sgmo-8ka_20181101.DOCX.htm

SANGAMO THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

000-30171

68-0359556

(State or other jurisdiction of

incorporation)

(Commission File Number)

(IRS Employer ID Number)

501 Canal Blvd., Richmond, California 94804

(Address of principal executive offices) (Zip Code)


	☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


	☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


	☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


	☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

	SANGAMO THERAPEUTICS, INC.


	By:	/s/ KATHY Y. YI
	Name:	Kathy Y. Yi
	Title:	Senior Vice President and Chief Financial Officer


	Dated:	January 4, 2019

1.	TXCELL S.A. STATEMENT OF FINANCIAL POSITION

2.	TXCELL S.A. STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS

3.	TXCELL S.A. STATEMENT OF CHANGES IN EQUITY

4.	TXCELL S.A. STATEMENT OF CASH FLOWS

5.	TXCELL S.A. NOTES TO THE FINANCIAL STATEMENTS

Note 1 :

The Company

Note 2 :

Accounting principles and methods

•

the amendment to IAS 7 “Disclosure Initiative”;

•

the amendment to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”;

•

the annual improvements of the IFRS: 2014-2016 cycle.

•

valuation of stock option subscription plans, warrants, free shares and notes convertible into shares (see Notes 2.9 and 9.3);

•

recognition of deferred taxes on loss carryforwards (see Notes 2.15 and 18);

•

valuation of provisions for risks and charges (see Notes 2.11.1 and 11);

•

valuation of rights capitalized under the license acquired (see Note 3).

•

the Company's historical loss-making position is the result of the innovative nature of its products, which require several years of research and development;

•

at December 31, 2017, the Company had €4.9 million in cash, after partial pre-financing of the 2017 Research Tax Credit (RTC) in the amount of €1.4 million. It also secured a zero-interest innovation loan of €1.2 million, which was received in February 2018;

•

the Company has a OCABSA financing program in place with Yorkville, which was entered into in June 2016 and amended in October 2017 giving it, provided that certain contractual conditions¹ are met on the date the financial statements are approved, access to monthly drawdowns to cover its projected monthly cash requirements. These drawdowns may be for a nominal amount of up to €1.8 million for the first tranche, then up to €1.2 million for subsequent tranches, up to a maximum total of €15 million.

¹	The main contractual conditions are as follows:

•	no material adverse changes occurred;

•	the closing price of TxCell S.A. shares on the day before the Request is equal to or greater than 120% of the TxCell S.A. shares' par value, i.e. €0.24 (compared with €2.80 in the initial version of the contract);

•	no cases of default or events which would be considered defaults if not remedied existed on the day of the Request; default means delisting TxCell S.A. shares and certain cases of change in Company control;

•

the Company has a number of shares authorized and available equal to at least (i) twice the number of shares to be issued in the event of conversion of the convertible notes to be issued and in circulation (based on the conversion price applicable on the day of the Request) plus (ii) 1 time the number of shares to be issued upon exercise of the BSA warrants to be issued and in circulation.

•	the technical feasibility of completing the intangible asset so that it will be available for use or sale;

•	its intention to complete the intangible asset and use or sell it;

•	its ability to use or sell the intangible asset;

•	how the intangible asset will generate probable future economic benefits;

•	the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

•	its ability to measure reliably the expenditures during its development.

•

level 1: fair value determined based on the prices quoted on the asset markets for identical assets or liabilities;

•

level 2: fair value determined based on the observable data for the asset or liability concerned, either directly or indirectly;

•

level 3: fair value determined using measurement techniques based wholly or partially on non-observable data; an unobservable parameter is one whose value is derived from assumptions or correlations based neither on transaction prices observable on the markets for the same instrument on the valuation date, nor on observable market data available on the same date.

•

a lump sum paid by the Company upon their retirement (defined benefit scheme);

•

a pension paid by the social security authorities and funded by employer and employee contributions (national defined contribution scheme).

•

the Company will meet the conditions of the grant; and

•

the conditions of their receipt have been met.

Note 3 :

Intangible assets

•	the discount rate, set at 12.5%;

•	the likelihood of success of the next clinical efficacy study, at 31.7%; and

•	market share peak on the target market, at 50%.

•	for the discount rate: +5%;

•	for the likelihood of success of the next clinical efficacy study: -5%; and

•	for market share peak: -25%.

Note 4 :

Property, plant and equipment

•	purchase of laboratory equipment for manufacturing process development programs; most of these investments were in the form of finance leases (see Note 10.1);

•	renovations of premises, underway at December 31, 2017, with the dual aim of grouping the two existing sites into the head office premises, and the creation of level 2 laboratories for in vivo developments of the CAR-Treg platform.

