What changed in this filing

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Item 1. Financial Statements

2020-08-13 compared with 2020-05-15 · 118 added, 86 removed, 385 unchanged (35% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

March 31, 2020

June 30, 2020

December 31, 2019

23 unchanged sentences

Stockholders’ equity:

Preferred stock, $0.0001 par value— 10,000,000 shares authorized as of March 31, 2020 and December 31, 2019;

no shares issued and outstanding as of March 31, 2020 and December 31, 2019

Preferred stock, $0.0001 par value— 10,000,000 shares authorized as of June 30, 2020 and December 31, 2019;

no shares issued and outstanding as of June 30, 2020 and December 31, 2019

Common stock;

$0.000005 par value— 200,000,000 shares authorized as of March 31, 2020 and December 31, 2019;

52,253,327 shares issued and 51,442,855 shares outstanding as of March 31, 2020;

$0.000005 par value— 200,000,000 shares authorized as of June 30, 2020 and December 31, 2019;

52,978,901 shares issued and 52,168,429 shares outstanding as of June 30, 2020;

51,965,708 shares issued and 51,155,236 shares outstanding as of December 31, 2019

8 unchanged sentences

(In thousands, except share and per share amounts)

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Operating expenses

29 unchanged sentences

Balance- March 31, 2019

Conversion of convertible preferred stock into common stock upon initial public offering

Issuance of common stock upon conversion of convertible notes

Issuance of common stock in initial public offering, net of discounts and issuance costs

Stock option exercises

Share-based compensation

Balance- June 30, 2019

Balance- January 1, 2020

3 unchanged sentences

Balance- March 31, 2020

Stock option exercises

Share-based compensation expense

Balance- June 30, 2020

See notes to condensed consolidated financial statements

2 unchanged sentences

(In thousands)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash flows from operating activities:

2 unchanged sentences

Share-based compensation

Loss on disposal of assets

Non-cash interest expense

18 unchanged sentences

Issuance of convertible notes

Proceeds from IPO, net of underwriting discounts and commissions

Net cash provided by financing activities

3 unchanged sentences

Supplemental disclosures of noncash financing and investing activities:

Common stock issued on conversion of convertible notes

Property, equipment and software additions included in accounts payable,

accrued expenses and other current liabilities

Deferred offering costs included in accounts payable, accrued expenses

and other current liabilities

See notes to condensed consolidated financial statements

10 unchanged sentences

The Food segment focuses on applying ARCUS to develop food and nutrition products through collaboration agreements with consumer-facing companies.

The Company’s 100% owned subsidiary, Precision PlantSciences, Inc., was incorporated on January 4, 2012.

The Company’s wholly (100%) owned subsidiary, Precision PlantSciences, Inc., was incorporated on January 4, 2012.

Precision PlantSciences, Inc.

14 unchanged sentences

Subsequent to the closing of the IPO, there were no shares of Series A or Series B convertible preferred stock or convertible notes payable outstanding.

Management believes that existing cash and cash equivalents will allow the Company to continue its operations into the second half of 2021.

Management believes that existing cash, cash equivalents and available credit will allow the Company to continue its operations into 2022.

In the absence of a significant source of recurring revenue, the continued viability of the Company beyond that point is dependent on its ability to continue to raise additional capital to finance its operations.

There can be no assurance that the Company will be able to obtain sufficient capital to cover its costs on acceptable terms, if at all.

Unaudited Interim Financial Information

Unaudite d Interim Financial Information

The accompanying unaudited condensed consolidated financial statements and notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

3 unchanged sentences

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the Company’s consolidated financial position as of March 31, 2020 and consolidated results of operations for the three months ended March 31, 2020 and 2019 and the consolidated cash flows for the three months ended March 31, 2020 and 2019, have been made.

The Company’s consolidated results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2020.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the Company’s consolidated financial position as of June 30, 2020 and consolidated results of operations for the three and six months ended June 30, 2020 and 2019 and the consolidated cash flows for the six months ended June 30, 2020 and 2019, have been made.

The Company’s consolidated results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2020.

Summary of Significant Accounting Policies

26 unchanged sentences

and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company evaluates the performance obligations promised in the contract that are based on goods and services that will be transferred to the customer and determines whether t hose obligations are both (i) capable of being distinct and (ii) distinct in the context of the contract.

At contract inception, once the contr act is determined to be within the scope of ASC 606, the Company evaluates the performance obligations promised in the contract that are based on goods and services that will be transferred to the customer and determines whether those obligations are both (i) capable of being distinct and (ii) distinct in the context of the contract.

