Company: PGEN
Filing Date: 2025-03-19
Form Type: 10-K
Source: 0001356090-25-000007
Chunk: 154

Company: PRECIGEN, INC.
Filing Date: 2025-03-19
Form: 10-K
Item: Item 12
Chunk 154
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 liability-classified instruments based on an assessment of the warrant’s specific terms. Liability-classified warrants are recorded at their fair value and are subject to subsequent remeasurement at each consolidated balance sheet date until the warrants are exercised or expired, and any change in fair value is recognized in the Company’s statements of operations and comprehensive loss. The Company entered into a Securities 

F-3

Purchase Agreement with investors for the sale of its 8.00% Series A Convertible Perpetual Preferred Stock and warrants to purchase 52,666,669 shares of its common stock, no par value per share at an exercise price of $0.75 per share in a private placement. The Company sold an aggregate of 79,000 shares of Preferred Stock. As the warrants do not meet all the requirements for equity classification under ASC 815, Derivatives and Hedging, they are therefore accounted for as a warrant liability at fair value on the Company’s consolidated balance sheet, with subsequent changes in fair value recognized in the consolidated statement of operations at each reporting date.

The Company uses the Black-Scholes option pricing model (“Black-Scholes model”) to estimate the fair value of the warrants and the Black-Scholes model within a Monte Carlo simulation model to determine the fair value of the PIK warrants. Estimates and assumptions affecting the fair value measurement as of December 31, 2024 include the Term to PIK dividend payment rate; risk-free interest rate; the expected volatility of common stock; the fair value per share of the underlying shares of common stock; the expected term of the warrants; and a zero-dividend yield. The most significant assumption impacting the fair value of the warrants is the expected volatility of common stock, which the Company based primarily on the blended equity volatiles of the Company and guideline public companies, which were selected based on the similarity of their operations to those of the Company as well as their tenure as a public company. As of December 31, 2024, the warrant liability was $50.5 million. 

We identified warrants as a critical audit matter because of the significant judgments necessary in determining the consolidated balance sheet classification and the fair value of the warrant liability. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s expected volatility of common stock, including selection of the comparable public companies.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures