United States are our and/or our affiliates' common law trademarks in the United States. This Quarterly Report on Form 10-Q, or Quarterly Report, and the information incorporated herein by reference contain references to trademarks, service marks, and trade names owned by us or other companies. Solely for convenience, trademarks, service marks, and trade names referred to in this Quarterly Report and the information incorporated herein, including logos, artwork, and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks, service marks, and trade names. We do not intend our use or display of other companies' trade names, service marks, or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Other trademarks, trade names, and service marks appearing in this Quarterly Report are the property of their respective owners. Unless the context requires otherwise, references in this Quarterly Report to "Precigen", "we", "us", and "our" refer to Precigen, Inc.
2

Table of Contents

Special Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Quarterly Report, including statements regarding our strategy; future events, including their outcome or timing; future operations; future financial position; future revenue; projected costs; prospects; plans; objectives of management; and expected market growth, are forward-looking statements. The words "aim", "anticipate", "assume", "believe", "continue", "could", "due", "estimate", "expect", "intend", "may", "plan", "positioned", "potential", "predict", "project", "seek", "should", "target", "will", "would", and the negatives of these terms or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These statements may relate to, among other things: (i) the timeliness of regulatory approvals; (ii) our strategy and overall approach to our business model, our efforts to realign our business, and our ability to exercise more control and ownership over the development process and commercialization path; (iii) our ability to successfully enter new markets or develop additional product candidates, including the expected timing and results of investigational studies and preclinical and clinical trials, whether with our collaborators or independently; (iv) our ability to consistently manufacture our product candidates on a timely basis or to establish agreements with third-party manufacturers; (v) our ability to successfully enter into optimal strategic relationships with our subsidiaries and operating companies that we may form in the future; (vi) our ability to hold or generate significant operating capital, including through partnering, asset sales, and operating cost reductions; (vii) actual or anticipated variations in our operating results; (viii) actual or anticipated fluctuations in competitors' or collaborators' operating results or changes in their respective growth rates; (ix) our cash position; (x) market conditions in our industry; (xi) the volatility of our stock price; (xii) the ability, and the ability of our collaborators, to protect our intellectual property and other proprietary rights and technologies; (xiii) outcomes of pending and future litigation; (xiv) the rate and degree of market acceptance of any products developed by us, our subsidiaries, collaborations, or joint ventures, or JVs, and competition from existing technologies and products or new technologies and products that may emerge; (xv) our ability to retain and recruit key personnel; (xvi) expectations related to the use of proceeds from public offerings and other financing efforts; and (xvii) estimates regarding expenses, future revenue, capital requirements, and needs for additional financing.
Forward-looking statements are based on our beliefs, assumptions, and expectations of our future performance, and may also concern our expectations relating to our subsidiaries and other affiliates. We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report.
We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report, particularly in Part II, Item 1A, "Risk Factors," that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, JVs, or investments that we may make.
You should read this Quarterly Report, the documents that we reference in this Quarterly Report, our Annual Report on Form 10-K for the year ended December 31, 2022, the other reports we have filed with the Securities and Exchange Commission, or SEC, and the documents that we have filed as exhibits to our filings with the SEC completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Precigen, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands, except share data)June 30,
2023
December 31,
2022
Assets
Current assets
Cash and cash equivalents$16,546 $4,858 
Restricted cash 43,339 
Short-term investments71,888 51,092 
Receivables
Trade, less allowance for credit losses of $184 as of both June 30, 2023 and December 31, 2022
1,354 978 
Other13,052 12,826 
Prepaid expenses and other2,792 5,066 
Total current assets105,632 118,159 
Long-term investments7,127  
Property, plant and equipment, net6,574 7,329 
Intangible assets, net42,656 44,455 
Goodwill36,966 36,923 
Right-of-use assets7,623 8,086 
Other assets949 1,025 
Total assets$207,527 $215,977 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Precigen, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited) 
(Amounts in thousands, except share data)June 30,
2023
December 31,
2022
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable$2,510 $4,068 
Accrued compensation and benefits4,820 6,377 
Other accrued liabilities3,257 4,997 
Settlement and Indemnification Accruals18,750 18,750 
Deferred revenue15 25 
Current portion of long-term debt 43,219 
Current portion of lease liabilities1,421 1,209 
Total current liabilities30,773 78,645 
Deferred revenue, net of current portion1,818 1,818 
Lease liabilities, net of current portion6,545 6,992 
Deferred tax liabilities2,181 2,263 
Total liabilities41,317 89,718 
Commitments and contingencies (Note 14)
Shareholders' equity
Common stock, no par value, 400,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 255,482,753 shares and 208,150,021 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively
  
Additional paid-in capital2,080,348 1,998,314 
Accumulated deficit(1,911,620)(1,868,567)
Accumulated other comprehensive loss (2,518)(3,488)
Total shareholders' equity166,210 126,259 
Total liabilities and shareholders' equity$207,527 $215,977 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Precigen, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)

(Amounts in thousands, except share and per share data)Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
2023202220232022
Revenues
Product revenues$324 $621 648 1,113 
Service revenues1,438 2,213 2,965 7,146 
Other revenues5 77 5 165 
Total revenues1,767 2,911 3,618 8,424 
Operating Expenses
Cost of products and services1,697 1,811 3,224 3,505 
Research and development11,874 11,954 24,037 23,755 
Selling, general and administrative9,316 12,670 20,954 26,359 
Impairment of goodwill   482 
Impairment of other noncurrent assets 638  638 
Total operating expenses22,887 27,073 48,215 54,739 
Operating loss(21,120)(24,162)(44,597)(46,315)
Other income (Expense), Net
Interest expense(136)(2,063)(460)(4,101)
Interest income828 37 1,460 75 
Other income, net44 40 424 238 
Total other income (expense), net736 (1,986)1,424 (3,788)
Equity in net loss of affiliates   (1)
Loss from continuing operations before income taxes(20,384)(26,148)(43,173)(50,104)
Income tax benefit65 89 120 147 
Loss from continuing operations(20,319)(26,059)(43,053)(49,957)
Income from discontinued operations, net of income taxes 8,424  13,071 
Net loss$(20,319)$(17,635)$(43,053)$(36,886)
Net Loss per Share
Net loss from continuing operations per share, basic and diluted$(0.08)$(0.13)$(0.18)$(0.25)
Net income from discontinued operations per share, basic and diluted 0.04  0.07 
Net loss per share, basic and diluted$(0.08)$(0.09)$(0.18)$(0.18)
Weighted average shares outstanding, basic and diluted248,003,322 200,461,441 240,307,403 200,047,629 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Precigen, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
 
 Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
(Amounts in thousands)2023202220232022
Net loss$(20,319)$(17,635)$(43,053)$(36,886)
Other comprehensive income (loss):
Unrealized gain (loss) on investments228 (202)491 (1,004)
Gain (loss) on foreign currency translation adjustments(47)(2,655)479 (3,755)
Comprehensive loss$(20,138)$(20,492)$(42,083)$(41,645)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Precigen, Inc. and Subsidiaries
Condensed Consolidated Statements of Shareholders' Equity
(Unaudited)
 
(Amounts in thousands, except share data)Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Shareholders'
Equity
SharesAmount
Balances at March 31, 2023255,482,753 $ $2,078,133 $(2,699)$(1,891,301)$184,133 
Stock-based compensation expense— — 2,188 — — 2,188 
Other— — 27 — — 27 
Net loss— — — — (20,319)(20,319)
Other comprehensive income— — — 181 — 181 
Balances at June 30, 2023255,482,753 $ $2,080,348 $(2,518)$(1,911,620)$166,210 
(Amounts in thousands, except share data)Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Shareholders'
Equity
SharesAmount
Balances at March 31, 2022207,693,277 $ $1,991,670 $(1,699)$(1,916,135)$73,836 
Stock-based compensation expense— — 2,309 — — 2,309 
Shares issued for accrued compensation456,744 —  — —  
Net loss— — — — (17,635)(17,635)
Other comprehensive loss— — — (2,857)— (2,857)
Balances at June 30, 2022208,150,021 $ $1,993,979 $(4,556)$(1,933,770)$55,653 
The accompanying notes are an integral part of these condensed consolidated financial statements.








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Precigen, Inc. and Subsidiaries
Condensed Consolidated Statements of Shareholders' Equity
(Unaudited)
 

(Amounts in thousands, except share data)Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Shareholders'
Equity
SharesAmount
Balances at December 31, 2022208,150,021 $ $1,998,314 $(3,488)$(1,868,567)$126,259 
Stock-based compensation expense— — 5,320 — — 5,320 
Shares issued upon vesting of restricted stock units and for exercises of stock options697,815 —  — —  
Shares issued for accrued compensation2,206,469 — 3,361 — — 3,361 
Shares issued as payment for services465,808 — 545 — — 545 
Shares issued in public offering, net of issuance costs43,962,640 — 72,808 — — 72,808 
Net loss— — — — (43,053)(43,053)
Other comprehensive income— — — 970 — 970 
Balances at June 30, 2023255,482,753 $ $2,080,348 $(2,518)$(1,911,620)$166,210 
(Amounts in thousands, except share data)Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Shareholders'
Equity
SharesAmount
Balances at December 31, 2021206,739,874 $ $2,022,701 $203 $(1,915,556)$107,348 
Cumulative effect of adoption of ASU 2020-06
— — (36,868)— 18,672 (18,196)
Stock-based compensation expense— — 5,871 — — 5,871 
Shares issued upon vesting of restricted stock units and for exercises of stock options354,089 — 1 — — 1 
Shares issued for accrued compensation772,071 — 1,698 — — 1,698 
Shares issued as payment for services283,987 — 576 — — 576 
Net loss— — — — (36,886)(36,886)
Other comprehensive loss— — — (4,759)— (4,759)
Balances at June 30, 2022208,150,021  $1,993,979 $(4,556)$(1,933,770)$55,653 
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Precigen, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Six Months Ended 
 June 30,
(Amounts in thousands)20232022
Cash flows from operating activities
Net loss$(43,053)$(36,886)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization3,404 6,518 
(Gain) Loss on disposals of assets, net(40)360 
Impairment of goodwill 482 
Impairment of other noncurrent assets 638 
Gain on debt retirement(60) 
Amortization of (discounts) premiums on investments, net(721)468 
Equity in net loss of affiliates 1 
Stock-based compensation expense5,320 5,871 
Shares issued as payment for services545 576 
Provision for credit losses 735 
Accretion of debt discount and amortization of deferred financing costs60 596 
Deferred income taxes(113)(112)
Other noncash items1 105 
Changes in operating assets and liabilities:
Receivables:
Trade(376)(7,016)
Other(226)10 
Prepaid expenses and other2,274 4,284 
Other assets83 2 
Accounts payable(1,537)(963)
Accrued compensation and benefits1,804 (1,015)
Other accrued liabilities(1,740)1,862 
Deferred revenue(10)(2,184)
Lease liabilities229 (40)
Related party payables (78)
Other long-term liabilities (50)
Net cash used in operating activities(34,156)(25,836)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Precigen, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

