Discontinued Operations

9 Months Ended

Sep. 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 August 18, 2022, the Company completed the previously announced sale of 100% of the issued and outstanding membership interests in its wholly-owned subsidiary,Trans Ova, to Spring Bidco LLC, 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 2022 and 2023 (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 approximately $1,000 is expected to be received in the fourth quarter of 2022.

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, as of September 30, 2022, holds a total of $82,443, in a segregated account to be used for certain permitted purposes, including resolution of the Company’s outstanding convertible notes as discussed further in Note 11. 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, which was recorded as a reduction of the gain on divestiture in the three and nine months ended September 30, 2022, and is included in other accrued liabilities as of September 30, 2022. To date, the Company has not received an indemnification claim.

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 December 31, 2021, are as follows:


	December 31, 2021
Assets
Cash and cash equivalents	$	6,497
Trade receivables, net	19,491
Inventory	12,935
Other current assets	1,265
Property, plant and equipment, net	25,716
Intangible assets, net	1,824
Goodwill	16,594
Right-of-use assets	910
Other noncurrent assets	252
Total assets held for sale	$	85,484
Liabilities
Accounts payable	$	2,293
Accrued compensation and benefits	3,367
Other accrued liabilities	3,778
Deferred revenue	2,952
Current portion of long-term debt	350
Other current liabilities	111
Long-term debt, net of current portion	2,867
Other long-term liabilities	805
Total liabilities held for sale	$	16,523

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Product revenues	$	4,322	$	6,743	$	21,494	$	20,153
Service revenues	7,880		11,485		49,657		48,916
Total revenues	12,202		18,228		71,151		69,069
Cost of products	4,163		7,010		18,634		17,895
Cost of services	4,352		6,988		22,701		21,400
Research and development	481		486		2,348		1,367
Selling, general and administrative	3,204		7,683		15,215		17,162
Total operating expenses	12,200		22,167		58,898		57,824
Operating income (loss)	2		(3,939)		12,253		11,245
Other income, net	319		434		1,139		1,133
Gain on divestiture	94,702		—		94,702		—
Income (loss) before income taxes	95,023		(3,505)		108,094		12,378
Income tax (expense) benefit	—		—		—		—
Income (loss) from discontinued operations	$	95,023	$	(3,505)	$	108,094	$	12,378

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 flows:


	Nine Months Ended September 30,
	2022		2021
Adjustments to reconcile net income to net cash used in operating activities
Depreciation and amortization	$	3,574	$	4,268


Loss on disposal of assets	421		547

Stock-based compensation expense	9		272

Provision for credit losses	944		1,035
Cash flows from investing activities
Purchases of property, plant and equipment	(3,529)		(2,731)
Proceeds from sale of assets	594		1,425

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 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 nine months ended

September 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 nine months ended September 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 which was recognized as revenue in the third quarter of 2022 upon acquiring control of these entities (See Notes 2, 4, 5 and 16), 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 nine months ended September 30, 2022. The following table presents the financial results of discontinued operations related to MBP Titan for the three and nine months ended September 30, 2021:


	Three Months Ended September 30,			Nine Months Ended September 30,
		2021		2021

Operating gain		60		4,599
Operating gain		60		4,599






Gain from discontinued operations		$	60	$	4,599

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 nine months ended September 30, 2021 that are included in the accompanying condensed consolidated statements of cash flows.


	Nine Months Ended September 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