8-K/A

0001193125-14-381613.txt : 20141024 0001193125-14-381613.hdr.sgml : 20141024 20141024163735 ACCESSION NUMBER: 0001193125-14-381613 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20140808 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20141024 DATE AS OF CHANGE: 20141024 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTREXON CORP CENTRAL INDEX KEY: 0001356090 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 000000000 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-36042 FILM NUMBER: 141172829 BUSINESS ADDRESS: STREET 1: 1750 KRAFT DRIVE STREET 2: SUITE 1400 CITY: BLACKSBURG STATE: VA ZIP: 24060 BUSINESS PHONE: 301-556-9809 MAIL ADDRESS: STREET 1: 1750 KRAFT DRIVE STREET 2: SUITE 1400 CITY: BLACKSBURG STATE: VA ZIP: 24060 8-K/A 1 d809755d8ka.htm 8-K/A 8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 24, 2014 (August 8, 2014)

INTREXON CORPORATION

(Exact Name of Registrant as Specified in Charter)

Virginia

001-36042

26-0084895

(State or Other Jurisdiction

of Incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

20374 Seneca Meadows Parkway, Germantown, Maryland 20876

(Address of Principal Executive Offices) (Zip Code)

(301) 556-9900

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨	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))

EXPLANATORY NOTE

This Amendment No. 1 to Form 8-K amends our Form 8-K dated August 8, 2014, originally filed with the Securities and Exchange Commission on August 11, 2014 (the “Original Report”). We filed the Original Report to report, among other things, our acquisition, effective as of August 8, 2014, of Trans Ova Genetics, L.C., an Iowa limited liability company (“Trans Ova”), in accordance with the terms of the previously disclosed Amended and Restated Membership Interest Purchase Agreement, filed as Exhibit 2.1 to the Original Report. As permitted by Items 9.01(a)(4) and 9.01(b)(2), we are filing this amendment to include the financial statements and pro forma financial information required by Items 9.01(a) and 9.01(b).

Item 9.01.

Financial Statements and Exhibits.

(a)

Financial Statements of Business Acquired.

In accordance with Rule 3-05(a)(1)(i) of Regulation S-X, filed herewith (and incorporated herein by reference) are the following financial statements of Trans Ova:

•

Exhibit 99.1 – Audited Consolidated Financial Statements of Trans Ova Genetics, L.C. and Subsidiaries as of and for the year ended December 31, 2013.

•

Exhibit 99.2 – Unaudited Condensed Consolidated Financial Statements of Trans Ova Genetics, L.C. and Subsidiaries as of June 30, 2014 and December 31, 2013, and for the six months ended June 30, 2014 and 2013.

(b)

Pro Forma Financial Information.

In accordance with Rule 11-01(a)(1) of Regulation S-X, filed herewith (and incorporated herein by reference) as Exhibit 99.3 is unaudited pro forma condensed combined consolidated financial information of Intrexon Corporation and Trans Ova, giving effect to certain pro forma events related to the acquisition. It does not purport to project future financial position or operating results of the post-acquisition combined company. The unaudited pro forma condensed combined consolidated statements of operations are for the six months ended June 30, 2014 and for the year ended December 31, 2013. The unaudited pro forma condensed combined consolidated balance sheet is as of June 30, 2014.

(c)

Shell Company Transactions.

Not applicable.

(d)

Exhibits.

See the Exhibit Index immediately following the signature page hereto, which is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 24, 2014


INTREXON CORPORATION

By:		/s/ Rick L. Sterling
		Rick L. Sterling
		Chief Financial Officer

EXHIBIT INDEX


Exhibit Number		Description

23.1		Consent of Frost, PLLC.

99.1		Audited Consolidated Financial Statements of Trans Ova Genetics, L.C. and Subsidiaries as of and for the year ended December 31, 2013.

99.2		Unaudited Condensed Consolidated Financial Statements of Trans Ova Genetics, L.C. and Subsidiaries as of June 30, 2014 and December 31, 2013, and for the six months ended June 30, 2014 and 2013.

99.3		Unaudited Pro forma Condensed Combined Consolidated Financial Information of Intrexon Corporation and Trans Ova Genetics, L.C. consisting of: unaudited pro forma condensed combined consolidated statement of operations for the six months ended June 30, 2014; unaudited pro forma condensed combined consolidated statement of operations for the year ended December 31, 2013; unaudited pro forma condensed combined consolidated balance sheet as of June 30, 2014; and notes to the unaudited pro forma condensed combined consolidated financial statements.

EX-23.1 2 d809755dex231.htm EX-23.1 EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in Registration Statement No. 333-196840 on Form S-8 and Registration Statement No. 333-198598 on Form S-3 of Intrexon Corporation of our report dated October 22, 2014, relating to the consolidated financial statements of Trans Ova Genetics, L.C. and Subsidiaries as of and for the year ended December 31, 2013, appearing in this Current Report on Form 8-K of Intrexon Corporation dated August 8, 2014 and filed with the Securities and Exchange Commission on August 11, 2014.

/s/ Frost, PLLC

Little Rock, Arkansas

October 22, 2014

EX-99.1 3 d809755dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

December 31, 2013

Consolidated Financial Statements

With

Independent Auditor’s Report

Board of Directors

Trans Ova Genetics, L.C. and Subsidiaries

Sioux Center, Iowa

We have audited the accompanying consolidated financial statements of Trans Ova Genetics, L.C. and Subsidiaries, which comprise the consolidated balance sheet as of December 31, 2013, and the related consolidated statements of operations, equity and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Trans Ova Genetics, L.C. and Subsidiaries as of December 31, 2013, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ Frost, PLLC

Certified Public Accountants

Little Rock, Arkansas

October 22, 2014

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Consolidated Balance Sheet

December 31, 2013


Assets

Current assets
Cash	$	865,027
Accounts receivable, less allowance for doubtful accounts of $2,200,288		12,119,389
Inventory		17,153,577
Prepaid expenses		485,619

Total current assets		30,623,612


Property, plant and equipment, net		13,911,539


Other assets
Intangible assets - finite-lived, net		803,966
Other		375,311

Total other assets		1,179,277


Total assets	$	45,714,428


Liabilities and Equity

Current liabilities
Accounts payable	$	4,054,108
Other current liabilities		5,687,724
Lines of credit		498,000
Current portion of notes payable and long-term debt		1,336,995

Total current liabilities		11,576,827

Notes payable and long-term debt, less current portion		11,045,674


Total liabilities		22,622,501


Equity
Members’ equity		22,985,057
Noncontrolling interest in consolidated entity		106,870

Total equity		23,091,927


Total liabilities and equity	$	45,714,428

The accompanying notes are an integral part of these consolidated financial statements.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Consolidated Statement of Operations

For the Year Ended December 31, 2013


Revenue
Product revenue	$	33,409,345
Service revenue		28,788,621
Other		1,032,820

Total revenue		63,230,786


Cost of sales
Cost of product		32,208,863
Cost of service		16,657,337

Total cost of sales		48,866,200


Gross profit		14,364,586


Other operating expenses
Sales and marketing		1,505,042
General and administration		7,876,510
Research and development		1,466,433

Total other operating expenses		10,847,985


Income from operations		3,516,601


Other income (expense)
Interest income and finance charge revenue		820,304
Dissolution loss on disposal from noncontrolling interest		(39,877	)
Rental income		60,135
Miscellaneous income		428,674
Interest expense		(426,985	)

Total other income		842,251


Net income		4,358,852

Net loss attributable to noncontrolling interest		(506,265	)


Net income attributable to members’ equity	$	4,865,117

The accompanying notes are an integral part of these consolidated financial statements.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Consolidated Statement of Equity

For the Year Ended December 31, 2013


	Members’ Equity			Noncontrolling Interest in Consolidated Entity			Total Equity




Balance - January 1, 2013	$	19,825,515		$	155,733		$	19,981,248

Members’ distributions		(1,113,845	)		—			(1,113,845	)

Accrued distributions		(1,064,000	)		—			(1,064,000	)

Capital contribution from noncontrolling interest		—			885,599			885,599

Unit-based compensation to noncontrolling interest		—			4,196			4,196

Dissolution loss on disposal of noncontrolling interest		—			39,877			39,877

Noncash additional paid-in capital from change in investment basis		472,270			(472,270	)		—

Net income (loss)		4,865,117			(506,265	)		4,358,852


Balance - December 31, 2013	$	22,985,057		$	106,870		$	23,091,927

The accompanying notes are an integral part of these consolidated financial statements.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2013


Cash flows from operating activities
Net income	$	4,358,852
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		1,823,657
Amortization		240,293
Provision for bad debts		567,434
Gain on sale of property, plant and equipment		(156,136	)
Unit-based compensation to noncontrolling interest		4,196
Dissolution loss on disposal of noncontrolling interest		39,877
Gain from debt forgiveness		(116,667	)
Changes in operating assets and liabilities
Accounts receivable		(1,209,969	)
Inventory		2,984,180
Prepaid expenses		(98,205	)
Other assets		(7,415	)
Accounts payable		318,884
Other current liabilities		1,182,374

Net cash provided by operating activities		9,931,355


Cash flows from investing activities
Purchases of property, plant and equipment		(3,228,592	)
Proceeds from sale of property, plant and equipment		561,017
Net change in swine breeding herd animals		6,575
Payments for intangible assets		(101,306	)

Net cash used by investing activities		(2,762,306	)


Cash flows from financing activities
Net payments on lines of credit		(10,854,000	)
Proceeds from issuance of notes payable and long-term debt		7,050,000
Repayments on notes payable and long-term debt		(1,363,527	)
Members’ distributions		(2,748,845	)
Capital contributions from noncontrolling interest		885,599

Net cash used by financing activities		(7,030,773	)


Net increase in cash		138,276

Cash - beginning of year		726,751


Cash - end of year	$	865,027


Supplementary disclosure of cash flow information
Cash paid during the year for interest	$	461,674

Supplementary disclosures of noncash transactions
Accrued distributions	$	1,064,000
Debt forgiveness		116,667

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2013

1.	Summary of Significant Accounting Policies

Nature of operations – Trans Ova Genetics, L.C. and Subsidiaries (the “Company”), an Iowa limited liability company, was formed on November 14, 2000. Prior to that date, the Company operated as a division of Pro Edge LP. The majority owner is the partnership, Pro Edge LP.

Trans Ova Genetics, L.C. (“TOG”) offers bovine embryo transfer, in-vitro fertilization and related reproductive services, with primary locations in Iowa, Maryland, Missouri, Oklahoma and Texas.

TOG previously owned 80% of Trans Ova Genetics International, LLC (“TOGI”), which was created in February 2011 for the purpose of expanding operations and customer base in Russia. TOGI was dissolved in 2013.

TOG owns 100% ViaGen, L.C. (“ViaGen”), an Iowa limited liability company acquired by TOG in 2012. Future sales growth in excess of specific revenue milestones, or any future sale of ViaGen’s investment in Exemplar Genetics, LLC (“Exemplar”), would trigger additional contingent payments. ViaGen was founded in Texas in January 2002. ViaGen provides gene banking, commercial cloning and genomic services in the United States and licenses technology globally.

Exemplar was founded in Iowa in February 2008. Exemplar produces and markets genetically engineered swine to be used in medical and genetic research with primary locations in Iowa and South Dakota. Through Exemplar’s involvement in the medical and genetic research field, Exemplar receives government grants for use in research and development. As of December 31, 2013, TOG owns 27% and ViaGen owns 26% of Exemplar.

Bovance was incorporated in Delaware in September 2007. Bovance offers bovine cloning services with primary locations in Iowa and Texas. In 2013, Bovance was dissolved and all operations are now reported under ViaGen.

Principles of consolidation – The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash equivalents – The Company considers all highly liquid cash investments with an original maturity of three months or less to be cash equivalents. As a result of the Company’s cash management system, checks issued but not presented for payment, may create negative financial statement cash balances. Checks outstanding in excess of related cash balances totaling approximately $1,185,000 at December 31, 2013 are included in accounts payable. The Company had no cash equivalents at December 31, 2013.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2013

1.	Summary of Significant Accounting Policies (cont.)

Inventory – Inventory includes livestock used in providing reproductive services, live swine finisher inventories, feed and other inventory which is valued at the cost of acquisition based on a first in, first-out method or market. The work in process inventory relates to the accumulated cost including embryo, production costs, yardage cost and related items associated with providing these services and are valued at the lower of cost or market.

Swine breeding herd animals – Purchased breeding swine are recorded at cost and amortized over their useful lives, which is 24 months. Raised breeding swine are valued at accumulated cost, which includes cost of feed, supplies, labor and production overhead prior to mating, and amortized over their useful lives, which is 24 months. In accordance with industry practice, all swine breeding stock is included in the accompanying consolidated balance sheet as property, plant and equipment, net.

Trade accounts receivable – Accounts receivable consists of credit extended to the Company’s customers in the normal course of business and are reported net of an allowance for doubtful accounts. The Company reviews its customer accounts on a periodic basis and records bad debt expense for specific amounts the Company evaluates as uncollectible. In addition, the Company provides an allowance for potential uncollectible amounts that have not been specifically identified. Past due status is determined based upon contractual terms. Amounts are written off at the point when collection attempts have been exhausted. Management estimates uncollectible amounts considering such factors as current economic conditions and historic and anticipated customer performance. This estimate can fluctuate due to changes in economic, industry or specific customer conditions which may require adjustment to the allowance recorded by the Company. Management has included amounts believed to be uncollectible in the allowance for doubtful accounts.

Property, plant and equipment – Property, plant and equipment are stated at cost. Depreciation is recorded using the straight-line method based on the following useful lives:


Buildings			15 - 20 years
Leasehold improvements			7 -15 years
Equipment and fixtures			3 - 7 years
Vehicles			3 - 5 years

Intangible assets – finite-lived, net – Intangible assets – finite-lived, net, consist of purchased intangibles, which consist primarily of customer relationships and intellectual property. Customer relationships are amortized using the straight-line method over a range of 4 to 20 years. Intellectual property is amortized using the straight-line method over a 10-year period.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2013

1.	Summary of Significant Accounting Policies (cont.)

Impairment of long-lived assets – The Company reviews the carrying value of its long-lived assets for impairment whenever triggering events or changes in circumstances indicate that the carrying value of an asset may not be recoverable from estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying amount exceeds the fair value of assets. The factors considered by management in performing this assessment include operating results, trends, prospects, as well as the effects of obsolescence, demand, competition and other economic factors. Based upon management’s assessment of impairment of the existing assets, no triggering events or changes in circumstances indicated that an impairment loss should be recognized at December 31, 2013.

Income taxes – No provision has been made in the consolidated financial statements for federal and state income taxes since the income is taxable to the respective owners, not to the Company.

The Company’s policy with respect to evaluating uncertain tax positions is based upon whether management believes it is more likely than not uncertain tax positions will be sustained upon review by the taxing authorities, then the Company shall initially and subsequently measure the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The tax positions must meet the more-likely-than-not recognition threshold with consideration given to the amounts and probabilities of the outcomes that could be realized upon settlement using the facts, circumstances and information at the reporting date. The Company will reflect only the portion of the tax benefit that will be sustained upon resolution of the position and applicable interest on the portion of the tax benefit not recognized. Based upon management’s assessment, there are no uncertain tax positions expected to have a material impact on the Company’s consolidated financial statements.