 Six Months Ended 
 June 30,
(Amounts in thousands)20232022
Cash flows from investing activities
Purchases of investments$(128,563)$ 
Sales and maturities of investments101,852 36,000 
Purchases of property, plant and equipment(255)(3,297)
Proceeds from sale of assets61 438 
Net cash (used in) provided by investing activities(26,905)33,141 
Cash flows from financing activities
Proceeds from issuance of shares, net of issuance costs72,808  
Payments of long-term debt(43,099)(277)
Payments of cost to retire long-term debt(120) 
Proceeds from stock option exercises 1 
Net cash provided by(used in) financing activities29,589 (276)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(172)(471)
Net decrease in cash, cash equivalents, and restricted cash(31,644)6,558 
Cash, cash equivalents, and restricted cash
Beginning of period48,596 43,343 
End of period$16,952 $49,901 
Supplemental disclosure of cash flow information
Cash paid during the period for interest$1,156 $3,568 
Significant noncash activities
Accrued compensation paid in equity awards$3,361 $1,698 
Purchases of property and equipment included in accounts payable and other accrued liabilities19 234 
Proceeds from sale of assets included in accounts receivable 147 
The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of June 30, 2023 and December 31, 2022 as shown above:
June 30,
2023
December 31,
2022
Cash and cash equivalents$16,546 $4,858 
Restricted cash 43,339 
Restricted cash included in other assets406 399 
Cash, cash equivalents, and restricted cash$16,952 $48,596 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Precigen, Inc. and Subsidiaries
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 dedicated discovery and clinical-stage biopharmaceutical company advancing the next generation of gene and cell therapies with the overall goal of improving outcomes for patients with significant unmet medical needs. Precigen is leveraging its proprietary technology platforms to develop product candidates designed to target urgent and intractable diseases in its core therapeutic areas of immuno-oncology, autoimmune disorders, and infectious diseases. Precigen has developed an extensive pipeline of therapies across multiple indications within these core focus areas. Precigen’s primary operations are located in the State of Maryland.

Precigen also has two wholly owned operating subsidiaries. Precigen ActoBio, Inc. ("ActoBio"), and Exemplar Genetics,LLC, doing business as Precigen Exemplar ("Exemplar").

ActoBio is pioneering a proprietary class of microbe-based biopharmaceuticals that enable expression and local delivery of disease-modifying therapeutics, with its primary operations located in Ghent, Belgium.

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. Exemplar’s primary operations are located in the State of Iowa.
Precigen and its consolidated subsidiaries are hereinafter referred to as the "Company."
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying 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 June 30, 2023 and results of operations and cash flows for the interim periods ended June 30, 2023 and 2022. 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, 2023, 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, 2022.
The accompanying condensed consolidated financial statements reflect the operations of Precigen and its majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated.
Liquidity
Management believes that existing liquid assets as of June 30, 2023 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. Additionally, the 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 six months ended June 30, 2023, the Company incurred a net loss of $43,053 and, as of June 30, 2023, had an accumulated deficit of $1,911,620. 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 (which could occur through debt or equity issuances, sales or partnerships of non-core assets, collaborations or out-licensing of core or non-core assets, or other transactions), obtain regulatory approval of its therapeutic product candidates, successfully commercialize its therapeutic product candidates, generate revenue, meet its obligations and, ultimately, attain profitable operations.
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Risks and Uncertainties
The Company is subject to a number of risks similar to those of other companies conducting high-risk, early-stage research and development of therapeutic 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' therapeutic product candidates.

Research and Development

The Company considers that regulatory requirements inherent in the research and development of new products preclude it from capitalizing such costs. Research and development expenses include salaries and related costs of research and development personnel, including stock-based compensation expense, costs to acquire technology rights, contract research organizations and consultants, facilities, materials and supplies associated with research and development projects as well as various laboratory studies. Costs incurred in conjunction with collaboration and licensing arrangements are included in research and development. Indirect research and development costs include depreciation, amortization, and other indirect overhead expenses.

The Company has research and development arrangements with third parties that include upfront and milestone payments. As of June 30, 2023 and December 31, 2022, the Company had research and development commitments with third parties that had not yet been incurred totaling $19,525 and $19,909, respectively. The commitments are generally cancellable by the Company by providing written notice at least sixty days before the desire termination date.

Cash and Cash Equivalents

All highly liquid investments with an original maturity of three months or less at the date of purchase are considered to be cash equivalents. Cash balances at a limited number of banks may periodically exceed insurable amounts. The Company believes that it mitigates its risk by investing in or through major financial institutions. Recoverability of investments is dependent upon the performance of the issuer. As of June 30, 2023 and December 31, 2022, the Company had cash equivalent investments in highly liquid money market accounts at major financial institutions of $11,390 and $3, respectively, which are included in cash and cash equivalents in the accompanying consolidated balance sheets.

Restricted Cash

Included in the condensed consolidated balance sheet as of December 31, 2022, is restricted cash of $43,339. This cash was restricted for the permitted purposes related to our Convertible Notes, including the resolution of such notes.

Short-term and Long-Term Investments

As of June 30, 2023 and December 31, 2022 short-term and long-term investments include United States government debt and agency securities and certificates of deposit. The Company determines the appropriate classification as short-term or long-term at the time of purchase based on original maturities and management's reasonable expectation of sales and redemption. The Company reevaluates such classification at each balance sheet date.

Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset and liability. As a basis for considering such assumptions, the Company uses a three-tier fair value hierarchy that prioritizes the inputs used in its fair value measurements. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

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Level 1:Quoted prices in active markets for identical assets and liabilities;
Level 2:Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly; and
Level 3:Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available.
Net Loss per Share
Basic net loss per share is calculated by dividing net loss attributable to common shareholders by the weighted average shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, using the treasury-stock method and the if-converted method. For purposes of the diluted net loss per share calculation, shares to be issued pursuant to convertible debt, stock options, RSUs, and warrants are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive as described in the next paragraph. Therefore, basic and diluted net loss per share were the same for all periods presented. See Note 11 for further discussion of the Company's Share Lending Agreement.
In accordance with Accounting Standards Codification (“ASC”) 260, the control number for determining whether including potential common shares in the diluted earnings per share, or EPS, computation would be anti-dilutive is income (loss) from continuing operations. As a result, if there is a loss from continuing operations, diluted EPS would be computed in the same manner as basic EPS is computed, even if the entity has net income after including discontinued operations. The following potentially dilutive securities as of June 30, 2023 and 2022, have been excluded from the above computations of diluted weighted average shares outstanding for the three and six months then ended as they would have been anti-dilutive:
June 30,
20232022
Options22,325,095 15,492,339 
Restricted stock units1,877,308 714,687 
Warrants 121,888 
Total24,202,403 16,328,914 

In addition, the Company's Convertible Notes, prior to their retirement in the second quarter of 2023, were convertible at an exercise price of approximately $17.05 per share of common stock, representing approximately 11,732,440 shares at June 30, 2022. The shares underlying the Convertible Notes were considered for the dilutive calculation but were excluded in all periods presented as their effect was anti-dilutive. See Note 9 for further discussion of the Convertible Notes.
Segment Information

The Company's chief operating decision maker ("CODM") regularly reviews disaggregated financial information for various operating segments. The financial information regularly reviewed by the CODM consists of (i) Biopharmaceuticals and (ii) Exemplar, each an operating segment that was also determined to be a reportable segment. The Biopharmaceuticals reportable segment is primarily comprised of the Company's legal entities of Precigen and ActoBio. See Note 1 for a description of Precigen, ActoBio and Exemplar. Prior to January 1, 2023, corporate expenses were not allocated to the segments and were managed at a consolidated level. Corporate expenses, 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, gain or loss on disposals of assets, stock-based compensation expense, loss on settlement agreement, and equity in net loss of affiliates and include unrealized and realized gains and losses on the Company's securities portfolio as well as dividend income. Beginning in the first quarter of 2023, the Company allocated certain corporate expenses to Precigen as its operations directly benefited from these expenditures, and are now included in the Biopharmaceuticals reportable segment. As presented in Note 15, the prior year period has been reclassified to conform to the current period’s presentation.
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
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date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Adopted Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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"). Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments.
We adopted ASU 2020-06 on January 1, 2022 using the modified retrospective transition method, which resulted in an increase to our reported long-term debt outstanding, net of current portion, of $18,196, a decrease to our additional paid-in capital of $36,868, and a corresponding cumulative-effect reduction to our opening accumulated deficit of $18,672. The adoption of ASU 2020-06 was expected to reduce non-cash interest expense related to existing convertible debt outstanding by approximately $11,800 for the year ending December 31, 2022, and did not have an impact on our consolidated cash flows. The use of the if-converted method did not have an impact on our overall earnings per share calculation.
Recently Issued Accounting Pronouncements Not Yet Adopted
There are no accounting standards which have not yet been adopted that are expected to have a significant impact on our financial statements and related disclosures.
3. Discontinued Operations
Trans Ova
As part of the Company's strategic shift to becoming a healthcare company, in August 2022, the Company completed the sale of 100% of the issued and outstanding membership interests in its wholly-owned subsidiary, Trans Ova, to Spring Bidco LLC (the “Buyer”), a Delaware limited liability company for $170,000 and up to $10,000 in cash earn-out payments contingent upon the performance of Trans Ova in each of 2022 and 2023, consisting of $5,000 for each year (the “Transaction”). The Company received $162,306 in proceeds, net of certain transaction costs, on August 18, 2022, after giving effect to the preliminary closing purchase price adjustments. The final working capital adjustment of $936 was received in the fourth quarter of 2022. In February 2023, the buyer notified the Company that Trans Ova did not meet the financial measures required in 2022 in order to require the first $5,000 earn-out payment.
The Company elected to account for the contingent consideration arrangement as a gain contingency in accordance with ASC 450, Contingencies (Subtopic 450-30). Under this approach, the Company recognizes the contingent consideration receivable in earnings after the contingency is resolved. Accordingly, to determine the initial gain on the sale of Trans Ova, the Company did not include an amount related to the contingent consideration arrangement as part of the consideration received.
In connection with the Transaction, the Company held restricted cash in a segregated account to be used for certain permitted purposes, including resolution of the Company’s outstanding Convertible Notes which were retired in the second quarter of 2023, as discussed further in Note 9. In addition, the Company is required to indemnify the Buyer for certain expenses incurred post close (related to covenants and certain additional specified liabilities including certain patent infringement lawsuits), if incurred, in amounts not to exceed $5,750. Such indemnification was recorded as a reduction of the gain on divestiture in the third quarter of 2022, and is included in Settlement and Indemnification accruals as of June 30, 2023. To date, the Company has received an indemnification claim of $675 that has not been paid as of June 30, 2023.
The following table presents the financial results of discontinued operations related to Trans Ova for the three and six months ended June 30, 2022:
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Three months ended June 30,Six Months Ended 
 June 30,
2022
Product revenues$8,940 $17,172 
Service revenues23,501 41,777 
Total revenues32,441 58,949 
Cost of products and services17,415 32,820 
Research and development908 1,867 
Selling, general and administrative6,124 12,011 
Total operating expenses24,447 46,698 
Operating income7,994 12,251 
Other income, net430 820 
Income from discontinued operations$8,424 $13,071 
The following table presents the significant noncash items, purchases of property, plant and equipment, and proceeds from sales of assets for the discontinued operations related to Trans Ova for the six months ended June 30, 2022 that are included in the accompanying condensed consolidated statements of cash flows.
Adjustments to reconcile net income to net cash used in operating activities
Depreciation and amortization$2,765 
Loss on disposal of assets360 
Stock-based compensation expense68 
Provision for credit losses735 
Cash flows from investing activities
Purchases of property, plant and equipment(2,629)
Proceeds from sale of assets438 
Cash flows from financing activities
Payments of long-term debt(225)