Note 5 :

Financial assets

•

security deposits for €90 thousand, mainly corresponding to commercial leases;

•

other long-term receivables for €159 thousand, corresponding to the guarantee deductions in 2017 relating to the pre-financing of the Company's 2016 RTC (see Note 6). The guarantee deductions are made up of the following:

an individual part to cover the individual risk inherent to the Company's debt, which is returned once one of the following events takes place, whichever happens first: (i) payment of the RTC by the French government, (ii) the end of the tax inspection on said credit, potentially after any adjustments are allocated, or (iii) the end of the taxation limitation period for the credit concerned (December 31 of the third year after the year in which the RTC declaration was made); and

a collective part to cover the collective risk of the receivables recorded in the portfolio of the pre-financing fund, returnable upon closure of the pre-financing fund.

•

The cash balance of the liquidities contract in place with Kepler Cheuvreux since August 2016, is €24 thousand. In the first half of 2017, the Company made an additional contribution of €100 thousand to the liquidity contract. Under this liquidity contract, 99,318 treasury shares were recognized as a reduction in shareholders' equity at December 31, 2017.

Note 6 :

Other current assets

•

Other receivables

•

Prepaid expenses

Note 7 :

Financial instruments recorded on the statement of financial position and their impact on net profit/(loss)

(1)

The fair value level of the instruments is presented in Note 7.1.

(1)

Level 1: the fair value of the items at fair value through the statement of operations corresponds to the market value of these assets.

(2)

Level 2: the fair value of the items at fair value through the statement of operations corresponds to an average market value of these assets and liabilities.

(3)

Level 3: no assets or liabilities were measured at level 3 fair value.

Note 8 :

Cash and cash equivalents

(1)

All 2014 T1 Options are exercisable for a ten-year period, starting from their allocation by the board of directors. Should the beneficiary leave the Company he or she has, from the time he or she ceases to be an eligible beneficiary, six months to exercise the Options that would be exercisable at the date of leaving, after which the Options are void.

(2)

The 2014 T2 and the 2015 Options are exercisable by a third at the end of each year from their allocation by the board of directors, provided that the beneficiary is still an employee and/or corporate officer of the Company or one of its affiliates. Should the beneficiary leave the Company he or she has, from the time he or she ceases to be an eligible beneficiary, six months to exercise the Options that would be exercisable at the date of leaving, after which the Options are void.

(3)

The SB 2015 Options can be exercised by a third at the end of each year from their allocation by the board and are subject to performance conditions, the fulfillment of which will be established by the board of directors, provided that Stéphane Boissel remains a corporate officer of the Company or one of its affiliates. Should he leave the Company, Stéphane Boissel has, from the time he ceases to be an eligible beneficiary, six months to exercise the SB 2015 Options that would be exercisable at the date of leaving, after which the Options are void.

(4)

Notwithstanding the above, in case of a change of control of the Company, all Options will immediately become exercisable by the beneficiary before the completion of such change of control, and the board of directors will have the choice of deciding that any Option not exercised before the completion of such change of control will automatically be void.

(5)

This number takes into account, where applicable, the par value adjustment decided by the board of directors on February 21, 2017 in connection with the capital increase of February 2017, for the protection of the interests of holders of warrants, stock options and free shares.

(1)

In case of a change of control of the Company, all warrants allocated to any beneficiary will immediately become exercisable by such beneficiary before the completion of such change of control, and the board of directors will have the choice of deciding that any warrant not exercised before the completion of such change of control will automatically be void.

(2)	The BSA 03-14 warrants allocated to François Meyer were canceled following his formal waiver of his right to exercise them on August 15, 2017, due to the allocation of BSA 07-17 warrants.

(3)	The BSA 05-14 warrants allocated to Marie-Yvonne Landel-Meunier can be exercised by a third at the end of each year from their allocation by the board of directors, subject to the beneficiary's continuous presence on the board of directors over the vesting period.

(4)	The BSA 03-15 warrants allocated to David Horn Solomon can be exercised by a third at the end of each year from their allocation by the board of directors, subject to the beneficiary's continuous presence on the board of directors over the vesting period.

(5)	The BSA 03-15 warrants allocated to François Meyer can be exercised by a third at the end of each year from their allocation by the board of directors, provided he is Chairman of the board of directors on the exercise date.

(6)

The BSA 05-16 warrants have been allocated to the Scientific Advisory Board (SAB) members. The BSA 05-16 warrants may be exercised in full, provided that, on the date of exercise, the beneficiary meets one of the following criteria: (i) is a member or observer of the board of directors of the Company or of one of its subsidiaries, or (ii) is bound by a services or consultancy contract to the Company or to one of its subsidiaries, or (iii) is a member of one of the board's committees.