Goods or services that meet these criteria are considered distinct performance obligations.

If both these criteria are not met, the goods and services are combined into a single performance obligation.

If both these criteria are not met, the goods and services are combined into a singl e performance obligation.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Arrangements tha t include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options.

The Company assess es if these options provide a material right to the customer and if so, the se options are considered perfo rmance obligations.

The exercise of a material right is accounted for as a contract modification for accounting purposes.

Arrangements that include rights to additi onal goods or services that are exercisable at a customer’s discretion are generally considered options.

The Company assess es if these options provide a material right to the customer and if so, the se options are considered performance obligations.

The exe rcise of a material right is accounted for as a contract modification for accounting purposes.

The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time this is based on the use of an output or input method.

For the three months ended March 31, 2020, the Company reduced revenue recognition by $1.6 million for changes in total estimated time to be incurred in the future to satisfy the performance obligation.

For the six months ended June 30, 2020, the Company recorded cumulative catch up adjustments that reduced revenue recognition by $6.6 million, in addition to a contract liability adjustment, for changes in total estimated effort to be incurred in the future to satisfy the performance obligation.

Amounts received prior to revenue recognition are recorded as deferred revenue.

37 unchanged sentences

As a result of adopting ASC 606, the Company recorded a $1.0 million transition adjustment in the first quarter of 2019 to reduce the opening balance of accumulated deficit as of January 1, 2019 primarily as a result of the treatment of the up-front consideration received from the Company’s collaboration agreements under prior revenue recognition guidance.

During the three months ended March 31, 2020, the Company recognized $3.7 million in revenue that was included in the deferred revenue balance as of December 31, 2019.

During the six months ended June 30, 2020, the Company recognized $4.2 million in revenue that was included in the deferred revenue balance as of December 31, 2019.

The most significant change to the Company’s revenue recognition as a result of the adoption of ASC 606 relates to the accounting for certain option fees and milestone payments in determining the transaction price (step (iii)), and the revenue recognition pattern (step (v)) related to the Company’s development and commercial license agreement with Servier.

17 unchanged sentences

The adoption of the standard did not have an impact on the Company’s condensed consolidated financial statements.

STOCKHOLDE RS’ EQUITY

STOCKHOLDERS’ EQUITY

Capital Structure

6 unchanged sentences

The 2006 Plan expired in 2016 and there are no remaining shares available to be granted under the 2006 Plan.

There were 1,380,203 stock options outstanding under the 2006 Plan as of March 31, 2020.

There were 758,080 stock options outstanding under the 2006 Plan as of June 30, 2020.

Upon adoption of the 2015 Plan, there were 5,270,095 shares of common stock reserved for issuance.

In May 2018, the Company amended the 2015 Plan to increase the number of shares reserved for issuance to 8,211,980.

The 2015 Plan had 5,152,693 stock options outstanding as of March 31, 2020.

The 2015 Plan had 4,921,312 stock options outstanding as of June 30, 2020.

The Company’s board of directors determines the terms of stock options granted under the 2015 Plan, including option exercise prices and vesting.

6 unchanged sentences

Any shares that are subject to awards outstanding under the Company’s 2006 Plan and 2015 Plan as of the effective date of the 2019 Plan that expire, lapse, or are terminated, exchanged for cash, surrendered, repurchased, or canceled without having been fully exercised or forfeited, to the extent so unused, will become available for award grants under the 2019 Plan.

The 2019 Plan had 2,453,540 stock options outstanding as of March 31, 2020.

The 2019 Plan had 4,296,545 stock options outstanding as of June 30, 2020.

Up to 525,000 shares of the Company’s common stock were initially reserved for issuance under the 2019 ESPP.

7 unchanged sentences

The Company recorded employee and nonemployee share-based compensation expense as follows (in thousands):

Three Months Ended March 31,

S hare -based compensation expense related to stock options is included in the following line items in the condensed consolidated statements of operations (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

S hare -based compensation expense related to stock options is included in the following line items in the condensed consolidated statements of operations (in thous ands):

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

2 unchanged sentences

The fair value of each stock option grant is estimated using a Black-Scholes option-pricing model on the date of grant as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Estimated dividend yield

7 unchanged sentences

The risk-free rate is based on the United States Treasury yield curve during the expected life of the option.