4. 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 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.
There were no material amounts recognized as revenue for the three and six months ended June 30, 2023 and 2022.
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Alaunos License Agreement
On April 3, 2023, the Company entered into an amended and restated exclusive license agreement (the “License Agreement”), with Alaunos Therapeutics (“Alaunos”). The License Agreement amended and replaced the terms of the Exclusive License Agreement by and between the Company and Alaunos, dated October 5, 2018.
Pursuant to the terms of the License Agreement, the Company has granted Alaunos an exclusive, worldwide, royalty-free, sub-licensable license to research, develop and commercialize T-cell receptor products, designed for neoantigens for the treatment of cancer or the treatment and prevention of human papilloma virus, or HPV, to the extent that the primary reason for such treatment or prevention is to prevent cancer, which is referred to as the HPV Field. The Company has also granted Alaunos an exclusive, worldwide, royalty-free, sub-licensable license for certain patents relating to the Sleeping Beauty technology to research, develop and commercialize TCR Products for both neoantigens and shared antigens for the treatment of cancer and in the HPV Field. The Company also granted Alaunos certain non-exclusive rights with respect to shared antigens, NK cells and gamma delta T-cells. Alaunos will be solely responsible for all aspects of the research, development and commercialization of the exclusively licensed products for the treatment of cancer and will not be subject to a diligence obligation with respect to such efforts.
Pursuant to the License Agreement, Alaunos no longer has any rights to certain of the Company’s technology including with respect to (i) products utilizing the Company’s RheoSwitch® gene switch, or RTS to express IL-12, or the IL-12 Products, for the treatment of cancer, (ii) chimeric antigen receptor, or CAR, products including CD19 and BCMA, or (iii) products utilizing an additional construct that expresses RTS IL-12, or Gorilla IL-12 Products, for the treatment of cancer and in the HPV Field. In addition, the Company may research, develop and commercialize products for the treatment of cancer, outside of the products exclusively licensed to Alaunos. Alaunos will provide the Company with certain access to information and materials related to Alaunos’s prior use of the Company’s technologies that is no longer within the scope of the License Agreement.
In consideration of the licenses and other rights granted by the Company, Alaunos will pay the Company an annual license fee of $0.1 million. Neither Alaunos nor the Company will have any other obligations with respect to the payment of milestones or royalties on products developed in connection with the License Agreement.
The Company has agreed that, during the term of the License Agreement, it will not use the licensed intellectual property to research, develop or commercialize any exclusive product for the treatment of cancer. The License Agreement will terminate on a product-by-product and/or country-by-country basis upon the expiration of the last to expire patent claim for a licensed product. In addition, Alaunos may terminate the License Agreement on a country-by-country or program-by-program basis following written notice to the Company, and either party may terminate the License Agreement following notice of a material breach. The License Agreement also contains customary representations, warranties and covenants from Alaunos and the Company, as well as customary provisions related to indemnity, confidentiality and other matters.
Deferred Revenue
Deferred revenue primarily consists of upfront and milestone consideration received for the Company's collaboration and licensing agreements. Revenue is recognized as services are performed. The arrangements classified as long-term are not active while the respective counterparties evaluate the status of the project and its desired future development activities since the Company cannot reasonably estimate the amount of service to be performed over the next year.
As of June 30, 2023 and December 31, 2022, the Company had long-term deferred revenue for collaboration and licensing arrangements of $1,818, and deferred revenue classified as current related to prepaid products and services of $15 and $25, respectively.



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5. Short-term and Long-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 June 30, 2023:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Aggregate
Fair Value
U.S. government debt securities$73,047 $15 $(276)$72,786 
U.S. agency securities991 8 (13)986 
Certificates of deposit5,247  (4)5,243 
Total$79,285 $23 $(293)$79,015 
The following table summarizes the amortized cost, gross unrealized gains and losses, and fair value of available-for-sale investments as of December 31, 2022:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Aggregate
Fair Value
U.S. government debt securities$51,755 $ $(760)$50,995 
Certificates of deposit97   97 
Total$51,852 $ $(760)$51,092 
The estimated fair value of available-for-sale investments classified by their contractual maturities as of June 30, 2023 was:
Due within one year$71,888 
After one year through two years7,127 
Total$79,015 
Changes in market interest rates and bond yields cause certain investments to fall below their cost basis, resulting in unrealized losses on investments. We do not intend to sell these investments nor is it more likely than not that the Company will be required to sell these investments, prior to maturity or recovery of amortized cost.
6. Fair Value Measurements
The carrying amount of cash and cash equivalents, receivables, accounts payable, accrued compensation and benefits, other accrued liabilities, and related party payables approximate fair value due to the short maturity of these instruments.
Assets
The following table presents the placement in the fair value hierarchy of financial assets that are measured at fair value on a recurring basis as of June 30, 2023:
Quoted Prices in Active Markets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
June 30,
2023
Assets
U.S. government debt securities$ $72,786 $ $72,786 
U.S. agency securities986 986 
Certificates of deposit 5,243  5,243 
Total$ $79,015 $ $79,015 
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The following table presents the placement in the fair value hierarchy of financial assets that are measured at fair value on a recurring basis as of December 31, 2022:
Quoted Prices in Active Markets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
December 31,
2022
Assets
U.S. government debt securities$ $50,995 $ $50,995 
Certificates of deposit 97  97 
Total$ $51,092 $ $51,092 
The method used to estimate the fair value of the Level 2 short-term and long-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 calculated fair value of the Convertible Notes (Note 9) was approximately $43,000 as of December 31, 2022, and was 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 $43,219 as of December 31, 2022.