(7)

The BSA 09-16 warrants have been allocated to a member of the Company's Scientific Advisory Board (SAB). The BSA 09-16 warrants may be exercised in full, provided that, on the date of exercise, the beneficiary meets one of the following criteria: (i) is a member or observer of the board of directors of the Company or of one of its subsidiaries, or (ii) is bound by a services or consultancy contract to the Company or to one of its subsidiaries, or (iii) is a member of one of the board's committees.

(8)

The BSA 09-16 warrants allocated to François Meyer are exercisable on the following schedule: 100,000 BSA warrants on the first anniversary of their allocation, 50,000 BSA warrants on the second anniversary of their allocation, and 50,000 BSA warrants on the third anniversary of their allocation. The exercise of these BSA warrants is fully subject to performance conditions, the meeting of which is to be decided by the board of directors, and provided that, on the exercise date, the beneficiary meets one of the following criteria: (i) is a member or observer of the board of directors of the Company or of one of its subsidiaries, or (ii) is bound by a services or consultancy contract to the Company or to one of its subsidiaries, or (iii) is a member of one of the board's committees.

(9)

The board of directors on March 8, 2017 allocated 50,000 BSA warrants. 10,000 were allocated to one of the Company's clinical boards, 20,000 to Marie-Yvonne Landel-Meunier and 20,000 to David Horn Solomon. The BSA 03-17 warrants may be exercised by third parties at the end of each year following their assignment by the board of directors, provided that, on the exercise date, the beneficiary meets one of the following criteria: (i) is a member or observer of the board of directors of the Company or of one of its subsidiaries, or (ii) is bound by a services or consultancy contract to the Company or to one of its subsidiaries, or (iii) is a member of one of the board's committees.

(10)

The board of directors on July 20, 2017 allocated 274,040 BSA warrants to François Meyer, on the condition precedent that he waives all rights and shares under BSA 03-14 warrants granted to him. Having noted that the condition precedent had been met, the BSA 07-17 warrants were fully subscribed by François Meyer. The BSA 07-17 warrants may be exercised according to the following schedule: 137,020 BSA warrants immediately, and 137,020 as of January 1, 2019. All of the BSA warrants may be exercised provided that, on the exercise date, the beneficiary meets one of the following criteria: (i) is a member or observer of the board of directors of the Company or of one of its subsidiaries, or (ii) is bound by a services or consultancy contract to the Company or to one of its subsidiaries, or (iii) is a member of one of the Board's committees. The exercise of the second half of the BSA warrants is dependent on performance conditions being met, as decided by the board of directors.

(11)	This number takes into account, where applicable, the par value adjustment decided by the board of directors on February 21, 2017 in connection with the capital increase of February 2017, for the protection of the interests of holders of warrants, stock options and free shares.

(1)

The 2016 AGA employees are acquired by a third at the end of each year from their allocation by the board of directors, provided that the acquisition is subject to a condition of presence, and, for some employees, to performance conditions, linked to the realization of annual objectives by the beneficiary, as determined by the board of directors.

(2)

The 2016 AGA management are acquired by a third at the end of each year from their allocation by the board of directors, provided that the acquisition is subject to a condition of presence, and to performance conditions, linked to the realization of annual objectives by the beneficiary (i.e. financing, progress on research and development programs, signature of strategic partnerships), as determined by the board of directors.

(3)

The first third of the allocated free shares is subject to a one-year holding period from the date of acquisition, i.e. until May 2, 2018. No holding period was set for the two other thirds, subject to the provisions applicable in case of a change of control as described in (5) below.

(4)

Following the recognition of the performance conditions set out in its management contract, the board of directors of March 8, 2017 has granted Stéphane Boissel with 80,000 free shares 2017 AGA, the acquisition of which will be definitive, subject to a presence condition, at the expiration of a period of one year from their allocation by the board of directors.

(5)

In the event of a change in the Company's control, all AGAs allocated to a beneficiary will be immediately vested at one of these times, whichever happens the latest: (i) the 1^st anniversary of the date of award (the attendance condition is then removed and the vesting period, plus a holding period which ends on the 2^nd anniversary of the date of award and (ii) the date of the change in control (this date marks the end of the vesting period), potentially extended by a holding period which runs until the 2^nd anniversary of the date of award.

(6)

This number takes into account, where applicable, the par value adjustment decided by the board of directors on February 21, 2017 in connection with the capital increase of February 24, 2017, for the protection of the interests of holders of warrants, stock options and free shares.

