Precigen(PGEN) - 2023 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's analysis for Precigen, Inc Item 1. Condensed Consolidated Financial Statements This section presents Precigen, Inc.'s unaudited condensed consolidated financial statements and detailed notes for Q3 2023 and 2022 Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position at specific points in time Condensed Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | Change (2023 vs 2022) | % Change | | :-------------------------------- | :----------- | :----------- | :-------------------- | :------- | | Cash and cash equivalents | $10,076 | $4,858 | $5,218 | 107.4% | | Restricted cash | — | $43,339 | $(43,339) | -100.0% | | Short-term investments | $63,679 | $51,092 | $12,587 | 24.6% | | Total current assets | $92,988 | $118,159 | $(25,171) | -21.3% | | Total assets | $190,688 | $215,977 | $(25,289) | -11.7% | | Total current liabilities | $32,875 | $78,645 | $(45,770) | -58.2% | | Total liabilities | $43,010 | $89,718 | $(46,708) | -52.1% | | Total shareholders' equity | $147,678 | $126,259 | $21,419 | 17.0% | Condensed Consolidated Statements of Operations This section details the company's revenues, expenses, and net income or loss over specific periods Condensed Consolidated Statements of Operations Highlights (Amounts in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenues | $1,379 | $16,722 | $4,997 | $25,146 | | Total operating expenses | $22,316 | $24,336 | $70,531 | $79,075 | | Operating loss | $(20,937) | $(7,614) | $(65,534) | $(53,929) | | Net (loss) income | $(19,795) | $87,379 | $(62,848) | $50,493 | | Net (loss) income per share, basic and diluted | $(0.08) | $0.44 | $(0.26) | $0.25 | - Total revenues for the three months ended September 30, 2023, decreased by 91.8% to $1,379 thousand from $16,722 thousand in the prior year, primarily due to a 100% decrease in collaboration and licensing revenues. For the nine months ended September 30, 2023, total revenues decreased by 80.1% to $4,997 thousand from $25,146 thousand[23][170][184] - The company reported a net loss of $(19,795) thousand for the three months ended September 30, 2023, compared to a net income of $87,379 thousand in the same period last year, largely influenced by the absence of income from discontinued operations in 2023. For the nine months, the net loss was $(62,848) thousand, a significant change from the $50,493 thousand net income in 2022[23][170][184] Condensed Consolidated Statements of Comprehensive Loss This section presents the net loss and other comprehensive income or loss components for the reporting periods Condensed Consolidated Statements of Comprehensive Loss Highlights (Amounts in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net (loss) income | $(19,795) | $87,379 | $(62,848) | $50,493 | | Unrealized gain (loss) on investments | $123 | $99 | $614 | $(905) | | Loss on foreign currency translation adjustments | $(1,166) | $(2,724) | $(687) | $(6,479) | | Comprehensive (loss) income | $(20,838) | $84,754 | $(62,921) | $43,109 | Condensed Consolidated Statements of Shareholders' Equity This section outlines changes in the company's equity, including common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Shareholders' Equity Highlights (Amounts in thousands, except share data) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Common stock shares outstanding | 256,398,527 | 208,150,021 | | Additional paid-in capital | $2,082,654 | $1,998,314 | | Accumulated deficit | $(1,931,415) | $(1,868,567) | | Total shareholders' equity | $147,678 | $126,259 | - Total shareholders' equity increased by $21,419 thousand from December 31, 2022, to September 30, 2023, primarily driven by $72,808 thousand in net proceeds from a public offering of common stock in January 2023, partially offset by a net loss of $(62,848) thousand[20][32][98] Condensed Consolidated Statements of Cash Flows This section reports the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (Nine Months Ended September 30, Amounts in thousands) | Cash Flow Activity | 2023 | 2022 | | :----------------- | :---------- | :---------- | | Operating activities | $(51,164) | $(49,649) | | Investing activities | $(16,380) | $214,996 | | Financing activities | $29,589 | $(116,010) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(38,261) | $48,533 | | Cash, cash equivalents, and restricted cash, End of period | $10,335 | $91,876 | - Net cash used in operating activities increased slightly to $(51,164) thousand in 2023 from $(49,649) thousand in 2022. Net cash used in investing activities was $(16,380) thousand in 2023, a significant change from $214,996 thousand provided in 2022, primarily due to the absence of proceeds from the sale of discontinued operations (Trans Ova) in 2023. Net cash provided by financing activities was $29,589 thousand in 2023, compared to $(116,010) thousand used in 2022, driven by proceeds from a public offering and the retirement of Convertible