See Note 8 for discussion of non-recurring fair value estimates used in calculating an impairment charge recorded during the six months ended June 30, 2022.
7. Property, Plant and Equipment, Net
Property, plant and equipment consist of the following:
June 30,
2023
December 31,
2022
Land and land improvements$164 $164 
Buildings and building improvements2,629 2,592 
Furniture and fixtures508 457 
Equipment18,541 18,006 
Leasehold improvements4,324 4,333 
Breeding stock138 123 
Computer hardware and software4,638 4,562 
Construction and other assets in progress106 531 
31,048 30,768 
Less: Accumulated depreciation and amortization(24,474)(23,439)
Property, plant and equipment, net$6,574 $7,329 
Depreciation expense was $475 and $616 for the three months ended June 30, 2023 and 2022, respectively, and $981 and $1,269 for the six months ended June 30, 2023 and 2022, respectively.
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8. Goodwill and Intangible Assets, Net
The changes in the carrying amount of goodwill for the six months ended June 30, 2023 were as follows:
Balance at December 31, 2022$36,923 
Foreign currency translation adjustments43 
Balance at June 30, 2023$36,966 
The Company had $14,483 of cumulative impairment losses as of both June 30, 2023 and December 31, 2022.
Intangible assets consist of the following as of June 30, 2023:
Gross Carrying AmountAccumulated AmortizationNet
Patents, developed technologies and know-how$81,598 $(38,942)$42,656 
Customer relationships1,600 (1,600) 
Trademarks200 (200) 
Total$83,398 $(40,742)$42,656 
Intangible assets consist of the following as of December 31, 2022:
Gross Carrying AmountAccumulated AmortizationNet
Patents, developed technologies and know-how$80,892 $(36,437)$44,455 
Customer relationships1,600 (1,600) 
Trademarks200 (200) 
Total$82,692 $(38,237)$44,455 
Amortization expense was $1,218 and $1,219 for the three months ended June 30, 2023 and 2022, respectively, and $2,423 and $2,484 for the six months ended June 30, 2023 and 2022, respectively.
9. Lines of Credit and Short-Term Debt
Lines of Credit
Exemplar has a $2,500 revolving line of credit that matures on October 31, 2023. As of June 30, 2023, the line of credit bears interest at a stated rate of 7.00% per annum. As of June 30, 2023 and December 31, 2022, there was no outstanding balance on the line of credit.
Short-Term Debt
As of December 31, 2022, $43,219 of short-term debt consisted solely of the Company's Convertible Notes.
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 between Precigen and The Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented by the First Supplemental Indenture.
The Convertible Notes were senior unsecured obligations of Precigen and bore 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 matured on
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July 1, 2023, although certain notes were repurchased prior to maturity beginning in third quarter of 2022 (as discussed further below). On June 30, 2023, the Company re-purchased all remaining outstanding Convertible Notes at par plus accrued interest.
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 described in Note 2, the Company adopted ASU 2020-06 on January 1, 2022. Pursuant to ASU 2020-06, the equity components of the Convertible Notes separated from the debt components as required under the cash conversion model is required to be recombined into the Convertible Notes as a single instrument upon the adoption of ASU 2020-06. The Convertible Notes shall be accounted for as if the conversion option had not been separated. As the Company elected the modified retrospective approach, the difference between the accounting under the cash conversion model and new model after the adoption of ASU 2020-06 (i.e., the single debt instrument with no separation) was recorded as an adjustment on the adoption date (i.e., January 1, 2022) through accumulated deficit. Tax accounting consequences of the adoption also required the reversal of the previously reported deferred tax benefit on the date of adoption.

As discussed in Note 3, in connection with the sale of Trans Ova in 2022, the Company transferred a total of $200,000 into a segregated account to be used for certain permitted purposes, including resolution of the Company's outstanding Convertible Notes. During the year December 31, 2022 and subsequently, the Company executed open market purchases of a portion of the outstanding Convertible Notes. During the six months ended June 30, 2023, the Company retired, through open market purchases and payment upon maturity, $43,340 of principal balance and recorded a gain on extinguishment of debt of approximately $61, which was recorded within Other income (expense), net, within the condensed consolidated statements of operations. The Company had previously retired $156,660 of principal balance from purchases during the year ended December 31, 2022. As of June 30, 2023, no restricted cash remained in the segregated account noted above, as all of the Company's outstanding Convertible Notes had been retired.
The components of interest expense related to the Convertible Notes were as follows:
 Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
 2023202220232022
Cash interest expense$108 $1,750 $397 $3,500 
Non-cash interest expense26 312 60 596 
Total interest expense$134 $2,062 $457 $4,096 
10. Income Taxes
For the three and six months ended June 30, 2023, the Company calculated its tax benefit using the estimated annual effective tax rate method. The rate is the ratio of estimated annual income tax expense related to estimated pretax loss from continuing operations, excluding significant unusual or infrequently occurring items. As a result of the pretax losses anticipated for the full year which are not benefited, this rate has been calculated and applied to the year-to-date interim period’s ordinary income or loss on a jurisdiction by jurisdiction basis to determine the income tax expense/benefit allocated to the year-to-date period. The annual effective tax rate is revised, if necessary, at the end of each interim period based on the Company’s most current best estimate. The Company recorded $65 and $120 of income tax benefit from continuing operations for the three and six months ended June 30, 2023, respectively. The effective tax rate differs from the U.S. statutory tax rate, primarily as a result of the change in valuation allowance required.