(1)

The OCA may be converted into new ordinary Company shares at the request of the bearer, at any time from their issue and for a period of 14 months as of this date (inclusive) or if the notes convertible into shares are not exercised on their maturity date, according to the conversion rate determined using the formula below:

“N” is the number of ordinary new TxCell S.A. shares to be issued upon conversion of an OCA;

“Vn” is the note which the OCA represents (par value of an OCA);

“P” is 93% of the lowest volume-weighted average daily price of TxCell S.A. shares (as published by Bloomberg) over the ten (10) trading days immediately prior to the date a notice of conversion for the OCA concerned is sent. Trading days on which the holder of the note convertible into shares sold TxCell S.A. shares shall not be included. However, P cannot be less than the par value of a TxCell S.A. share, i.e. €0.20 on the date of the discount.

(2)

Notes convertible into shares do not carry interest. However, in the event of default, each OCA in force shall bear interest equal to 15% per annum (redeemed in cash as of the occurrence of the default until the date (i) the default is remedied or (ii) the note convertible into shares is redeemed or converted).

Note 9.3.4.2.2 :

Share subscription warrants (BSA)

(1)

BSA OCA 08–16 and BSA OCA 11-16 are fully exercisable.

(2)

This number takes into account the par value adjustment decided by the board of directors on February 21, 2017 in connection with the capital increase of February 2017, for the protection of the interests of holders of warrants, stock options and free shares.

Note 10 :

Loans and financial payables

Note 11 :

Provisions

Note 12 :

Trade payables and other current liabilities

Note 13 :

Revenue and other income

•	grants in the amount of €183 thousand;

•	the 2017 RTC of €1,945 thousand

Note 14 :

Staff costs

Note 15 :

Breakdown of expenses by function

•

programs to develop manufacturing processes, improve the ASTrIA process and develop a ENTrIA process;

•

the ENTrIA CAR-Treg research programs, conducted internally or under research and development agreements, to generate preclinical proof-of-concept data.

Note 16 :

Share-based payments

•

the share price on the allocation date is equal to the strike price;

•

the risk free rate is determined from the average lifespan of the instruments, based on the borrowing rates of the GRFN index;

•

volatility was determined on the basis of a sample of listed companies in the biotechnology sector, both at the date on which the instruments are subscribed and over a period equivalent to the life of the options;

•

the price discount linked to the non-transferability of the share subscription options compared to equivalent options without transfer restrictions has been calculated using the “forward price” model at the estimated borrowing rate;

•

the Black Scholes model was used to measure the fair value of the plans for instruments convertible to Company equity.

(1)

This price corresponds to the weighted average price on the actual subscription date by each beneficiary.

(1)

For the first third of the AGA, the closing price used is the one on the date of the allocation, i.e. €5.49. For the second and final thirds of the AGA, the closing price used is the one prevailing at December 31, 2016, i.e. €3.42.

(2)

No non-transferability discount was applied to the AGAs; the value of the free share after discount is thus identical to the value of the free share.

Note 17 :

Financial income and expenses

•

€14 thousand in accretion of finance flows linked to the zero-interest innovation loan (see Note 10);

•

€38 thousand in accretion of the trade payable assets (see Note 12.2); and

•

€262 thousand from the fair value recognition through profit and loss of the note issues (see Note 10.3).

Note 18 :

Tax charge

Note 19 :

Commitments

•

due in less than one year: €148 thousand;

•

due in between one and five years: €74 thousand.

•

due in less than one year: €17 thousand;

•

due in between one and five years: €0 thousand.

•

a set €6 million for which the Company paid €2 million upon signature of the termination agreement on December 2, 2015. The €4 million balance was contractually payable on the issue of an invoice due on December 2, 2017 for €2 million and December 2, 2018 for the remaining €2 million. As the invoice from Trizell maturing on December 2, 2017 was only received by the Company in 2018, this payment could only be made in the first quarter of 2018;

•

a conditional €9 million on any future revenue generated by Ovasave, which will be recognized if the contractual conditions are met.

Note 20 :

Related party transactions

(1)

For the financial year. Variable compensation owed for one financial year is paid in the next financial year.

(2)

During the financial year.

(3)

The board of directors' meeting held on September 6, 2013 set François Meyer's gross annual compensation at €60 thousand, covering his functions as Chairman of the Board, as well as his general management support function. The board of directors' meeting held on February 10, 2015 revalued and revised the apportionment of François Meyer's compensation to make a distinctionbetween his compensation as Chairman of the board of directors (€60 thousand gross per year) and the compensation for his specific mission (€24 thousand gross per year) effective February 1, 2015. At its meeting of September 21, 2016, the board of directors reviewed the specific assistance mission to general management for François Meyer, and decided to entrust to him the specific role of Head of Research

which involves managing the Company's entire research division and its programs. For this task, the fixed compensation paid to François Meyer was increased, with effect from August 1, 2016, to €80 thousand gross per year, along with variable annual compensation of 30% of said specific compensation according to the attainment of corporate targets set yearly by the board of directors. The board of directors, at its meeting of March 8, 2017, on the recommendation of the Nomination and Compensation Committee as regards the expertise and investments necessary, reviewed the annual fixed compensation paid to François Meyer specifically in respect of his role as "Head of Research" to €200 thousand gross as of January 1, 2017; 70% of the attached variable compensation of 30% would ultimately be dependent on Company targets being met, and the remaining 30% would be dependent on François Meyer meeting his own personal targets, as set each year by the board of directors.

(4)

At its meeting of March 8, 2017, the board of directors, on the proposal of the nomination and compensation committee, decided to set the variable compensation to be paid to François Meyer at €10.3 thousand for the 2016 financial year in consideration of the attainment of corporate and individual targets. At December 31, 2017, the variable compensation to be paid to François Meyer was an estimate based on management assumptions, and amounted to €54 thousand.

(5)

On March 12, 2018, the Board of Directors, on the recommendation of the nomination and compensation committee, decided to grant François Meyer an exceptional bonus of €27 thousand gross, in light of the scientific progress made. by the Company under its leadership in 2017. This remuneration was approved by the ordinary and extraordinary shareholders’ meeting of April 26, 2018.

(6)

The Company entered into a management agreement with Stéphane Boissel following his appointment as the Company's CEO by the board of directors of April 27, 2015, with a view to determining the main terms and conditions of his duty as CEO. The signature of this management contract was authorized by the board of directors at its meeting held on April 27, 2015. As consideration for his duties, Stéphane Boissel will receive (i) a yearly fixed compensation of €275 thousand, (ii) variable compensation that may not exceed 30% of the said fixed compensation, based on the achievement of objectives set annually by the Company's board of directors, and (iii) in-kind benefits consisting of the payment of business travel expenses, an unemployment insurance policy for executives, and supplementary social security, healthcare and retirement protection. After noting the attainment of the performance conditions provided for in his management agreement, the board of directors at its meeting of March 8, 2017 amended the gross annual fixed compensation paid to Stéphane Boissel to €300 thousand as of January 1, 2017.

(7)

The board of directors, at its meeting of March 8, 2017, on the proposal of the Nomination and Compensation Committee, set the variable compensation supplement to be paid to Stéphane Boissel in respect of 2015 at €66 thousand, in accordance with the management agreement amended by an amendment dated September 21, 2016, duly authorized by the board of directors on the same day, and his variable compensation for 2016 to €27 thousand. At December 31, 2017, the variable compensation to be paid to Stéphane Boissel was an estimate based on management assumptions, and amounted to €81 thousand.

(8)

Mr. Stéphane Boissel's benefits in kind are, pursuant to the management agreement entered into with the Company on April 27, 2015, the provision of a vehicle and of unemployment insurance.

(1)

For the financial year. Variable compensation owed for one financial year is paid in the next financial year.

(2)

During the financial year.

(3)

Share-based payments correspond to the possible costs of allocation plans for instruments convertible to Company equity allocated during the financial year to the corporate officers, following deduction of the non-transferability discount linked to the shareholders; agreement in place on the date of the award.

(1)

For the financial year. Compensation owed for one financial year is paid in the next financial year.

(2)

During the financial year.

Note 21 :

Loss per share

•

the weighted average number of shares outstanding during the financial year;

•

plus the number of shares that may result from the conversion of instruments giving deferred access to the share capital, as soon as such instruments have been issued.

Note 22 :

Management of financial risks

•

zero-interest innovation loan taken out on November 28, 2014 for €1.7 million with Bpifrance Financement. This loan bears no interest (see Note 10.2); At December 31, 2017, the balance of the Zero Interest Innovation Loan was €1.5 million, following the €170 thousand repayment in 2017;

•

Optional convertible-note line financing with Yorkville. During the 2016 financial year, the Company drew down 50 convertible notes in the amount of €5 million. Notes convertible into shares (OCA) do not generate interest (except in cases of default) and have a maturity of 14 months as of their issue date. At December 31, 2017, the 50 convertible notes had been converted by Yorkville.

Note 23 :

Events subsequent to the reporting period

•	on January 26, 2018, the 1,150,000 stock option subscription warrants under the PACEO® optional equity line financing with Société Générale expired;

•	on February 2, 2018, the Company received a zero-interest loan from Bpifrance in the gross amount of €1.2 million;

•

from January 1 to February 26, 2018, 14,678 BSA warrants issued as a result of the capital increase with preferential subscription rights of February 2017 had been exercised, resulting in the issue of a total of 11,008 new shares for a total nominal amount of €2,201.60 and a total issue premium of €26,418.48. On February 26, 2018, the 5,528,978 remaining listed BSA warrants from the issue as a result of the capital increase of February 2017 expired;

•

During the first half of 2018, 66 Warrants were exercised on the request of the Company, which then issued 66 OCA to Yorkville for a total nominal amount of €6.6 million, of which 550,000 BSA warrants were detached. As at June 30, 2018, 10 OCA have been converted and no share warrant has been exercised by Yorkville. It is specified that the Company has no draw obligation.