Notes[199][202][203][204][205][206] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Organization This note describes Precigen's business, strategic focus on gene and cell therapies, and its key subsidiaries - Precigen, Inc. is a discovery and clinical-stage biopharmaceutical company focused on gene and cell therapies for immuno-oncology, autoimmune disorders, and infectious diseases, leveraging proprietary technology platforms like UltraCAR-T, AdenoVerse immunotherapy, and ActoBiotics[39] - The company operates through two wholly-owned subsidiaries: Precigen ActoBio, Inc. (ActoBio) in Belgium, pioneering microbe-based biopharmaceuticals, and Exemplar Genetics, LLC (Exemplar) in Iowa, developing Yucatan MiniSwine preclinical research models and services[40][41] 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and estimates used in preparing the financial statements - The company's financial statements are prepared on a going concern basis, but management expects continued operating losses and negative cash flows, requiring additional capital to fund operations and achieve profitability[44] - Research and development expenses are recognized as incurred, including salaries, technology rights, contract research, materials, and facility costs[46] - The company adopted ASU 2020-06 on January 1, 2022, which resulted in an $18,196 thousand increase in long-term debt, a $36,868 thousand decrease in additional paid-in capital, and an $18,672 thousand reduction in accumulated deficit[57][58] 3. Discontinued Operations This note details the financial impact and sale of the Trans Ova subsidiary, classified as discontinued operations - In August 2022, Precigen completed the sale of its wholly-owned subsidiary, Trans Ova, for $170,000 thousand, with potential earn-out payments. The company received $162,306 thousand in net proceeds[60] - As of September 30, 2023, and December 31, 2022, settlement and indemnification accruals related to the Trans Ova sale were $5,075 thousand and $5,750 thousand, respectively[62] Financial Results of Discontinued Operations (Trans Ova) (Amounts in thousands) | Metric | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | | :-------------------------- | :------------------------------ | :----------------------------- | | Total revenues | $12,202 | $71,151 | | Total operating expenses | $12,200 | $58,898 | | Operating income | $2 | $12,253 | | Gain on divesture | $94,702 | $94,702 | | Income from discontinued operations | $95,023 | $108,094 | 4. Collaboration and Licensing Revenue This note explains the recognition of collaboration and licensing revenues, including changes in agreements - In September 2022, the company recognized $14,561 thousand in revenue from Intrexon Energy Partners and Intrexon Energy Partners II after gaining control and determining no further performance obligations. No such revenue was recognized in 2023[69][70] - An amended license agreement with Alaunos Therapeutics in April 2023 grants Alaunos exclusive, royalty-free licenses for T-cell receptor products for cancer and HPV fields, in exchange for an annual license fee of $0.1 million, with no further milestone or royalty obligations[71][72][74] Deferred Revenue (Amounts in thousands) | Type of Deferred Revenue | Sep 30, 2023 | Dec 31, 2022 | | :----------------------- | :----------- | :----------- | | Current portion | $509 | $25 | | Long-term portion | $1,818 | $1,818 | 5. Short-term and Long-term Investments This note details the company's available-for-sale investments, including their fair values and maturities Available-for-Sale Investments (Amounts in thousands) | Investment Type | Sep 30, 2023 Fair Value | Dec 31, 2022 Fair Value | | :---------------------- | :---------------------- | :---------------------- | | U.S. government debt securities | $61,280 | $50,995 | | U.S. agency securities | $992 | — | | Certificates of deposit | $6,678 | $97 | | Total | $68,950 | $51,092 | Available-for-Sale Investments by Maturity (Sep 30, 2023, Amounts in thousands) | Maturity Period | Fair Value | | :-------------------- | :--------- | | Due within one year | $63,679 | | After one year through two years | $5,271 | | Total | $68,950 | 6. Fair Value Measurements This note describes the fair value hierarchy and measurement techniques used for financial instruments - The company uses a three-tier fair value hierarchy (Level 1, 2, 3) for financial instruments. As of September 30, 2023, all available-for-sale investments (U.S. government debt, agency securities, and certificates of deposit) totaling $68,950 thousand were classified as Level 2, based on professional pricing sources[51][52][81] - The fair value of Convertible Notes was approximately $43,000 thousand as of December 31, 2022, classified as Level 2, based on third-party trades[82] 7. Property, Plant and Equipment, Net This note provides details on the company's property, plant, and equipment, including depreciation expenses Property, Plant and Equipment, Net (Amounts