The following table summarizes activity in the Company’s stock option plans for the three months ended March 31, 2020:

The following table summarizes activity in the Company’s stock option plans for the six months ended June 30, 2020:

Outstanding Option Shares

2 unchanged sentences

Forfeited/canceled

Balance as of March 31, 2020

The intrinsic value of stock options exercised was $2.1 million and $1.9 million during the three months ended March 31, 2020 and 2019, respectively.

There was approximately $28.9 million of total unrecognized compensation cost related to unvested stock options as of March 31, 2020, which is expected to be recognized over a weighted-average period of 2.8 years.

Balance as of June 30, 2020

The intrinsic value of stock options exercised was $6.7 million and $4.6 million during the six months ended June 30, 2020 and 2019, respectively.

There was approximately $33.6 million of total unrecognized compensation cost related to unvested stock options as of June 30, 2020, which is expected to be recognized over a weighted-average period of 2.8 years.

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

COVID-19 Pandemic

On March 11, 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus known as COVID-19 as a global pandemic.

Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including, but not limited to, shelter-in-place orders, quarantines, significant restrictions on travel, as well as restrictions that prohibit many employees from going to work.

Uncertainty with respect to the economic impacts of the pandemic has introduced significant volatility in the financial markets.

The Company did not observe significant impacts on its business or results of operations for the three months ended March 31, 2020 due to the global emergence of COVID-19.

While the extent to which COVID-19 impacts the Company’s future results will depend on future developments, the pandemic and associated economic impacts could result in a material impact to the Company’s future financial condition, results of operations and cash flows.

To date, Precision has not experienced material delays to its planned or ongoing clinical trials.

In March 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus known as COVID-19 as a global pandemic.

The Company has taken steps in line with guidance from the U.S.

Centers for Disease Control and Prevention (“ CDC”) and the State of North Carolina to protect the health and safety of its employees and the community.

In particular, the Company has implemented a work-from-home policy and has restricted on-site activities, including certain manufacturing functions and limited laboratory and support activities.

The Company is working closely with its clinical sites, physician partners and the patient community to monitor and manage the impact of the COVID-19 pande mic.

The Company remains committed to its clinical programs and development plans, however, disruptions, competing resource demands and safety concerns caused by the COVID-19 pandemic have caused delays in the Company’s clinical trial site activation and impacted its ability to enroll patients.

The Company may also experience other difficulties, disruptions or delays in conducting preclinical studies or initiating, enrolling, conducting or completing its planned and ongoing clinical trials, and the Company may incur other unforeseen costs as a result .

While the extent to which COVID-19 may continue to impact the Company’s future results will depend on future developments, the pandemic and associated economic impacts could result in a material impact to the C ompany’s future financial condition, results of operations and cash flows.

The Company is continuing to assess the impact of the COVID-19 pandemic to best mitigate risk and continue the operations of its business.

The Company has operating leases for real estate in North Carolina and does not have any finance leases.

During the three months ended March 31, 2020, the Company entered into two related amendments to an existing real estate lease for additional space.

The Company is involved in the construction and design of the space and anticipates that it will incur c onstruction costs, subject to an allowance for tenant improvements of up to $0.9 million.

During the six months ended June 30, 2020, the Company entered into three related amendments to an existing real estate lease for additional space.

The Company is involved in the constru ction and design of the space and anticipates that it will incur construction costs, subject to an allowance for tenant improvements of up to $0.9 million.

The lease expires on August 31, 2027.

The base rent is $ 0.5 million per year, subject to an annual upward adjustment of 3.0%.

The base rent is $0.5 million per year, subject to an annual u pward adjustment of 3.0%, and the Company is subject to a two month free-rent period .

Variable lease payments include the Company’s allocated share of costs incurred and expenditures made by the landlord in the operation and management of the building.

The lease commencement date, for accounting purposes, was not reached as of March 31, 2020 and therefore the lease is not included in the Company’s operating lease right-of-use asset or operating lease liabilities as of March 31, 2020.

The lease commencement date, for accounting purposes, was not reached as of June 30, 2020 and therefore the lease is not included in the Company’s operating lease right-of-use asset or operating lease liabilities as of June 30, 2020.

As part of the amendments, upon construction completion, the term of the existing space will be extended by one year, through August 31, 2027.

5 unchanged sentences

The Company has existing net leases in which the non-lease components (e.g., common area maintenance, consumables, etc.) are paid separately from rent based on actual costs incurred and therefore are not included in the right-of-use asset and lease liability but rather reflected as an expense in the period incurred.