The Company is no longer subject to U.S. federal and state examinations by tax authorities for years before 2010. The Company’s federal and state tax returns are not currently under examination. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. During the year ended December 31, 2013, the Company did not recognize any interest or penalties. The Company did not have any interest or penalties accrued at December 31, 2013.

Revenue recognition – Service revenues are recognized when persuasive evidence of an agreement exists; the services are provided; the Company’s price to the buyer is fixed and determinable; and the collectibility of revenues is reasonably assured.

Government grants – During the year ended December 31, 2013, the Company applied for and was awarded several grants from the United States National Institutes of Health for cardiovascular disease and lung disease research. The grants reimburse the Company for expenses relating to the fostering of research and prevention for diseases. The Company recognized $896,648 in grant income under the above mentioned grants for the year ended December 31, 2013. The Company had outstanding receivable balances in the amount of $90,412 recorded under these grants for 2013.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2013

1.	Summary of Significant Accounting Policies (cont.)

Research and development costs – Research and development costs are expensed as incurred.

Shipping and handling costs – All shipping and handling costs are included in cost of sales in the accompanying consolidated statement of operations.

Advertising costs – Advertising costs are expensed as incurred. Advertising costs were approximately $241,000 in 2013.

2.	Inventory

Inventory consists of the following:


Supplies, semen and embryos	$	1,066,657
Work in process		3,518,582
Livestock		10,253,450
Feed		2,307,967
Other		6,922


	$	17,153,578

3.	Property, Plant and Equipment, Net

Property, plant and equipment, net, consist of the following:


Land	$	2,198,700
Buildings		9,328,369
Leasehold improvements		1,484,821
Equipment and fixtures		8,300,741
Vehicles		1,775,244
Land improvements		2,538,663
Construction in progress		2,419

		25,628,957
Accumulated depreciation		(11,741,443	)

		13,887,514
Swine breeding herd animals, net		24,025


Property, plant and equipment, net	$	13,911,539

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2013

4.	Intangible Assets – Finite-Lived, Net

The Company’s components of other intangible assets and related accumulated amortization are as follows:


	Gross		Accumulated Amortization		Net

Customer relationship	$	1,146,000	$	605,857	$	540,143
Intellectual property		362,223		98,400		263,823


	$	1,508,223	$	704,257	$	803,966

Total amortization expense for customer relationship and intellectual property was $240,293 for the year ended December 31, 2013.

Estimated amortization expense is as follows:


2014	$	233,424
2015		165,007
2016		61,722
2017		39,651
2018		39,646
Thereafter		264,516


	$	803,966

5.	Lines of Credit, Notes Payable and Long-Term Debt

Lines of credit consist of the following:


Exemplar $700,000 revolving line of credit with American State Bank, matures in November 2014. The note bears interest at 4.5% per annum, collateralized by substantially all of the Company’s assets.	$	498,000

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2013

5.	Lines of Credit, Notes Payable and Long-Term Debt (cont.)

Notes payable and long-term debt consists of the following:


TOG note payable to American State Bank, payable in monthly installments of $39,234, including interest at a fixed rate of 3.95%, maturing April 2033, collateralized by all assets of the Company.	$	6,285,044

TOG forgivable loans from the Iowa Economic Development Authority. Loans are potentially forgiven based upon new job creation criteria. Because certain job creation milestones must be met and maintained, forgiveness or repayment is uncertain and the exact maturity has yet to be determined. Default interest is 6.00%. Loans are collateralized by assets financed.		4,393,453

TOG $750,000 equipment loan with First National Bank of Omaha, which matures September 2017. The loan bears interest at a rate of 3.72%. The loan is collateralized by substantially all of the Company’s assets, excluding real estate.		438,550

Exemplar noninterest-bearing note payable to the Iowa Economic Development Authority, payable in monthly installments of $2,500, balance due September 2018, collateralized by certain members’ letters of credit.		290,000

Exemplar noninterest bearing note payable to the Iowa Economic Development Authority, payable in monthly installments of $3,333, balance due May 2020, collateralized by certain members’ letters of credit.		253,333

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2013

5.	Lines of Credit, Notes Payable and Long-Term Debt (cont.)


Exemplar convertible promissory note totaling $250,000, payable to a related party, interest only payments due quarterly at a fixed rate of 7.0%, principal due August 2015. The note is convertible for the unpaid principal balance at a price of $2.75 per unit (rounded to the nearest whole unit). Accrued interest as of the date of the conversion is required to be paid in cash. The conversion is exercisable by written notice from the holder on or before the maturity date.	$	250,000

Exemplar forgivable loan from the South Dakota Economic Development Finance Authority, forgivable in the event that if the Company reaches certain milestones as determined by the loan agreement, the unpaid balance of the loan would be forgiven by the lender. The loan is payable in monthly installments of $1,568, including interest at a fixed rate of 5.00%, with a balloon payment due in 2015, collateralized by real estate.		206,159

Exemplar note payable to Sioux County Revolving Fund bearing interest at 3.00%, interest accrues monthly and is payable in monthly installments of $1,446, with the note maturing on November 1, 2019, collateralized by real estate.		92,721

Other		173,409

		12,382,669
Less current portion		1,336,995


Notes payable and long-term debt, less current portion	$	11,045,674

The revolving line of credits contains certain restrictive covenants that include maintaining minimum tangible net worth, maximum allowable annual capital expenditures and working capital. The Company was in compliance with these covenants at December 31, 2013. The amount available under the revolving line of credits is based on eligible accounts receivable and inventory or the maximum line of credit amount. At December 31, 2013, the amount available under the revolving line of credits was $10,000,000.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2013

5.	Lines of Credit, Notes Payable and Long-Term Debt (cont.)

Future annual maturities of notes payable and long-term debt are as follows:


2014	$	1,336,995
2015		1,698,792
2016		1,250,425
2017		357,861
2018		354,771
Thereafter		7,383,825


	$	12,382,669

6.	Leases

The Company leases cattle yards, animal care facilities, swine facilities and equipment under noncancelable operating leases that expire in 2018. Operating leases and rent expense included in the statement of operations amounted to approximately $1,687,000 at December 31, 2013.

Minimum lease payments under the operating leases with terms in excess of one year are as follows:


2014	$	173,750
2015		32,917
2016		33,302
2017		33,302
2018		14,881


	$	288,152

7.	Related Party Transactions

The Company had additional accounts receivable from a related party of approximately $211,000 as of December 31, 2013. The Company had sales of approximately $64,000 to the related party during 2013. Additionally, the Company had accounts payable due to members of $12,342 as of December 31, 2013.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2013

8.	Benefit Plans

The Company sponsors a 401(k) savings plan covering all employees of the Company who have completed six months of service and have reached the age of 21. Participants may elect to contribute from 1% to 60% of their salary annually and the Company will match up to 50% of the employee’s contribution, subject to certain limitations. Total expense related to this plan was $241,008 for 2013.

9.	Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of trade receivables and equivalents with financial institutions. The Company controls credit risk through credit approvals, credit limits and monitoring procedures. The Company performs ongoing credit evaluations of its customers, but generally does not require collateral to support accounts receivable.

At December 31, 2013 and at various times throughout the year, the Company maintains cash and cash investment balances with a financial institution in excess of Federal Deposit Insurance Corporation insured limits.

10.	Commitments and Contingencies

On March 6, 2012, the Company was named as a defendant in a licensing and patent infringement suit brought by XY, Inc. alleging that certain of the Company’s activities breach a licensing agreement and infringe on patents that XY, Inc. allegedly owns. The Company is reviewing, defending and filing counter claims in the case. Based on advice from legal counsel, the Company believes that XY, Inc.’s complaints are without merit; however, no assurance can be given that this matter will be resolved in the Company’s favor.