in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Total gross PP&E | $30,776 | $30,768 | | Accumulated depreciation and amortization | $(23,661) | $(23,439) | | Property, plant and equipment, net | $7,115 | $7,329 | - Depreciation expense was $434 thousand for the three months ended September 30, 2023 (down from $564 thousand in 2022) and $1,415 thousand for the nine months ended September 30, 2023 (down from $1,833 thousand in 2022)[84] 8. Goodwill and Intangible Assets, Net This note presents information on goodwill and other intangible assets, including amortization and impairment Goodwill and Intangible Assets, Net (Amounts in thousands) | Category | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Goodwill | $36,894 | $36,923 | | Patents, developed technologies and know-how, net | $40,426 | $44,455 | | Total Intangible Assets, net | $40,426 | $44,455 | - Goodwill decreased slightly due to foreign currency translation adjustments. The company recorded $482 thousand of goodwill impairment in Q1 2022. Amortization expense for intangible assets was $1,217 thousand for Q3 2023 and $3,639 thousand for the nine months ended September 30, 2023[85][88] 9. Lines of Credit and Short-Term Debt This note details the company's credit lines and the retirement of Convertible Notes, including related interest expenses - Exemplar's $2,500 thousand revolving line of credit matured on October 31, 2023, with no outstanding balance as of September 30, 2023. A new $5,000 thousand line of credit was entered into on October 20, 2023, maturing November 1, 2024, at 8.5% interest[89] - The company's Convertible Notes, with an aggregate principal amount of $200,000 thousand, were fully retired by June 30, 2023, through open market purchases and payment upon maturity. This resulted in a gain on extinguishment of debt of approximately $61 thousand during the nine months ended September 30, 2023[91][92][93] Interest Expense Related to Convertible Notes (Amounts in thousands) | Type of Interest Expense | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Cash interest expense | — | $1,697 | $397 | $5,197 | | Non-cash interest expense | — | $338 | $60 | $934 | | Total interest expense | — | $2,035 | $457 | $6,131 | 10. Income Taxes This note explains the company's income tax benefit and the factors influencing its effective tax rate - The company recorded an income tax benefit of $6 thousand for the three months and $126 thousand for the nine months ended September 30, 2023. The effective tax rate differs from the U.S. statutory rate primarily due to a valuation allowance offsetting net deferred tax assets, given the company's history of net losses[95][97] 11. Shareholders' Equity This note details changes in shareholders' equity, including public offerings and share lending agreements - In January 2023, Precigen completed a public offering of 43,962,640 shares of common stock, generating net proceeds of $72,808 thousand. Related parties, including the CEO and Chairman, purchased 11,517,712 shares[98] - A share lending agreement with J.P. Morgan Securities LLC, involving 7,479,431 shares, terminated on October 1, 2023, with shares returned to Precigen on October 5, 2023[100] Components of Accumulated Other Comprehensive Loss (Amounts in thousands) | Component | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Unrealized loss on investments | $(146) | $(760) | | Loss on foreign currency translation adjustments | $(3,415) | $(2,728) | | Total accumulated other comprehensive loss | $(3,561) | $(3,488) | 12. Share-Based Payments This note provides information on stock-based compensation expense and equity award activity Stock-Based Compensation Expense (Amounts in thousands) | Category | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Cost of products and services | $20 | $22 | $55 | $85 | | Research and development | $579 | $524 | $1,666 | $1,658 | | Selling, general and administrative | $1,707 | $1,638 | $5,905 | $6,244 | | Total | $2,306 | $2,125 | $7,626 | $7,996 | Stock Option and RSU Activity (Shares) | Metric | Stock Options (Sep 30, 2023) | RSUs (Sep 30, 2023) | | :-------------------------- | :--------------------------- | :------------------ | | Balances at Dec 31, 2022 | 15,201,276 | 697,815 | | Granted | 7,706,369 | 4,083,777 | | Exercised/Vested | — | (3,820,058) | | Forfeited | (244,000) | — | | Expired | (712,305) | — | | Balances at Sep 30, 2023 | 21,951,340 | 961,534 | 13. Operating Leases This note outlines the company's operating lease costs and the maturities of its lease liabilities Lease Costs (Amounts in thousands) | Lease Cost Type | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating lease costs | $621 | $600 | $1,853 | $1,840 | | Short-term lease costs | $11 | $53 | $41 | $155 | | Variable lease costs | $89 | $84 | $295 | $308 | | Total Lease costs | $721 | $737 | $2,189 | $2,303 | Maturities of Lease Liabilities (Sep 30, 2023, Amounts in thousands) | Year | Amount | | :--- | :----- | | 2023 | $465 | | 2024 | $2,011 | | 2025 | $1,886 | | 2026 | $1,494 | | 2027 | $1,238 | | 2028 | $1,260 | | Thereafter | $1,847 | | Total | $10,201 | 14. Commitments and Contingencies This note discloses the company's legal commitments and contingencies, including a shareholder class action lawsuit - A shareholder class action lawsuit was resolved with final court approval of a $13,000 thousand settlement on November 6, 2023. The company recorded an accrual of $13,000 thousand and a corresponding insurance receivable of $12,592 thousand as of September 30, 2023[116][117] - Other legal matters, including a derivative shareholder action and a lawsuit for inspection of books and records, are ongoing. The company does not believe these will have a material adverse effect on its financial condition[118][119] 15. Segments This note provides financial information by reportable segment, Biopharmaceuticals and Exemplar, and their performance metrics - The company's reportable segments are Biopharmaceuticals (Precigen and ActoBio) and Exemplar. Segment performance is assessed using Segment Adjusted EBITDA[122] Segment Adjusted EBITDA (Amounts in thousands) | Segment | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Biopharmaceuticals | $(17,068) | $(18,082) | $(56,345) | $(58,956) | | Exemplar | $(464) | $346 | $(426) | $4,699 | | Total | $(17,532) | $(17,736) | $(56,771) | $(54,257) | Revenues by Reportable Segment (Amounts in thousands) | Segment | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Biopharmaceuticals | $— | $14,624 | $— | $14,778 | | Exemplar | $1,379 | $2,098 | $4,997 | $10,368 | | Total | $1,379 | $16,722 | $4,997 | $25,146 | - For the three and nine months ended September 30, 2023, 78.7% and 78.2% of total consolidated revenue, respectively, was attributable to four customers in the Exemplar segment. In 2022, one customer accounted for 41.1% (Q3) and 62.4% (9M) of revenue[126] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Precigen's financial condition, operational results, strategic biopharmaceutical focus, liquidity, and future outlook Overview This overview introduces Precigen's biopharmaceutical focus, key clinical programs, and financial challenges - Precigen is a discovery and clinical-stage biopharmaceutical company focused on gene and cell therapies for immuno-oncology, autoimmune disorders, and infectious diseases, leveraging proprietary technology platforms like UltraCAR-T, AdenoVerse immunotherapy, and ActoBiotics[131][132] - Key clinical programs include PRGN-3005, PRGN-3006, PRGN-3007 (UltraCAR-T), PRGN-2009, PRGN-2012 (AdenoVerse), and AG019 (ActoBiotics). The UltraPorator device streamlines UltraCAR-T manufacturing[133][134][139][140][141][142][146] - The company has incurred significant losses since inception and expects continued losses, requiring additional capital. Revenues are primarily from the Exemplar segment, with a shift away from historical collaboration and licensing agreements[153][155] Sources of revenue This section discusses the company's current revenue streams, primarily from its Exemplar subsidiary - Current primary revenues are from the Exemplar subsidiary, which sells genetically engineered miniature swine models and services. The company expects collaboration revenues to decrease in the near term, with future revenues dependent on advancing and commercializing its own product candidates[155][157][158] Cost of products and services This section outlines the components of the cost of products and services, exclusively from the Exemplar segment - Cost of products and services, entirely related to the Exemplar segment, includes labor, drugs, supplies, feed, and facility charges. Fluctuations in livestock and feed prices have not significantly impacted operating margins[159] Research and development expenses This section details R&D expenses, their components, and allocation across Biopharmaceuticals and Exemplar segments - R&D expenses primarily cover personnel costs, consultant fees, laboratory supplies, technology rights, and facility expenses. The Biopharmaceuticals segment focuses on clinical programs (PRGN-3005, PRGN-3006, PRGN-3007, PRGN-2009, PRGN-2012, AG019), while Exemplar focuses on new pig research models[160] Research and Development Expenses by Segment (Amounts in thousands) | Segment | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Biopharmaceuticals | $11,517 | $12,536 | $35,411 | $36,133 | | Exemplar | $66 | $86 | $209 | $244 | | Total | $11,583 | $12,622 | $35,620 | $36,377 | - R&D expenses decreased by $1.0 million (8%) for the three months and $0.8 million (2.1%) for the nine months ended September 30, 2023, primarily due to continued reprioritization of clinical product candidates[173][187] Selling, general and administrative expenses This section describes SG&A expenses, including personnel, professional fees, and their recent fluctuations - SG&A expenses include salaries, benefits, stock-based compensation, rent, utilities, insurance, accounting, legal