Segment Reporting

9 Months Ended

Sep. 30, 2019

NOTE 9:

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 nine months ended September 30, 2018, 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 nine months ended September 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 September 30,
(in thousands)	2019			2018
Revenue:
Therapeutics	$	4,719		$	2,115
Food		146			426
Total segment revenue		4,865			2,541
Segment operational cash expenditures:
Therapeutics	$	14,290		$	11,727
Food		1,942			857
Total segment operational cash expenditures		16,232			12,584
Allocation of centralized research and development operational cash expenditures:
Therapeutics	$	4,081		$	2,387
Food		—			597
Total allocation of centralized research and development operational cash expenditures		4,081			2,984
Segment operating loss:
Therapeutics	$	(13,652	)	$	(11,999	)
Food		(1,796	)		(1,028	)
Total segment operating loss		(15,448	)		(13,027	)
Adjustments to reconcile segment operating loss to consolidated loss from operations:
Corporate general and administrative cash expenditures	$	(6,581	)	$	(3,719	)
Interest income received		(1,236	)		(691	)
Depreciation and amortization		(1,401	)		(584	)
Share-based compensation		(2,491	)		(292	)
Changes in prepaid expenses, accounts payable and accrued expenses		5,179			7,866
Total consolidated loss from operations	$	(21,978	)	$	(10,447	)

	Nine Months Ended September 30,
(in thousands)	2019			2018
Revenue:
Therapeutics	$	14,357		$	5,009
Food		1,359			934
Total segment revenue		15,716			5,943
Segment operational cash expenditures:
Therapeutics	$	42,072		$	25,903
Food		6,126			2,590
Total segment operational cash expenditures		48,198			28,493
Allocation of centralized research and development operational cash expenditures:
Therapeutics	$	10,952		$	6,329
Food		—			1,830
Total allocation of centralized research and development operational cash expenditures		10,952			8,159
Segment operating loss:
Therapeutics	$	(38,667	)	$	(27,223	)
Food		(4,767	)		(3,486	)
Total segment operating loss		(43,434	)		(30,709	)
Adjustments to reconcile segment operating loss to consolidated loss from operations:
Corporate general and administrative cash expenditures	$	(24,726	)	$	(8,397	)
Interest income received		(3,322	)		(1,213	)
Depreciation and amortization		(3,508	)		(1,555	)
Share-based compensation		(6,319	)		(697	)
Loss on disposal of assets		(22	)		(8	)
Changes in prepaid expenses, accounts payable and accrued expenses		15,988			10,772
Total consolidated loss from operations	$	(65,343	)	$	(31,807	)