From time to time, the Company is involved in lawsuits which occur during the normal course of business. Management vigorously defends these actions when they occur and believes no potential material losses from such litigation exists at December 31, 2013.

11.	Share-Based Compensation

Effective August 2010, the Company approved a membership interest unit option plan. ASC 718, “Share-Based Payments,” establishes standards for the accounting of transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the Company’s equity instruments or that may be settled by the issuance of those equity instruments. The fair value of the stock options was computed using the Black-Sholes model was $21,000 at the measurement date or grant date with the amount being capitalized in intangible assets – finite-lived, net. Expected volatility was measured based on historical volatility of the stock prices of Pro Edge LP. The stock options expire December 31, 2014.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2013

11.	Share-Based Compensation (cont.)

Exemplar has a membership interest unit option plan. The plan was amended December 1, 2013 and is authorized to grant options up to a maximum of 500,000 options, with an eligible increase in options as determined by the Board of Managers and requiring an amendment to the operating agreement. Such options will be granted to eligible participants who are, at the time of such grant, employees of the Company, including employees who are officers of Exemplar and to persons who are, at the time of such grant, not employees of Exemplar but are deemed by the manager to be important to the future success of Exemplar or its affiliates. The fair value of the unit options was computed using the Black-Sholes model and is estimated at $605,025 at the measurement date or grant date. Compensation expense is recognized over the awards requisite service period during the vesting period ranging from one to three years. Compensation expense of $4,196 was recognized during the year ended December 31, 2013. In May 2013, an employee’s position was eliminated and the employee did not exercise the membership unit options in the required 60 days; therefore, 5,000 membership unit options were forfeited during 2013.

Assumptions used for the valuation of Exemplar’s unit option awards granted during the year ended December 31, 2013 consisted of the following:


Key assumptions
Risk-free interest rate	2.55	%
Expected life in years	10
Expected volatility (over expected life)	35.00	%
Expected dividend yield (over expected life)	0.00	%

As of December 31, 2013, there was $248,425 of total unrecognized compensation cost related to nonvested unit options.

A summary of Exemplar’s plan options outstanding is as follows:


	Options			Weighted- Average Exercise Price Per Share

Balance - January 1, 2013		220,000			1.57
Granted		183,000			2.75
Exercised		—			—
Expired		—			—
Forfeited		(5,000	)		2.50


Outstanding - December 31, 2013		398,000		$	2.10

No options have been exercised under the current plan.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2013

11.	Share-Based Compensation (cont.)

Changes in Exemplar’s nonvested options are summarized as follows:


	Options			Weighted- Average Exercise Price Per Share

Balance - January 1, 2013		3,400			2.50
Granted		183,000			2.75
Vested		(3,400	)		2.50
Forfeited		—			—


Nonvested - December 31, 2013		183,000		$	2.75

The following table summarizes information about Exemplar’s unit options outstanding:


		Options Outstanding
Range of Exercise Prices		Number Outstanding at December 31, 2013		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price

$	1.50		205,000		4.0	$	1.50
	2.50		10,000		7.0		2.50
	2.75		183,000		10.0		2.75

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2013

12.	Subsequent Events

Effective August 8, 2014 (the “Closing Date”), Intrexon Corporation (“Intrexon”) purchased 100% of the membership interests of TOG. Intrexon and TOG intend to build upon TOG’s current platform with new capabilities to allow for even higher levels of delivered value to dairy and beef cattle producers. The consideration paid at closing for all the membership interests in TOG consisted of $60,000,000 in cash and the issuance of 1,444,388 shares of Intrexon’s common stock. In addition, $20,000,000 in deferred cash is payable in three equal installments upon the first, second and third anniversaries of the Closing Date (the “Base Consideration”). The Purchase Agreement also provides for (i) the payment to former equity holders of TOG of the aggregate amounts of certain debts, together with accrued interest, currently owed by TOG to governmental entities in the event and to the extent that those debts are forgiven by the relevant governmental entities; and (ii) the payment to such former equity holders of a portion of certain cash proceeds in the event there is an award under currently pending litigation matters to which TOG is a party (together with the Base Consideration, the “Purchase Agreement Consideration”). The Purchase Agreement Consideration is subject to further adjustment as described in the Purchase Agreement.

In August 2014, TOG and the Iowa Economic Development Authority (“IEDA”) finalized a settlement agreement on outstanding forgivable loans. TOG has agreed to pay IEDA $1,465,561 in quarterly payments of $183,195, beginning October 1, 2014, with a maturity date of July 1, 2016, in satisfaction of all of its obligations. As of the forgiveness date, total outstanding debt and other liabilities to IEDA was $4,630,657, resulting in debt forgiveness of $3,165,096.

The Company has been made aware of a threatened lawsuit from certain former members of the Company whose units were purchased prior to the Intrexon acquisition, but no claim has been filed as of the date hereof. The Company believes any such claim is without merit and denies any misrepresentations or wrongdoing. The Company intends to vigorously defend itself in response to any legal action that is actually commenced. The Company has not accrued any liability related to this threatened litigation.

The Company evaluated the events and transactions subsequent to its December 31, 2013 consolidated balance sheet date and determined there were no significant events, other than disclosed above, necessary for disclosure through October 22, 2014, which is the date the Company issued its consolidated financial statements.

EX-99.2 4 d809755dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

June 30, 2014 and December 31, 2013

Condensed Consolidated Financial Statements

(Unaudited)

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Condensed Consolidated Balance Sheet

(Unaudited)

June 30, 2014 and December 31, 2013


	June 30, 2014		December 31, 2013
Assets

Current assets
Cash	$	1,029,340	$	865,027
Accounts receivable, less allowance for doubtful accounts of $2,485,337 at June 30, 2014 and $2,200,288 at December 31, 2013		16,825,229		12,119,389
Inventory		18,251,109		17,153,577
Prepaid expenses		286,194		485,619

Total current assets		36,391,872		30,623,612


Property, plant and equipment, net		14,016,416		13,911,539


Other assets
Intangible assets - finite-lived, net		746,422		803,966
Other		353,821		375,311

Total other assets		1,100,243		1,179,277


Total assets	$	51,508,531	$	45,714,428


Liabilities and Equity

Current liabilities
Accounts payable	$	4,088,395	$	4,054,108
Other current liabilities		4,461,487		5,687,724
Lines of credit		3,874,000		498,000
Current portion of notes payable and long-term debt		557,124		1,336,995

Total current liabilities		12,981,006		11,576,827

Notes payable and long-term debt, less current portion		11,502,952		11,045,674


Total liabilities		24,483,958		22,622,501


Equity
Members’ equity		26,749,920		22,985,057
Noncontrolling interest in consolidated entity		274,653		106,870

Total equity		27,024,573		23,091,927


Total liabilities and equity	$	51,508,531	$	45,714,428

See accompanying notes.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Condensed Consolidated Statement of Operations

(Unaudited)

For the Six Months Ended June 30, 2014 and 2013


	June 30, 2014			June 30, 2013
Revenue
Product revenue	$	19,376,957		$	17,276,438
Service revenue		17,591,153			15,080,290
Other		513,308			555,858

Total revenue		37,481,418			32,912,586


Cost of sales
Cost of product		15,972,459			17,233,165
Cost of service		9,851,464			8,283,544

Total cost of sales		25,823,923			25,516,709


Gross profit		11,657,495			7,395,877


Other operating expenses
Sales and marketing		756,261			718,537
General and administration		5,465,534			3,741,368
Research and development		844,721			734,960

Total other operating expenses		7,066,516			5,194,865


Income from operations		4,590,979			2,201,012


Other income (expense)
Interest income and finance charge revenue		422,353			348,632
Rental and miscellaneous income		103,162			210,520
Interest expense		(168,629	)		(250,270	)