services, and intellectual property costs. These expenses may fluctuate based on corporate function scaling and legal claim outcomes[163][164] - SG&A expenses decreased by $0.9 million (9%) for the three months and $6.3 million (17.4%) for the nine months ended September 30, 2023, mainly due to reduced professional fees (legal) and lower salaries/benefits from reduced headcount[175][188] Other income (expense), net This section explains the components of other income and expense, including gains on debt retirement and interest income - Other income consists of gains on convertible debt retirement and interest earned on investments. Other expense primarily relates to interest on Convertible Notes, which decreased in 2023 due to their retirement[165][166] - Total other income, net, increased by $2.1 million for the three months and $7.3 million for the nine months ended September 30, 2023, driven by reduced interest expense from Convertible Notes retirement and increased interest income from higher rates on investments[176][189] Equity in net income or loss of affiliates This section defines the company's share of operating results from equity method investments - Equity in net income or loss of affiliates represents the company's pro-rata share of equity method investments' operating results, adjusted for basis difference accretion[167] Segment performance This section describes how segment performance is measured using Segment Adjusted EBITDA - Segment Adjusted EBITDA is the primary measure of segment performance, excluding non-cash revenues and expenses not reflective of underlying business performance[168] Results of operations This section analyzes the financial performance and key changes in revenues and expenses over the reporting periods Comparison of the three months ended September 30, 2023 and the three months ended September 30, 2022 This section compares the company's financial results for the three-month periods ended September 30, 2023 and 2022 Key Financial Changes (Three Months Ended September 30, Amounts in thousands) | Metric | 2023 | 2022 | Dollar Change | Percent Change | | :-------------------------------- | :---------- | :---------- | :------------ | :------------- | | Collaboration and licensing revenues | $— | $14,561 | $(14,561) | -100.0% | | Product and service revenues | $1,378 | $2,092 | $(714) | -34.1% | | Total revenues | $1,379 | $16,722 | $(15,343) | -91.8% | | Research and development | $11,583 | $12,622 | $(1,039) | -8.2% | | Selling, general and administrative | $9,196 | $10,137 | $(941) | -9.3% | | Operating loss | $(20,937) | $(7,614) | $(13,323) | 175.0% | | Total other income (expense), net | $1,136 | $(942) | $2,078 | >200% | | Net (loss) income | $(19,795) | $87,379 | $(107,174) | -122.7% | - Biopharmaceuticals Segment Adjusted EBITDA increased by $1,014 thousand (5.6%) due to reduced SG&A and R&D expenses. Exemplar Segment Adjusted EBITDA decreased by $(810) thousand (over 200%) due to decreased revenues from lower demand[178][181][182] Comparison of the nine months ended September 30, 2023 and the nine months ended September 30, 2022 This section compares the company's financial results for the nine-month periods ended September 30, 2023 and 2022 Key Financial Changes (Nine Months Ended September 30, Amounts in thousands) | Metric | 2023 | 2022 | Dollar Change | Percent Change | | :-------------------------------- | :---------- | :---------- | :------------ | :------------- | | Collaboration and licensing revenues | $— | $14,561 | $(14,561) | -100.0% | | Product and service revenues | $4,991 | $10,351 | $(5,360) | -51.8% | | Total revenues | $4,997 | $25,146 | $(20,149) | -80.1% | | Research and development | $35,620 | $36,377 | $(757) | -2.1% | | Selling, general and administrative | $30,150 | $36,496 | $(6,346) | -17.4% | | Operating loss | $(65,534) | $(53,929) | $(11,605) | 21.5% | | Total other income (expense), net | $2,560 | $(4,730) | $7,290 | 154.1% | | Net (loss) income | $(62,848) | $50,493 | $(113,341) | <(200)% | - Biopharmaceuticals Segment Adjusted EBITDA increased by $2,611 thousand (4.4%) due to reduced SG&A expenses. Exemplar Segment Adjusted EBITDA decreased by $(5,125) thousand (109.1%) due to decreased revenues from lower customer demand and prior year revenue recognition[191][194][195] Liquidity and capital resources This section assesses the company's ability to meet its financial obligations and fund future operations - As of September 30, 2023, the company had an accumulated deficit of $1.9 billion, with cash and cash equivalents of $10.1 million and investments of $69.0 million. Operations have historically been funded by equity/debt offerings, collaborator cash, and product/service sales[196][197] - In January 2023, a public offering of common stock generated net proceeds of $72.8 million. The company believes existing liquid assets will fund operations for at least the next 12 months but will require additional capital for long-term funding[198][207] - Future