As of March 31, 2020, right-of-use assets of $6.6 million, current lease liabilities of $1.7 million, and non-current lease liabilities of $9.5 million are reflected on the balance sheet.

As of June 30, 2020, right-of-use assets of $6.5 million, current lease liabilities of $1.8 million, and non-current lease liabilities of $9.1 million are reflected on the balance sheet.

The elements of lease expense were as follows:

Six Months Ended June 30,

(in thousands)

Three Months Ended

March 31, 2020

Operating lease cost

9 unchanged sentences

Weighted average discount rate

Future lease payments under non-cancelable leases with terms of greater than one year as of March 31, 2020 , were as follows:

Future lease payments under non-cancelable leases with terms of greater than one year as of June 30, 2020, were as follows:

(in thousands)

March 31, 2020

2020 (excluding the 3 months ended March 31, 2020)

June 30, 2020

2020 (excluding the 6 months ended June 30, 2020)

2025 and beyond

12 unchanged sentences

The 2019 Notes accrued interest at a rate of 6% per annum.

The 2019 Notes were settled in 2,921,461 shares of common stock in connection with the closing of the Company’s IPO (see Note 1) at a settlement price of $13.60 per share (equal to 85% of the IPO price per share).

The 2019 Notes were settled in 2,921,461 shares of common stock in

connection with the closing of the Company’s IPO (see Note 1) at a settlement price of $13.60 per share ( equal to 85% of the IPO price per share ) .

On issuance, the Company elected to account for the 2019 Notes at fair value with any changes in fair value being recognized through the condensed consolidated statements of operations until the 2019 Notes are settled.

1 unchanged sentence

Revolving Line

In May 2019, the Company entered into a loan and security agreement with Pacific Western Bank (the “Pacific Western Loan Agreement”) pursuant to which the Company may request advances on a revolving line of credit of up to an aggregate principal of $50.0 million (the “Revolving Line”).

The maturity date of the Revolving Line is May 15, 2022.

The Revolving Line bears interest at an annual rate equal to the greater of (i) 1.25 % below the prime rate then in effect, or (ii) 4.25% at all times when the Company maintains a daily balance of cash in its demand deposit accounts at Pacific Western Bank of at least $25.0 million, and the greater of (i) 0.25% above the prime rate then in effect;

or (ii) 5.75% at all times when the Company does not maintain a daily balance of cash in demand deposit accounts at Pacific Western Bank of at least $25.0 million.

The Pacific Western Loan Agreement requires that the Company pay a quarterly fee i n an amount equal to 0.50% per annum of the unused portion of the Revolving Line.

The unused fee shall be waived for any quarter the Company maintains a daily balance in its demand deposit accounts of at least $25.0 million.

The Pacific Western Loan Agreem ent includes customary representations, warranties and covenants (affirmative and negative).

There were no borrowings, and the Company was in compliance with its financial covenants, under the Pacific Western Loan Agreement as of March 31, 2020.

The Company estimates an annual effective tax rate of 0% for the year ending December 31, 2020 as the Company incurred losses for the three months ended March 31, 2020 and is forecasting additional losses through the remainder of fiscal year ending December 31, 2020, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2020.

On June 23, 2020, the Company and Pacific Western Bank (“Bank”) entered into the Third Amendment to Loan and Security Agreement to the revolving line of credit agreement dated as of May 15, 2019 (as amended, the “Pacific Western Loan”).

The aggregate principal amount under the Pacific Western Loan is $30.0 million.

The Pacific Western Loan matures on June 23, 2022, provided that, if the Company receives aggregate cash proceeds of at least $125.0 million from the issuance of the Company’s equity securities and/or upfront cash proceeds from strategic partnerships on terms and conditions reasonably satisfactory to the Bank, the maturity date shall then instead be June 23, 2023.

All outstanding principal amounts are due on the maturity date.

The Company must also maintain an aggregate balance of unrestricted cash at Bank (not including amounts in certain specified accounts) equal to or greater than $10.0 million.

The interest rate under the Pacific Western Loan is a variable annual rate equal to the greater of (a) 2.75% above the Prime Rate (as defined in the Pacific Western Loan), or (b) 6.00%.

There were no borrowings, and the Company was in compliance with its financial covenants, under the Pacific Western Loan as of June 30, 2020.

The Company estimates an annual effective tax rate of 0% for the year ending December 31, 2020 as the Company incurred losses for the six months ended June 30, 2020 and is forecasting additional losses through the remainder of fiscal year ending December 31, 2020, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2020.

