PRECIGEN, INC. 10-Q

Item 1A. Risk Factors As disclosed in "Summary of Risk Factors" and "Item 1A. Risk Factors" in our Annual Report, there are a number of risks and uncertainties that may have a material effect on the operating results of our business and our financial condition. There are no additional material updates or changes to our risk factors since the filing of our Annual Report, except as discussed below. In evaluating our risks, readers also should carefully consider the risk factors discussed in our Annual Report and the risk factor included in this Quarterly Report on Form 10-Q, which could materially affect our business, financial condition, or operating results, in addition to the other information set forth in this report and in our other filings with the SEC. We are subject to a number of risks associated with the sale of Trans Ova, and these risks could adversely impact our operations, financial condition and business. The proceeds we receive from the sale, together with certain additional funds, will be placed in a segregated account upon the closing of the Transaction and must be used for certain permitted purposes, including resolution of our outstanding convertible bonds, and therefore we have limited discretion in the use of proceeds and the additional funds we put in. On July 1, 2022, we entered into an agreement (the “Purchase Agreement”) to sell 100% of the outstanding membership interests of Trans Ova Genetics, L.C., an Iowa limited liability company (“Trans Ova”), our wholly-owned subsidiary, to Spring Bidco LLC, a Delaware limited liability company (the “Buyer”) in exchange for $170 million in cash payable at the closing of the transaction (subject to a working capital adjustment mechanism) and up to $10 million in cash in earn-out payments over two years (the “Transaction”). We are subject to a number of risks in connection with the Transaction, including risks associated with: • the failure to satisfy on the expected timeline, or at all, the closing conditions set forth in the Purchase Agreement, whether due to a failure to receive, or delay in the receipt of, clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or other third party consents required for the transaction or our inability to satisfy other conditions to the consummation of the Transaction; • the need to incur significant transaction costs in connection with the Transaction, regardless of whether it is completed; • the diversion of our management’s attention from the operation of the business we are retaining; • the share price of our common stock falling if the Transaction is not consummated, to the extent that the current market price of our common stock reflects an assumption that the Transaction will be completed; • a negative impact on our liquidity and our ability to meet our obligations when due, including the outstanding convertible bonds, if the Transaction is not consummated; • our failure to realize the full purchase price anticipated under the Purchase Agreement, including due to the inability of Trans Ova to generate sufficient EBITDA following the closing during the relevant periods to result in payment of the targeted earn-out payments; • the inability of the Buyer to pay the purchase price; • becoming the target of litigation, including securities class action lawsuits and derivative lawsuits, that could result in substantial costs and may delay or prevent the consummation of the Transaction; • business uncertainties and contractual restrictions while the Transaction is pending; 50 • any disruptions to our business resulting from the announcement and pendency of the Transaction, which may continue or intensify in the event the Transaction is not consummated or is significantly delayed; and • other developments beyond our control that may affect the timing or success of the Transaction. In connection with the closing of the Transaction, we will hold a total of $200 million, comprising the purchase price and certain additional funds, in a segregated account and will use such funds for certain permitted purposes, including resolution of our outstanding convertible bonds. Therefore, we have limited discretion in the use of proceeds and the additional funds we put in to the segregated account, which may have a negative impact on our liquidity and ability to satisfy our capital requirements and we may be prevented from using the cash opportunistically for other purposes. As a result of these risks, we may be unable to realize the anticipated benefits of the Transaction, including the total amount of cash we expect to realize. Our failure to realize the anticipated benefits of the Transaction would adversely impact our operations, financial condition and business and could limit our ability to pursue additional strategic transactions. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3. Defaults on Senior Securities None. Item 4. Mine Safety Disclosures Not applicable.