Segment Reporting

6 Months Ended

Jun. 30, 2019

NOTE 11:

SEGMENT REPORTING

The Company has developed a genome editing platform and performed related research for human therapeutic and agricultural applications. The Company’s Chief Operating Decision Maker (“CODM”) evaluates the Company’s financial performance based on two reportable segments: Therapeutics and Food. The Therapeutics segment is focused on the development of products in the field of immuno-oncology and of novel products outside immuno-oncology to treat human diseases. The Food segment is focused on applying ARCUS to develop food and nutrition products through collaboration agreements with consumer-facing companies. The CODM reviews segment performance and allocates resources based upon segment revenue and segment operating loss of the Therapeutics and Food reportable segments.

Segment operating loss is derived by deducting operational cash expenditures, net, from GAAP revenue. Operational cash expenditures are cash disbursements made that are directly attributable to the reportable segment (including directly attributable research and development and property, equipment, and software expenditures). For the six months ended June 30, 2019, the Company allocated centralized research and development expenditures for early stage research, nuclease development and the purchase of general laboratory supplies to the Therapeutics and Food segments based on headcount. In January 2019, the Food segment moved into a new leased facility at Research Triangle Park, North Carolina. The Company has determined that the Food segment is no longer deriving benefit from the Company’s centralized research and development expenditures, thus all these expenditures are allocated to the Therapeutics segment for the six months ended June 30, 2019. The reportable segment and centralized research and development operational cash expenditures include cash disbursements for compensation, laboratory supplies, purchases of property, equipment, and software and procuring services from CROs, CMOs, and research organizations.

Certain cost items are not allocated to the Company’s reportable segments. These cost items primarily consist of compensation and general operational expenses associated with the Company’s executive, business development, finance, operations, human resources and legal functions. The Company does not allocate non-cash income statement amounts to its reportable segments, such as share based compensation, depreciation and amortization, intangible asset impairment charges, non-cash interest expense and losses on the disposal of assets. When reconciling segment operating loss to consolidated loss from operations, the Company makes an adjustment to convert the cash expenditures to the accrual basis to reflect GAAP.

All segment revenue is earned in the United States and there are no intersegment revenues. Additionally, the Company reports assets on a consolidated basis and does not allocate assets to its reportable segments for purposes of assessing segment performance or allocating resources.

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

	Three Months Ended June 30,
(in thousands)	2019			2018
Revenue:
Therapeutics	$	4,819		$	1,447
Food		570			427
Total segment revenue		5,389			1,874
Segment operational cash expenditures:
Therapeutics	$	14,872		$	4,926
Food		2,077			674
Total segment operational cash expenditures		16,949			5,600
Allocation of centralized research and development operational cash expenditures:
Therapeutics	$	3,118		$	1,905
Food		—			816
Total allocation of centralized research and development operational cash expenditures		3,118			2,721
Segment operating loss:
Therapeutics	$	(13,171	)	$	(5,384	)
Food		(1,507	)	$	(1,063	)
Total segment operating loss		(14,678	)		(6,447	)
Adjustments to reconcile segment operating loss to consolidated loss from operations:
Corporate general and administrative cash expenditures	$	(11,123	)	$	(2,118	)
Interest income received		(1,485	)		(299	)
Depreciation and amortization		(1,168	)		(512	)
Share-based compensation		(2,279	)		(255	)
Loss on disposal of assets		(22	)		(3	)
Changes in prepaids, accounts payable and accrued expenses		6,884			(2,491	)
Total consolidated loss from operations	$	(23,871	)	$	(12,125	)

	Six Months Ended June 30,
(in thousands)	2019			2018
Revenue:
Therapeutics	$	9,638		$	2,894
Food		1,213			508
Total segment revenue		10,851			3,402
Segment operational cash expenditures:
Therapeutics	$	27,782		$	14,176
Food		4,184			1,733
Total segment operational cash expenditures		31,966			15,909
Allocation of centralized research and development operational cash expenditures:
Therapeutics	$	6,871		$	3,942
Food		—			1,233
Total allocation of centralized research and development operational cash expenditures		6,871			5,175
Segment operating loss:
Therapeutics	$	(25,015	)	$	(15,224	)
Food		(2,971	)		(2,458	)
Total segment operating loss		(27,986	)		(17,682	)
Adjustments to reconcile segment operating loss to consolidated loss from operations:
Corporate general and administrative cash expenditures	$	(18,145	)	$	(4,677	)
Interest income received		(2,086	)		(522	)
Depreciation and amortization		(2,107	)		(970	)
Share-based compensation		(3,828	)		(405	)
Loss on disposal of assets		(22	)		(10	)
Changes in prepaids, accounts payable and accrued expenses		10,809			2,906
Total consolidated loss from operations	$	(43,365	)	$	(21,360	)