Total other income		356,886			308,882


Net income		4,947,865			2,509,894

Net loss attributable to noncontrolling interest		(139,473	)		(173,225	)


Net income attributable to members’ equity	$	5,087,338		$	2,683,119

See accompanying notes.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Condensed Consolidated Statement of Cash Flows

(Unaudited)

For the Six Months Ended June 30, 2014 and 2013


	June 30, 2014			June 30, 2013
Cash flows from operating activities
Net income	$	4,947,865		$	2,509,894
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		977,599			908,233
Amortization		117,640			118,765
Provision for bad debts		285,048			355,686
Gain on sale of property, plant and equipment		(26,478	)		(180,346	)
Unit-based compensation to noncontrolling interest		41,184			2,100
Changes in operating assets and liabilities
Accounts receivable		(4,990,888	)		(2,618,018	)
Inventory		(1,097,532	)		2,951,101
Prepaid expenses		199,425			139,986
Other assets		20,807			(53,912	)
Accounts payable		34,287			(658,996	)
Other current liabilities		(162,237	)		(235,863	)

Net cash provided by operating activities		346,720			3,238,630


Cash flows from investing activities
Purchases of property, plant and equipment		(1,104,598	)		(1,107,882	)
Proceeds from sale of property, plant and equipment		49,700			555,060
Net change in swine breeding herd animals		(1,100	)		1,650
Payments for intangible assets		(59,413	)		(59,821	)

Net cash used by investing activities		(1,115,411	)		(610,993	)


Cash flows from financing activities
Net borrowings from (payments on) lines of credit		3,376,000			(7,788,000	)
Proceeds from issuance of notes payable and long-term debt		—			6,800,000
Repayments on notes payable and long-term debt		(322,593	)		(1,006,152	)
Purchase of members’ units		(1,345,837	)		—
Members’ distributions		(1,356,792	)		(2,074,648	)
Capital contributions from noncontrolling interest		582,226			732,702

Net cash provided (used) by financing activities		933,004			(3,336,098	)


Net increase (decrease) in cash		164,313			(708,461	)

Cash - beginning of period		865,027			726,751


Cash - end of period	$	1,029,340		$	18,290


Supplementary disclosure of cash flow information
Cash paid during the period for interest	$	162,344		$	260,868

See accompanying notes.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.	Summary of Significant Accounting Policies

Trans Ova Genetics, L.C. (“TOG”) offers bovine embryo transfer, in-vitro fertilization and related reproductive services, with primary locations in Iowa, Maryland, Missouri, Oklahoma and Texas.

TOG owns 100% of ViaGen, L.C (“ViaGen”) an Iowa limited liability company acquired by TOG in 2012. Future sales growth in excess of specific revenue milestones, or any future sale of ViaGen’s investment in Exemplar Genetics, LLC (“Exemplar”), would trigger additional contingent payments.

ViaGen was founded in Texas in January 2002. ViaGen provides gene banking, commercial cloning and genomic services in the United States and licenses technology globally.

Exemplar was founded in Iowa in February 2008. Exemplar produces and markets genetically engineered swine to be used in medical and genetic research with primary locations in Iowa and South Dakota. Through Exemplar’s involvement in the medical and genetic research field, Exemplar receives government grants for use in research and development. As of June 30, 2014, TOG owns 26% and ViaGen owns 25% of Exemplar.

The consolidated financial statements for the six months ending June 30, 2014 should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2013, as issued on April 4, 2014.

The consolidated financial statements at December 31, 2013 have been derived from the audited consolidated financial statements at that date, but do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. The accompanying consolidated financial statements include all adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and cash flows. Results of operations for the periods ending June 30, 2014 and 2013 are not necessarily indicative of results to be expected for a full year.

Principles of consolidation – The condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.	Summary of Significant Accounting Policies (cont.)

Use of estimates – The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash equivalents – The Company considers all highly liquid cash investments with an original maturity of three months or less to be cash equivalents. As a result of the Company’s cash management system, checks issued but not presented for payment, may create negative financial statement cash balances. Checks outstanding in excess of related cash balances totaling approximately $1,392,000 and $1,185,000 at June 30, 2014 and December 31, 2013, respectively, are included in accounts payable. The Company had no cash equivalents at June 30, 2014 or December 31, 2013.

Swine breeding herd animals – Purchased breeding swine are recorded at cost and amortized over their useful lives, which is 24 months. Raised breeding swine are valued at accumulated cost, which includes cost of feed, supplies, labor and production overhead prior to mating, and amortized over their useful lives, which is 24 months. In accordance with industry practice, all swine breeding stock is included in the accompanying condensed consolidated balance sheet as property, plant and equipment, net.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.	Summary of Significant Accounting Policies (cont.)

Property, plant and equipment – Property, plant and equipment are stated at cost. Depreciation is recorded using the straight-line method based on the following useful lives:


Buildings			15 - 20 years
Leasehold improvements			7 - 15 years
Equipment and fixtures			3 - 7 years
Vehicles			3 - 5 years

Income taxes – No provision has been made in the condensed consolidated financial statements for federal and state income taxes since the income is taxable to the respective owners, not to the Company.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.	Summary of Significant Accounting Policies (cont.)

The Company is no longer subject to U.S. federal and state examinations by tax authorities for years before 2011. The Company’s federal and state tax returns are not currently under examination. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. During the six months ended June 30, 2014 and 2013, the Company did not recognize any interest or penalties. The Company did not have any interest or penalties accrued at June 30, 2014 or December 31, 2013.

Government grants – During the six months ended June 30, 2014 and 2013, the Company applied for and was awarded several grants from the United States National Institutes of Health for cardiovascular disease and lung disease research. The grants reimburse the Company for expenses relating to the fostering of research and prevention for diseases. The Company recognized $399,988 and $477,964 in grant income under the above mentioned grants for the six months ended June 30, 2014 and 2013, respectively. The Company had outstanding receivable balances in the amount of $103,346 and $90,412 recorded under these grants for June 30, 2014 and December 31, 2013, respectively.

Research and development costs – Research and development costs are expensed as incurred.

Shipping and handling costs – All shipping and handling costs are included in cost of sales in the accompanying condensed consolidated statement of operations.

Advertising costs – Advertising costs are expensed as incurred. Advertising costs were approximately $125,000 and $108,000 in the six months ended June 30, 2014 and 2013, respectively.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

2.	Inventory

Inventory consists of the following:


	June 30, 2014		December 31, 2013

Supplies, semen and embryos	$	1,043,080	$	1,066,657
Work in process		4,003,085		3,518,581
Livestock		12,041,999		10,253,450
Feed		1,156,023		2,307,967
Other		6,922		6,922


	$	18,251,109	$	17,153,577

3.	Property, Plant and Equipment, Net

Property, plant and equipment, net, consist of the following:


	June 30, 2014			December 31, 2013

Land	$	2,198,700		$	2,198,700
Buildings		9,413,571			9,328,369
Leasehold improvements		1,482,959			1,484,821
Equipment and fixtures		8,679,194			8,300,741
Vehicles		1,917,037			1,775,244
Land improvements		2,538,663			2,538,663
Construction in progress		52,396			2,419

		26,282,520			25,628,957
Accumulated depreciation		(12,291,229	)		(11,741,443	)

		13,991,291			13,887,514
Swine breeding herd animals, net		25,125			24,025


Property, plant and equipment, net	$	14,016,416		$	13,911,539

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

4.	Lines of Credit, Notes Payable and Long-Term Debt

Lines of credit consist of the following:


	June 30, 2014		December 31, 2013
TOG $10,000,000 revolving line of credit with First National Bank of Omaha, matures in May 1, 2015. The line of credit bears interest at the greater of 2.95% above the London Interbank Offered Rate (“LIBOR”) or 3.00%. At June 30, 2014, the interest rate was 3.11% per annum. The line of credit is collateralized by substantially all of the Company’s assets, excluding real estate.	$	3,375,000	$	—