For the three and six months ended June 30, 2022, the Company calculated its tax benefit using an estimate of actual taxable income or loss for the period, rather than estimating the Company's annual effective income tax rate, as the Company was unable to reliably estimate its income for the full year. The Company recorded $89 and $147 of income tax benefit from continuing operations for the three and six months ended June 30, 2022, respectively. The effective tax rate differs from the U.S. statutory tax rate, primarily as a result of the change in valuation allowance required.
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The Company's net deferred tax assets 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 tax attributes and other net deferred tax assets. A portion of the Company’s tax attributes are subject to annual limitations under Section 382 of the Internal Revenue Code. 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.
11. Shareholders' Equity
Issuances of Precigen Common Stock
In January 2023, the Company closed a public offering of 43,962,640 shares of its common stock, resulting in net proceeds of $72,808, after deducting underwriting discounts, fees, and other offering expenses. Of the 43,962,640 shares, 11,517,712 shares were purchased by related parties and their affiliates, including the Company's Chief Executive Officer, its Chairman of the Board of Directors and his affiliates, and certain other of the Company's officers.
We completed the offering of shares of common stock, utilizing a number of underwriters, with J.P. Morgan Securities LLC acting as representative of the underwriters. The services provided by JP Morgan Securities LLC were in the ordinary course of their role as lead underwriter, for which they received customary fees and commissions.
Share Lending Agreement
Concurrently with the offering of the Convertible Notes (Note 9), 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.
At-the-Market Sales Agreement
On August 9, 2022, the Company entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (the “Agent”), pursuant to which the Company may issue and sell from time to time shares of the Company’s common stock, no par value per share (the “Shares”), through the Agent. The offering and sale of up to $100,000 of the Shares has been registered under the Securities Act of 1933. The Company has no obligation to sell any of the Shares under the Sales Agreement, and may at any time suspend or terminate the offering of its common stock pursuant to the Sales Agreement upon notice and subject to other conditions. The Company intends to use the proceeds of any sales to fund the development of clinical and preclinical product candidates and for working capital and other general corporate purposes.
No shares were sold in connection with the Sales Agreement during the six months ended June 30, 2023 nor for the year ended December 31, 2022.
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Components of Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are as follows:
June 30,
2023
December 31,
2022
Unrealized loss on investments$(270)$(760)
Loss on foreign currency translation adjustments(2,248)(2,728)
Total accumulated other comprehensive loss$(2,518)$(3,488)
12. 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 
 June 30,
Six Months Ended 
 June 30,
2023202220232022
Cost of products and services$17 $30 $35 $63 
Research and development582 589 1,087 1,134 
Selling, general and administrative1,589 1,660 4,198 4,606 
Discontinued operations 30  68 
Total$2,188 $2,309 $5,320 $5,871 
Precigen Equity Incentive Plans
In August 2013, Precigen adopted the 2013 Omnibus Incentive Plan ("the 2013 Plan"), for employees and nonemployees pursuant to which Precigen's board of directors may grant share-based awards, including stock options, restricted stock units, shares of common stock and other awards, to employees, officers, consultants, advisors, and nonemployee directors. Upon the effectiveness of the 2023 Omnibus Incentive Plan in June 30, 2023, as discussed in the next paragraph, (the "2023 Plan"), no new awards may be granted under the 2013 Plan and any awards granted under the 2013 Plan prior to the effectiveness of the 2023 Plan will remain outstanding under such plan and will continue to vest and/or become exercisable in accordance with their original terms and conditions. As of June 30, 2023, there were 19,167,088 stock options and 862,356 RSUs outstanding under the 2013 Plan.
In April 2023, Precigen adopted the 2023 Plan, which became effective upon shareholder approval in June 2023. The 2023 Plan permits the grant of share-based awards, including stock options, restricted stock awards, and RSUs and other awards, to officers, employees and nonemployees. The 2023 Plan authorizes for issuance pursuant to awards under the 2023 Plan an aggregate of 16,418,137 shares (which is comprised of 12,500,000 shares, plus 3,918,137 shares remaining available for issuance under the 2013 Plan as of the adoption of the 2023 Plan). As of June 30, 2023, no awards were granted under the plan.
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 June 30, 2023, there were 12,000,000 shares authorized for issuance under the 2019 Plan, of which 3,158,007 stock options and 1,014,952 RSUs were outstanding and 4,502,466 shares were available for grant.


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Stock option activity was as follows:
Number of SharesWeighted Average Exercise PriceWeighted Average Remaining Contractual Term (Years)
Balances at December 31, 202215,201,276 $10.41 6.87
Granted7,507,869 1.19 
Exercised  
Forfeited(220,625)2.74 
Expired(163,425)17.74 
Balances at June 30, 202322,325,095 7.33 7.54
Exercisable at June 30, 202311,759,874 11.22 6.14
RSU activity was as follows:
Number of Restricted Stock UnitsWeighted Average Grant Date Fair ValueWeighted Average Remaining Contractual Term (Years)
Balances at December 31, 2022697,815 $2.66 0.13
Granted4,083,777 1.01 
Vested(2,904,284)1.37 
Forfeited  
Balances at June 30, 20231,877,308 1.07 0.43
Precigen currently uses authorized and unissued shares to satisfy share award exercises.
13. 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 seven 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 
 June 30,
Six Months Ended 
 June 30,
2023202220232022
Operating lease costs$617 $613 $1,232 $1,240 
Short-term lease costs10 49 30 102 
Variable lease costs86 121 206 224 
Lease costs$713 $783 $1,468 $1,566 
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As of June 30, 2023, maturities of lease liabilities, excluding short-term and variable leases, for continuing operations were as follows:
2023$1,222 
20242,029 
20251,903 
20261,503 
20271,238 
20281,260 
Thereafter1,847 
Total11,002 
Present value adjustment(3,036)
Total$7,966 
Current portion of operating lease liabilities$1,421 
Long-term portion of operating lease liabilities6,545 
Total$7,966 
Other information related to operating leases in continuing operations was as follows:
June 30,
2023
December 31,
2022
Weighted average remaining lease term (years)5.616.09
Weighted average discount rate11.08 %11.05 %
Six Months Ended 
 June 30,
20232022
Supplemental disclosure of cash flow information
Cash paid for operating lease liabilities$1,022 $1,264 
Operating lease right-of-use assets obtained in exchange for new lease liabilities (includes new leases or modifications of existing leases)373 65 
14. Commitments and Contingencies
Contingencies