•

On May 17, 2018, the Company signed an amendment to the original agreement of June 17, 2016, amended on October 25, 2017, whereby the Company has the option, at any time and in its sole discretion, to redeem in cash up to 50% of notes not yet converted into shares upon the exercise of this call option, for a price equal to 110% of the nominal value of the said notes.

•

On July 23, 2018, the Company announced the acquisition by Sangamo, subject to the fulfillment of conditions precedent, of approximately 53% of the Company's capital, and the intention of Sangamo, if applicable, to file a simplified cash tender offer for the remaining outstanding common shares of the Company at the same unit price of €2.58, representing an enterprise value of approximately €72 million on a basis without cash and without debt..

•

On July 23, 2018, the Company also announced the renegotiation of its OCABSA financing program. Subject to the effective completion of Sangamo's proposed acquisition of a majority stake in the Company, the contract provides for (i) the repurchase by the Company of 50% of the 56 unconverted OCA for a total amount of €3,080,000 (i.e. 110% of their total nominal value of €2,800,000), (ii) Yorkville's conversion of the remaining 28 OCA into 1,866,666 new shares of the Company at a fixed unit price of €1.50, and (iii) ) the repurchase by the Company of the 84 Tranche Warrants and the 1,236,350 BSA warrants currently held by Yorkville for the lump sum of one euro, with a view to their cancellation. For more information, see the press release of July 23, 2018.

•	In order to cover for working capital expenses of the Company in the following months, Sangamo has granted a loan to the Company for €4.5 million pursuant to a loan agreement dated September 18, 2018. The loan has an annual interest rate of 2.5%, and is repayable after 6 months.

•	On October 1, 2018, Sangamo acquired a controlling block of TxCell S.A. of around 53%.

•	Sangamo Therapeutics, Inc. has confirmerd its intention to provide the necessary financial support to enable its subsidiary TxCell to continue its normal business over the next 12 months in compliance with the going-concern principle.

•	The board of directors of October 1, 2018 has noted:

The conversion of 28 notes by Yorkville, which resulted in the issuance of 1,866,666 new shares for a total nominal value of €373,333.20;

The early redemption of the 28 remaining notes for €3,080,000;

The cancellation of the 84 outstanding Tranche Warrants, and 1,236,350 share warrants purchased to Yorkville for the lump sum of 1 euro;

The exercise of 274,040 BSA 07-17, which resulted in the issuance of 274,040 new shares for a total nominal value of €54,808.00;

The vesting of 104,175 free shares granted to employees of the Company in 2016 and 5,002 free shares granted to employees of the Company in 2017, which resulted in the issuance of respectively 109,801 and 5,002 new shares, i.e. a capital increase of €22,960.20 euros in nominal value, factoring in the arithmetic correction set by the board at its meeting of February 21, 2017

to take account of the capital increase with preferential subscription rights carried out in February 2017, for free shares granted in 2016;

The cancellation of the 2014 T1 Options, 2014 T2 Options, SB 2015 Options, 2015 Options, BSA 03-15, BSA 05-14, BSA 05-16 and BSA 0916, following their renunciation by their respective holders.

1.	TXCELL S.A. STATEMENTS OF FINANCIAL POSITION

2.	TXCELL S.A. STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

3.	TXCELL S.A. STATEMENTS OF CHANGES IN EQUITY

4.	TXCELL S.A. STATEMENTS OF CASH FLOWS

5.	TXCELL S.A. NOTES TO THE FINANCIAL STATEMENTS

Note 1 :

The Company

Note 2 :

Accounting principles and methods

Note 2.1 :

Basis of preparation of the financial statements

•

IFRS 15: “Revenue from Contracts with Customers”,

•

IFRS 9: “Financial Instruments”,

•

the annual improvements of the IFRS: 2014-2016 cycle;

•

amendments to IFRS 1, IFRS 12 and IAS 28;

•

amendments to IFRS 2: “Clarifications and classification and measurement of share-based payment transacations”.

•

Valuation of stock option subscription plans, warrants, free shares and notes convertible into shares (see Notes 2.9 and 9.3);

•

Recognition of deferred taxes on loss carryforwards (see Notes 2.15 and 18);

•

Valuation of provisions for risks and charges (see Notes 2.11.1 and 11);

•

Valuation of capitalized rights under the license acquired (see Note 3).