capital requirements depend on R&D progress, regulatory approvals, strategic transactions, sales/royalties, collaborative arrangements, intellectual property costs, and potential M&A. Funding strategies include equity offerings, debt financings, and strategic alliances, which may dilute ownership or impose covenants[207][208][209] Contractual obligations and commitments This section details the company's contractual obligations, primarily operating leases and R&D commitments Contractual Obligations and Commitments (Sep 30, 2023, Amounts in thousands) | Obligation | Total | Less Than 1 Year | 1 - 3 Years | 3 - 5 Years | More Than 5 Years | | :------------------------ | :------- | :--------------- | :---------- | :---------- | :---------------- | | Operating leases | $10,201 | $1,973 | $3,575 | $2,491 | $2,162 | | Operating leases not yet commenced | $706 | $176 | $471 | $59 | $— | | Total | $10,907 | $2,149 | $4,046 | $2,550 | $2,162 | - As of September 30, 2023, the company also had $16.8 million in un-incurred research and development commitments with third parties, which are generally cancellable[211] Off-balance sheet arrangements This section confirms the absence of any off-balance sheet arrangements during the reporting periods - The company did not have any off-balance sheet arrangements during the periods presented[212] Critical accounting policies and estimates This section refers to the consistency of critical accounting policies with the prior annual report - There have been no material changes to the company's critical accounting policies from those described in its Annual Report on Form 10-K for the year ended December 31, 2022[214] Recent accounting pronouncements This section directs to Note 2 for details on recent accounting pronouncements and their impact - Information regarding recent accounting pronouncements and their impact is detailed in Note 2 to the Condensed Consolidated Financial Statements[215] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, focusing on interest rate risk for its cash and investment portfolio Interest rate risk This section assesses the potential impact of interest rate fluctuations on the company's financial instruments - As of September 30, 2023, the company held $79.0 million in cash, cash equivalents, and short-term/long-term investments, primarily in money market funds, certificates of deposit, and U.S. government debt/agency securities[217][218] - A hypothetical 100 basis point increase in interest rates is not expected to materially affect the fair value of its interest-sensitive financial instruments, with losses only realized if investments are sold prior to maturity[218] Item 4. Controls and Procedures This section evaluates the effectiveness of the company's disclosure controls and internal control over financial reporting Disclosure Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2023[219] Internal Control Over Financial Reporting This section confirms no material changes to the company's internal control over financial reporting - There have been no material changes in the company's internal control over financial reporting during the three months ended September 30, 2023[220] PART II - OTHER INFORMATION This part provides additional information on legal proceedings, risk factors, equity sales, and other disclosures Item 1. Legal Proceedings This section outlines the company's involvement in legal matters and ongoing litigation - The company is involved in various legal matters, but as of September 30, 2023, it does not believe any, individually or in aggregate, will have a material adverse effect on its business, financial condition, results of operations, or cash flows. Further details are in Note 14[223][224] Item 1A. Risk Factors This section refers to the company's risk factors as previously disclosed in its Annual Report - There are no additional material updates or changes to the company's risk factors since the filing of its Annual Report on Form 10-K[225] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms no unregistered sales of equity securities occurred during the reporting period - None[227] Item 3. Defaults on Senior Securities This section confirms no defaults on senior securities occurred during the reporting period - None[228] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company's operations - Not applicable[229] Item 5. Other Information This section confirms no other material information is required to be reported - None[230] Item 6. Exhibits This section lists the exhibits included in the Quarterly Report on Form 10-Q - Exhibits include certifications from the CEO and CFO (31.1, 31.2, 32.1, 32.2) and Interactive Data Files (101, 104) formatted in Inline XBRL[232] Signatures This section contains the official signatures for the Quarterly Report on Form 10-Q - The report was signed on November 9, 2023, by Harry Thomasian Jr., Chief Financial Officer (Principal Financial and Accounting Officer) of Precigen, Inc[236]