In October 2020, several shareholder class action lawsuits were filed in the United States 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 and former officers. The plaintiffs' claims challenged disclosures about the MBP program from May 10, 2017 to March 1, 2019. In March 2021, the Court granted an order consolidating the claims and, in April 2021, appointed a lead plaintiff and lead counsel in the case, captioned In re Precigen Securities Litigation, Case No. 5:20-cv-06936-BLF (N.D. Cal.). On May 18, 2021, the lead plaintiff filed an Amended Class Action Complaint. On August 2, 2021, the defendants moved to dismiss the Amended Class Action Complaint. On September 27, 2021, the lead plaintiff filed a Second Amended Class Action Complaint in lieu of a response to the defendants’ motion to dismiss. On November 3, 2021, the defendants moved to dismiss the Second Amended Class Action Complaint and on May 31, 2022, the Court granted the defendants’ motion to dismiss the Second Amended Class Action Complaint with leave to amend. On August 1, 2022, the lead plaintiff filed a Third Amended Class Action Complaint.

On August 2, 2022, the Court granted the parties' request to conduct a private mediation session to explore potential resolution of the action. On November 17, 2022, at the conclusion of the mediation session, the parties executed a memorandum of understanding that agreed in principle to resolve the claims asserted in the securities class action. The settlement provides for a payment to the plaintiff class of $13,000. On July 7, 2023, the Court granted preliminary approval of the settlement and scheduled a final approval hearing for October 2023. Should the Court not approve the proposed settlement or if the proposed settlement otherwise does not become final, the parties will be returned to their litigation postures prior to the agreement in
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principle to settle. In the event that the litigation resumes, the defendants intend to move to dismiss the plaintiff’s Third Amended Class Action Complaint. As of both June 30, 2023 and December 31,2022, the Company recorded an accrual of $13,000 in Settlement and Indemnification accruals on the condensed consolidated balance sheets for this matter. In addition, the Company separately recognized an insurance receivable asset of $12,545 and $12,411 within Receivables, other, on the condensed consolidated balance sheets as of June 30, 2023 and December 31,2022, respectively.

In December 2020, a derivative shareholder action, captioned Edward D. Wright, derivatively on behalf of Precigen, Inc. F/K/A Intrexon Corp. v. Alvarez et al, was filed in the Circuit Court for Fairfax County in Virginia on behalf of Precigen, Inc. asserting similar claims under state law against Precigen's current directors and certain officers. The plaintiff seeks damages, forfeiture of benefits received by defendants, and an award of reasonable attorneys' fees and costs. The case was stayed by an order entered on June 14, 2021. On September 24, 2021, an individual shareholder filed a lawsuit in the Circuit Court for Henrico County styled Kent v. Precigen, Inc., Case CL21-6349. The Kent action demands inspection of certain books and records of the Company pursuant to Virginia statutory and common law. On April 1, 2022, the Court denied the demurrer and referred the matter to a hearing on the merits. The Company intends to defend the lawsuits vigorously; however, there can be no assurances regarding the ultimate outcome of these lawsuits.
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 June 30, 2023, 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.
15. Segments
The Company's CODM assesses the operating performance of and allocates resources for several operating segments using Segment Adjusted EBITDA as a basis. 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 income (loss) before (i) interest expense, (ii) income tax expense or benefit, (iii) depreciation and amortization, (iv) stock-based compensation expense, (v) loss on settlement agreements where noncash consideration is paid, (vi) adjustments for accrued bonuses paid in equity awards, (vii) gain or loss on disposals of assets, (viii) loss on impairment of goodwill and other noncurrent assets, (ix) equity in net loss of affiliates, and (x) recognition of previously deferred revenue associated with upfront and milestone payments as well as cash outflows from capital expenditures and investments in affiliates, but includes proceeds from the sale of assets in the period sold.
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. 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 amounts related to the operations of Trans Ova which are reported as discontinued operations (Note 3).
For the three and six months ended June 30, 2023, the Company's reportable segments were (i) Biopharmaceuticals and (ii) Exemplar. These identified reportable segments met the quantitative thresholds to be reported separately for the six months ended June 30, 2023. See Note 2 for a description of Biopharmaceuticals. See Note 1 for a description of Exemplar.
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Segment Adjusted EBITDA by reportable segment was as follows:
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
2023202220232022
Biopharmaceuticals
$(17,880)$(19,997)$(39,277)$(40,874)
Exemplar(83)795 38 4,353 
Segment Adjusted EBITDA for reportable segments$(17,963)$(19,202)$(39,239)$(36,521)

The table below reconciles Segment Adjusted EBITDA for reportable segments to consolidated net loss from continuing operations before income taxes:
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
2023202220232022
Segment Adjusted EBITDA for reportable segments$(17,963)$(19,202)$(39,239)$(36,521)
All Other Segment Adjusted EBITDA    
Remove cash paid for capital expenditures, net of proceeds from sale of assets, and cash paid for investments in affiliates101 172 255 668 
Interest Income828 37 1,461 75 
Other expenses:
Interest expense(136)(2,063)(460)(4,101)
Depreciation and amortization(1,693)(1,835)(3,404)(3,753)
Gain (loss) on disposals of assets40  40  
Impairment losses (638) (1,120)
Stock-based compensation expense(2,188)(2,279)(5,320)(5,803)
Adjustment related to accrued bonuses paid in equity awards  3,361 1,698 
Equity in net loss of affiliates   (1)
Other (105) (105)
Shares issue for payment of services  (545)(576)
Corporate noncash items627 (203)678 (468)
Eliminations (32) (97)
Consolidated net loss from continuing operations before income taxes$(20,384)$(26,148)$(43,173)$(50,104)
Revenues by reportable segment were as follows:
Three Months Ended June 30, 2023
Biopharmaceuticals
Exemplar