Discontinued Operations

6 Months Ended

Jun. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

Where applicable, the notes to the accompanying condensed consolidated financial statements have been updated to reflect information pertaining to the Company's continuing operations based on the discontinued operations summarized below.

Trans Ova

As part of the Company's strategic shift to becoming a primarily healthcare company, as discussed in Note 1, on July 1, 2022, the Company entered into a Purchase Agreement for the sale of 100% of the membership interests in its wholly-owned subsidiary, Trans Ova, to Spring Bidco LLC, a Delaware limited liability company (the “Buyer”), for $170,000 payable at the closing of the transaction (plus the cash balance of Trans Ova at the date of closing, less the debt balance of Trans Ova at the date of closing, and subject to a net working capital adjustment mechanism) and up to $10,000 in cash earn - out payments contingent upon the performance of Trans Ova in 2022 and 2023 (the “Transaction”). In connection with the Transaction, the Company will hold a total of $200,000, comprising the purchase price and additional funds provided by the Company, in a segregated account and will use such funds for certain permitted purposes, including resolution of the Company’s outstanding convertible bonds described in Note 11. The board of directors of the Company approved the sale in June 2022. In addition, the Company is required to indemnify the Buyer for certain expenses incurred post close, if incurred, in amounts not to exceed $5,750.

The Purchase Agreement contains representations and warranties, and covenants customary for a transaction of this nature. The consummation of the Transaction is subject to customary closing conditions, including (among others) the expiration or termination of any applicable waiting period under the HSR Act with respect to the Transaction, the absence of an injunction or order of any court of competent jurisdiction in the United States enjoining, prohibiting or rendering illegal the consummation of the Transaction, the absence of any material adverse effect on the business, assets, results of operations or condition of Trans Ova and its subsidiaries, the accuracy of the representations and warranties of each party (subject to materiality qualifiers) and the compliance by each party with its covenants in all material respects. The Transaction is currently expected to close in the third quarter of 2022.

The Purchase Agreement contains certain termination rights for the Company and Buyer, including, among other events, (1) if the Transaction has not been completed on or prior to July 1, 2023, (2) if the closing of the Transaction would violate any non-appealable, final injunction or order of any court of competent jurisdiction in the United States or (3) following a breach by the other party that would cause certain closing conditions not to be satisfied and is not or cannot be cured within 45 days’ notice of such breach. If the Purchase Agreement is terminated under certain circumstances relating to the failure of the expiration or termination of the applicable waiting period under the HSR Act to occur, Buyer is obligated pay a termination fee of $12,750 to the Company.

The carrying values of the major classes of assets and liabilities included in assets and liabilities held for sale related to Trans Ova as of June 30, 2022 and December 31, 2021, are as follows:


	June 30, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	5,667	$	6,497
Trade receivables, net	26,020		19,491
Inventory	12,262		12,935
Other current assets	624		1,265
Property, plant and equipment, net	25,507		25,716
Intangible assets, net	736		1,824
Goodwill	16,594		16,594
Right-of-use assets	1,321		910
Other noncurrent assets	182		252
Total assets held for sale	$	88,913	$	85,484
Liabilities
Accounts payable	$	1,332	$	2,293
Accrued compensation and benefits	3,632		3,367
Other accrued liabilities	3,764		3,778
Deferred revenue	2,080		2,952
Current portion of long-term debt	359		350
Other current liabilities	281		111
Long-term debt, net of current portion	2,633		2,867
Other long-term liabilities	982		805
Total liabilities held for sale	$	15,063	$	16,523

The following table presents the financial results of discontinued operations related to Trans Ova for the for the three and six months ended June 30, 2022 and 2021:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Product revenues	$	8,940	$	7,641	$	17,172	$	13,410
Service revenues	23,501		22,124		41,777		37,431
Total revenues	32,441		29,765		58,949		50,841
Cost of products	7,438		5,699		14,471		10,885
Cost of services	9,977		7,984		18,349		14,412
Research and development	908		497		1,867		881
Selling, general and administrative	6,124		5,043		12,011		9,479
Total operating expenses	24,447		19,223		46,698		35,657
Operating income	7,994		10,542		12,251		15,184
Other income, net	430		334		820		699


Income from discontinued operations	$	8,424	$	10,876	$	13,071	$	15,883

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 that are included in the accompanying condensed consolidated statements of cash flow:


	Six Months Ended June 30,
	2022		2021
Adjustments to reconcile net income to net cash used in operating activities
Depreciation and amortization	$	2,765	$	2,898


Loss on disposal of assets	360		242

Stock-based compensation expense	68		204

Provision for credit losses	735		645
Cash flows from investing activities
Purchases of property, plant and equipment	(2,629)		(1,625)
Proceeds from sale of assets	438		1,168

MBP Titan

As a result of market uncertainty driven by the COVID-19 pandemic and the state of the energy sector raising significant challenges for the strategic alternatives pursued by MBP Titan, beginning in the second quarter of 2020 and throughout the remainder of 2020, the Company suspended MBP Titan's operations, preserved certain of MBP Titan's intellectual property, terminated all of its personnel, and undertook steps to dispose of its other assets and obligations. The wind down of MBP Titan's activities was substantially completed by December 31, 2020, with the final disposition of certain property and equipment and the facility operating lease occurring in January 2021. This discontinuation of operations represented the continuation of a strategic shift to becoming a primarily healthcare company advancing technologies and products that address complex healthcare challenges that the Company commenced in 2020. The assets, liabilities, and expenses related to the discontinued operations of MBP Titan are reclassified and presented as discontinued operations in the accompanying condensed consolidated financial statements for all periods.

The January 2021 sale of property and equipment resulted in a gain on disposal of assets of $464, which is included in income from discontinued operations in the accompanying condensed consolidated statement of operations for the six months ended June 30, 2021. In January 2021, the Company executed termination and recapture agreements with the landlord of the leased facility used in MBP Titan's operations, thereby relieving the Company of all of its obligations related to the facility that were originally due to expire in July 2025. This lease termination resulted in a gain of $4,602, which is also included in income from

discontinued operations in the accompanying condensed consolidated statement of operations for the six months ended June 30, 2021.

After the wind down of MBP Titan, certain assets and contractual obligations which were previously managed by MBP Titan continue to be managed at the Precigen corporate level. These remaining assets and contractual obligations include the Company's equity interest in and collaboration agreements with Intrexon Energy Partners, LLC ("Intrexon Energy Partners"), and Intrexon Energy Partners II, LLC ("Intrexon Energy Partners II"), including the associated deferred revenue remaining under each collaboration agreement (Notes 4 and 5), as well as the associated intellectual property developed by MBP Titan to date. These assets, liabilities, and related historical revenue and equity losses are included in the Company's operating results from continuing operations in the accompanying condensed consolidated financial statements for all periods presented as a result of the Company's continuing involvement.

There were no discontinued operations related to MBP Titan for the three and six months ended June 30, 2022. The following table presents the financial results of discontinued operations related to MBP Titan for the three and six months ended June 30, 2021:


	Three Months Ended June 30,			Six Months Ended June 30,
		2021		2021

Operating gains		$	13	$	4,539
Operating income		13		4,539






Income from discontinued operations		$	13	$	4,539

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 MBP Titan for the six months ended June 30, 2021 that are included in the accompanying condensed consolidated statements of cash flows.


	Six Months Ended June 30,
		2021
Adjustments to reconcile net loss to net cash used in operating activities



Gain on disposals of assets		$	(464)





Noncash gain on termination of leases		(4,602)

Cash flows from investing activities


Proceeds from sales of assets		1,083