Exemplar $700,000 revolving line of credit with American State Bank, matures in November 2014. The note bears interest at 4.5% per annum, collateralized by substantially all of the Company’s assets.		499,000		498,000


Total lines of credit	$	3,874,000	$	498,000

Notes payable and long-term debt consists of the following:


	June 30, 2014		December 31, 2013
TOG note payable to American State Bank, payable in monthly installments of $39,234, including interest at a fixed rate of 3.95%, maturing April 2033, collateralized by all assets of the Company.	$	6,119,931	$	6,285,044

TOG forgivable loans from the Iowa Economic Development Authority. Loans are potentially forgiven based upon new job creation criteria. Because certain job creation milestones must be met and maintained, forgiveness or repayment is uncertain and the exact maturity has yet to be determined. Default interest is 6.00%. Loans are collateralized by assets financed.		4,370,740		4,393,453

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

4.	Lines of Credit, Notes Payable and Long-Term Debt (cont.)


	June 30, 2014		December 31, 2013
TOG $750,000 equipment loan with First National Bank of Omaha, which matures September 2017. The loan bears interest at a rate of 3.72%. The loan is collateralized by substantially all of the Company’s assets, excluding real estate.	$	363,550	$	438,550

Exemplar noninterest-bearing note payable to the Iowa Economic Development Authority, payable in monthly installments of $2,500, balance due September 2018, collateralized by certain members’ letters of credit.		275,000		290,000

Exemplar convertible promissory note totaling $250,000, payable to a related party, interest only payments due quarterly at a fixed rate of 7.0%, principal due August 2015. The note is convertible for the unpaid principal balance at a price of $2.75 per unit (rounded to the nearest whole unit). Accrued interest as of the date of the conversion is required to be paid in cash. The conversion is exercisable by written notice from the holder on or before the maturity date.		250,000		250,000

Exemplar noninterest bearing note payable to the Iowa Economic Development Authority, payable in monthly installments of $3,333, balance due May 2020, collateralized by certain members’ letters of credit.		233,333		253,333

Exemplar forgivable loan from the South Dakota Economic Development Finance Authority, forgivable in the event that if the Company reaches certain milestones as determined by the loan agreement, the unpaid balance of the loan would be forgiven by the lender. The loan is payable in monthly installments of $1,568, including interest at a fixed rate of 5.00%, with a balloon payment due in 2015, collateralized by real estate.		201,848		206,159

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

4.	Lines of Credit, Notes Payable and Long-Term Debt (cont.)


	June 30, 2014		December 31, 2013
Exemplar note payable to Sioux County Revolving Fund bearing interest at 3.00%, interest accrues monthly and is payable in monthly installments of $1,446, with the note maturing on November 1, 2019, collateralized by real estate.	$	85,393	$	92,721

Other		160,281		173,409

		12,060,076		12,382,669
Less current portion		557,124		1,336,995


Notes payable and long-term debt, less current portion	$	11,502,952	$	11,045,674

The revolving line of credits contains certain restrictive covenants that include maintaining minimum tangible net worth, maximum allowable annual capital expenditures and working capital. The Company was in compliance with these covenants at June 30, 2014. The amount available under the revolving line of credits is based on eligible accounts receivable and inventory or the maximum line of credit amount. At June 30, 2014, the amount available under the revolving line of credits was $6,625,000.

Future annual maturities of notes payable and long-term debt are as follows:


2015	$	557,124
2016		948,632
2017		444,353
2018		362,075
2019		343,000
Thereafter		9,404,892


	$	12,060,076

5.	Leases

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

5.	Leases (cont.)

Minimum lease payments under the operating leases with terms in excess of one year are as follows:


2015	$	74,769
2016		74,897
2017		75,282
2018		56,861
2019		13,294


	$	295,103

6.	Related Party Transactions

The Company transacts business with entities under common ownership and management. Pro Edge LP pays wages for the Company utilizing a common pay master account with these amounts then reimbursed by the Company on a monthly basis. The Company had outstanding accounts receivable with these affiliates in the amount of $1,058,223 and $1,243,049 as of June 30, 2014 and December 31, 2013, respectively. The Company had outstanding accounts payable due to these affiliates in the amount of $1,039,683 and $1,217,601 as of June 30, 2014 and December 31, 2013, respectively.

The Company had additional accounts receivable from a related party of approximately $60,000 and $211,000 as of June 30, 2014 and December 31, 2013, respectively. The Company had sales of approximately $11,000 and $64,000 to the related party during 2014 and 2013, respectively. Additionally, the Company had accounts payable due to members of approximately $12,000 as of June 30, 2014 and December 31, 2013.

7.	Concentrations of Credit Risk

At June 30, 2014 and December 31, 2013 and at various times throughout these periods, the Company maintains cash and cash investment balances with a financial institution in excess of Federal Deposit Insurance Corporation insured limits.

TRANS OVA GENETICS, L.C. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

8.	Commitments and Contingencies

9.	Subsequent Events

The Company evaluated the events and transactions subsequent to its June 30, 2014 condensed consolidated balance sheet date and determined there were no additional significant events, other than disclosed above, necessary for disclosure through October 22, 2014, which is the date the Company issued its condensed consolidated financial statements.

EX-99.3 5 d809755dex993.htm EX-99.3 EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined consolidated financial information has been prepared to illustrate the effect of Intrexon Corporation’s (“Intrexon”) acquisition of Trans Ova Genetics, L.C. (“Trans Ova”).

The historical financial information has been adjusted to give effect to pro forma events that are directly attributable to the acquisition and factually supportable. The unaudited pro forma condensed combined consolidated statement of operations for the year ended December 31, 2013 and for the six months ended June 30, 2014 presents the results of operations of Intrexon and Trans Ova as if Intrexon’s acquisition of Trans Ova had been consummated on January 1, 2013. The unaudited pro forma condensed combined consolidated balance sheet is based on the individual historical consolidated balance sheets of Intrexon and Trans Ova as of June 30, 2014 and gives effect to the acquisition as if it had been consummated on June 30, 2014. The unaudited pro forma condensed combined consolidated financial statements show the impact on the combined statements of operations under the acquisition method of accounting under Financial Accounting Standards Board Accounting Standard Codification 805, Business Combinations, with Intrexon treated as the acquirer. Under the acquisition method of accounting, the total purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of the purchase price over the amounts assigned to tangible or intangible assets acquired and liabilities assumed is recorded as goodwill.

The following unaudited pro forma condensed combined consolidated financial statements are presented for illustrative purposes only and do not purport to reflect the historical results that would have been obtained had Intrexon and Trans Ova been a combined company during the periods presented or the results the combined company may achieve in future periods. There were no material transactions between Intrexon and Trans Ova during the periods presented in the unaudited pro forma condensed combined consolidated financial statements that require elimination.

The unaudited pro forma condensed combined consolidated financial information is derived from and should be read in conjunction with the historical financial statements and related notes included elsewhere in this Form 8-K/A and our historical filings.

The following unaudited pro forma condensed combined consolidated financial statements should be read in conjunction with:

•

the accompanying notes to the unaudited pro forma condensed combined consolidated financial statements;

•

the historical consolidated financial statements of Intrexon as of and for the year ended December 31, 2013 included in its Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 31, 2014 and Intrexon’s historical consolidated financial statements for the six months ended June 30, 2014 included in its Form 10-Q filed with the SEC on August 14, 2014; and

•

the historical consolidated financial statements of Trans Ova as of and for the periods ended June 30, 2014 and December 31, 2013 included in this Form 8-K/A.