Therefore, no federal or state income taxes are expected and none have been recorded at this time.

2 unchanged sentences

Accordingly, the deferred tax assets have been reduced by a full valuation allowance, since the Company does not currently believe that realization of its deferred tax assets is more likely than not.

As of March 31, 2020, the Company had no unrecognized income tax benefits that would reduce the Company’s effective tax rate if recognized.

As of June 30, 2020, the Company had no unrecognized income tax benefits that would reduce the Company’s effective tax rate if recognized.

FAIR VALUE MEASUREMENTS

7 unchanged sentences

Investments in repurchase agreements are classified within Level 2 as these instruments are valued using observable market inputs including reported trades, broker/dealer quotes, bids and/or offers.

As of March 31, 2020 and December 31, 2019, the Company held cash equivalents which are composed of money market funds and repurchase agreements that were purchased through repurchase intermediary banks and collateralized by deposits in the form of government securities and obligations.

As of June 30, 2020 and December 31, 2019, the Company held cash equivalents which are composed of money market funds and repurchase agreements that were purchased through repurchase intermediary banks and collateralized by deposits in the form of government securities and obligations.

The following represents assets measured at fair value on a recurring basis by the Company (in thousands):

March 31, 2020

June 30, 2020

Money market funds

Repurchase agreements

March 31, 2019

December 31, 2019

Money market funds

8 unchanged sentences

The Company recognizes revenue from the upfront payment of $105.0 million based on an input method in the form of research effort relative to expected research effort at the completion of the performance obligation, which is based on the actual time of R&D activities performed relative to expected time to be incurred in the future to satisfy the performance obligation.

Management evaluates and adjusts the total expected research effort for the performance obligation on a quarterly basis based upon actual research accomplishments and the probability of continuing research efforts in the future.

Management evaluates and adjusts the total expected research effort for the performance obligation on a quarterly basis based upon actual research accomplishments, changes in research approach as determined by the JSC, Servier’s selection and direction on antigen targets, and the probability of continuing research efforts in the future.

The transfer of control occurs over this time period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation.

The remaining performance obligation associated with the $105.0 million upfront payment is expected to be satisfied over a 4 year period as of March 31, 2020.

During the three months ended March 31, 2020 and 2019, the Company recognized revenue under the agreement with Servier of approximately $2.1 million and $1.5 million, respectively.

Deferred revenue related to the agreement with Servier amounted to $78.7 million and $80.9 million as of March 31, 2020 and December 31, 2019, respectively, of which $12.8 million and $15.0 million, respectively is included in current liabilities.

No development or sales-based milestone payments were received during the three months ended March 31, 2020 and 2019.

The remaining performance obligation associated with the $105.0 million upfront payment is expected to be satisfied over an approximate 5 year period as of June 30, 2020.

During the six months ended June 30, 2020 and 2019, the Company recognized revenue under the agreement with Servier of approximately $2.6 million and $3.0 million, respectively.

Deferred revenue related to the agreement with Servier amounted to $78.2 million and $80.9 million as of June 30, 2020 and December 31, 2019, respectively, of which $23.1 million and $15.0 million, respectively is included in current liabilities.

No development or sales-based milestone payments were received during the six months ended June 30, 2020 and 2019.

Collaboration and License Agreement with Gilead

On September 10, 2018, the Company and Gilead Sciences, Inc.

(“Gilead”) entered into a collaboration and license agreement to develop genome editing tools to target viral DNA associated with Hepatitis B.

Pursuant to the terms of the agreement, Gilead will receive an exclusive license to exploit the resulting synthetic nucleases and products that use them to treat Hepatitis B in humans (“development license”), and the Company is entitled to receive up to $40.0 million in research funding for early-stage R&D services, paid in semi-annual increments, over an initial three year term and development and commercial milestone payments of up to an aggregate of $445.0 million, consisting of up to $105.0 million in development milestone payments and up to $340.0 million in commercial milestone payments.

The Company is also entitled to receive tiered royalties ranging from the high single digit percentages to the mid-teen percentages on worldwide net sales of the products developed through the term of the agreement, subject to customary potential reductions.

Gilead is responsible for obtaining regulatory approvals and, upon completion of the collaboration, will assume sole responsibility for the development and commercialization of such gene editing therapies and products.

The Company will provide technology transfer of its development know-how prior to Gilead assuming responsibility.