Note 2.2 :

Going-concern principle

•

The Company’s historical loss-making position is the result of the innovative nature of its products, which require several years of research and development;

•

As at September 30, 2018, the cash and cash equivalents amounted to €6.6 million, after pre-financing of the 2018 Research Tax Credit (RTC) for €1.0 million, drawing of five monthly tranches of the amended financing program of notes convertible into shares with share

subscription warrants (OCABSA) for a nominal amount of €6.6 million and proceeds of €4.5 million loan granted by Sangamo.

Note 2.3 :

Intangible assets

•	the technical feasibility of completing the intangible asset so that it will be available for use or sale;

•	its intention to complete the intangible asset and use or sell it;

•	its ability to use or sell the intangible asset;

•	how the intangible asset will generate probable future economic benefits;

•	the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

•	its ability to measure reliably the expenditures during its development.

Note 2.4 :

Property, plant and equipment

Note 2.5 :

Financial assets


Exhibit No.		Description

2.1*		Share Purchase Agreement dated July 20, 2018, among the Company and the Sellers (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 23, 2018, File No. 000-30171)
2.2*		Amendment Agreement to the Share Purchase Agreement dated October 1, 2018, among the Company and the Sellers (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 6, 2018, File No. 000-30171)
2.3*		Tender Offer Agreement dated July 20, 2018, between the Company and TxCell (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed with the SEC on July 23, 2018, File No. 000-30171)
2.4*		Amendment No. 1 to the Tender Offer Agreement dated October 1, 2018, between the Company and TxCell (incorporated by reference to Exhibit 2.4 to the Company’s Current Report on Form 8-K filed with the SEC on November 6, 2018, File No. 000-30171)
23.1		Consent of Ernst & Young Audit, TxCell’s independent auditor
99.1		Audited financial statements of TxCell as of and for the year ended December 31, 2017, and the notes related thereto
99.2		Unaudited financial statements of TxCell as of September 30, 2018 and December 31, 2017 and for the nine months ended September 30, 2018 and 2017, and the notes related thereto
99.3		Unaudited pro forma condensed combined financial information for the year ended December 31, 2017 and as of and for the nine months ended September 30, 2018, and the notes related thereto

		Sangamo Historical			TxCell Historical US GAAP (in USD)				Pro Forma Adjustments			Pro Forma Combined
Assets
Current assets:
	Cash and cash equivalents	$	39,298		$	7,625		A	$	(2,951	)	$	43,972
	Marketable securities		419,272			—							419,272
	Interest receivable		683			—							683
	Accounts receivable		5,567			—							5,567
	Prepaid expenses and other current assets		3,382			2,404							5,786
	Total current assets		468,202			10,029							475,280

	Property and equipment, net		50,497			1,856							52,353
	Goodwill		1,585			—		B		39,137			40,722
	Other non-current assets		6,379			155		C		(5,222	)		1,312
	Non-current restricted cash		79,941			—		A		(74,987	)		4,954
	Intangible assets					20		D		55,000			55,020
	Total assets	$	606,604		$	12,060						$	629,641

Liabilities and stockholders' equity:
Current liabilities:
	Accounts payable and accrued liabilities	$	16,424		$	5,404		E		3,547		$	25,375
	Accrued compensation and employee benefits		6,605			5		F		996			7,606
	Deferred revenues		51,094			—							51,094
	Financial debts - current		—			13,905		G		(6,886	)		1,797
								C		(5,222	)
	Total current liabilities		74,123			19,314							85,872

	Deferred revenues, non-current		123,917			—							123,917
	Build-to-suit lease obligation		26,928			—							26,928
	Non-current liabilities		1,730			—		H		6,798			8,528
	Financial debt - non-current		—			3,133							3,133
	Debts related to leasing - non-current		—			—							—
	Total liabilities		226,698			22,447							248,378
Stockholders' equity:
	Common stock		1,018			5,383		I		(5,383	)		1,018
	Additional paid-in capital		923,164			29,818		I		(29,818	)		923,164
	Accumulated deficit		(544,032	)		(45,620	)	I		45,620			(544,032	)
	Accumulated other comprehensive loss		(244	)		32		I		(32	)		(244	)
	Total Sangamo Therapeutics Inc. stockholders' equity		379,906			(10,387	)						379,906
	Non-controlling interest							J		1,357			1,357
	Total stockholders' equity		379,906			(10,387	)						381,263
	Total liabilities and stockholders' equity	$	606,604		$	12,060						$	629,641

		Sangamo Historical			TxCell Historical US GAAP (in USD)				Pro Forma Adjustments			Pro Forma combined
Revenues:
	Collaboration agreements	$	57,378		$	—						$	57,378
	Research grants		237			1,730							1,967
Total revenues			57,615			1,730							59,345
Operating expenses:
	Research and development		81,612			8,802							90,414
	General and administrative		32,381			3,528		K		(1,497	)		34,412
Total operating expenses			113,993			12,330							124,826
Loss from operations			(56,378	)		(10,600	)						(65,481	)
	Interest and other income (loss), net		6,708			(1,077	)	G		(399	)		5,232
Loss before income taxes			(49,670	)		(11,677	)						(60,249	)
	Income taxes		—			—							—
Net loss			(49,670	)		(11,677	)						(60,249	)
	Net loss attributable to non-controlling interest		—			—		J		208			208
Net loss attributable to Sangamo Therapeutics, Inc. stockholders		$	(49,670	)	$	(11,677	)					$	(60,041	)
Loss per share
	Basic and diluted net loss per share attributable to Sangamo Therapeutics, Inc. stockholders	$	(0.52	)								$	(0.63	)
	Shares used in computing basic and diluted net loss per share attributable to Sangamo Therapeutics, Inc. stockholders		95,165										95,165

		Sangamo Historical			TxCell Historical US GAAP (in USD)				Pro Forma Adjustments		Pro Forma combined
Revenues:
	Collaboration agreements	$	35,960		$	—					$	35,960
	Research grants		607			2,524						3,131
Total revenues			36,567			2,524						39,091
Operating expenses:
	Research and development		65,728			9,762						75,490
	General and administrative		27,200			4,622						31,822
Total operating expenses			92,928			14,384						107,312
Loss from operations			(56,361	)		(11,860	)					(68,221	)
	Interest and other income (loss), net		1,793			(464	)	G		323		1,652
Loss before income taxes			(54,568	)		(12,324	)					(66,569	)
	Income taxes		—			—						—
Net loss			(54,568	)		(12,324	)					(66,569	)
	Net loss attributable to non-controlling interest		—			—		J		219		219
Net loss attributable to Sangamo Therapeutics, Inc. stockholders		$	(54,568	)	$	(12,324	)				$	(66,350	)
Loss per share
	Basic and diluted net loss per share attributable to Sangamo Therapeutics, Inc. stockholders	$	(0.70	)							$	(0.85	)
	Shares used in computing basic and diluted net loss per share attributable to Sangamo Therapeutics, Inc. stockholders		78,084									78,084

Cash paid to purchase TxCell Ordinary Shares in Block Transaction	$	40,475
Cash paid to acquire TxCell Ordinary Shares in open market purchases, the Offer, and the squeeze out procedures		34,512
TxCell Loan		5,222
Estimated fair value of Free Shares Options		190
Total	$	80,399

Period of Exchange Rate	$ / €
Balance Sheet as of September 30, 2018: Period end exchange rate as of September 30, 2018	1.16
Statement of Operations for the nine months ended September 30, 2018: Average exchange rate for that period	1.194
Statement of Operations for the year ended December 31, 2017: Average exchange rate for that period	1.129

Cash transactions (in thousands)	Cash and cash equivalents			Non-current restricted cash
Sangamo cash consideration for TxCell Ordinary Shares	$	—		$	(74,987	)
TxCell cash used to settle outstanding convertible debt		(3,574	)		—
Cash payment received by TxCell for converted warrants		623			—
Total	$	(2,951	)	$	(74,987	)

Purchase consideration	$	80,399
Fair value of non-controlling interest		1,357
Total value of TxCell		81,756

Less: Estimated fair value of assets acquired:
Cash		(4,674	)
Current assets		(2,404	)
Property and equipment		(1,856	)
Other assets		(155	)
Fair value of intangible assets acquired, primarily in-process research and development (IPR&D)		(55,020	)
Plus: Estimated fair value of the liabilities assumed
Current liabilities		11,559
Deferred tax liability		6,798
Long-term liabilities		3,133
Goodwill	$	39,137

Historical debt and debt like items	Balance
Payment to settle convertible debt	$	(3,574	)
Convertible debt that was converted into TxCell Ordinary Shares		(3,312	)
Total convertible notes eliminated as part of the Acquisition	$	(6,886	)

Statement of operations impact	Twelve months ended December 31, 2017			Nine months ended September 30, 2018
Mark-to-market changes	$	323		$	(399	)

			Net loss attributable to non-controlling interest
	Fair value of non-controlling interest at September 30, 2018		Twelve months ended December 31, 2017			Nine months ended September 30, 2018
Non-controlling interest	$	1,357	$	(219	)	$	(208	)


	(d)	Exhibits