Unaudited Pro Forma Condensed Combined Consolidated Statement of Operations

For the Six Month Period Ended June 30, 2014

(Thousands of dollars, except per share data)


	Intrexon			Trans Ova		Pro Forma Adjustments			Footnotes	Pro Forma Combined
Revenues:
Collaboration revenues	$	19,601		$	—	$	—			$	19,601
Product sales*		9			19,377		—				19,386
Services revenues		—			17,591		—				17,591
Other revenues*		31			513		—				544

Total revenues		19,641			37,481		—				57,122

Operating expenses:
Cost of product sales*		85			15,972		(83	)	(A), (B)		15,974
Cost of services		—			9,852		(11	)	(A), (B)		9,841
Research and development*		26,493			845		462		(A), (B)		27,800
Selling, general and administrative*		29,017			6,221		919		(A), (B), (C)		36,157

Total operating expenses		55,595			32,890		1,287				89,772

Operating income (loss)		(35,954	)		4,591		(1,287	)			(32,650	)
Other income (expense):
Unrealized depreciation in fair value of equity securities		(11,855	)		—		—				(11,855	)
Other income, net		37			356		—				393

Total other income (expense)		(11,818	)		356		—				(11,462	)

Equity in net loss of affiliates		(1,891	)		—		—				(1,891	)

Income (loss) before tax		(49,663	)		4,947		(1,287	)			(46,003	)
Income tax expense		(23	)		—		(55	)	(D)		(78	)

Net income (loss)		(49,686	)		4,947		(1,342	)			(46,081	)
Net loss attributable to the noncontrolling interest		1,758			140		166		(A), (B)		2,064

Net income (loss) attributable to Intrexon	$	(47,928	)	$	5,087	$	(1,176	)		$	(44,017	)

Net income (loss) attributable to common shareholders per share, basic and diluted	$	(0.49	)							$	(0.44	)

Weighted average shares outstanding, basic and diluted		98,113,493					1,444,388				99,557,881

*	Please see Note 2 to these unaudited pro forma condensed combined consolidated financial statements.

Unaudited Pro Forma Condensed Combined Consolidated Statement of Operations

For the Year Ended December 31, 2013

(Thousands of dollars, except per share data)


	Intrexon			Trans Ova			Pro Forma Adjustments			Footnotes	Pro Forma Combined
Revenues:
Collaboration revenues	$	23,525		$	—		$	—			$	23,525
Product sales*		164			33,409			—				33,573
Services revenues		—			28,789			—				28,789
Other revenues*		71			1,033			—				1,104

Total revenues		23,760			63,231			—				86,991

Operating expenses:
Cost of product sales*		22			32,209			(115	)	(A), (B)		32,116
Cost of services		—			16,657			151		(A), (B)		16,808
Research and development*		48,143			1,466			921		(A), (B)		50,530
Selling, general and administrative*		33,618			9,382			2,491		(A), (B)		45,491

Total operating expenses		81,783			59,714			3,448				144,945

Operating income (loss)		(58,023	)		3,517			(3,448	)			(57,954	)
Other income:
Unrealized appreciation in fair value of equity securities		10,443			—			—				10,443
Other income, net		7,278			882			—				8,160

Total other income		17,721			882			—				18,603

Equity in net loss of affiliates		(606	)		(40	)		—				(646	)

Income (loss) before tax		(40,908	)		4,359			(3,448	)			(39,997	)
Income tax expense		—			—			—				—

Net income (loss)		(40,908	)		4,359			(3,448	)			(39,997	)
Net loss attributable to the noncontrolling interest		1,928			506			329		(A), (B)		2,763

Net income (loss) attributable to Intrexon	$	(38,980	)	$	4,865		$	(3,119	)		$	(37,234	)

Accretion of dividends on redeemable convertible preferred stock		(18,391	)		—			—				(18,391	)

Net income (loss) attributable to common shareholders	$	(57,371	)	$	4,865		$	(3,119	)		$	(55,625	)

Net income (loss) attributable to common shareholders per share, basic and diluted	$	(1.40	)								$	(1.31	)

Weighted average shares outstanding, basic and diluted		40,951,952						1,444,388				42,396,340

*	Please see Note 2 to these unaudited pro forma condensed combined consolidated financial statements.

Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet

At June 30, 2014

(Thousands of dollars)


	Intrexon			Trans Ova		Pro Forma Adjustments			Footnotes	Pro Forma Combined
Assets
Current assets:
Cash and cash equivalents	$	74,505		$	1,029	$	(63,165	)	(E)	$	12,369
Short-term investments		101,046			—		—				101,046
Receivables
Trade, less allowance for doubtful accounts		806			16,825		—				17,631
Related parties		8,304			—		—				8,304
Other		698			—		—				698
Inventory		—			18,251		975		(F)		19,226
Prepaid expenses and other current assets		2,944			286		—				3,230

Total current assets		188,303			36,391		(62,190	)			162,504

Long-term investments		73,545			—		—				73,545
Equity securities		134,895			—		—				134,895
Property, plant and equipment, net		17,389			14,017		4,528		(G)		35,934
Intangible assets, net		45,406			746		23,354		(H)		69,506
Goodwill*		34,865			42		64,519		(I)		99,426
Investments in affiliates		4,997			—		—				4,997
Other assets*		1,137			312		—				1,449

Total assets	$	500,537		$	51,508	$	30,211			$	582,256


Liabilities and Total Equity (Deficit)
Current liabilities:
Accounts payable	$	1,799		$	4,088	$	—			$	5,887
Accrued compensation and benefits*		4,094			1,175		—				5,269
Other accrued liabilities*		3,998			722		762		(C)		5,482
Deferred revenue*		10,706			2,351		—				13,057
Lines of credit		—			3,874		—				3,874
Current portion of long-term debt*		—			770		(213	)	(J)		557
Current portion of deferred consideration		—			—		6,686		(E)		6,686
Related party payables		95			—		—				95

Total current liabilities		20,692			12,980		7,235				40,907

Long term debt, net of current portion		2,001			11,503		(2,905	)	(J)		10,599
Deferred consideration, net of current portion		—			—		13,429		(E)		13,429
Deferred revenue		88,747			—		—				88,747
Other long-term liabilities		731			—		—				731

Total liabilities		112,171			24,483		17,759				154,413

Total equity:
Common stock, no par value		—			—		—				—
Additional paid-in capital		797,516			26,750		6,052		(E), (K)		830,318
Accumulated deficit		(424,342	)		—		(762	)	(C)		(425,104	)
Accumulated other comprehensive income		81			—		—				81

Total Intrexon shareholders’ equity		373,255			26,750		5,290				405,295
Noncontrolling interests		15,111			275		7,162		(L)		22,548

Total equity		388,366			27,025		12,452				427,843



Total liabilities and total equity	$	500,537		$	51,508	$	30,211			$	582,256

*	Please see Note 2 to these unaudited pro forma condensed combined consolidated financial statements.

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

Note 1 – Basis of Pro Forma Presentation

Effective August 8, 2014 (the “Closing Date”), Intrexon acquired 100% of the membership interests of Trans Ova pursuant to an Amended and Restated Membership Interest Purchase Agreement (the “Purchase Agreement”) dated as of August 8, 2014. The consideration paid at closing consisted of $60.0 million in cash and the issuance of 1,444,388 shares of Intrexon common stock. In addition, $20.0 million in deferred cash is payable in three equal installments upon the first, second and third anniversaries of the Closing Date. The Purchase Agreement also provides for (i) the payment of $3.2 million to former equity holders of Trans Ova representing the aggregate amount of certain debts, together with accrued interest, owed by Trans Ova to governmental entities at the Closing Date that was forgiven by the relevant governmental entities; and (ii) the payment to such former equity holders of a portion of certain cash proceeds in the event there is an award under currently pending litigation matters to which Trans Ova is a party, the fair value of which Intrexon has preliminarily estimated to be $0.

The unaudited pro forma condensed combined consolidated statements of operations for the six months ended June 30, 2014 and for the year ended December 31, 2013 give effect to the acquisition as if it were completed on January 1, 2013. The unaudited pro forma condensed combined consolidated balance sheet as of June 30, 2014 gives effect to the acquisition as if it were completed on June 30, 2014.

The unaudited pro forma condensed combined consolidated financial statements have been derived from the historical consolidated financial statements of Intrexon and historical consolidated financial statements of Trans Ova. Assumptions and estimates underlying the unaudited pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined consolidated financial statements. Because the unaudited pro forma condensed combined consolidated financial statements have been prepared based upon preliminary estimates, the final amounts recorded at the date of the acquisition may differ materially from the information presented. These estimates are subject to change pending further review of the assets acquired and liabilities assumed.

The acquisition is reflected in the unaudited pro forma condensed combined consolidated financial statements as being accounted for based on the guidance provided by accounting standards for business combinations. Under the acquisition method of accounting, the total estimated purchase price is allocated as described in Note 3. In accordance with accounting guidance for business combinations, the assets acquired and the liabilities assumed have been measured at fair value. The fair value measurements use estimates based on key assumptions of the acquisition, and historical and current market data. The pro forma adjustments included herein may be revised as additional information becomes available and as additional analyses are performed. The purchase price allocation is considered preliminary and the final amounts recorded may differ materially from the information presented. Management expects the purchase price allocation to be finalized by the first quarter of 2015. The unaudited pro forma condensed combined consolidated financial statements do not reflect the effect of any regulatory actions that may impact the pro forma financial statements when the acquisition is completed.

For the purpose of measuring the estimated fair value of the assets acquired and liabilities assumed, Intrexon has applied the accounting guidance for fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Note 2. Accounting Policy Changes and Reclassifications

Intrexon performed certain procedures for the purpose of identifying any material differences in the presentation of financial information between Intrexon and Trans Ova, and whether any reclassifications would be required in connection with preparing uniform financial statements. Preliminary procedures performed by Intrexon have involved a review of Trans Ova’s historical financial statements, the summary of significant accounting policies contained in Trans Ova’s financial statements and preliminary discussion with Trans Ova management regarding Trans Ova’s presentation of financial information. While Intrexon expects to engage in additional discussions with Trans Ova’s management, the preliminary procedures performed have identified insignificant changes in the presentation of certain financial statement line items as discussed below. Differences between these preliminary procedures and the final accounting may occur and these differences could have a material impact on the accompanying unaudited pro forma condensed consolidated combined financial statements.

The historical consolidated financial statements of Trans Ova and Intrexon presented herein have been adjusted by condensing certain insignificant line items, reclassifying or expanding certain line items in order to conform certain Trans Ova line items to Intrexon’s financial statement presentation, and reclassifying or expanding certain line items to present disaggregated information concerning Intrexon in conformity with certain Trans Ova line items. Line items that have been adjusted are denoted by an asterisk.

Note 3. Preliminary Purchase Price Allocation; Funding Sources and Uses

Preliminary Purchase Price Allocation

The estimated fair value of the consideration transferred is $116.1 million and consists of $63.2 million of cash, $32.8 million of shares of Intrexon common stock and $20.1 million of deferred cash. The estimated fair value of the noncontrolling interest in Trans Ova’s consolidated, majority-owned subsidiary is $7.4 million. The preliminary allocation of the consideration transferred and the fair value of the noncontrolling interest as of the acquisition date is as follows (in thousands):


Cash	$	960
Accounts receivable, net		19,215
Inventory		17,256
Prepaid expenses and other current assets		589
Property, plant and equipment		18,545
Intangible assets		24,100
Other assets		147

Total assets		80,812
Accounts payable		4,563
Accrued expenses		3,603
Line of credit		4,091
Long-term debt		9,090

Total liabilities		21,347

Net assets acquired		59,465
Goodwill		64,054

Total consideration transferred and fair value of noncontrolling interest	$	123,519

The above fair values of assets acquired, liabilities assumed, and the noncontrolling interest at the acquisition date are considered preliminary. The final fair values of assets acquired, liabilities assumed, and the noncontrolling interest could differ materially from the preliminary amounts presented in these unaudited pro forma condensed combined consolidated financial statements. A decrease in the fair value of assets acquired or an increase in the fair value of liabilities assumed in the acquisition from those preliminary valuations presented in these unaudited pro forma condensed combined consolidated financial statements would result in a dollar-for-dollar corresponding increase in the amount of goodwill. In addition, if the value of the acquired assets is higher than the preliminary indication, it may result in higher amortization and depreciation expense than is presented in these unaudited pro forma condensed combined consolidated financial statements.

Funding Sources and Uses

The acquisition was funded at closing out of our cash reserves and through the issuance of shares of Intrexon common stock. We expect to fund the remainder of the payments due in connection with the acquisition out of Intrexon’s cash reserves or through debt or equity financing.

Note 4 – Pro Forma Adjustments

(A) This pro forma adjustment represents the change in amortization expense associated with acquired intangible assets, based on the preliminary estimated fair value of $24.1 million. The intangible assets have estimated useful lives of between three and nine years.

(B) This pro forma adjustment represents the change in depreciation expense associated with acquired property, plant and equipment, based on the preliminary estimated fair value of $18.5 million. Property, plant and equipment have estimated useful lives of between three and twenty years.

(C) For the unaudited pro forma condensed combined consolidated statement of operations for the six months ended June 30, 2014, this pro forma adjustment represents the removal of $0.3 million of expenses incurred associated with this acquisition. For the unaudited pro forma condensed combined consolidated balance sheet as of June 30, 2014, this pro forma adjustment represents the estimated accrual of $0.8 million additional expenses to complete this acquisition.

(D) This pro forma adjustment represents the change in tax expense as a result of increased consolidated taxable net income for the six months ended June 30, 2014 and is determined based on the planned use of available loss carryforwards except for the amount subject to a 2% corporate alternative minimum tax rate.

(E) This pro forma adjustment represents the estimated fair value consideration of $63.2 million cash paid, $32.8 million of Intrexon common stock issued, and $20.1 million of deferred cash payments to acquire Trans Ova. This pro forma adjustment does not reflect cash that will be paid for accrued acquisition related expenses of $1.1 million.

(F) This pro forma adjustment represents the preliminary estimated fair value of inventory acquired from Trans Ova. Inventory consists of livestock, feed, supplies and work in process and the adjustment is associated with adjusting livestock and feed inventory to market value at the acquisition date.

(G) This pro forma adjustment represents the change in property, plant and equipment as a result of the preliminary estimated fair value of $18.5 million. Property, plant and equipment consist of land, buildings, leasehold improvements, equipment and fixtures, vehicles, land improvements and construction in progress. Property, plant and equipment have estimated useful lives of between three and twenty years.

(H) This pro forma adjustment represents the change in intangible assets as a result of the preliminary estimated fair value of $24.1 million. Intangible assets include customer relationships, know-how and developed technology, and trade names. These assets have estimated useful lives of between three and nine years.

(I) This pro forma adjustment reflects the change in goodwill as a result of the preliminary estimate of the excess of the purchase price paid over the fair value of Trans Ova assets acquired, liabilities assumed and noncontrolling interest.

(J) This pro forma adjustment represents the $3.2 million reduction of long-term debt representing amounts owed by Trans Ova to government entities that were forgiven by the relevant government entities and the amount of which forgiven debt was paid by Intrexon to the former equity holders of Trans Ova.

(K) This pro forma adjustment reflects the elimination of Trans Ova’s $26.8 million historical equity balance.

(L) This pro forma adjustment reflects the change in the value of the noncontrolling interest of Trans Ova’s consolidated, majority-owned subsidiary as a result of the preliminary estimated fair value of $7.4 million.