Also, the Company and Gilead will negotiate a separate supply agreement for the Company to manufacture specifically identified products for Gilead to use in clinical trials at price based on the Company’s costs.

The Company and Gilead have formed a joint steering committee (“JSC”) and a joint research and development committee (“JRDC”) that collectively will provide oversight, decision making and implementation guidance regarding the collaboration activities covered under the agreement.

Revenue associated with the combined performance obligation is being recognized as revenue on a straight-line basis as the R&D services are provided over the initial three-year term.

The transfer of control occurs over this time period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation.

During each of the three months ended March 31, 2020 and 2019, the Company recognized revenue under the agreement with Gilead of approximately $3.3 million.

Deferred revenue related to the agreement with Gilead amounted to $0.5 million and $1.5 million as of March 31, 2020 and December 31, 2019, respectively, all of which is included in current liabilities.

No development or sales-based milestone payments were received during the three months ended March 31, 2020.

On July 6, 2020 (the “Termination Notice Date”), Gilead Sciences (“Gilead”) notified the Com pany of its termination of the Collaboration and License Agreement between Gilead and the Company, dated September 10, 2018, as subsequently amended by Amendment No.

1 to the Collaboration and License Agreement, dated March 10, 2020 (as amended, the “Gilead Agreement”).

Pursuant to the termination notice, the Gilead Agreement will terminate effective September 4, 2020.

Upon termination, the Company will regain full rights and all data it generated for the in vivo chronic hepatitis B virus (“HBV”) program d eveloped under the Gilead Agreement.

The Company is exploring partnership or alternative opportunities to enable the continued development of ARCUS-based HBV therapies, the progression toward the submission of an IND for this product candidate and the reassessment of the timing of such IND submission.

Revenue associated with the combined performance obligation was recognized on a straight-line basis as the R&D services were provided through the Termination Notice Date.

During the six months ended June 30, 2020 and 2019, the Company recognized revenue under the Gilead Agreement of approximately $3.9 million and $6.7 million, respectively.

The Company did not have deferred revenue related to the Gilead Agreement as of June 30, 2020.

Deferred revenue amounted to $1.5 million as of December 31, 2019.

No development or sales-based milestone payments were received during the six months ended June 30, 2020.

SEGMENT REPORTING

10 unchanged sentences

Prior period information was presented consistent with the current period presentation.

In January 2019, the Food segment moved into a new leased facility at Research Triangle Park, North Carolina.

The Company determined that the Food segment is no longer deriving benefit from the Company’s centralized research and development expenditures for early stage research, nuclease development and the purchase of general laboratory supplies and, as such, all these expenditures are allocated to the Therapeutics segment.

In January 2019, the Food

segment moved into a new leased facility at Research Triangle Park, North Carolina .

The Company determined that the Food seg ment is no longer deriving benefit from the Company’s centralized research and development expenditure s for early stage research, nuclease development and the purchase of general laboratory supplies and , as such , all these expenditures are allocated to the Therapeutics segment .

Certain reclassifications have been made to the presentation of reportable segments as centralized research and development expenditures are no longer reported separately.

The reportable segment operational cash expenditures include cash disbursements for compensation, laboratory supplies, purchases of property, equipment and software and procuring services from CROs, CMOs and research organizations.

T he reportable se gment operational cash expenditures include cash disbursements for compensation, lab oratory supplies, purchases of property, equipment and software and procuring services from CROs, CMOs and research organizations .

Certain cost items are not allocated to the Company’s reportable segments.

4 unchanged sentences

Additionally, the Company reports assets on a consolidated basis and does not allocate assets to its reportable segments for purposes of assessing segment performance or allocating resources.

Presented below is the financial information with respect to t he Company’s reportable segments:

Three Months Ended March 31,

Presented below is the financial information with respect to the Company’s reportable segments:

Three Months Ended June 30,

(in thousands)

11 unchanged sentences

Share-based compensation

Loss on disposal of assets

Changes in prepaid expenses, accounts payable and accrued expenses

Total consolidated loss from operations

Six Months Ended June 30,

(in thousands)

Total segment revenue

Segment operational cash expenditures:

Total segment operational cash expenditures

Segment operating loss:

Total segment operating loss

Adjustments to reconcile segment operating loss to consolidated

loss from operations:

Corporate general and administrative cash expenditures

Interest income received

Depreciation and amortization

Amortization of right-of-use asset

Share-based compensation

Loss on disposal of assets

Changes in prepaid expenses, accounts payable and accrued expenses

Total consolidated loss from operations

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements